GATO.TO - Earnings call transcript Q4 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Gatos Silver's Fourth Quarter and Full Year 2023 Financial and Operating Results Conference Call.

Presenting today will be Dale Andres, CEO of Gatos Silver; and Andre Van Niekerk, Chief Financial Officer.

We will conclude today's session with a question-and-answer period where other members of Gatos Silver management team will be available. [Operator Instructions].

Slide to attention your X. Turning call Please statements. forward-looking note today's contains results may Various uncertainties actual to risks and cause vary. does to statements. update Silver any Gatos not forward-looking assume the obligation

I over the go to would Andres. ahead. Dale Please call now like to turn

Dale Andres

you, everyone. operator, and Thank morning, good

like X. the more joint in $XX detail, to the I venture. fourth while Andre continued this this will highlight X free in strengthen remaining cash XX% of balance to our Gatos balance highlight year. debt-free, Turning quarter. I'd points one, at Number to owned flow to Los quarter received Silver's of million but Gatos to first distributions Slide the speak want the including we quarter further the and cash for sheet, continuing increasing in

that the I to range guidance -- our Gatos lower guidance Mine production for point want continue year at cost well the throughput is all-in end for year we range, ended record the of and highlight to rate. Cerro our operations with costs. two We sustaining within setting Los finished very the perform revised Number upwardly another

result, that's venture a is, the when basis. a per million, for up our XXXX. production of life on $XX X,XXX QX Gatos update our and we're mine aiming the again, medium-term $XX day years to ramping the performance yet mine we flow year continue free and approximately And we of tonnes a additional the As third was to in goal sustainable joint X XXXX. quarter by drive an full [indiscernible] life for million operational of point the Los And at cash third extend to with

which while approximately X,XXX in quarter a increase quarter, Mill silver Slide ounces. to per compared in improved XX% X.X the to day, grades throughput X. Turning prior million production was silver of resulted the over in tonnes

day tonnes closer and some minor mill of that it we upgrades current Importantly, rates. we the sure X,XXX kind to demonstrated capacity planning the to those of make per is in December sustain are can

production, for zinc, and equivalent was which quarter. million gold ounces Silver lead includes X.X the

silver fourth to XXXX, X.X silver the primarily by For produced XX.X XX% quarter for equivalent. ounces increased million comparable of increased of due Cost and quarter last sales milling compared million ounces the the to rates. year, we of

plant sales cash more that's However, strong the only and and inflationary Mexican cost a were X% lower All-in were XXXX cost which pressures, after higher. the we credits in is -- than the in to on of managed And processing to compared and -- great for X% result tonnes basis, byproduct $XX.XX peso despite mining $XX.XX per ounce year for ounce of ounce in also largely And payable which XXXX, we're offset. per byproducts XXXX to considering XXXX. higher a XX% sustaining per compared full costs that's year-over-year. only XXXX silver production despite

expected lower as up are ramping bill extra first in in up grades December. fill expected per day year we the that we the versus increase Turning rates tonnes for with X. to expected capacity full plan Fee Mine between cost focused mining in quarter for This rates throughput We shows XXXX Los to to increase on to guidance to X,XXX and to average the proved average the Gatos grades production be the and at year. through our XXXX. Cerro Slide X,XXX rates

in phase focus the conversion of million with focus are switch last be underground capital Exploration and expected to near on the targets. opening and as increase drilling complete and of current we our mine definition both at start guidance continued district development area. drilling spend is majority Deeps on expected to South-East spend up to the with the to to year's Sustaining expenditures similar Southeast $XX

We of XX XXXX byproducts million $X,XXX during $XX on cost equivalent $XXX at expect X.X equivalent $XX basis. ounces all-in per after to an to a million X.X between ounce silver a sustaining silver co-product XX.X silver and that's between to and of to at basis, million ounces a ounce per million on produce silver of payable and

over now to I'll turn results. call the present to our financial Andre

AndrÃ© van Niekerk

generated Thank million venture from XXXX. flow [ in you, great ], Gatos cash XX% Dale. joint approximately X% on generating another Good lower morning, Los $XX of cash everyone. The operations had than quarter, flow QX

venture than the XX% cash this more free flow quarter, joint of $XX.X XXXX. generated However, QX million

investing million drilling lower in totaled this This is focused the lower revenues. infill South-East QX due the due activities $X incurred. $XX.X with to quarter to of lower the offsetting flow from expenditures development XXXX to for million of expected million most spending Deeps. sustaining Cash in quarter, the used Resource drilling the on reduced capital expenditures, capital $XX.X

we $XX.X XXXX, $X.X drilling. year full expenditures million on million incurred the development For sustaining on resource capital and

approximately of free higher XX% than XXXX. of million, the flow in $XX million $XX Free generated cash cash for was XXXX flow

As XXXX. $XX distributed million made million is a totaled of to partners the million free in generation, distributions in This joint $XX the than result more cash flow venture dividends the of XXXX. capital $XX by the

In a to capital the of year XX. end addition, on the partners to venture subsequent of made the further $XX February quarterly distribution joint the million

and the silver lower financial venture in X% were million before the Revenues quarter to for in lower fourth $XX.X partially of turning to due which quarter. revenue to decreased sales lead of look as volumes Los X by the adjustment at quarter results the Gatos Revenues the fourth by silver were Slide higher XXXX. revenues. expected, provisional prices joint higher Now offset

contributed recorded primarily the QX QX to adjustment, of costs. Cost resulting higher had revenue lower XXXX. operating positive provisional larger to quarter QX sales of XXXX we higher in we which higher XX% result for -- compared as than revenues a throughput a In were XXXX, XXXX,

Depreciation, primarily of and was XXXX recovery and million productivity tax recorded amortization to of reduction the and And by million JV LG in to expense $XX.X U.S. X%, by by was QX Mexican income strengthening decreased as of increase program. against due approximately improvements mineral The cost $X.X life. QX part the income impacted extension expense in was XXXX. partly of in mine the the improvement continuous which the reserves the of dollar, tax depletion initiatives offset compared peso our

The mine recovery income tax is be due tax additional incurred. assets to in expenditures increase deferred an tax certain of to available and for recognition deductions development

lower income XXXX. approximately JV LG million QX for quarter, than the net the XX% Finally, of recorded $XX

the $X.XX Silver. Gatos Silver Net and XXX% share to the Gatos Now to X per are and respectively, the income or for QX XXXX. net recorded Equity moving as venture. $XX.X quarter. per by share basic of up recorded million results at primarily Slide diluted decreased financial review result for at income and income income net joint for income lower XXX%, of a the affiliates net XX%,

audit, incurred mainly Corporate G&A to severance QX quarter in lower the million consulting was and to costs XXXX, due of approximately fourth XXXX compared in $X lower QX XXXX.

severances and statements of $XX.X $X $XX.X in noncash fees to For $XXX,XXX. compared year, of and the XXXX XXXX million XXXX, financial defense are general related In nonrecurring stock-based compensation million, administrative to expenses of we the some of XXXX. full of legal general $X.X administrative the costs restatement million million, million and incurred $X.X expenses and included

million X. XX, a a million cash cash venture January $XX.X and Slide debt-free. balance Gatos with Los to had ended joint remain of of balance at The continued JV $XX.X to XXXX. Moving LG

mentioned $XX and I've its of the a million. we earlier, Silver XXXX, paid As joint to distribution $XX on February partners capital received XX, venture million Gatos which Dowa of

just $XX.X the additional remains balance million and cash Gatos the of well execute Los XXXX million few venture $XX.X on February a on balance of positioned of and $XX XX, with joint opportunities. venture paid Silver XXXX, the a by January ended million partner to before a cash receipt weeks distribution continue capital The Gatos growth XX. had company the joint to at

I will back Dale. hand now to it

Dale Andres

XX, with announce quarter on XXXX. and year target X and Slide in our to realizing end announced have highlight our that we like mine track third that to are upside that and another we the life believe current extended upside, XXXX of on And add updated Andre. of mine substantial that years, we continue mineral to on life we're of this additional September to focused the X Thanks, reserve the a on I'd we to

last working for South-East we drills drilled our of areas for higher-grade XX-meter Deep the had quarter having update this of have plan conversion year. resource on of Since inferred reserve spacing numerous we aim and zone April, the third have that with to the for that

focus, South-East drilling. the our now, have X right Deep major that drills infill focused we and on surface is So currently

of our mine. X,XXX advancing We drills across future that rigs with operating We mill In on total potential tonnes now processing also day of per value mine projects, additional have December, And expansion including tonnes. target, basis, is we on on Portigueno site resource the underground to rig, showed X,XXX recently definition which to and growth. enhancement course, reserve our bringing the capable consistently went up are and focused expansion of number the added XX. another near on surface X is we an

On the and studies for silver, the evaluating recovery for copper recovery our technology side, we of are separation completing zinc. various gold increasing options and circuit and

Turning workings underground to from few XX. a key that and of mine This accessible targets a Slide potentially the infrastructure. the figure few existing of within shows kilometers are existing

to years our package. ramp getting hectare last the at of land life work mine. by hard in to been we And rest our the have adding up exploration South-East of couple Deeps XXXX, geologists Our the are the and chance the work excited on now defined XXX,XXX of for

timely X We will find as will lot to to a of within into the be in work mine easiest manner. still this kilometers doing we operations anything bring close the area production to be X in a of mine it

the know within clearly of can range. just of already close You veins we see that large number

about with mine, kilometers We beyond mine area, rigged Northwest, from Luis the the to targets the prospective some of XX will the further San getting this the kilometers in as northwest which and the number very we about of targets area. [indiscernible] is well be drill to X area a the in have out

we very other distributions mine Gatos to Slide And cash together value-enhancing together continue the and strategy. we to we strong as drilling core growing with finally which regular a our a start importantly, district. venture with expected Los cash near productivity balance. to with our throughput and business and Los So turning remain the flow operating Gatos XXXX, by summary, is and and quarter mine from And initiatives. highly mill improvements we generate on excited prospective and and in the part focused XX. third district We large increases, drive be that's extending optimization, joint to life, safely the and cost to margins of continue increase continue In operating of

questions. for operator the to back it hand now I'll

Operator

your line Instructions] the question with Canaccord. [Operator first is Lucas And from Pamatat of

Lucas Pamatat

you of ] color more Can -- X,XXX sorry, on sort tonnes the day? [ get efforts that undertaking or developed you mill provide a mine to the to you're

Dale Andres

now, we sure. Lucas. have Yes, development of Thanks, well Right production. ahead

And our stopes faster. up mill. to day to through quicker. so new that the [ day, rates per we X,XXX stopes ] get is just to mining X,XXX above to tonnes is our areas open midterm need up per stated to That's to through cycle fill cycling continue and the you sustain And goal and goal tonne

So day-to-day of developing. fill both productivities, hole through paste of and our just long utilizations stoping use maximum cycle it's not and matter equipment on to It's basis, a really plant cut faster. more making a

and make zone. Southeast we need sure to drive And a our of then of open our focus the X,XXX to importantly, going we day, up What towards that's of tonnes long-term And the but to per that that, as on obviously, lot do periods we time, rate. development for area, well. is as goal to it's can Southeast up sustainable for are a want short opening

Lucas Pamatat

South-East year? understand the in Got as to do be think you'll your Deep, able you drilling new undertake X,XXX-tonne day include plan that you. a later and you And this of more this scenario sort mine about

Dale Andres

put said, our in average -- guiding we I Like we're and to we're X,XXX X,XXX tonnes. like between guidance, Yes. making

that towards work we're Lucas. our progress goal going So guidance range. expected But to in we're good what yes, that's already X,XXX-tonne making towards,

Operator

over [Operator to be no Instructions] time, appeared Mr. And further Andres, at I questions. this will call back there you. to turn

Dale Andres

everyone thanks participated. Well, who for

look shareholder We excited year positioned XXXX. Thanks, progresses. to We additional we're well everyone. the forward and think deliver about updates are providing we very as to value, very

Operator

today's concludes call. conference This

now may You disconnect.

Gatos Silver (GATO) 21 Feb 242023 Q4 Earnings call transcript