Gatos Silver Reports 2023 Silver Production Near Top End of Guidance
Gatos Silver, Inc. (NYSE/TSX: GATO) announced production results for the quarter and year ended December 31, 2023 at its 70%-owned Cerro Los Gatos mine in Mexico. The company's silver and silver equivalent production exceeded 2023 guidance, with CEO Dale Andres commenting on the record mill throughput and potential future expansion. Despite lower ore grades, the operation achieved impressive results, with silver production close to the high end of upwardly revised guidance. The company also plans to provide annual production and cost guidance for 2024 in the near future.
The reported production results from Gatos Silver's CLG mine demonstrate a substantial operational achievement, particularly in terms of mill throughput. The consistent quarterly increase and the recent tests indicating a potential rise to 3,500 tonnes per day without significant capital investment are noteworthy. Such improvements in efficiency can lead to enhanced profitability, especially when considering the relatively low investment of less than US$0.5 million required for further optimization. Moreover, the operation's alignment with the upper end of revised guidance instills confidence in the company's operational forecasting and adaptability.
However, the decline in metal production due to lower ore grades, despite improved mill throughput, suggests that the company must continue to innovate and possibly invest in exploration to maintain or increase production levels. The focus on debottlenecking and mine life extension strategies in 2024 indicates proactive management of resources to optimize production capabilities. The implications for stakeholders include the potential for sustained or increased production efficiency, which could positively influence the company's stock performance and market valuation.
From a financial perspective, the production results of Gatos Silver have several implications. The close alignment with the high end of the guidance range can be perceived as a positive signal to investors, reflecting management's ability to meet and even exceed expectations. This could potentially lead to increased investor confidence and a positive impact on the stock price. It is also important to note the strategic capital management demonstrated by the company's ability to increase throughput with minimal investment, which could lead to improved margins and cash flow.
On the downside, the lower ore grades and resultant decline in metal production year over year may raise concerns about the long-term sustainability of current production levels. This could potentially lead to increased capital expenditures in the future for exploration and development to replace depleted reserves. Investors will be closely monitoring the company's ability to manage these challenges while maintaining cost efficiency.
The production results from Gatos Silver's CLG mine also have implications for the broader commodity markets, particularly for silver and associated metals like zinc, lead and gold. The company's performance contributes to the overall supply dynamics, which can influence commodity prices. Given that the production was within the upper guidance range, this indicates a stable supply from CLG, which may not exert significant pressure on silver prices in the short term.
However, the reported lower ore grades could signal a broader industry trend of declining ore quality, which may affect the long-term supply outlook and thus commodity prices. Additionally, the company's exploration of mill expansion and mine life extension opportunities could have longer-term implications for the supply and pricing of these metals. Market participants will be interested in how these operational efficiencies and expansions might affect supply levels and whether they could offset any potential decline in ore quality.
01/09/2024 - 04:15 PM
VANCOUVER, British Columbia, Jan. 09, 2024 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the “Company”) today announced production results for the quarter and year ended December 31, 2023 at its 70% -owned Cerro Los Gatos (“CLG”) mine in Mexico. Silver production and silver equivalent production were both near the top end of the 2023 guidance range, even after taking into account an upward guidance revision in November 2023.
Dale Andres, CEO of Gatos Silver, commented: “The CLG mine performed very well during the fourth quarter and full year 2023. The operation achieved another record for mill throughput, with a quarterly average higher than 3,000 tonnes per day during the fourth quarter. This was the fourth consecutive quarterly increase in mill throughput rate, partially offsetting the expected lower grades of ore mined in 2023 compared with 2022. We are very encouraged by recent mill throughput tests, which indicate that 3,500 tonnes per day is possible without significant capital investment. We are also continuing to evaluate mill expansion options up to 4,000 tonnes per day in conjunction with further mine life extension opportunities.”
2023 CLG Production Results Compared with Guidance (100% basis)
Contained Metal Original 2023 Updated 2023 2023 Actual Silver ounces (millions) 7.4 – 8.2 8.8 - 9.3 9.21 Zinc pounds - in zinc conc. (millions) 57 - 63 57 - 63 57.3 Lead pounds - in lead conc. (millions) 36 - 40 36 - 40 38.9 Gold ounces - in lead conc. (thousands) 5.4 – 6.2 5.4 - 6.2 5.26 Silver Equivalent ounces (millions)1 12.4 – 13.8 13.8 - 14.6 14.33
1 Silver equivalent production is calculated using prices of US$22 /oz silver, US$1.20 /lb zinc, US$0.90 /lb lead and US$1,700 /oz gold to “convert” zinc, lead and gold production contained in concentrate to “equivalent” silver ounces (contained metal, multiplied by price, divided by silver price).
Due to the continued strong performance of CLG during 2023 and changes to mine plan sequencing, Gatos Silver increased production guidance for silver and silver equivalent on November 6, 2023 from the original levels provided on February 23, 2023. Production guidance for zinc, lead and gold did not change after February 23, 2023. Gatos Silver expects to provide annual production and cost guidance for 2024 toward the end of February.
As shown in the table above, 2023 silver production of 9.21 million ounces and silver equivalent production of 14.33 million ounces were both close to the high end of upwardly revised guidance. For metals with no guidance change during 2023, lead production of 38.9 million pounds was close to the high end of guidance, zinc production of 57.3 million pounds was slightly higher than the low end of guidance, and gold production was slightly below guidance.
Production Results (100% basis)
CLG comparative production highlights are summarized below:
Three Months Ended December 31, Year Ended December 31, CLG Production 2023 2022 2023 2022 Tonnes milled (dmt) 277,318 261,929 1,071,400 971,595 Tonnes milled per day (dmt) 3,014 2,847 2,935 2,662 Feed Grades Silver (g/t) 318 387 299 368 Zinc (%) 3.86 3.74 3.90 4.37 Lead (%) 1.86 1.95 1.85 2.31 Gold (g/t) 0.30 0.30 0.29 0.33 Contained Metal Silver ounces (millions) 2.56 2.92 9.21 10.32 Zinc pounds - in zinc conc. (millions) 14.6 13.5 57.3 60.7 Lead pounds - in lead conc. (millions) 10.2 9.7 38.9 43.9 Gold ounces - in lead conc. (thousands) 1.39 1.36 5.26 5.35 Silver Equivalent ounces (millions)1 3.88 4.16 14.33 15.84 Recoveries Silver - in both lead and zinc concentrates 90.3% 89.6% 89.4% 89.8% Zinc - in zinc concentrate 61.8% 62.7% 62.1% 64.8% Lead - in lead concentrate 89.8% 86.3% 88.7% 88.7% Gold - in lead concentrate 51.6% 53.9% 52.4% 52.0%
1 Silver equivalent production is calculated using prices of US$22 /oz silver, US$1.20 /lb zinc, US$0.90 /lb lead and US$1,700 /oz gold to “convert” zinc, lead and gold production contained in concentrate to “equivalent” silver ounces (contained metal, multiplied by price, divided by silver price).
Mill throughput averaged 3,014 tonnes per day during the fourth quarter of 2023, an increase of 6% compared to the fourth quarter of 2022, and averaged 2,935 tonnes per day during 2023, an increase of 10% compared to 2022.
As expected, overall metal production in 2023 was lower than 2022 because lower ore grades more than offset improved mill throughput. Silver production in 2023 declined by 11% from a record 10.32 million ounces in 2022. Zinc production declined by 6% , lead production by 12% , and gold production by 2% .
Silver production in the fourth quarter of 2023 was 2.56 million ounces, 12% below the record 2.92 million ounces in the fourth quarter of 2022. However, zinc, lead and gold production increased by 8% , 5% , and 2% , respectively, compared with the fourth quarter of 2022.
Increased fourth quarter and 2023 mill throughput rates were supported by continued debottlenecking and optimization efforts focused on achieving higher mining rates through increased productivity and improved mine plan flexibility.
During December various mill throughput capacity tests were successfully completed to better understand current plant capabilities and future bottlenecks. The mill operated for 27.3 days during December and achieved an average of 3,573 tonnes per operational day with the highest being 4,096 tonnes with good metallurgical performance. During the test period, minor electrical modifications were made to the mill motors and mill programming. After taking into account maintenance downtime and the additional downtime for electrical upgrades during the month, the mill averaged 3,145 tonnes per day during the month.
The test work has identified further plant optimization work necessary for the plant to achieve 3,500 tonnes per day consistently, and those modifications are expected to be made during H1 2024 at a cost of less than US$0.5 million . The mine continues to be the constraint on improving mill throughput beyond 3,000 tonnes per day on a sustainable basis. During 2024, the operation will be focused on further debottlenecking efforts in the mine and life extension to take advantage of both current and future mill capabilities.
About Gatos Silver
Gatos Silver is a silver dominant exploration, development and production company that discovered a new silver and zinc-rich mineral district in southern Chihuahua State, Mexico. As a 70% owner of the Los Gatos Joint Venture (“LGJV”), the Company is primarily focused on operating the Cerro Los Gatos mine and on growth and development of the Los Gatos district. The LGJV consists of approximately 103,000 hectares of mineral rights, representing a highly prospective and under-explored district with numerous silver-zinc-lead epithermal mineralized zones identified as priority targets.
Qualified Person
Scientific and technical disclosure in this press release was approved by Anthony (Tony) Scott, P.Geo., Senior Vice President of Corporate Development and Technical Services of Gatos Silver who is a “Qualified Person” as defined in S-K 1300 and NI 43-101.
Forward-Looking Statements
This press release contains statements that constitute “forward looking information” and “forward-looking statements” within the meaning of U.S. and Canadian securities laws. All statements other than statements of historical facts contained in this press release, including statements regarding mine debottlenecking, expected and potential mill throughput rates and associated production and capital costs, and further life extension opportunities are forward-looking statements. Forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements, and such other risks and uncertainties described in our filings with the U.S. Securities and Exchange Commission and Canadian securities commissions. Gatos Silver expressly disclaims any obligation or undertaking to update the forward-looking statements contained in this press release to reflect any change in its expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law. No assurance can be given that such future results will be achieved. Forward-looking statements speak only as of the date of this press release.
Investors and Media Contact
André van Niekerk
Gatos Silver, Inc. (NYSE/TSX: GATO) announced production results for the quarter and year ended December 31, 2023 at its 70%-owned Cerro Los Gatos mine in Mexico.
The company's silver and silver equivalent production exceeded 2023 guidance, with CEO Dale Andres commenting on the record mill throughput and potential future expansion.
Silver production for 2023 was 9.21 million ounces, close to the high end of upwardly revised guidance. Silver equivalent production was 14.33 million ounces, also near the high end of upwardly revised guidance.
The company plans to provide annual production and cost guidance for 2024 toward the end of February.
