Gatos Silver Reports Second Quarter 2024 Results

August 06, 2024

VANCOUVER, British Columbia, Aug. 06, 2024 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the “Company”) today announced its second quarter 2024 financial and operating results. The Company will host an investor and analyst call on August 7, 2024, details of which are provided below.

The Company has a 70% interest in the Los Gatos Joint Venture (“LGJV”), which in turn owns the Cerro Los Gatos (“CLG”) mine in Mexico. Production for the second quarter of 2024 was previously disclosed on July 9, 2024. The Company’s reporting currency is US dollars.

Dale Andres, CEO of Gatos Silver, commented: “The LGJV generated record revenue and free cash flow in quarter, reflecting significantly lower unit operating costs and higher metal prices combined with the strong previously reported production at CLG. The LGJV has distributed $95 million to its partners so far this year through July, with our share being $66.5 million.

“We remain on track to achieve 2024 production and cost guidance and we continue to expect that our updated life of mine plan scheduled for the third quarter of 2024 will further extend CLG’s mine life. We are also continuing to follow-up on the exciting initial exploration results we announced on July 23, as we continue to advance our district exploration program.”

Summary

LGJV Q2 2024 results compared to Q2 2023 (100% basis):

  • Record revenue of $94.2 million, up 62% from $58.3 million
  • Cost of sales $32.0 million, up 24% from $25.8 million
  • Record net income $20.5 million, up from $0.7 million
  • Record EBITDA $54.1 million1, up 101% from $27.0 million
  • Record cash flow from operations of $54.5 million, up 59% from $34.3 million
  • Record free cash flow $40.8 million1, up 107% from $19.7 million
  • Silver production 2.30 million ounces, up 15% from 2.00 million ounces
  • Silver equivalent production of 3.88 million ounces2, up 18% from 3.30 million ounces
  • By-product AISC of $6.571 per ounce of payable silver, down 54% from $14.32
  • Co-product AISC of $15.261 per ounce of payable silver, down 13% from $17.55

Gatos Silver Q2 2024 results compared to Q2 2023:

  • Net income of $9.2 million, up from net loss of $3.6 million
  • Basic and diluted earnings per share of $0.13, up from loss of $0.05
  • EBITDA of $8.2 million1, up from a $3.5 million loss
  • Cash flow provided by operating activities and free cash flow of $11.8 million1, compared to cash flow used by operating activities and free cash outflow of $3.8 million1

_________________________________
1 See “Non-GAAP Financial Measures” below.
2 See definition of silver equivalent production below

At the LGJV, the 62% increase in revenue in Q2 2024, compared to the same quarter in 2023, was primarily attributable to higher sales volumes and higher realized metal prices after final settlement adjustments. Cost of sales increased by 24% primarily due to a 29% increase in concentrate sales volumes and the associated increase in mining and milling rates. Site operating unit costs of $101.28/t milled were 3% lower than in Q2 2023. By-product AISC1 per ounce of payable silver decreased to $6.57 primarily due to significantly higher by-product production and sales volumes, further supported by lower sustaining capital1 expenditures during the quarter.

For Gatos Silver, higher net income, earnings per share and EBITDA1 for Q2 2024 were primarily attributable to the higher equity income from the LGJV. This was partially offset by an increase in general and administrative expenses, mainly due to higher non-cash stock-based compensation expenses of $1.6 million and higher legal and consulting expenses which are not expected to be recurring beyond 2024.

As of June 30, 2024, the Company had a cash balance of $82.5 million, up 17% from $70.6 million at the end of March 2024. The increase in cash was due to receipt of a $17.5 million capital distribution during the second quarter. On July 29, 2024, which was subsequent to the quarter end, the LGJV made a capital distribution to its partners of $40.0 million of which the Company received $28.0 million. As of July 31, 2024, the Company had a cash balance of $108.9 million and the LGJV had a cash balance of $24.4 million. The Company continues to be debt free with $50.0 million available under the revolving credit facility.

Financial and Operating Results

Below is select operational and financial information for the three and six months ended June 30, 2024 and 2023. For a detailed discussion of financial and operating results refer to the Form 10-Q for the three months ended June 30, 2024, filed on August 6, 2024 on both the EDGAR and SEDAR+ systems and posted on the Company’s website at https://gatossilver.com.

Los Gatos Joint Venture

LGJV 100% Basis
Selected Financial Information (Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions, except where otherwise stated)   2024     2023     2024     2023  
Revenue $ 94.2   $ 58.3   $ 166.4   $ 128.1  
Cost of sales   32.0     25.8     62.7     51.8  
Royalties and duties   0.7     0.3     1.0     0.7  
Exploration   1.6     0.7     3.0     1.1  
General and administrative   4.1     4.4     8.4     8.3  
Depreciation, depletion and amortization   20.8     22.0     41.1     42.8  
Other expense (income)   2.0     (0.4 )   2.2     (0.9 )
Income tax expense   12.5     4.7     17.3     10.7  
Net income and comprehensive income2 $ 20.5   $ 0.7   $ 30.7   $ 13.4  
Sustaining capital1 $ 11.4   $ 13.1   $ 20.3   $ 20.7  
Resource development drilling expenditures1 $ 1.9   $ 4.0   $ 5.1   $ 7.0  
EBITDA1 $ 54.1   $ 27.0   $ 89.3   $ 66.6  
Cash provided by operating activities $ 54.5   $ 34.3   $ 91.8   $ 74.4  
Free cash flow1 $ 40.8   $ 19.7   $ 66.3   $ 48.4  
         
Operating Results (CLG 100% Basis)        
Tonnes milled (dmt)   294,869     265,342     586,983     525,770  
Tonnes milled per day (dmt)   3,240     2,916     3,225     2,905  
Average Grades        
Silver grade (g/t)   273     265     279     296  
Zinc grade (%)   4.55     4.00     4.27     3.96  
Lead grade (%)   2.06     1.85     1.92     1.86  
Gold grade (g/t)   0.29     0.26     0.29     0.28  
Production - Contained Metal        
Silver ounces (millions)   2.30     2.00     4.67     4.43  
Zinc pounds – in zinc conc. (millions)   19.1     14.8     34.9     28.9  
Lead pounds – in lead conc. (millions)   12.0     9.7     22.2     19.1  
Gold ounces – in lead conc. (thousands)   1.36     1.20     2.75     2.58  
Silver equivalent ounces (millions)2   3.88     3.30     7.58     6.99  
Co-product cash cost per ounce of payable silver equivalent1 $ 11.83   $ 12.72   $ 11.70   $ 11.49  
By-product cash cost per ounce of payable silver1 $ 0.96   $ 7.10   $ 3.66   $ 4.66  
Co-product AISC per ounce of payable silver equivalent1 $ 15.26   $ 17.55   $ 14.73   $ 14.94  
By-product AISC per ounce of payable silver1 $ 6.57   $ 14.32   $ 8.42   $ 9.80  
         
Sales volumes by payable metal        
Silver ounces (millions)   2.03     1.81     4.27     4.03  
Zinc pounds – in zinc conc. (millions)   15.9     11.7     29.6     23.7  
Lead pounds – in lead conc. (millions)   11.0     9.0     21.0     17.9  
Gold ounces – in lead conc. (thousands)   0.97     0.93     2.15     2.06  
Copper pounds – in lead conc. (millions)   0.03         0.10      
         
Average realized price by payable metal        
Average realized price per silver ounce4 $ 29.00   $ 24.11   $ 25.80   $ 25.48  
Average realized price per zinc pound4 $ 1.53   $ 0.99   $ 1.32   $ 1.21  
Average realized price per lead pound4 $ 0.96   $ 0.92   $ 0.91   $ 0.99  
Average realized price per gold ounce4 $ 2,200   $ 1,817   $ 2,057   $ 1,801  
Average realized price per copper pound4 $ 3.74   $   $ 3.83   $  

1 See Non-GAAP Financial Measures below
2 Totals may not add up due to rounding
3 Silver equivalent production for 2024 is calculated using prices of $23/oz silver, $1.20/lb zinc, $0.90/lb lead and $1,800/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). For 2023, silver equivalent production was calculated using prices of $22/oz silver, $1.20/lb zinc, $0.90/lb lead and $1,700/oz gold. For comparative purposes, the calculated silver equivalent production for the three and six months ended June, 2023 would be 3.24 million ounces and 6.89 million ounces, respectively, using price assumptions for 2024.
4 Realized prices include the impact of final settlement adjustments from sales

Gatos Silver, Inc.

Selected Financial Information (Unaudited) Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions, except where otherwise stated)   2024     2023     2024     2023  
General and Administrative $ 7.9   $ 6.1   $ 14.8   $ 11.7  
Total expenses   7.9     6.1     14.9     11.8  
Equity income in affiliates   14.5     1.5     21.8     6.5  
Other income, net   2.7     1.1     5.0     2.5  
Total net other income   17.2     2.6     26.8     9.0  
Net income (loss) and comprehensive income (loss)2 $ 9.2   $ (3.6 ) $ 11.7   $ (2.8 )
Net income (loss) and comprehensive income (loss) per share (basic and diluted) $ 0.13   $ (0.05 ) $ 0.17   $ (0.04 )
         
EBITDA1 $ 8.2   $ (3.5 ) $ 10.0   $ (2.6 )
Cash provided (used) by operating activities $ 11.8   $ (3.8 ) $ 26.9   $ (7.9 )
Free cash flow1 $ 11.8   $ (3.8 ) $ 26.9   $ (7.9 )

1 See Non-GAAP Financial Measures below
2 Totals may not add up due to rounding

2024 Guidance (CLG 100% basis)

Gatos Silver continues to expect plant throughput in 2024 to average in the top half of our previously announced guidance range of 3,000 and 3,300 tonnes processed per day and compares to 2,935 tonnes per day in 2023. Mine debottlenecking efforts are continuing to help achieve our medium-term target of sustaining 3,500 tonnes per day beyond 2024, or 40% above original design capacity.

We continue to expect both silver equivalent and silver production to be in the top half of our previously announced guidance ranges of 13.5 to 15.0 million ounces and 8.4 to 9.2 million ounces respectively for the full year in 2024, and full year co-product and by-product AISCs to remain in the lower half of our original guidance ranges of $14.00 to $16.00 per ounce of payable silver equivalent and $9.50 to $11.50 per ounce of payable silver.

Financial Results Webcast and Conference Call

Investors and analysts are invited to attend the financial results webcast and conference call as follows:

Date: Wednesday, August 7, 2024

Time: 11:00 a.m. ET

Listen-Only Webcast: https://events.q4inc.com/attendee/924567096

Direct Event Registration Link (for Analysts only): https://registrations.events/direct/Q4I98433134

An archive of the webcast will be available on the Company’s website at: https://gatossilver.com within 24 hours.

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 includes 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.

Non-GAAP Financial Measures

We use certain measures that are not defined by GAAP to evaluate various aspects of our business. These non-GAAP financial measures are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.

Cash Costs and All-In Sustaining Costs

Cash costs and all-in sustaining costs (“AISC”) are non-GAAP measures. AISC was calculated based on guidance provided by the World Gold Council (“WGC”). WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as definitional differences of sustaining versus expansionary (i.e. non-sustaining) capital expenditures based upon each company’s internal policies. Current GAAP measures used in the mining industry, such as cost of sales, do not capture all of the expenditures incurred to discover, develop and sustain production. Therefore, we believe that cash costs and AISC are non-GAAP measures that provide additional information to management, investors and analysts that aid in the understanding of the economics of the Company’s operations and performance compared to other producers and provides investors visibility by better defining the total costs associated with production.

Cash costs include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, treatment and refining costs, general and administrative costs, royalties and mining production taxes. AISC includes total production cash costs incurred at the LGJV’s mining operations plus sustaining capital expenditures. The Company believes this measure represents the total sustainable costs of producing silver from current operations and provides additional information of the LGJV’s operational performance and ability to generate cash flows. As the measure seeks to reflect the full cost of silver production from current operations, new project and expansionary capital at current operations are not included. Certain cash expenditures such as exploration, new project spending, tax payments, dividends, and financing costs are not included.

EBITDA

Management uses earnings before interest, income tax, depreciation, depletion and amortization (“EBITDA”) to evaluate the Company’s operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. The Company believes the use of EBITDA reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. EBITDA do not represent, and should not be considered an alternative to, net income (loss) or cash flow from operations as determined under GAAP.

Free Cash Flow

Management uses free cash flow as a non-GAAP measure to analyze cash flows generated from operations. Free cash flow is cash provided by (used in) operating activities less cash flow from (used in) investing activities, as presented on the condensed consolidated statements of cash flows. The Company believes free cash flow is also useful as one of the bases for comparing the Company’s performance with its competitors. Although free cash flow and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s calculation of free cash flow is not necessarily comparable to such other similarly titled captions of other companies.

Reconciliation of GAAP to non-GAAP measures

The table below presents a reconciliation between the most comparable GAAP measure of the LGJV’s expenses to the non-GAAP measures of (i) cash costs, (ii) cash costs, net of by-product credits, (iii) co-product AISC and (iv) by-product AISC for our operations.

CLG 100% Basis
Financial
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except where otherwise stated)   2024     2023     2024     2023  
Expenses $ 59,180   $ 53,215   $ 116,193   $ 104,839  
Depreciation, depletion and amortization   (20,821 )   (22,027 )   (41,077 )   (42,846 )
Exploration1   (1,601 )   (657 )   (2,972 )   (1,120 )
Treatment and refining costs2   2,339     3,917     6,296     8,072  
Cash costs (A) $ 39,097   $ 34,448   $ 78,440   $ 68,945  
Sustaining capital3   11,357     13,100     20,301     20,742  
Co-product AISC (B) $ 50,454   $ 47,548   $ 98,741   $ 89,687  
By-product credits4   (37,144 )   (21,574 )   (62,818 )   (50,161 )
AISC, net of by-product credits (C) $ 13,310   $ 25,974   $ 35,923   $ 39,526  
Cash costs, net of by-product credits (D) $ 1,953   $ 12,874   $ 15,622   $ 18,784  
         
Payable ounces of silver equivalent5 (E)   3,306     2,709     6,703     6,002  
Co-product cash cost per ounce of payable silver equivalent (A/E) $ 11.83   $ 12.72   $ 11.70   $ 11.49  
Co-product AISC per ounce of payable silver equivalent (B/E) $ 15.26   $ 17.55   $ 14.73   $ 14.94  
         
Payable ounces of silver (F)   2,025     1,814     4,268     4,033  
By-product cash cost per ounce of payable silver (D/F) $ 0.96   $ 7.10   $ 3.66   $ 4.66  
By-product AISC per ounce of payable silver (C/F) $ 6.57   $ 14.32   $ 8.42   $ 9.80  

1 Exploration costs are not related to current mining operations.
2 Represent reductions on customer invoices and are included in revenue of the LGJV combined statement of operations and comprehensive income.
3 Sustaining capital excludes resource development drilling costs related to resource development drilling of the South- East Deeps zone.
4 By-product credits reflect realized metal prices of zinc, lead and gold for the applicable period, which includes any final settlement adjustments from prior periods.
5 Silver equivalents utilize the average realized prices during the six months ended June 30, 2024, of $25.80/oz silver, $1.32/lb zinc, $0.91/lb lead, $2,057/oz gold and $3.83/lb copper and the average realized prices during the three months ended June 30, 2024, of $29.00/oz silver, $1.53/lb zinc, $0.96/lb lead and $2,200/oz gold and $3.74/lb copper. Silver equivalents utilize the average realized prices during the six months ended June 30, 2023, of $25.48/oz silver, $1.21/lb zinc, $0.99/lb lead and $1,801/oz gold and the average realized prices during the three months ended June 30, 2023, of $24.11/oz silver, $0.99/lb zinc, $0.92/lb lead and $1,817/oz gold. The average realized prices are determined based on revenue inclusive of final settlements.

The following table provides a breakdown of cash flows used by investing activities of the LGJV and a reconciliation of sustaining capital and resource development drilling to that measure:

  Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)   2024     2023     2024     2023  
Cash flow used by investing activities $ 13,729   $ 14,626   $ 25,557   $ 25,992  
Sustaining capital   11,357     13,100     20,301     20,742  
Resource development drilling   1,885     4,041     5,107     7,047  
Materials & supplies       914         1,426  
Change in capital-related accounts payable   487     (3,429 )   149     (3,223 )
Total $ 13,729   $ 14,626   $ 25,557   $ 25,992  


The table below reconciles EBITDA, a non-GAAP measure to net income (loss) and comprehensive income (loss) for the Company:

  Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)   2024     2023     2024     2023  
Net income (loss) and comprehensive income (loss) $ 9,156   $ (3,593 ) $ 11,688   $ (2,758 )
Interest expense       183         347  
Interest income   (1,117 )   (126 )   (1,884 )   (287 )
Income tax expense   129         172      
Depreciation, depletion and amortization   3     34     7     71  
EBITDA $ 8,171   $ (3,502 ) $ 9,983   $ (2,627 )


The table below reconciles of EBITDA, a non-GAAP measure, to the LGJV’s net income and comprehensive income:

  Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)   2024     2023     2024     2023  
Net income and comprehensive income $ 20,487   $ 746   $ 30,659   $ 13,447  
Interest expense   554     15     749     141  
Interest income   (270 )   (555 )   (543 )   (555 )
Income tax expense   12,544     4,741     17,319     10,698  
Depreciation, depletion and amortization   20,821     22,027     41,077     42,846  
EBITDA $ 54,136   $ 26,974   $ 89,261   $ 66,577  


The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided (used) by operating activities operating activities for the Company, which the Company believes to be the GAAP financial measure most directly comparable to free cash flow.

  Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)   2024     2023     2024     2023  
Net cash provided (used) by operating activities $ 11,799   $ (3,762 ) $ 26,935   $ (7,865 )
Net cash used by investing activities                
Free cash flow $ 11,799   $ (3,762 ) $ 26,935   $ (7,865 )


The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities for the LGJV.

  Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)   2024     2023     2024     2023  
Net cash provided by operating activities $ 54,483   $ 34,321   $ 91,808   $ 74,365  
Net cash used by investing activities   (13,729 )   (14,626 )   (25,557 )   (25,992 )
Free cash flow $ 40,754   $ 19,695   $ 66,251   $ 48,373  


Please see Appendix A for the unaudited condensed consolidated balance sheets of the Company and the LGJV as of June 30, 2024 and December 31, 2023, the related unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) of the Company, unaudited combined statements of operations and comprehensive income of the LGJV for the three and six months ended June 30, 2024 and 2023, and unaudited statements of cash flows for the six months ended June 30, 2024 and 2023.

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 prospective exploration, timing of an updated life of mine plan, guidance for 2024 including processing rates, production and AISC 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
Chief Financial Officer
investors@gatossilver.com
(604) 424 0984

APPENDIX A

GATOS SILVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

  June 30, December 31,
(US$ in thousands)   2024       2023  
ASSETS    
Current Assets    
Cash and cash equivalents $ 82,476     $ 55,484  
Related party receivables   155       560  
Other current assets   1,593       22,642  
Total current assets   84,224       78,686  
Non-Current Assets    
Investment in affiliates   305,228       321,914  
Deferred tax assets   200       266  
Other non-current assets   382       38  
Total Assets $ 390,034     $ 400,904  
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current Liabilities    
Accounts payable and other accrued liabilities $ 8,938     $ 33,357  
Non-Current Liabilities    
Lease liability   218        
Stockholders’ Equity    
Common Stock, $0.001 par value; 700,000,000 shares authorized; 69,341,227 and 69,181,047 shares outstanding as of June 30, 2024 and December 31, 2023, respectively   117       117  
Paid-in capital   554,962       553,319  
Accumulated deficit   (174,201 )     (185,889 )
Total stockholders’ equity   380,878       367,547  
Total Liabilities and Stockholders’ Equity $ 390,034     $ 400,904  
 

GATOS SILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

(US$ in thousands, except for share data)

Three Months Ended June 30, Six months ended June 30,
  2024       2023       2024       2023  
Expenses        
Exploration $ 44     $     $ 75     $ 26  
General and administrative   7,872       6,127       14,835       11,663  
Amortization   3       34       7       71  
Total expenses   7,919       6,161       14,917       11,760  
Other income        
Equity income in affiliates   14,526       1,474       21,814       6,485  
Interest expense         (183 )           (347 )
Interest income   1,117       126       1,884       287  
Other income   1,561       1,151       3,079       2,577  
Other income   17,204       2,568       26,777       9,002  
Income (loss) before taxes   9,285       (3,593 )     11,860       (2,758 )
Income tax expense   129             172        
Net income (loss) and comprehensive income (loss) $ 9,156     $ (3,593 )   $ 11,688     $ (2,758 )
Net income (loss) per share:        
Basic and diluted $ 0.13     $ (0.05 )   $ 0.17     $ (0.04 )
Weighted average shares outstanding:        
Basic   69,217,512       69,162,223       69,199,280       69,162,223  
Diluted   71,096,361       69,162,223       70,793,043       69,162,223  
                               

GATOS SILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

  Six months ended June 30,
(US$ in thousands)   2024       2023  
OPERATING ACTIVITIES    
Net income (loss) and comprehensive income (loss) $ 11,688     $ (2,758 )
     
Adjustments to reconcile net income to net cash provided (used) by operating activities:    
Amortization   7       71  
Stock-based compensation expense   3,295       1,205  
Equity income in affiliates   (21,814 )     (6,485 )
Deferred tax recovery   57        
Other   60        
Distributions received from affiliate   38,500        
     
Changes in operating assets and liabilities:    
Receivables from related‑parties   405       (389 )
Accounts payable and other accrued liabilities   (26,338 )     (648 )
Other current assets   21,075       1,139  
Net cash provided (used) by operating activities   26,935       (7,865 )
     
INVESTING ACTIVITIES    
Net cash used by investing activities          
     
FINANCING ACTIVITIES    
Proceeds from exercise of stock options   111        
Lease payments   (54 )      
Net cash used by financing activities   (57 )      
Net increase (decrease) in cash and cash equivalents   26,992       (7,865 )
Cash and cash equivalents, beginning of period   55,484       17,004  
Cash and cash equivalents, end of period $ 82,476     $ 9,139  
     
Interest paid $ 11     $ 364  
Interest earned $ 1,884     $ 287  
               

LOS GATOS JOINT VENTURE
COMBINED BALANCE SHEETS
(UNAUDITED)

  June 30, December 31,
(US$ in thousands)   2024       2023  
ASSETS    
Current Assets    
Cash and cash equivalents $ 45,523     $ 34,303  
Receivables   12,559       12,634  
Inventories   15,782       16,397  
VAT receivable   12,781       12,610  
Income tax receivable   13,580       20,185  
Other current assets   2,652       1,253  
Total current assets   102,877       97,382  
Non-Current Assets    
Mine development, net   231,138       234,980  
Property, plant and equipment, net   161,171       171,965  
Deferred tax assets   2,783       9,568  
Total non-current assets   395,092       416,513  
Total Assets $ 497,969     $ 513,895  
LIABILITIES AND OWNERS’ CAPITAL    
Current Liabilities    
Accounts payable and accrued liabilities $ 47,293     $ 38,704  
Related party payable   192       560  
Total current liabilities   47,485       39,264  
Non-Current Liabilities    
Lease liability   172       208  
Asset retirement obligation   12,027       11,593  
Deferred tax liabilities   3,681       3,885  
Total non-current liabilities   15,880       15,686  
Owners’ Capital    
Capital contributions   400,638       455,638  
Paid-in capital   18,186       18,186  
Retained earnings (accumulated deficit)   15,780       (14,879 )
Total owners’ capital   434,604       458,945  
Total Liabilities and Owners’ Capital $ 497,969     $ 513,895  
 

LOS GATOS JOINT VENTURE
COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

  Three months ended June 30, Six months ended June 30,
(US$ in thousands)   2024       2023       2024       2023  
Revenue $ 94,198     $ 58,259     $ 166,416     $ 128,124  
Expenses        
Cost of sales   31,956       25,821       62,727       51,809  
Royalties and duties   713       308       1,043       726  
Exploration   1,601       657       2,972       1,120  
General and administrative   4,089       4,402       8,374       8,338  
Depreciation, depletion and amortization   20,821       22,027       41,077       42,846  
Total expenses   59,180       53,215       116,193       104,839  
         
Other expense (income)        
Accretion expense   218       296       435       593  
Interest expense   554       15       749       141  
Interest income   (270 )     (555 )     (543 )     (555 )
Other expense   653       43       648       31  
Foreign exchange loss (gain)   832       (242 )     956       (1,070 )
    1,987       (443 )     2,245       (860 )
         
Income before taxes   33,031       5,487       47,978       24,145  
Income tax expense   12,544       4,741       17,319       10,698  
Net income and comprehensive income $ 20,487     $ 746     $ 30,659     $ 13,447  
 

LOS GATOS JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)

  Six months ended June 30,
(US$ in thousands)   2024       2023  
Cash flows from operating activities:    
Net income and comprehensive income $ 30,659     $ 13,447  
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation, depletion and amortization   41,077       42,846  
Accretion   435       593  
Deferred taxes   6,691       5,453  
Unrealized gain on foreign currency rate change   1,016       (55 )
Other         (7 )
     
Changes in operating assets and liabilities:    
VAT receivable   (442 )     5,828  
Receivables   75       20,910  
Inventories   178       (400 )
Other current assets   (1,404 )     (1,281 )
Income tax receivable   4,912       (2,459 )
Accounts payable and other accrued liabilities   8,978       (10,884 )
Payables to related parties   (367 )     374  
Net cash provided by operating activities   91,808       74,365  
     
Cash flows from investing activities:    
Mine development   (21,071 )     (18,597 )
Purchase of property, plant and equipment   (4,486 )     (8,718 )
Materials and supplies inventory         1,323  
Net cash used by investing activities   (25,557 )     (25,992 )
     
Cash flows from financing activities:    
Equipment loan and lease payments   (31 )     (503 )
Capital distributions   (55,000 )      
Net cash used by financing activities   (55,031 )     (503 )
     
Net Increase in cash and cash equivalents   11,220       47,870  
Cash and cash equivalents, beginning of period   34,303       34,936  
Cash and cash equivalents, end of period $ 45,523     $ 82,806  
Interest paid $ 419     $ 132  
Interest earned $ 543     $ 555  


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Source: Gatos Silver, Inc.