Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gatos Silver Inc (GATO, Financial) entered into a merger agreement with First Majestic, consolidating three world-class silver districts in Mexico, expected to close in Q1 2025.
- The Los Gatos Joint Venture achieved record cash flow from operations and free cash flow, with $42.6 million in the third quarter.
- Revised guidance upward for 2024, with increased silver production expected between 9.2 million and 9.7 million ounces.
- Site operating unit costs decreased by 8% compared to the previous year, with continuous improvement initiatives driving costs lower.
- The life of mine extended to 2032, with a 36% increase in expected silver equivalent production over the life of mine.
Negative Points
- The company remains mine-limited, requiring monthly mill shutdowns for maintenance, impacting operational efficiency.
- All-in sustaining costs per payable ounce of silver equivalent were slightly above guidance due to higher realized silver prices.
- General and administrative expenses increased by $2.9 million, primarily due to costs associated with the proposed merger.
- Income tax expense increased significantly to $13.9 million due to higher taxable income.
- Despite strong performance, the company faces inflationary pressures and a strengthening Mexican peso impacting cost management.
Q & A Highlights
Q: Can you provide an update on the merger with First Majestic?
A: Dale Andres, CEO: The merger with First Majestic is expected to close in the first quarter of 2025. We are currently progressing through the Mexican antitrust approval process and securities regulatory approvals.
Q: How did the Los Gatos Joint Venture perform financially in the third quarter?
A: Andre van Niekerk, CFO: The Los Gatos Joint Venture had a strong quarter with cash flow from operations reaching $58.2 million, a new quarterly record. Free cash flow was $42.6 million, significantly higher than the previous year, driven by higher metal prices and sales volumes.
Q: What are the expectations for silver production and costs for the full year 2024?
A: Dale Andres, CEO: We have increased our full-year silver production guidance to between 9.2 million and 9.7 million ounces. All-in sustaining costs are expected to be between $8.50 and $10 per ounce of payable silver, reflecting a decrease from our original guidance.
Q: Can you elaborate on the exploration activities in the Los Gatos district?
A: Dale Andres, CEO: We are focusing on resource expansion near the mine and broader district growth. Initial results from Central Deeps are promising, and we are drilling in the San Luis and Lince areas, which have not been explored in the past decade.
Q: What is the current cash position of Gatos Silver?
A: Andre van Niekerk, CFO: Gatos Silver ended the third quarter with a cash balance of $116.7 million. The company and the Los Gatos Joint Venture remain debt-free, and we continue to receive regular distributions from the joint venture.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
