- Mine Life Extended by 2.75 Years to the End of 2030 with 46% Increase in Total Silver Production
- Significant Opportunities Available for Further Optimization, Growth and Mine Life Extension
VANCOUVER, British Columbia, Sept. 06, 2023 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (TSX:GATO) ("Gatos Silver" or the "Company") today reported an updated mineral reserve estimate (the "2023 Mineral Reserve"), mineral resource estimate (the "2023 Mineral Resource") and life of mine ("LOM") plan (the "2023 LOM Plan", and together with the 2023 Mineral Reserve and 2023 Mineral Resource, the "2023 Updates") for the Cerro Los Gatos Mine ("CLG") with an effective date of July 1, 2023. The Company will host an investor and analyst call on September 7, 2023, details of which are provided below.
The Company has a 70% interest in the Los Gatos Joint Venture ("LGJV"), which in turn owns the CLG mine in Mexico. All dollar amounts are expressed in, and references to "$" refer to, United States dollars unless otherwise noted.
Dale Andres, CEO of Gatos Silver said: "We have achieved significant life extension objectives with this updated mineral reserve estimate, exceeding our target of adding one to two years. The new life of mine plan, which is based on recent operating performance, demonstrates our continued confidence in CLG's ability to deliver robust margins and consistent cash flow. Gatos Silver has a strong balance sheet and remains debt free, with regular cash distributions to the joint venture partners expected throughout CLG's mine life. We continue to believe there remains substantial additional value at CLG and we are now analyzing a number of projects with the potential to further improve margins and mine life as we move forward. In the near term, the LGJV is continuing to define the South-East Deeps area and ramp up exploration efforts in the Los Gatos district with the mobilization of a seventh surface drill rig this month."
Summary
- Robust CLG 2023 LOM Plan with strong and consistent annual cash flow profile (100% basis):
- Mine life extended from early 2028 through to the end of 2030, an addition of 2.75 years
- Average annual after-tax free cash flow1 of $75 million, resulting in an after-tax net present value ("NPV")2 of $462 million, an increase of $123 million from the 2022 LOM from July 1, 2023 onwards
- Sustaining capital costs of $160 million, a $93 million increase from the 2022 LOM to support the longer mine life including additional underground mine development and tailings storage capacity
- Attractive by-product all-in sustaining costs ("AISC")1 of $7.703 per ounce of payable silver
- Total silver production over the remaining mine life expected to increase by 46% and total silver equivalent production4 expected to increase by 50%
- Average annual production of 7.7 million ounces of silver expected during the 2024 to 2026 period
- Average annual production over the LOM of 6.6 million ounces of silver, 65 million pounds of zinc and 47 million pounds of lead, or 12.4 million ounces of silver equivalent4 production
- Additional drilling has delivered a significant increase to the 2023 Mineral Reserve:
- 2023 Mineral Reserve of 8.1 million tonnes at 217 g/t silver, 4.32% zinc, 2.20% lead, 0.25 g/t gold and 0.15% copper, with 56.3 million ounces of contained silver
- 61,520 additional metres of diamond drilling used in the block model estimation including 284 underground holes and 51 surface holes, an increase of 28%
- 1.8 million tonnes of the 2023 Mineral Reserve increase is in the South-East zone, inclusive of 328,000 tonnes below 1,100 metre elevation level in the South-East Deeps area
- South-East Deeps discovery in 2022 has resulted in a significant increase to the 2023 Mineral Resource:
- As first announced in October 2022, a deeper zone of mineralization, South-East Deeps, was discovered extending up to 415m below the 2022 Mineral Reserve
- The first stage of drilling completed on the South-East Deeps zone (up until March 31, 2023) has resulted in an inferred resource estimate for CLG of 4.6 million tonnes at 100 g/t silver, 3.40% zinc, 2.32% lead, 0.21 g/t gold and 0.40% copper
- 2023 Mineral Resource includes 0.4 million tonnes of measured and indicated resource at 93 g/t silver, 3.55% zinc, 1.88% lead, 0.25 g/t gold and 0.14% copper
- Substantial opportunities remain to increase mine life and further improve margins at CLG:
- As previously announced, the infill drilling and exploration budget for 2023 was increased by $3 million to $16 million with a seventh surface drill rig being mobilized this month
- Current drilling is focused on converting the higher-grade portions of the inferred resource in the South-East Deeps zone to measured and indicated resources, with a target of adding 3 to 4 years of mine life over the next 12 months
- Increased drilling of near mine and district exploration targets planned during Q4-2023 and 2024
- Capital efficient modifications to the existing plant are being evaluated in conjunction with further mine life extension efforts including; a pyrite leach circuit to increase silver and gold recovery, a copper separation circuit to produce copper concentrate and potential mill throughput growth up to 4,000 tpd
1 See Non-GAAP Financial Measures below.
2 NPV is as of July 1, 2023 using a 5% discount rate. NPV and free cash flow assume base case prices of $22/oz silver, $1.20/lb zinc, $0.90/lb lead, $1,700/oz gold, $3.50/lb copper and a Mexican Peso exchange rate of MXN 20.00 per US$1.00.
3 Includes LGJV management fee and administrative costs. Refer to Table 11 for AISC details.
4 Silver equivalent production is calculated using base case price assumptions to "convert" zinc, lead and gold production contained in concentrate to "equivalent" silver ounces (contained metal, multiplied by price, divided by silver price). Copper is excluded due to relatively low payable terms for copper in lead concentrate.
2023 CLG LOM Plan Update Summary
Table 1 presents a comparison of key metrics of the 2023 LOM Plan to the 2022 LOM Plan considering the comparable periods from July 1, 2023 onwards (the effective date of the 2023 LOM Plan).
Total silver production in the 2023 LOM Plan has increased by 46% compared with the 2022 LOM Plan, with slightly higher average mill throughput of 2,949 tpd and similar unit operating costs. Silver production averages 6.6 million ounces per year over the mine life and averages 7.7 million ounces during the 2024 to 2026 period. Figures 1 and 2 present annual mill throughput rates and silver head grades, and silver production and by-product AISC, respectively.
Table 1 – Summary of the 2023 LOM Plan and Comparison to the 2022 LOM Plan(1,2)
2023 LOM Plan (H2'23+) | 2022 LOM Plan (H2'23+) | Change | Change (%) | |
Total Mill Throughput (Mt) | 8.08 | 5.03 | 3.05 | 61% |
Average Mill Throughput rate (tpd) | 2,949 | 2,900 | 49 | 2% |
Total Silver Production (Moz) | 49.7 | 34.1 | 15.6 | 46% |
Total Silver Equivalent Production (Moz) | 93.1 | 62.0 | 31.1 | 50% |
Average Silver Production (Moz / year)(1) | 6.6 | 7.2 | (0.5) | (8%) |
Average Zinc Production (Mlbs / year)(1) | 64.5 | 67.2 | (2.7) | (4%) |
Average Lead Production (Mlbs / year)(1) | 46.8 | 44.8 | 2.1 | 5% |
Average Silver Equivalent Production (Moz / year) | 12.4 | 13.1 | (0.6) | (5%) |
Site Operating Costs ($ / tonne milled) | $88.67 | $88.95 | ($0.28) | 0% |
Sustaining Capital () | $160.2 | $67.6 | $92.7 | 137% |
By-Product AISC ($/oz Ag pay.)(2) | $7.70 | $6.87 | $0.82 | 12% |
Co-Product AISC ($/oz AgEq pay.)(2) | $14.30 | $13.55 | $0.74 | 5% |
Total Undiscounted Free Cash Flow () | $547.5 | $381.2 | $166.3 | 44% |
Post-Tax NPV (5%, ) | $461.7 | $338.6 | $123.1 | 36% |
(1) | Silver production is silver contained in Pb and Zn concentrates, zinc production is zinc contained in Zn concentrate, lead production is lead contained in Pb concentrate. |
(2) | By-product AISC and Co-product AISC include the LGJV management fee and administrative costs of $1.09 / oz Ag payable and $0.59 / oz AgEq payable, respectively in the 2023 LOM Plan and $0.89 / oz Ag payable and $0.50 AgEq payable, respectively in the 2022 LOM Plan from July 1, 2023. Refer to Table 11 for AISC details. |
Figure 1 – Mill Throughput and Silver Grade (2023 LOM Plan and 2022 LOM Plan)
Figure 2 – Silver Production and By-Product AISC (2023 LOM Plan and 2022 LOM Plan)
2023 CLG Mineral Reserve and Mineral Resource Tables
The 2023 Mineral Reserve for CLG by reserve category is summarized in Table 2 and the CLG 2023 Mineral Resource reported by category is summarized in Table 3.
Table 2: 2023 CLG Mineral Reserve as at July 1 2023 (1,2,3,4,5,6,7,8,9,10)
Mt | Ag (g/t) | Zn (%) | Pb (%) | Au (g/t) | Cu (%) | Ag (Moz) | Zn (Mlbs) | Pb (Mlbs) | Au (koz) | Cu (Mlbs) | |
Proven | 3.46 | 317 | 4.39 | 2.17 | 0.31 | 0.09 | 35.3 | 335.0 | 165.7 | 34.7 | 6.9 |
Probable | 4.62 | 141 | 4.27 | 2.23 | 0.20 | 0.19 | 21.0 | 435.3 | 226.6 | 29.3 | 19.5 |
Proven and Probable | 8.08 | 217 | 4.32 | 2.20 | 0.25 | 0.15 | 56.3 | 770.2 | 392.3 | 64.0 | 26.4 |
(1) | Mineral Reserves are reported on a 100% basis and exclude all mineral reserve material mined prior to July 1, 2023. |
(2) | Specific gravity has been assumed on a dry basis. |
(3) | Tonnage and contained metal have been rounded to reflect the accuracy of the estimate and numbers may not sum exactly. |
(4) | Values are inclusive of mining recovery and dilution. Values are determined as of delivery to the mill and therefore not inclusive of milling recoveries. |
(5) | Mineral Reserves are reported within stope shapes using a variable cut-off basis with a Ag price of US$22/oz, Zn price of US$1.20/lb, Pb price of US$0.90/lb, Au price of US$1,700/oz and Cu price of $3.50/lb. |
(6) | The Mineral Reserve is reported on a fully diluted basis defined by mining method, stope geometry and ground conditions. |
(7) | Contained Metal (CM) is calculated as follows: |
• Zn, Pb and Cu, CM (Mlb) = Tonnage (Mt) * Grade (%) / 100 * 2204.6 | |
• Ag and Au, CM (Moz) = Tonnage (Mt) * Grade (g/t) / 31.1035 ; multiply Au CM (Moz) by 1000 to obtain Au CM (koz) | |
(8) | The SEC definitions for Mineral Reserves in Regulation S-K 1300 were used for Mineral Reserve classification and are consistent with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (CIM (2014) definitions). |
(9) | Under SEC Regulation S-K 1300, a Mineral Reserve is defined as an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted. |
(10) | The Mineral Reserve estimates were prepared under the supervision of Mr. Stephan Blaho, P.Eng. an employee of WSP Canada Inc. who is the independent Qualified Person for these Mineral Reserve estimates. |
Table 3: 2023 CLG Mineral Resource as at July 1 2023 (Exclusive of Mineral Reserves) (1,2,3,4,5,6,7,8,9,10,11)
Mt | Ag (g/t) | Zn (%) | Pb (%) | Au (g/t) | Cu (%) | Ag (Moz) | Zn (Mlbs) | Pb (Mlbs) | Au (koz) | Cu (Mlbs) | |
Measured | 0.05 | 141 | 2.50 | 1.70 | 0.40 | 0.05 | 0.2 | 2.9 | 2.0 | 0.7 | 0.1 |
Indicated | 0.34 | 85 | 3.71 | 1.90 | 0.23 | 0.15 | 0.9 | 28.1 | 14.4 | 2.5 | 1.1 |
Measured and Indicated | 0.40 | 93 | 3.55 | 1.88 | 0.25 | 0.14 | 1.2 | 30.9 | 16.4 | 3.2 | 1.2 |
Inferred | 4.58 |