Exhibit 99.1 925 W Georgia St, Suite 910 Vancouver, British Columbia V6C 3L2 (604) 424-0984 www.gatossilver.com GATOS SILVER REPORTS FIRST QUARTER 2024 RESULTS AND ANNOUNCES INVESTOR CALL Vancouver, BC — May 6, 2024 — Gatos Silver, Inc. (NYSE/TSX: GATO) ("Gatos Silver" or the "Company") today announced its first quarter 2024 financial and operating results. The Company will host an investor and analyst call on May 7, 2024, details of which are provided below. The Company has a 70% interest in the Los Gatos ...

VANCOUVER, British Columbia, May 06, 2024 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (TSX:GATO) ("Gatos Silver" or the "Company") today announced its first quarter 2024 financial and operating results. The Company will host an investor and analyst call on May 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 first quarter of 2024 was previously disclosed on April ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Q1 2024 include balance sheets, income, equity, and cash flow statements [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $382.4 million, driven by a reduction in investment in affiliates, while stockholders' equity increased | ASSETS (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $70,586 | $55,484 | | Other current assets | $2,486 | $22,642 | | Investment in affiliates | $308,202 | $321,914 | | Total Assets | $382,399 | $400,904 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable and other accrued liabilities | $10,376 | $33,357 | | Total stockholders' equity | $371,768 | $367,547 | | Total Liabilities and Stockholders' Equity | $382,399 | $400,904 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Net income increased to $2.5 million for Q1 2024, a significant rise from $0.8 million in the prior-year period | (in thousands, except share amounts) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total expenses | $6,998 | $5,599 | | Equity income in affiliates | $7,288 | $5,011 | | Interest income | $767 | $161 | | Other income | $1,518 | $1,426 | | Income before taxes | $2,575 | $835 | | Net income and comprehensive income | $2,532 | $835 | | Net income per share (Basic and Diluted) | $0.04 | $0.01 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased to $371.8 million, primarily due to net income and stock-based compensation expenses | (in thousands) | Balance at Dec 31, 2023 | Stock-based compensation | DSU compensation | Net income | Balance at Mar 31, 2024 | | :------------------------- | :---------------------- | :----------------------- | :--------------- | :--------- | :---------------------- | | Common Stock (Amount) | 117 | — | — | — | 117 | | Paid-in Capital | 553,319 | 1,681 | 8 | — | 555,008 | | Accumulated deficit | (185,889) | — | — | 2,532 | (183,357) | | Total Stockholders' Equity | 367,547 | 1,681 | 8 | 2,532 | 371,768 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash from operating activities improved to $15.1 million, largely due to a $21.0 million distribution from an affiliate | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $2,532 | $835 | | Equity income in affiliates | $(7,288) | $(5,011) | | Distribution received from affiliate | $21,000 | — | | Net cash provided (used) by operating activities | $15,136 | $(4,103) | | Net cash used by financing activities | $(34) | — | | Net increase (decrease) in cash and cash equivalents | $15,102 | $(4,103) | | Cash and cash equivalents, end of period | $70,586 | $12,901 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, financial statement components, related party transactions, and contingencies [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) The unaudited interim statements are prepared per GAAP and should be read with the 2023 Annual Report on Form 10-K - The interim condensed consolidated financial statements are unaudited and include all necessary recurring adjustments for fair presentation, prepared in accordance with GAAP for interim financial information[17](index=17&type=chunk) - These statements should be read in conjunction with the Company's audited consolidated financial statements in the 2023 10-K[17](index=17&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) No material changes were made to significant accounting policies from those disclosed in the 2023 10-K - **No material changes** to significant accounting policies previously identified in the 2023 10-K[18](index=18&type=chunk) - The Company is assessing the impact of ASU No 2024-02 (Codification Improvements) and ASU No 2023-06 (Disclosure Improvements) but **does not expect a material impact** on financial statements[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) [Note 3. Other Current Assets](index=9&type=section&id=Note%203.%20Other%20Current%20Assets) Other current assets decreased significantly due to a reduction in insurance proceeds receivable for class action settlements | (in thousands) | March 31, 2024 | December 31, 2023 | | :------------------------ | :------------- | :---------------- | | Value added tax receivable | $696 | $691 | | Prepaid expenses | $1,379 | $1,914 | | Insurance proceeds receivable | $403 | $20,000 | | Other assets | $8 | $37 | | Total other current assets | $2,486 | $22,642 | - The significant decrease in insurance proceeds receivable is due to a **$19,597 thousand payment** made by the Company's insurers in escrow for the U.S Class Action settlement on March 22, 2024[23](index=23&type=chunk) [Note 4. Accounts Payable and Other Accrued Liabilities](index=10&type=section&id=Note%204.%20Accounts%20Payable%20and%20Other%20Accrued%20Liabilities) Current liabilities decreased substantially, mainly due to a $21.0 million reduction in legal settlement payable | (in thousands) | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | Accounts payable | $375 | $2,713 | | Accrued expenses | $4,700 | $3,031 | | Accrued compensation | $1,762 | $3,215 | | Legal settlement payable | $3,000 | $24,000 | | Current tax payable | $414 | $387 | | Other liabilities | $125 | $11 | | Total accounts payable and other current liabilities | $10,376 | $33,357 | - The legal settlement payable decreased significantly due to a **$1,403 thousand payment** made by the Company in escrow for the U.S Class Action settlement on March 22, 2024[25](index=25&type=chunk) [Note 5. Related Party Transactions](index=10&type=section&id=Note%205.%20Related%20Party%20Transactions) The Company earned increased management fees and employee secondment charges from the Los Gatos Joint Venture (LGJV) | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Management and administrative services income | $1,500 | $1,250 | | Employee secondment charges | $580 | $562 | [Note 6. Stockholders' Equity](index=10&type=section&id=Note%206.%20Stockholders'%20Equity) Stock-based compensation expense increased in Q1 2024 due to new grants of stock options and restricted share units | Stock-Based Compensation (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Stock Options | $690 | $693 | | Performance share units | $51 | $50 | | Restricted share units | $940 | — | | Total stock-based compensation | $1,681 | $743 | | Stock Option Activity (Employee & Director) | Number of options | Weighted-Average Exercise Price | | :---------------------------------------- | :---------------- | :------------------------------ | | Outstanding at December 31, 2023 | 2,616,515 | $8.83 | | Granted | 592,753 | $6.41 | | Forfeited | (17,818) | $6.82 | | Expired | (9,946) | $11.62 | | Outstanding at March 31, 2024 | 3,181,504 | $8.38 | | RSU Activity (Employee) | Number of RSUs | Weighted-Average Price Per Share | | :------------------------------ | :------------- | :------------------------------- | | Outstanding at December 31, 2023 | 925,172 | $5.04 | | Granted | 296,375 | $6.41 | | Forfeited | (11,948) | $5.50 | | Outstanding at March 31, 2024 | 1,209,599 | $8.38 | - Total unrecognized stock-based compensation expense as of March 31, 2024, was **$3,520 thousand for stock options** (expected to be recognized over 2.1 years), **$115 thousand for PSUs** (0.7 years), and **$4,511 thousand for RSUs** (1.76 years)[31](index=31&type=chunk)[33](index=33&type=chunk)[36](index=36&type=chunk) [Note 7. Net Income per Share](index=14&type=section&id=Note%207.%20Net%20Income%20per%20Share) Basic and diluted net income per share increased to $0.04 in Q1 2024 from $0.01 in the prior-year period | (in thousands, except share amounts) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income and comprehensive income | $2,532 | $835 | | Weighted average shares: Basic | 69,181,047 | 69,162,223 | | Effect of dilutive stock options | 312,878 | — | | Effect of dilutive PSUs | 38,966 | — | | Effect of dilutive RSUs | 583,844 | — | | Effect of dilutive DSUs | 302,930 | 146,796 | | Diluted | 70,419,665 | 69,309,019 | | Net income per share: Basic and Diluted | $0.04 | $0.01 | [Note 8. Fair Value Measurements](index=15&type=section&id=Note%208.%20Fair%20Value%20Measurements) The Company's investment in affiliates is classified as Level 3 due to reliance on internally developed assumptions - The Company's initial investment in affiliates is classified within **Level 3** of the fair value hierarchy, as its valuation is based on internally developed assumptions with few observable inputs and no market activity[47](index=47&type=chunk) [Note 9. Commitments, Contingencies and Guarantees](index=15&type=section&id=Note%209.%20Commitments%2C%20Contingencies%20and%20Guarantees) The Company is subject to legal proceedings and regulatory investigations, with class actions reaching settlement agreements - The U.S Class Action lawsuit reached an agreement in principle to settle for **$21.0 million**, funded by the Company ($1.4 million) and its insurers ($19.6 million), with preliminary approval granted on February 29, 2024, and a final fairness hearing scheduled for May 29, 2024[51](index=51&type=chunk)[52](index=52&type=chunk) - The Canadian Class Action lawsuit settled for **$3.0 million**, funded by the Company ($2.6 million) and its insurers ($0.4 million), with preliminary approval granted on April 16, 2024, and a final fairness hearing scheduled for June 28, 2024[54](index=54&type=chunk) - The Company is cooperating with U.S Department of Justice and SEC investigations related to its January 25, 2022 press release and issues concerning Cerro Los Gatos' mineral reserves and resources, with an **unpredictable outcome**[56](index=56&type=chunk) [Note 10. Segment Information](index=18&type=section&id=Note%2010.%20Segment%20Information) The Company operates through two segments, Mexico and Corporate, with the Mexico segment generating all equity income | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | **Mexico Segment** | | | | Exploration expense | $31 | $26 | | General and administrative expense | $174 | $224 | | Equity income in affiliates | $(7,288) | $(5,011) | | Total assets | $61,016 | $121,623 | | **Corporate Segment** | | | | General and administrative expense | $6,789 | $5,312 | | Interest income | $(767) | $(161) | | Total assets | $321,383 | $261,207 | [Note 11. Investment in Affiliates](index=18&type=section&id=Note%2011.%20Investment%20in%20Affiliates) Equity income from the LGJV investment increased, and the Company received a $21.0 million capital distribution - Gatos Silver recognized **$7,288 thousand in equity income** from its investment in LGJV Entities for the three months ended March 31, 2024, compared to $5,011 thousand in the prior year[60](index=60&type=chunk) - The LGJV made a **$30,000 thousand capital distribution** on February 15, 2024, with Gatos Silver's share being $21,000 thousand[61](index=61&type=chunk) | LGJV Combined Statements of Operations (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :---------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $72,218 | $69,865 | | Total expenses | $57,013 | $51,624 | | Income before taxes | $14,947 | $18,658 | | Net income and comprehensive income | $10,172 | $12,701 | | LGJV Combined Balance Sheets (in thousands) | March 31, 2024 | December 31, 2023 | | :------------------------------------------ | :------------- | :---------------- | | Total current assets | $88,318 | $97,382 | | Total non-current assets | $406,883 | $416,513 | | Total Assets | $495,201 | $513,895 | | Total current liabilities | $40,134 | $39,264 | | Total non-current liabilities | $15,950 | $15,686 | | Total owners' capital | $439,117 | $458,945 | | Total Liabilities and Owners' Capital | $495,201 | $513,895 | [Note 12. Subsequent Events](index=22&type=section&id=Note%2012.%20Subsequent%20Events) The Company made a $2.6 million escrow payment in April 2024 to fund the Canadian Class Action settlement - On April 26, 2024, the Company made a payment in escrow of **$2,597 thousand** to fund the Canadian Class Action settlement[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operational performance for Q1 2024, including results, cash flows, and liquidity [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements about future performance that are subject to risks and uncertainties - Forward-looking statements cover estimates of future mineral production, costs, cash flows, capital expenditures, and other financial and operational aspects[71](index=71&type=chunk) - These statements are **not guarantees of future performance** and involve risks, uncertainties, and assumptions that could cause actual results to differ materially[72](index=72&type=chunk)[73](index=73&type=chunk) [First Quarter 2024 Highlights](index=25&type=section&id=First%20Quarter%202024%20Highlights) The company reported strong net cash flow and income, while the LGJV achieved record throughput despite lower net income Gatos Silver Financial Highlights | Gatos Silver (in millions) | Q1 2024 | Q1 2023 | | :------------------------- | :------ | :------ | | Net cash flow provided (used) by operating activities | $15.1 | $(4.1) | | Cash and cash equivalents (as of March 31) | $70.6 | $12.9 | | Net income | $2.5 | $0.8 | | EBITDA | $1.8 | $0.9 | LGJV (100% basis) Operational and Financial Highlights | LGJV (100% basis) | Q1 2024 | Q1 2023 | | :---------------- | :------ | :------ | | Silver production (million oz) | 2.37 | 2.43 | | Lead production (million lbs) | 10.1 | 9.5 | | Zinc production (million lbs) | 15.8 | 14.0 | | Processing plant throughput (tonnes) | 292,114 | 260,428 | | Revenue (million) | $72.2 | $69.9 | | Cost of sales (million) | $30.8 | $26.0 | | LGJV net income (million) | $10.2 | $12.7 | | EBITDA (million) | $35.1 | $39.6 | | Co-product AISC per ounce of payable silver equivalent | $14.36 | $12.79 | | By-product AISC per ounce of payable silver | $10.08 | $6.11 | - CLG achieved **record process plant throughput rates**, averaging 3,210 tonnes per day (tpd), an 11% increase from 2,894 tpd in Q1 2023[77](index=77&type=chunk) [Results of Operations - Gatos Silver](index=27&type=section&id=Results%20of%20Operations%20-%20Gatos%20Silver) Net income increased to $2.5 million in Q1 2024, driven by higher equity and interest income Gatos Silver Select Financial Information (in thousands) | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total expenses | $6,998 | $5,599 | | Equity income in affiliates | $7,288 | $5,011 | | Interest income | $767 | $161 | | Net other income | $9,573 | $6,434 | | Income before taxes | $2,575 | $835 | | Net income and comprehensive income | $2,532 | $835 | | Net income per share (basic and diluted) | $0.04 | $0.01 | - General and administrative expenses increased by **$1.4 million**, mainly due to a $0.9 million increase in non-cash stock-based compensation expense and a $0.6 million increase in non-recurring legal defense fees[80](index=80&type=chunk) - Equity income in affiliates increased by **$2.3 million**, primarily from a reduction in the priority distribution obligation, partly offset by lower LGJV equity income[81](index=81&type=chunk) - Interest income increased by **$0.6 million** due to higher cash balances and increased interest rates on deposits[82](index=82&type=chunk) [Results of Operations - LGJV](index=29&type=section&id=Results%20of%20Operations%20-%20LGJV) LGJV's net income decreased to $10.2 million due to higher costs, despite a 3% increase in revenue LGJV Financial Results (in thousands) | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $72,218 | $69,865 | | Cost of sales | $30,771 | $25,988 | | Royalties | $330 | $418 | | Exploration | $1,371 | $463 | | General and administrative | $4,285 | $3,936 | | Depreciation, depletion and amortization | $20,256 | $20,819 | | Other expense (income) | $258 | $(417) | | Income tax expense | $4,775 | $5,957 | | Net income and comprehensive income | $10,172 | $12,701 | LGJV Operating Results | Operating Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Tonnes milled (dmt) | 292,114 | 260,428 | | Tonnes milled per day (dmt) | 3,210 | 2,894 | | Silver grade (g/t) | 284 | 329 | | Zinc grade (%) | 3.99 | 3.93 | | Lead grade (%) | 1.77 | 1.86 | | Silver ounces (millions) | 2.37 | 2.43 | | Zinc pounds (millions) | 15.8 | 14.0 | | Lead pounds (millions) | 10.1 | 9.5 | | Average realized price per silver ounce | $22.91 | $26.61 | | Average realized price per zinc pound | $1.07 | $1.43 | | Average realized price per lead pound | $0.85 | $1.05 | - **Revenue increased by 3%** due to a 94% increase in provisional revenue adjustment and increased sales volumes, despite decreased average realized prices for silver (-14%), zinc (-25%), and lead (-19%)[92](index=92&type=chunk) - **Cost of sales increased by 18%** due to higher mill throughput, increased concentrate tonnage sold, new plant operating costs, and the strengthening Mexican peso[95](index=95&type=chunk) [Sustaining Capital and Resource Development Drilling](index=35&type=section&id=Sustaining%20Capital%20and%20Resource%20Development%20Drilling) LGJV's Q1 2024 sustaining capital and resource development drilling expenditures totaled $8.9 million and $3.2 million, respectively - Sustaining capital expenditures for Q1 2024 were **$8.9 million**, including $5.8 million for mine development and $2.5 million for infrastructure and equipment[103](index=103&type=chunk) - Resource development drilling expenditures for Q1 2024 were **$3.2 million**, primarily related to resource expansion drilling of the South-East Deeps zone at CLG[104](index=104&type=chunk) [Cash Flows - Gatos Silver](index=35&type=section&id=Cash%20Flows%20-%20Gatos%20Silver) Cash and equivalents increased to $70.6 million, with operating activities providing $15.1 million, driven by a distribution from LGJV Gatos Silver Cash Flows (in thousands) | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided (used) by Operating activities | $15,136 | $(4,103) | | Net cash used by Investing activities | — | — | | Net cash used by Financing activities | $(34) | — | | Total change in cash | $15,102 | $(4,103) | | Cash and cash equivalents, beginning of period | $55,484 | $17,004 | | Cash and cash equivalents, end of period | $70,586 | $12,901 | - The **$15.1 million increase in cash and cash equivalents** was primarily due to a $21.0 million capital distribution received from the LGJV on February 15, 2024[107](index=107&type=chunk)[115](index=115&type=chunk) [Cash Flows - LGJV](index=37&type=section&id=Cash%20Flows%20-%20LGJV) LGJV's cash decreased to $29.8 million, primarily due to a $30.0 million capital distribution to its partners LGJV Cash Flows (in thousands) | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided (used) by Operating activities | $37,325 | $40,044 | | Net cash used by Investing activities | $(11,828) | $(11,366) | | Net cash used by Financing activities | $(30,016) | $(290) | | Total change in cash | $(4,519) | $28,388 | | Cash and cash equivalents, beginning of period | $34,303 | $34,936 | | Cash and cash equivalents, end of period | $29,784 | $63,324 | - The **$2.7 million decrease in cash provided by operating activities** was primarily due to increased cost of sales, exploration, and general and administrative expenses[112](index=112&type=chunk) - Cash used by investing activities was **$11.8 million**, including $10 million for mine development and $1.8 million for property, plant, and equipment[113](index=113&type=chunk) - Cash used by financing activities increased significantly to **$30.0 million** due to a capital distribution to LGJV partners in February 2024[114](index=114&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The Company's cash position strengthened to $85.4 million by April 30, 2024, with sufficient liquidity for business plans - Cash and cash equivalents increased to **$70.6 million** at March 31, 2024, from $55.5 million at December 31, 2023, primarily due to a $21.0 million capital distribution from the LGJV[115](index=115&type=chunk) - As of April 30, 2024, cash and cash equivalents were **$85.4 million**, following an additional $17.5 million capital distribution from the LGJV[116](index=116&type=chunk) - The Company has **$50.0 million available** for withdrawal from its revolving credit facility, with an accordion feature for an additional $50.0 million[115](index=115&type=chunk) [Contractual Obligations](index=39&type=section&id=Contractual%20Obligations) There have been no material changes to the Company's contractual obligations since the 2023 10-K filing - **No material changes** from the contractual obligations described in the 2023 10-K[119](index=119&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes to critical accounting policies and estimates as described in the 2023 10-K - **No material changes** to critical accounting policies and estimates described in the 2023 10-K[120](index=120&type=chunk) [Jumpstart Our Business Startups Act of 2012](index=39&type=section&id=Jumpstart%20Our%20Business%20Startups%20Act%20of%202012) The Company has opted out of the extended transition period for new accounting standards as an emerging growth company - Gatos Silver, as an 'emerging growth company,' has elected to **'opt out'** of the extended transition period for complying with new or revised accounting standards[121](index=121&type=chunk) - This decision is **irrevocable**, and the Company will comply with new or revised accounting standards on the relevant dates required for public companies that are not emerging growth companies[121](index=121&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP measures like AISC and EBITDA to provide insights beyond GAAP metrics - Non-GAAP measures such as Cash Costs, All-In Sustaining Costs (AISC), EBITDA, and Free Cash Flow are used to evaluate business aspects and provide additional information not captured by GAAP[122](index=122&type=chunk)[123](index=123&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) Reconciliation of LGJV Expenses (GAAP) to Non-GAAP Measures (in thousands) | (in thousands, except where otherwise stated) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total expenses | $57,013 | $51,624 | | Cash costs (A) | $39,343 | $34,497 | | Co-product AISC (B) | $48,287 | $42,139 | | AISC, net of by-product credits (C) | $22,613 | $13,552 | | Cash costs, net of by-product credits (D) | $13,669 | $5,910 | | Co-product cash cost per ounce of payable silver equivalent (A/E) | $11.70 | $10.47 | | Co-product AISC per ounce of payable silver equivalent (B/E) | $14.36 | $12.79 | | By-product cash cost per ounce of payable silver (D/F) | $6.09 | $2.66 | | By-product AISC per ounce of payable silver (C/F) | $10.08 | $6.11 | Reconciliation of Gatos Silver EBITDA (in thousands) | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income and comprehensive income | $2,532 | $835 | | Interest expense | — | $164 | | Interest income | $(767) | $(161) | | Income tax expense | $43 | — | | Depreciation, depletion and amortization expense | $4 | $37 | | EBITDA | $1,812 | $875 | Reconciliation of Gatos Silver Free Cash Flow (in thousands) | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided (used) by operating activities | $15,136 | $(4,103) | | Net cash used by investing activities | — | — | | Free cash flow | $15,136 | $(4,103) | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Gatos Silver is exempt from providing disclosures about market risk - Gatos Silver is a **'smaller reporting company'** and is not required to provide disclosures about market risk[138](index=138&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were not effective as of March 31, 2024, due to previously identified material weaknesses - Management, including the CEO and CFO, concluded that disclosure controls and procedures were **not effective** as of March 31, 2024, due to material weaknesses in internal control over financial reporting[140](index=140&type=chunk) - There have been **no material changes** in the Company's internal control over financial reporting during the quarter ended March 31, 2024[141](index=141&type=chunk) - Management acknowledges that all control systems have **inherent limitations** and cannot prevent all errors or fraud[142](index=142&type=chunk)[145](index=145&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 9 in the financial statements section - For a description of Legal Proceedings, refer to **Note 9. Commitments, Contingencies and Guarantees** in Item 1 Financial Statements[148](index=148&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's 2023 10-K - **No material changes** to the risk factors disclosed in the 2023 10-K as of the date of this Report[149](index=149&type=chunk) [Items 5. Other Information](index=46&type=section&id=Items%205.%20Other%20Information) No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - None of the Company's directors or officers adopted or terminated a 'Rule 10b5–1 trading arrangement' or a 'non-Rule 10b5–1 trading arrangement' during the three months ended March 31, 2024[151](index=151&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements and required certifications - Key exhibits include the Cerro Los Gatos Lead Concentrate Sales Agreement, Section 302 Certifications of the CEO and CFO, Section 1350 Certifications, and various Inline XBRL documents[153](index=153&type=chunk)

VANCOUVER, British Columbia, April 25, 2024 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (TSX:GATO) ("Gatos Silver" or the "Company") today provided an update on the drilling and exploration programs in the Los Gatos district ("LGD") in Mexico. The update includes new intercepts of mineralization in the South-East Deeps ("SE Deeps") zone of its 70%-owned Cerro Los Gatos ("CLG") mine. The Company also announced the appointment of Chad Yuhasz as Vice President, Exploration and Technical Services. "These latest resu ...

VANCOUVER, British Columbia, April 09, 2024 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (TSX:GATO) ("Gatos Silver" or the "Company") today announced production results for the quarter ended March 31, 2024 at its 70%-owned Cerro Los Gatos ("CLG") mine in Mexico. Dale Andres, CEO of Gatos Silver, commented: "The CLG mine delivered another strong quarter of operational results. Mill throughput for the quarter was more than 3,200 tonnes per day, an increase of 11% from the first quarter of 2023, and another quarterl ...

VANCOUVER, British Columbia, March 15, 2024 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (TSX:GATO) ("Gatos Silver" or the "Company") today announced that it has set the date of its 2024 annual meeting of stockholders (the "Annual Meeting") as June 6, 2024. The record date for the Annual Meeting is April 11, 2024. The time, format and other details for the Annual Meeting will be set forth in the Company's proxy materials for the Annual Meeting, which will be filed on both EDGAR and SEDAR+ systems. About Gatos Sil ...

PART I [Business Overview](index=15&type=section&id=Item%201.%20Business) Gatos Silver, Inc. is a Canadian-headquartered precious metals company focused on the Los Gatos Joint Venture (LGJV) in Chihuahua, Mexico, operating the Cerro Los Gatos (CLG) mine which commenced commercial production in September 2019 - Gatos Silver, Inc. is a Canadian-headquartered, Delaware-incorporated precious metals exploration, development, and production company, primarily focused on the LGJV in Chihuahua, Mexico, where it holds a **70% ownership** and operates the CLG mine producing silver-containing lead and zinc concentrates since September 1, 2019[57](index=57&type=chunk)[59](index=59&type=chunk) - Strategic objectives include maximizing margins, extending the CLG mine life, completing key capital projects, and expanding mineral resources within the broader Los Gatos District (LGD) through exploration[63](index=63&type=chunk)[64](index=64&type=chunk) - Key strategic developments in 2023 include LGJV capital distributions of **$85.0 million** (**$59.5 million** to Gatos Silver), extension of the Revolving Credit Facility to 2026 with no outstanding balance, updated mineral resource and reserve estimates extending CLG mine life to **2030** with a **46% increase in total silver production**, **9.2 million ounces** of silver production (top end of guidance) with a **10% increase in mill throughput to 2,935 tpd**, and agreements in principle to settle U.S. and Canadian class action lawsuits[64](index=64&type=chunk) **2023 Production Data (CLG):** | Metal | 2023 Production | 2022 Production | Change (YoY) | | :---- | :-------------- | :-------------- | :----------- | | Silver | 9.2 million oz | 10.3 million oz | -10.7% | | Zinc | 57.3 million lbs | 60.7 million lbs | -5.6% | | Lead | 38.9 million lbs | 43.9 million lbs | -11.4% | | Gold | 5.3 thousand oz | 5.4 thousand oz | -1.9% | | Mill Throughput | 2,935 tpd | 2,662 tpd | +10.2% | [Competition](index=19&type=section&id=Competition) The mining and precious metals industry is highly competitive, with larger companies often possessing greater resources and better financing access - The mining and precious metals industry is highly competitive, with larger, established companies often possessing greater resources, better financing access, and more efficient equipment[65](index=65&type=chunk) - Gatos Silver faces competition for key personnel, particularly experienced mine construction and management staff, and for the services of mine service companies, which may offer better terms to larger industry players[66](index=66&type=chunk)[67](index=67&type=chunk) [Environmental, Health and Safety Matters](index=19&type=section&id=Environmental%2C%20Health%20and%20Safety%20Matters) The company is subject to stringent and complex environmental, health, and safety regulations in Mexico, which can incur substantial costs and risks - The company is subject to stringent and complex environmental laws, regulations, and permits in Mexico, which can incur substantial capital or operating costs and may delay or prohibit development, with violations potentially leading to litigation, fines, or permit revocations[68](index=68&type=chunk) - Major government approvals for CLG facilities were issued in 2017, with the key MIA (Environmental Impact Assessment) valid until **2041**, and while four amendments have been successfully achieved, a permit amendment for the fluorine leach project was partially disallowed for technical reasons, requiring a further application[69](index=69&type=chunk)[70](index=70&type=chunk) - Recent significant amendments to Mexican mining laws (May 8, 2023) could materially adversely affect the mining industry and LGJV's Mexican businesses, particularly for new concessions, permits, and operations[71](index=71&type=chunk)[76](index=76&type=chunk) - The company could be liable for environmental contamination at or from its properties or third-party disposal sites, potentially incurring substantial remediation costs, fines, and claims, regardless of fault[72](index=72&type=chunk)[74](index=74&type=chunk) - Operations are regulated by various Mexican laws, with authorities conducting regular inspections, and violations can lead to fines, penalties, or operational closures[75](index=75&type=chunk) [Facilities and Employees](index=21&type=section&id=Facilities%20and%20Employees) The company maintains a lean corporate structure with a significant workforce at the LGJV in Mexico, prioritizing employee health and safety **Employee Count (as of Feb 20, 2024):** | Location | Employees | | :------- | :-------- | | United States | 0 | | Canada | 13 (full-time) | | Mexico | 6 (full-time) | | LGJV (Mexico) | ~882 (604 unionized) | - The company prioritizes employee health and safety, with over **99%** of CLG employees being Mexican, maintaining a Code of Conduct, conducting annual training, and focusing on employee development[62](index=62&type=chunk)[80](index=80&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) Gatos Silver faces a range of significant risks, including financial dependence on the CLG and LGD, uncertainty in mineral reserve estimates, and volatility in metal prices, alongside operational, regulatory, litigation, and cybersecurity threats, and potential stock price volatility influenced by major shareholders [Risks Related to Our Financial Condition](index=22&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition) The company's financial health is highly dependent on the CLG and LGD, subject to metal price volatility, and potential debt or tax changes - The company is highly dependent on the CLG and LGD for future operations and may not successfully identify additional proven or probable mineral reserves to extend the CLG mine life[83](index=83&type=chunk)[84](index=84&type=chunk) - While profitable in 2022 and 2023, there is no assurance of sustained profitability, which depends on successful LGJV operations and is subject to numerous risks[85](index=85&type=chunk) - Deliveries under concentrate sales agreements can be suspended or cancelled by customers due to force majeure, potentially reducing cash flow and adversely affecting financial condition[86](index=86&type=chunk) - The company does not currently hedge against metal price or currency fluctuations, exposing it to losses from declines in silver, lead, and zinc prices, and appreciation of Mexican pesos or Canadian dollars against the U.S. dollar[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - Future debt incurrence by Gatos Silver or LGJV could adversely affect financial health and limit future financing or business opportunities, with the existing **$50 million** Credit Facility having covenants that, if not met, could lead to termination or reduction of credit[91](index=91&type=chunk)[93](index=93&type=chunk) - The effective tax rate could be volatile and materially change due to changes in tax laws, the mix of earnings across jurisdictions (U.S., Mexico, Canada), and potential Mexican withholding taxes on LGJV distributions[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) [Risks Related to Our Operations](index=24&type=section&id=Risks%20Related%20to%20Our%20Operations) Mining operations face inherent risks including uncertain mineral reserve estimates, geological challenges, cost fluctuations, and potential title defects - Mineral reserve and resource calculations are estimates based on geological interpretation and sampling, which may be inaccurate, with actual production, future estimates, and economic viability varying significantly due to changes in metal prices, costs, recovery rates, or further exploration, and inferred resources carrying high uncertainty regarding existence and economic viability[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - Mineral exploration is highly speculative and often unsuccessful, requiring substantial expenditures without assurance of profitable mining operations[106](index=106&type=chunk)[107](index=107&type=chunk) - Factors like oversized material, unexpected breakage characteristics, deleterious materials, or hydrogeological challenges (e.g., underground water management at CLG) can adversely impact mining and processing efficiency, leading to lower throughput, recoveries, or increased downtime[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - Actual capital and operating costs may differ significantly from anticipated figures due to changes in labor, equipment, fuel prices, inflation, and regulatory requirements, potentially affecting profitability[111](index=111&type=chunk)[114](index=114&type=chunk) - Land reclamation and mine closure are costly and uncertain, with actual expenditures potentially exceeding estimates, which could materially affect financial performance, and financial assurances (e.g., letters of credit) are required[115](index=115&type=chunk) - Developing new mineral projects involves risks such as considerable costs and timing of construction, availability of skilled labor and equipment, appropriate smelting arrangements, obtaining necessary permits, financing, industrial accidents, natural phenomena, unusual geological conditions, and potential opposition from various groups[116](index=116&type=chunk)[117](index=117&type=chunk) - Mining operations involve significant inherent risks and hazards, including industrial accidents, ground control problems, equipment failure, and natural phenomena, which can cause injuries, property damage, environmental contamination, and operational suspensions[119](index=119&type=chunk) - Deepening underground mines and increasing waste/tailings deposits present geotechnical challenges, including the possibility of failure of underground openings, leading to additional expenses or negative impacts on operations and stated mineral reserves[121](index=121&type=chunk) - Title to mineral properties in Mexico may be uncertain or defective, subject to prior unregistered agreements, interests, or native land claims, and may be terminated if concession obligations are not met, with title insurance generally unavailable[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk) - Mining, processing, development, and exploration activities depend on adequate infrastructure (roads, power, water), and lack of availability, delays, or damage due to extreme weather or interference could adversely affect operations and profitability[128](index=128&type=chunk) [Risks Related to Our Business and Industry](index=32&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company's business is exposed to volatile metal prices, labor disputes, community relations, litigation, health crises, and competitive pressures - The prices of silver, zinc, and lead are highly volatile and influenced by numerous external factors (e.g., interest rates, inflation, speculation, supply/demand), which can significantly affect LGJV's revenues and the value of mineral properties[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - Changes in industrial and consumer demand for silver, zinc, and lead, including technological shifts or increased substitution by alternative materials, could adversely affect future sales volumes and revenues[132](index=132&type=chunk)[134](index=134&type=chunk) - The company is subject to the risk of labor disputes, including protests, blockades, and strikes, which could disrupt business operations and adversely affect results, especially with a unionized LGJV workforce[135](index=135&type=chunk) - Success depends on developing and maintaining productive relationships with local communities and stakeholders; dissatisfaction can lead to legal or administrative proceedings, civil unrest, protests, or campaigns against the company[136](index=136&type=chunk) - The company is currently and may in the future be subject to litigation, government investigations, and regulatory proceedings, which incur significant costs, divert management's time, and may not be adequately covered by insurance[137](index=137&type=chunk) - Widespread outbreaks of health pandemics, epidemics, communicable diseases, or public health crises could adversely affect the company, particularly in regions of operation, by disrupting operations and impacting financial condition[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - The mining industry is highly competitive, with larger, established companies often having greater liquidity, financial resources, and more efficient equipment, which could hinder Gatos Silver's ability to compete successfully[142](index=142&type=chunk) - The company's insurance may not provide adequate coverage for losses related to various mining risks and hazards, and certain risks (e.g., environmental) may not be insurable, potentially leading to significant uninsured costs and adverse financial impacts[143](index=143&type=chunk)[144](index=144&type=chunk) - The business is sensitive to nature and climate conditions; increasing climate change legislation could result in higher costs, and extreme weather events may disrupt operations and require additional expenditures[145](index=145&type=chunk) - The company's success depends significantly on retaining key members of its senior management team, and departures could negatively impact business execution due to the difficulty in finding suitable replacements in a competitive international mining industry[146](index=146&type=chunk) - The company may fail to identify attractive acquisition candidates or strategic partners, or successfully integrate acquired properties or manage joint ventures, and the Unanimous Omnibus Partner Agreement requires Dowa's consent for major LGJV decisions, potentially impacting strategic flexibility[147](index=147&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Information technology systems are vulnerable to disruption and cyberattacks, which could lead to data loss, operational failure, inaccurate recordkeeping, or disclosure of confidential information, resulting in financial losses and regulatory/legal exposure[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - Directors may have conflicts of interest due to their roles in other mining companies[156](index=156&type=chunk) - The company has identified material weaknesses in its internal control over financial reporting, specifically regarding accounting for current and deferred taxes, and failure to remediate these deficiencies could lead to inaccurate financial reporting, loss of investor confidence, and a decline in common stock value[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Damage to the company's reputation, resulting from actual or perceived negative events (e.g., environmental, safety, community relations), could decrease investor confidence, challenge community relations, and hinder project development[166](index=166&type=chunk)[167](index=167&type=chunk) [Risks Related to Government Regulations](index=40&type=section&id=Risks%20Related%20to%20Government%20Regulations) Operations are subject to increasingly strict and evolving Mexican regulations, political instability, and international trade policies, posing significant compliance and financial risks - Mining operations are subject to increasingly strict federal, state, and local regulations in Mexico (e.g., land use, permitting, environmental, labor), imposing significant costs and potentially restricting operations, with non-compliance leading to penalties, closures, or increased liabilities[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - Recent legislative amendments by the Mexican federal government (May 8, 2023) could significantly impact the mining industry and LGJV's Mexican businesses, particularly for new concessions, by requiring public bidding, specifying minerals, reducing concession terms, imposing profit payments to communities, and increasing environmental obligations, with the company initiating 'amparo' proceedings to challenge them due to unclear retroactive effect and full implementation[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) - Operations in Mexico are exposed to heightened political, economic, regulatory, and social risks, including potential contract cancellations, unfavorable law changes, tax increases, expropriation, political instability, currency fluctuations, social unrest, organized crime, and uncertainty regarding contractual rights[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - Local and regional meteorological conditions (e.g., severe precipitation, high winds, wildfires) can increase operating costs and disrupt mining/processing, potentially impacting power supply from the national grid[181](index=181&type=chunk) - Changes in trade agreements (e.g., USMCA) or imposition of tariffs/sanctions could increase costs, lower productivity, and adversely affect financial performance, with export of concentrates potentially depending on obtaining certain licenses or meeting quotas[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - Obtaining, maintaining, and renewing environmental, construction, and mining permits is costly, time-consuming, and may not always be possible, with permit terms potentially restricting operations and applications being challenged, leading to delays or denials[186](index=186&type=chunk)[187](index=187&type=chunk) - The company is subject to environmental and health and safety laws, regulations, and permits that may subject it to material costs, liabilities, and obligations, including for remediation of contamination, fines, or personal injury claims[188](index=188&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - Operations are governed by anticorruption and antibribery laws (e.g., FCPA), with increased enforcement and penalties, and non-compliance by the company, employees, or third parties could result in significant penalties and reputational damage[193](index=193&type=chunk)[194](index=194&type=chunk) - The company may be required by human rights laws to take actions, or may be subject to local or community actions, that delay operations or project advancement through legal proceedings, protests, or demands for agreements with local groups[195](index=195&type=chunk) [Risks Related to Ownership of Our Common Stock](index=48&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) The company's common stock price is subject to volatility, anti-takeover provisions, and the significant influence of major shareholders, with no immediate plans for cash dividends - The market price of common stock has been and may continue to be volatile due to factors like failure to identify mineral reserves, production issues, metal price changes, financial results, competitor performance, capital structure changes, large stock sales, regulatory changes, litigation, and general economic conditions[196](index=196&type=chunk)[198](index=198&type=chunk) - Anti-takeover defense provisions (e.g., blank check preferred stock, advance notice for nominations, supermajority vote for charter amendments) may make it more difficult or expensive for a third party to acquire control, potentially causing the stock to trade at a lower price[200](index=200&type=chunk) - Sales of a substantial number of shares by existing holders or the perception of such sales could significantly drop the market price and make it harder to raise future funds[201](index=201&type=chunk)[203](index=203&type=chunk) - The company does not intend to pay cash dividends in the foreseeable future, meaning shareholder returns depend on stock price appreciation[204](index=204&type=chunk)[205](index=205&type=chunk) - Electrum (**32%**) and MERS (**9%**) have substantial influence, including director nomination rights and approval rights over certain major corporate actions (e.g., mergers, large indebtedness, equity issuances) as long as Electrum holds at least **35%** of outstanding common stock, which could delay or prevent a change of control[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - As an 'emerging growth company' and 'smaller reporting company,' the company benefits from reduced disclosure requirements, which might make its common stock less attractive to some investors, potentially leading to a less active trading market and more volatile stock price[209](index=209&type=chunk)[210](index=210&type=chunk) - The Amended and Restated Certificate of Incorporation and shareholders agreement include provisions renouncing the company's interest in certain corporate opportunities, allowing Electrum and MERS to pursue opportunities that might otherwise be available to Gatos Silver, potentially adversely affecting financial performance[211](index=211&type=chunk)[212](index=212&type=chunk) - The Certificate of Incorporation designates Delaware courts and U.S. federal district courts as exclusive forums for certain disputes, which could limit stockholders' ability to choose a favorable judicial forum[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) [General Risk Factors](index=54&type=section&id=General%20Risk%20Factors) Operating as a public company incurs increased expenses and management time for compliance, and stock price is influenced by analyst reports - Operating as a public company incurs significantly increased legal, accounting, and other expenses, and requires substantial management time for compliance with SEC, NYSE, and TSX regulations, including Sarbanes-Oxley Act requirements[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk) - The trading market for common stock is influenced by research and reports from securities or industry analysts, and downgrades, inaccurate research, or cessation of coverage could lead to a decline in stock price and trading volume[221](index=221&type=chunk)[222](index=222&type=chunk) [Item 1B. Unresolved Staff Comments](index=56&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item is not applicable to the company - This item is not applicable[223](index=223&type=chunk) [Item 1C. Cybersecurity](index=56&type=section&id=Item%201C.%20Cybersecurity) Gatos Silver integrates cybersecurity risk management into its overall enterprise risk management program, with Board oversight and CFO direction, though acknowledging that all risks cannot be eliminated - Cybersecurity risk management is part of the company's overall enterprise risk management program, designed to provide a framework for handling cybersecurity threats and incidents, including those associated with third-party service providers[224](index=224&type=chunk) - The Board of Directors has overall oversight responsibility for cybersecurity risk management, while management, under the direction of the CFO, is responsible for identifying, assessing, and mitigating risks, with significant incidents reported to the audit committee and board[225](index=225&type=chunk) - Despite efforts, the company cannot eliminate all risks from cybersecurity threats and cannot provide assurances of not experiencing an undetected cybersecurity incident[226](index=226&type=chunk) [Item 2. Properties](index=56&type=section&id=Item%202.%20Properties) Gatos Silver's primary asset is its **70%** interest in the Los Gatos Joint Venture (LGJV) in Chihuahua, Mexico, which operates the Cerro Los Gatos (CLG) mine and explores the broader Los Gatos District (LGD), with updated mineral reserve and resource estimates extending the CLG mine life to **2030** [The CLG](index=57&type=section&id=The%20CLG) The CLG mine, located in Chihuahua, Mexico, is a polymetallic epithermal vein deposit processing over **2,950 tpd** of silver-lead-zinc ore using conventional flotation, a newly commissioned fluorine leach plant, and a paste backfill plant, while adhering to high environmental standards and utilizing **100%** renewable energy - The CLG mine, managed by Gatos Silver, is located in Chihuahua, Mexico, within the LGD, and is an epithermal vein deposit containing silver, zinc, lead, gold, and copper sulfides[228](index=228&type=chunk) - The site includes a polymetallic mine and processing facility handling over **2,950 tpd**, utilizing conventional sequential silver-lead-zinc flotation, with a paste backfill plant (commissioned Dec 2022) using **40%** of tailings, and a fluorine leach plant (commissioned Q2 2023) reducing fluorine levels in zinc concentrates[229](index=229&type=chunk) - The CLG is built to higher environmental standards than required by Mexican law, with a fully lined tailings impoundment facility and ore storage dome, and uses **100%** renewable energy sources for electrical power, significantly reducing its carbon footprint[231](index=231&type=chunk)[232](index=232&type=chunk) **CLG Production and Throughput (2023 vs. 2022):** | Metric | 2023 | 2022 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Silver Production (million oz) | 9.2 | 10.3 | -10.7% | | Zinc Production (million lbs) | 57.3 | 60.7 | -5.6% | | Lead Production (million lbs) | 38.9 | 43.9 | -11.4% | | Gold Production (thousand oz) | 5.3 | 5.4 | -1.9% | | Mill Throughput (tpd) | 2,935 | 2,662 | +10.3% | | Average Annual Silver Production (LOM) | 6.6 million oz | N/A | N/A | [The LGD](index=59&type=section&id=The%20LGD) The Los Gatos District (LGD) covers approximately **103,087 hectares** in Chihuahua, Mexico, with Gatos Silver holding a **70%** interest in the LGJV, which is subject to a **2%** net smelter return (NSR) royalty and requires Dowa's consent for major decisions, while actively conducting exploration focused on areas near the CLG mine - The Los Gatos District (LGD) covers approximately **103,087 hectares** in Chihuahua, Mexico, comprising **17** claim titles held by Minera Plata Real (MPR), valid until **2054-2062**, with MPR also owning surface rights covering **5,479 hectares**, including the CLG and Esther Resource areas[234](index=234&type=chunk) - The LGJV is subject to a production royalty agreement with La Cuesta International S.A. de C.V., requiring a **2%** net smelter return (NSR) until **$10 million** in payments, then reducing to **0.5%** NSR, with **$11.8 million** paid as of December 31, 2023, and a remaining balance of **$3.2 million** until concession ownership transfers to LGJV at **$15 million**[239](index=239&type=chunk) - The LGD and CLG are owned and operated through the Unanimous Omnibus Partner Agreement, with Gatos Silver holding **70%** and Dowa **30%**, where 'Major Decisions' require Dowa's consent, limiting Gatos Silver's full control, and Dowa has the right to purchase **100%** of the zinc concentrate produced[240](index=240&type=chunk)[245](index=245&type=chunk) - In 2023, the LGJV made capital distributions totaling **$85.0 million** to its partners, with Gatos Silver's share being **$59.5 million**, following **$55.0 million** in dividends in 2022, where Gatos Silver received **$30.8 million** net of withholding taxes and a priority dividend payment to Dowa[243](index=243&type=chunk)[244](index=244&type=chunk)[460](index=460&type=chunk) - Exploration on the LGD property includes geophysical analysis, surface mapping, rock and soil sampling, and drilling (**527,815 meters** across **2,090** drill holes as of December 31, 2023), with efforts prioritizing areas most proximate to the CLG to leverage existing infrastructure[246](index=246&type=chunk)[247](index=247&type=chunk) [Summary of Mineral Reserves and Resources](index=63&type=section&id=Summary%20of%20Mineral%20Reserves%20and%20Resources) As of July 1, 2023, the CLG mine has **8.08 Mt** of Proven and Probable reserves, containing **56.3 Moz** of silver, **770.3 Mlbs** of zinc, and **392.3 Mlbs** of lead, with additional Measured, Indicated, and Inferred resources at CLG and Esther, primarily due to extensive drilling **2023 CLG Mineral Reserves Statement (as of July 1, 2023):** | Reserve Classification | 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** | **770.3** | **392.3** | **64.0** | **26.4** | **2023 CLG Mineral Resources (Exclusive of Mineral Reserves, as of July 1, 2023):** | Resource Classification | 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 | 100 | 3.40 | 2.32 | 0.21 | 0.40 | 14.7 | 343.6 | 234.5 | 30.9 | 40.1 | **2023 Esther Mineral Resource Estimate (as of July 1, 2023):** | Resource Classification | Mt | Ag (g/t) | Zn (%) | Pb (%) | Au (g/t) | Ag (Moz) | Zn (Mlbs) | Pb (Mlbs) | Au (koz) | | :-------------------- | :--- | :------- | :----- | :----- | :------- | :------- | :-------- | :-------- | :------- | | Indicated | 0.28 | 122 | 4.30 | 2.17 | 0.14 | 1.1 | 26.8 | 13.6 | 1.2 | | Inferred | 1.20 | 133 | 3.69 | 1.53 | 0.09 | 5.1 | 98.0 | 40.6 | 3.3 | - Additions to 2023 CLG mineral reserves and resources were primarily due to extensive additional drilling (**28% increase** in drill data from 2022 to March 31, 2023), partially offset by depletion from mining operations (**1,071,400 tonnes** processed in 2023)[259](index=259&type=chunk) - Exploration and development drilling programs adhere to industry-standard quality control methods, including a secure sample chain-of-custody and insertion of reference and control samples, with mineral reserve and resource estimates reviewed and certified by qualified persons and the Technical Safety and Sustainability Committee[268](index=268&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) [Item 3. Legal Proceedings](index=69&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal proceedings, including U.S. and Canadian class action lawsuits related to mineral resource and reserve disclosures, with agreements in principle reached to settle both, largely covered by insurance, while cooperating with ongoing investigations by the U.S. Department of Justice and the SEC - An agreement in principle was reached on June 13, 2023, to settle the U.S. Class Action for **$21.0 million**, subject to court approval, with the company expecting to fund no more than **$2.53 million**, and the balance covered by insurance[441](index=441&type=chunk) - A term sheet was executed on January 26, 2024, to settle the Canadian Class Action for **$3.0 million**, subject to court approval, with the company expecting to fund **$1.47 million** of this settlement, based on insurance coverage[443](index=443&type=chunk) - The company has disclosed issues related to CLG's mineral reserves and resources to the U.S. Department of Justice and the SEC and is cooperating with their investigations, though the outcome cannot be predicted[444](index=444&type=chunk) [Item 4. Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is currently inapplicable to Gatos Silver as it has no operating properties in the United States - The provisions related to Item 4 are currently inapplicable to the Company as it has no operating properties in the United States[274](index=274&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=69&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Gatos Silver's common stock is listed on the NYSE and TSX under "GATO," with **69,181,047 shares** outstanding as of February 20, 2024, and the company has not declared dividends, intending to retain earnings for operations and expansion, while **10.3 million shares** remain available for future issuance under equity compensation plans - The Company's common stock is listed on the New York Stock Exchange and the Toronto Stock Exchange under the ticker symbol "GATO"[276](index=276&type=chunk) - As of February 20, 2024, there were **69,181,047 shares** of the Company's common stock outstanding, held by approximately **36** stockholders of record[7](index=7&type=chunk)[277](index=277&type=chunk) - The Company has not declared any dividends since incorporation and has no immediate plans to do so, intending to retain earnings for operations and business expansion, with the Credit Facility also containing restrictions on dividend payments[205](index=205&type=chunk)[278](index=278&type=chunk) **Equity Compensation Plans (as of December 31, 2023):** | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :------------------------------------ | :----------------------------------------------------------------------- | :----------------------------------------------------------------------- | :---------------------------------------------------------- | | Equity Incentive Compensation Plan | 3,917,802 | N/A (for DSUs, PSUs, RSUs) / $8.81 (for Stock Options) | 10,301,189 | - During the year ended December 31, 2023, the Company did not issue any unregistered shares of its common stock or other equity securities, and there were no purchases made by or on behalf of the Company or any affiliated purchaser of its common stock[281](index=281&type=chunk)[282](index=282&type=chunk) [Item 6. [Reserved]](index=70&type=section&id=Item%206.%20%5BReserved%5D) This item is not applicable - This item is not applicable[283](index=283&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Gatos Silver, Inc. reported a net income of **$12.9 million** in 2023, down from **$14.5 million** in 2022, primarily due to lower equity income from the LGJV, which itself saw a decrease in net income to **$53.4 million** in 2023 from **$72.2 million** in 2022, driven by lower revenues from reduced sales volumes despite higher realized prices, while maintaining a strong liquidity position with **$55.5 million** in cash and a **$50 million** undrawn credit facility [Overview](index=70&type=section&id=Overview) Gatos Silver is a Canadian-headquartered precious metals company focused on the LGJV in Chihuahua, Mexico, which operates the CLG mine, reporting a **$12.9 million** net income in 2023 and **$59.5 million** in capital distributions from LGJV, while the LGJV achieved record processing throughput of **1,071,400 tonnes** and extended CLG mine life to **2030** - Gatos Silver is a Canadian-headquartered, Delaware-incorporated precious metals exploration, development, and production company focused on the LGJV in Chihuahua, Mexico, which operates the CLG mine[285](index=285&type=chunk)[286](index=286&type=chunk) **2023 Key Highlights (Gatos Silver Inc.):** | Metric | Value | | :------------------------------------ | :---------- | | Net income | $12.9 million | | Basic EPS | $0.19 | | Diluted EPS | $0.18 | | EBITDA | $12.4 million | | Capital distributions from LGJV | $59.5 million | | Debt | $0 (Credit Facility available: $50 million) | | Operating cash flow used | $12.0 million | | Free cash flow generated | $47.5 million | **2023 Key Highlights (LGJV - 100% basis):** | Metric | Value | | :------------------------------------------ | :---------------- | | Record processing throughput | 1,071,400 tonnes (2,935 tpd) | | Silver recovery | 89.4% | | Zinc recovery | 62.1% | | Lead recovery | 88.7% | | CLG mine life extended | 2.75 years (to 2030) | | Revenue | $268.7 million | | Net income | $53.4 million | | EBITDA | $135.8 million | | Cash flow from operations | $142.0 million | | Free cash flow | $84.9 million | | Capital distributions to partners | $85.0 million | | Co-product cash cost per oz payable Ag equiv. | $12.11 | | By-product cash cost per oz payable Ag | $6.31 | | Co-product AISC per oz payable Ag equiv. | $15.51 | | By-product AISC per oz payable Ag | $11.33 | [Results of Operations Gatos Silver](index=71&type=section&id=Results%20of%20operations%20Gatos%20Silver) Gatos Silver's net income decreased to **$12.9 million** in 2023 from **$14.5 million** in 2022, primarily due to lower equity income in affiliates, despite a reduced legal settlement loss and increased interest income **Consolidated Operating Results (in thousands):** | Metric | 2023 | 2022 | Change | | :-------------------------- | :----- | :----- | :------- | | Exploration | $26 | $110 | -$84 | | General and administrative | $25,688 | $25,468 | +$220 | | Amortization | $79 | $180 | -$101 | | Total expenses | $25,793 | $25,758 | +$35 | | Equity income in affiliates | $33,622 | $45,230 | -$11,608 | | Legal settlement loss | $(1,500) | $(7,900) | +$6,400 | | Interest expense | $(679) | $(433) | -$246 | | Interest income | $1,332 | $154 | +$1,178 | | Other income | $5,992 | $4,801 | +$1,191 | | Total net other income | $38,767 | $41,852 | -$3,085 | | Income before taxes | $12,974 | $16,094 | -$3,120 | | Income tax expense | $114 | $1,565 | -$1,451 | | Net income | $12,860 | $14,529 | -$1,669 | - Net income decreased from **$14.5 million** in 2022 to **$12.9 million** in 2023, primarily due to lower equity income in affiliates[291](index=291&type=chunk) - General and administrative expenses increased slightly to **$25.7 million** in 2023 (from **$25.5 million** in 2022), including higher non-cash stock-based compensation (**$6.0 million** vs. **$2.8 million**), legal defense fees, and restatement costs, with management fees from LGJV (**$6.0 million** in 2023 vs. **$5.0 million** in 2022) included in Other Income[292](index=292&type=chunk) - Legal settlement loss was **$1.5 million** in 2023 (Canadian Class Action) compared to **$7.9 million** in 2022 (U.S. Class Action), both net of expected insurance proceeds[293](index=293&type=chunk) - Interest income increased by **$1.2 million** due to a higher cash balance and an increase in the interest rate earned on cash deposits[296](index=296&type=chunk) - Income tax expense decreased to **$0.1 million** in 2023 (related to Canadian subsidiary operations) from **$1.6 million** in 2022 (reflecting withholding tax on dividends received from the LGJV)[298](index=298&type=chunk) [Results of Operations LGJV](index=75&type=section&id=Results%20of%20operations%20LGJV) LGJV's revenue decreased by **14%** to **$268.7 million** in 2023, primarily due to lower sales volumes of silver, zinc, and lead, despite higher realized prices for some metals, leading to a **26%** decrease in net income to **$53.4 million**, while cash costs and AISC per payable silver ounce increased significantly **LGJV Financial and Operational Information (100% basis):** | Metric | 2023 | 2022 | Change (YoY) | | :------------------------------------------ | :------- | :------- | :----------- | | Revenue | $268,671 | $311,724 | -13.9% | | Cost of sales | $111,266 | $107,075 | +3.9% | | Royalties | $1,363 | $3,069 | -55.6% | | Exploration | $2,875 | $9,800 | -70.7% | | General and administrative | $18,068 | $14,307 | +26.3% | | Depreciation, depletion and amortization | $75,110 | $69,380 | +8.3% | | Net income | $53,443 | $72,216 | -26.0% | | Tonnes milled (dmt) | 1,071,400 | 971,595 | +10.3% | | Tonnes milled per day (dmt) | 2,935 | 2,662 | +10.3% | | Average Silver grade (g/t) | 299 | 368 | -18.7% | | Average Zinc grade (%) | 3.90 | 4.37 | -10.8% | | Average Lead grade (%) | 1.85 | 2.31 | -20.0% | | Contained Silver ounces (millions) | 9.21 | 10.32 | -10.7% | | Contained Zinc pounds (millions) | 57.3 | 60.7 | -5.6% | | Contained Lead pounds (millions) | 38.9 | 43.9 | -11.4% | | Silver Recovery | 89.4% | 89.8% | -0.4 pp | | Zinc Recovery | 62.1% | 64.8% | -2.7 pp | | Lead Recovery | 88.7% | 88.7% | 0.0 pp | | Co-product cash cost per oz payable Ag equiv. | $12.11 | $9.41 | +28.7% | | By-product cash cost per oz payable Ag | $6.31 | $2.17 | +190.8% | | Co-product AISC per oz payable Ag equiv. | $15.51 | $14.33 | +8.2% | | By-product AISC per oz payable Ag | $11.33 | $10.24 | +10.6% | - Total revenue decreased by **14%** in 2023 to **$268.7 million**, primarily due to lower sales volumes of silver, zinc, and lead (driven by lower ore grades), partly offset by higher realized prices for silver, lead, and gold, with provisional revenue adjustments also contributing to the decrease[303](index=303&type=chunk) - Cost of sales increased by **4%** in 2023 to **$111.3 million**, mainly due to a **10%** increase in mining and milling rates, higher equipment maintenance costs, and operation of the new leaching plant[304](index=304&type=chunk) - Cash costs increased by **1%** to **$147.9 million**, while by-product credits decreased by **24%** due to lower zinc prices and sales, consequently, co-product cash cost per ounce of payable silver equivalent increased by **29%** to **$12.11**, and by-product cash cost per ounce of payable silver increased by **191%** to **$6.31**, with AISC decreasing by **15%** to **$189.4 million**[305](index=305&type=chunk)[307](index=307&type=chunk) - Exploration expenditure decreased by **$6.9 million** in 2023 primarily due to reduced greenfield exploration, as the focus shifted to capitalized resource expansion drilling of the South-East Deeps Zone[308](index=308&type=chunk) - Sustaining capital expenditures decreased to **$41.6 million** in 2023 from **$76.5 million** in 2022, with major expenditures on mine development, dewatering wells, the fluorine leaching plant, and mining equipment, and resource development drilling expenditures totaled **$13.5 million** in 2023, primarily for the South-East Deeps zone[313](index=313&type=chunk)[314](index=314&type=chunk) [Cash Flows](index=80&type=section&id=Cash%20Flows) Gatos Silver's operating cash flow used **$12.0 million** in 2023, a **$26.6 million** decrease from 2022, primarily due to LGJV distributions being reclassified as capital distributions (investing activities), which provided **$59.5 million** in 2023, while LGJV's operating cash flow decreased by **$15.4 million** to **$142.0 million** **Gatos Silver Cash Flows (in thousands):** | Activity | 2023 | 2022 | Change | | :-------------------- | :------- | :------- | :------- | | Operating activities | $(12,020) | $14,554 | $(26,574) | | Investing activities | $59,500 | $(60) | +$59,560 | | Financing activities | $(9,000) | $(4,106) | -$4,894 | | Total change in cash | $38,480 | $10,388 | +$28,092 | - Gatos Silver's operating cash flow used **$12.0 million** in 2023, a **$26.6 million** decrease from **$14.6 million** provided in 2022, primarily because LGJV distributions were classified as capital distributions (investing) in 2023 versus dividends (operating) in 2022[317](index=317&type=chunk) - Gatos Silver's investing cash flow provided **$59.5 million** in 2023 (from LGJV capital distributions) compared to **$0.1 million** used in 2022[318](index=318&type=chunk) - Gatos Silver's financing cash flow used **$9.0 million** in 2023 for full repayment of the Credit Facility, compared to **$4.1 million** used in 2022 for partial repayment[319](index=319&type=chunk) **LGJV Cash Flows (in thousands):** | Activity | 2023 | 2022 | Change | | :-------------------- | :-------- | :-------- | :-------- | | Operating activities | $142,001 | $157,374 | -$15,373 | | Investing activities | $(57,087) | $(82,279) | +$25,192 | | Financing activities | $(85,547) | $(60,439) | -$25,108 | | Total change in cash | $(633) | $14,656 | -$15,289 | - LGJV's operating cash flow decreased by **$15.4 million** to **$142.0 million**, mainly due to lower revenue, partly offset by cash flow from working capital changes[321](index=321&type=chunk) - LGJV's financing activities used **$85.5 million** in 2023 (capital distributions of **$85.0 million**) compared to **$60.4 million** in 2022 (dividends of **$55.0 million**)[323](index=323&type=chunk) [Liquidity and Capital Resources](index=82&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, Gatos Silver had **$55.5 million** in cash and cash equivalents, along with a **$50.0 million** undrawn revolving Credit Facility, providing sufficient liquidity for the next 12 months, while the LGJV held **$34.3 million** in cash and made a **$30.0 million** capital distribution in February 2024 - As of December 31, 2023, Gatos Silver had **$55.5 million** in cash and cash equivalents (up from **$17.0 million** in 2022), primarily due to LGJV capital contributions and management fees, with cash at **$53.1 million** as of January 31, 2024[325](index=325&type=chunk)[326](index=326&type=chunk) - The company has a **$50.0 million** revolving Credit Facility with BMO, extended to December 31, 2026, with an accordion feature up to **$100.0 million**, and no outstanding borrowings as of December 31, 2023[326](index=326&type=chunk)[329](index=329&type=chunk) - The LGJV had **$34.3 million** in cash as of December 31, 2023, and **$43.1 million** as of January 31, 2024, with a **$30.0 million** capital distribution made on February 15, 2024[326](index=326&type=chunk)[465](index=465&type=chunk)[469](index=469&type=chunk) - The company believes it has sufficient liquidity for the next 12 months but may seek external financing for long-term needs, which could lead to dilution or significant debt obligations[326](index=326&type=chunk)[327](index=327&type=chunk) - The LGJV has a renewable energy supply contract with a committed purchase amount of **140,000 MW** per annum until September 6, 2025, with expected purchase commitments of **$11.4 million** in 2024 and **$9.5 million** in 2025, totaling **$20.9 million**[331](index=331&type=chunk) [Critical Accounting Policies](index=83&type=section&id=Critical%20Accounting%20Policies) The company accounts for its LGJV investment using the equity method, defers mineral property acquisition costs while expensing exploration, capitalizes development costs, and recognizes deferred tax assets based on significant management estimates, while assessing the impact of new accounting standards - The company accounts for its investment in LGJV using the equity method, recognizing its proportional share of LGJV's results, with the basis difference (value of mineral resources) amortized on a units-of-production basis[335](index=335&type=chunk) - Mineral property acquisition costs are deferred, while exploration and evaluation costs are expensed, and development costs are capitalized once proven and probable reserves are determined and depleted using the units-of-production method, with assets reviewed for impairment based on undiscounted cash flows and fair value[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - Deferred tax assets are recognized based on expected future taxable income, requiring significant management estimates, with recoverability assessed against forecasted cash flows and tax laws, and uncertainties in tax regulations and audits potentially leading to material differences from current estimates[339](index=339&type=chunk)[340](index=340&type=chunk)[342](index=342&type=chunk) - The company is assessing the impact of recently issued accounting standards, including ASU 2023-06 (Disclosure Improvements), ASU 2023-07 (Segment Reporting), and ASU 2023-09 (Income Taxes)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk) - As an 'emerging growth company' under the JOBS Act, Gatos Silver elected to opt out of the extended transition period for new accounting standards, complying with public company requirements[344](index=344&type=chunk) [Non-GAAP Financial Measures](index=86&type=section&id=Non-GAAP%20Financial%20Measures) Cash costs and all-in sustaining costs (AISC) are non-GAAP measures used to evaluate business performance, providing additional information beyond GAAP measures by including direct and indirect operating cash costs, and for AISC, sustaining capital expenditures - Cash costs and all-in sustaining costs (AISC) are non-GAAP measures used to evaluate business performance and provide additional information beyond GAAP measures, with cash costs including direct and indirect operating cash costs, while AISC adds sustaining capital expenditures[345](index=345&type=chunk)[346](index=346&type=chunk)[347](index=347&type=chunk) **Reconciliation of LGJV Expenses (GAAP) to Non-GAAP Measures (in thousands, except per ounce):** | Metric | 2023 | 2022 | | :-------------------------------------------------- | :------- | :------- | | Cost of sales | $111,266 | $107,075 | | Royalties | $1,363 | $3,069 | | Exploration | $2,875 | $9,800 | | General and administrative | $18,068 | $14,307 | | Depreciation, depletion and amortization | $75,110 | $69,380 | | Total expenses (GAAP) | $208,682 | $203,631 | | Cash costs (A) | $147,871 | $146,322 | | Sustaining capital | $41,571 | $76,526 | | All-in sustaining costs (B) | $189,442 | $222,848 | | By-product credits | $(95,648) | $(125,782) | | All-in sustaining costs, net of by-product credits (C) | $93,794 | $97,066 | | Cash costs, net of by-product credits (D) | $52,223 | $20,540 | | Payable ounces of silver equivalent (E) | 12,214 | 15,552 | | Co-product cash cost per ounce of payable silver equivalent (A/E) | $12.11 | $9.41 | | Co-product all-in sustaining cost per ounce of payable silver equivalent (B/E) | $15.51 | $14.33 | | Payable ounces of silver (F) | 8,282 | 9,482 | | By-product cash cost per ounce of payable silver (D/F) | $6.31 | $2.17 | | By-product all-in sustaining cost per ounce of payable silver (C/F) | $11.33 | $10.24 | **Sustaining Capital and Resource Development Drilling (LGJV, in thousands):** | Item | 2023 | 2022 | | :------------------------------ | :------- | :------- | | Cash flow used by investing activities | $57,087 | $82,279 | | Sustaining capital | $41,571 | $76,526 | | Resource development drilling | $13,464 | — | | Materials & supplies | $600 | $327 | | Amount included in accounts payable | $1,452 | $5,426 | | Total | $57,087 | $82,279 | **EBITDA Reconciliation (Gatos Silver, in thousands):** | Metric | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Net income | $12,860 | $14,529 | | Interest expense | $679 | $433 | | Interest income | $(1,332) | $(154) | | Income tax expense | $114 | $1,565 | | Depreciation, depletion and amortization | $79 | $180 | | EBITDA | $12,400 | $16,553 | **EBITDA Reconciliation (LGJV, in thousands):** | Metric | 2023 | 2022 | | :------------------------------------ | :-------- | :-------- | | Net income and comprehensive income | $53,443 | $72,216 | | Interest income | $(1,567) | — | | Interest expense | $660 | $582 | | Income tax expense | $8,147 | $37,306 | | Depreciation, depletion and amortization | $75,110 | $69,380 | | EBITDA | $135,793 | $179,484 | **Free Cash Flow Reconciliation (Gatos Silver, in thousands):** | Metric | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Net cash (used) provided by operating activities | $(12,020) | $14,554 | | Net cash provided (used) by investing activities | $59,500 | $(60) | | Free cash flow | $47,480 | $14,494 | **Free Cash Flow Reconciliation (LGJV, in thousands):** | Metric | 2023 | 2022 | | :------------------------------------ | :-------- | :-------- | | Net cash provided by operating activities | $142,001 | $157,374 | | Net cash used by investing activities | $(57,087) | $(82,279) | | Free cash flow | $84,914 | $75,095 | [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=90&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Gatos Silver is not required to provide disclosures under this item - As a smaller reporting company, Gatos Silver is not required to provide disclosure pursuant to this Item[360](index=360&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=91&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements of Gatos Silver, Inc. and the combined financial statements of the Los Gatos Joint Venture for the years ended December 31, 2023, and 2022, including the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Income and Comprehensive Income, Stockholders' Equity, Cash Flows, and detailed notes to the financial statements, providing a comprehensive view of the company's financial position, performance, and cash movements [Gatos Silver, Inc. Consolidated Financial Statements](index=91&type=section&id=Gatos%20Silver%2C%20Inc.%20Consolidated%20Financial%20Statements) Ernst & Young LLP provided an unqualified opinion on Gatos Silver's consolidated financial statements for December 31, 2023 and 2022, which include the Consolidated Balance Sheets, Statements of Income, and Cash Flows, reflecting a net income of **$12.9 million** in 2023 and **$55.5 million** in cash and cash equivalents, with **$59.5 million** in capital distributions from LGJV - Ernst & Young LLP provided an unqualified opinion on the consolidated financial statements for December 31, 2023 and 2022, stating they present fairly, in all material respects, the financial position, results of operations, and cash flows in accordance with U.S. generally accepted accounting principles[367](index=367&type=chunk) **Consolidated Balance Sheets (as of December 31, in thousands):** | Asset/Liability/Equity | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | **ASSETS** | | | | Cash and cash equivalents | $55,484 | $17,004 | | Related party receivables | $560 | $1,773 | | Other current assets | $22,642 | $16,871 | | Total current assets | $78,686 | $35,648 | | Investment in affiliates | $321,914 | $347,793 | | Deferred tax assets | $266 | — | | Other non-current assets | $38 | $60 | | **Total Assets** | **$400,904** | **$383,501** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable, accrued and other liabilities | $33,357 | $26,358 | | Credit Facility, net of debt issuance costs | — | $8,661 | | Common Stock | $117 | $117 | | Paid-in capital | $553,319 | $547,114 | | Accumulated deficit | $(185,889) | $(198,749) | | **Total stockholders' equity** | **$367,547** | **$348,482** | | **Total Liabilities and Stockholders' Equity** | **$400,904** | **$383,501** | **Consolidated Statements of Income (for the year ended December 31, in thousands):** | Item | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Exploration | $26 | $110 | | General and administrative | $25,688 | $25,468 | | Amortization | $79 | $180 | | Total expenses | $25,793 | $25,758 | | Equity income in affiliates | $33,622 | $45,230 | | Legal settlement loss | $(1,500) | $(7,900) | | Interest expense | $(679) | $(433) | | Interest income | $1,332 | $154 | | Other income | $5,992 | $4,801 | | Total net other income | $38,767 | $41,852 | | Income before taxes | $12,974 | $16,094 | | Income tax expense | $114 | $1,565 | | Net income and comprehensive income | $12,860 | $14,529 | | Net income per share (Basic) | $0.19 | $0.21 | | Net income per share (Diluted) | $0.18 | $0.21 | **Consolidated Statements of Cash Flows (for the year ended December 31, in thousands):** | Activity | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Net cash (used) provided by operating activities | $(12,020) | $14,554 | | Net cash provided (used) by investing activities | $59,500 | $(60) | | Net cash used by financing activities | $(9,000) | $(4,106) | | Net increase in cash and cash equivalents | $38,480 | $10,388 | | Cash and cash equivalents, end of period | $55,484 | $17,004 | - The company provides management and administrative services to LGJV, earning **$6.0 million** in 2023 and **$5.0 million** in 2022, and also seconds employees to LGJV, charging **$2.6 million** in 2023 and **$2.4 million** in 2022[407](index=407&type=chunk)[410](index=410&type=chunk) - Total stock-based compensation expense was **$5.3 million** in 2023 (vs. **$2.8 million** in 2022), including stock options, PSUs, and RSUs[412](index=412&type=chunk) - The **$50.0 million** Credit Facility was fully repaid in July 2023, resulting in no outstanding balance as of December 31, 2023[446](index=446&type=chunk) - Total income tax expense was **$0.1 million** in 2023 (related to Canadian subsidiary operations) compared to **$1.6 million** in 2022 (reflecting withholding tax on LGJV dividends), with deferred tax assets of **$2.996 million** (net of **$38.672 million** valuation allowance) recognized in 2023[449](index=449&type=chunk)[451](index=451&type=chunk)[452](index=452&type=chunk) - Equity income from LGJV was **$33.6 million** in 2023 (vs. **$45.2 million** in 2022), and the updated mineral reserve and resource estimate in September 2023 (effective July 1, 2023) resulted in a reduction of depletion, depreciation, and amortization expense by **$9.4 million** and deferred tax expense by **$3.7 million** for LGJV[457](index=457&type=chunk)[458](index=458&type=chunk) - Gatos Silver received **$59.5 million** in capital distributions from LGJV in 2023[459](index=459&type=chunk) [Los Gatos Joint Venture Combined Financial Statements](index=117&type=section&id=Los%20Gatos%20Joint%20Venture%20Combined%20Financial%20Statements) Ernst & Young LLP provided an unqualified opinion on the LGJV's combined financial statements for December 31, 2023 and 2022, which include Combined Balance Sheets, Statements of Operations, and Cash Flows, reflecting a net income of **$53.4 million** in 2023, **$34.3 million** in cash, and **$268.7 million** in revenue, with a **$30 million** capital distribution made in February 2024 - Ernst & Young LLP provided an unqualified opinion on the combined financial statements of Los Gatos Joint Venture for December 31, 2023 and 2022, confirming fair presentation in accordance with U.S. GAAP[471](index=471&type=chunk) **Combined Balance Sheets (as of December 31, in thousands):** | Asset/Liability/Equity | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | **ASSETS** | | | | Cash and cash equivalents | $34,303 | $34,936 | | Receivables | $12,634 | $26,655 | | Inventories | $16,397 | $11,542 | | VAT receivable | $12,610 | $21,531 | | Income tax receivable | $20,185 | $27,039 | | Other current assets | $1,253 | $4,138 | | Total current assets | $97,382 | $125,841 | | Mine development, net | $234,980 | $232,515 | | Property, plant and equipment, net | $171,965 | $198,600 | | Deferred tax assets | $9,568 | — | | Total non-current assets | $416,513 | $431,115 | | **Total Assets** | **$513,895** | **$556,956** | | **LIABILITIES AND OWNERS' CAPITAL** | | | | Accounts payable and accrued liabilities | $38,704 | $46,751 | | Related party payable | $560 | $1,792 | | Equipment loans | — | $480 | | Total current liabilities | $39,264 | $49,023 | | Lease liability | $208 | $268 | | Asset retirement obligation | $11,593 | $15,809 | | Deferred tax liabilities | $3,885 | $1,354 | | Total non-current liabilities | $15,686 | $17,431 | | Capital contributions | $455,638 | $540,638 | | Paid-in capital | $18,186 | $18,186 | | Accumulated deficit | $(14,879) | $(68,322) | | **Total owners' capital** | **$458,945** | **$490,502** | | **Total Liabilities and Owners' Capital** | **$513,895** | **$556,956** | **Combined Statements of Operations (for the year ended December 31, in thousands):** | Item | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Revenue | $268,671 | $311,724 | | Cost of sales | $111,266 | $107,075 | | Royalties | $1,363 | $3,069 | | Exploration | $2,875 | $9,800 | | General and administrative | $18,068 | $14,307 | | Depreciation, depletion and amortization | $75,110 | $69,380 | | Total expenses | $208,682 | $203,631 | | Interest expense | $660 | $582 | | Interest income | $(1,567) | — | | Accretion expense | $1,145 | $1,103 | | Other expense (income) | $741 | $(766) | | Foreign exchange gain | $(2,580) | $(2,348) | | Income before taxes | $61,590 | $109,522 | | Income tax expense | $8,147 | $37,306 | | Net income and comprehensive income | $53,443 | $72,216 | **Combined Statements of Cash Flows (for the year ended December 31, in thousands):** | Activity | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Net cash provided by operating activities | $142,001 | $157,374 | | Net cash used by investing activities | $(57,087) | $(82,279) | | Net cash used by financing activities | $(85,547) | $(60,439) | | Net increase (decrease) in cash and cash equivalents | $(633) | $14,656 | | Cash and cash equivalents, end of period | $34,303 | $34,936 | **Revenue Breakdown (in thousands):** | Item | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Lead Concentrate | $227,121 | $226,494 | | Zinc Concentrate | $69,989 | $95,794 | | Treatment and refining charges and penalties | $(17,174) | $(21,871) | | Provisional revenue adjustments | $(11,265) | $11,307 | | Total revenue | $268,671 | $311,724 | **Inventories (as of December 31, in thousands):** | Item | 2023 | 2022 | | :-------------------- | :------- | :------- | | Ore stockpiles | $2,006 | $843 | | Concentrate stockpiles | $3,850 | $941 | | Material & supplies | $10,541 | $9,758 | | Total inventories | $16,397 | $11,542 | **Property, Plant and Equipment, net (as of December 31, in thousands):** | Item | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Mineral properties | $832 | $853 | | Plant & equipment | $95,861 | $112,456 | | Land | $14,422 | $14,422 | | Infrastructure & improvements | $190,290 | $168,007 | | Furniture, fixtures & computers | $870 | $779 | | Right of use asset | $268 | $328 | | Property, plant & equipment at cost | $302,543 | $296,845 | | Less accumulated amortization | $(130,578) | $(98,245) | | Total property, plant & equipment, net | $171,965 | $198,600 | - The LGJV's minimum remaining production royalty obligation to La Cuesta International S.A. de C.V. is **$3.158 million** as of December 31, 2023[521](index=521&type=chunk)[522](index=522&type=chunk) **Asset Retirement Obligations (ARO) (in thousands):** | Item | 2023 | 2022 | | :-------------------- | :------- | :------- | | Balance, beginning of period | $15,809 | $14,706 | | Change in estimate | $(5,361) | — | | Accretion expense | $1,145 | $1,103 | | Balance, end of period | $11,593 | $15,809 | - The LGJV had no outstanding equipment loan balances as of December 31, 2023 (vs. **$480 thousand** in 2022)[542](index=542&type=chunk) **Income Taxes (in thousands):** | Item | 2023 | 2022 | | :------------------------------------ | :------- | :------- | | Income before taxes | $61,590 | $109,522 | | Deferred tax benefit (expense) | $7,841 | $(19,586) | | Current tax expense | $(15,988) | $(17,720) | | Income tax expense | $(8,147) | $(37,306) | - As of December 31, 2023, the LGJV had **$35.37 million** of net operati

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2023 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | | Cash and cash equivalents | $33,469 | $17,004 | +$16,465 | | Total current assets | $50,499 | $35,648 | +$14,851 | | Investment in affiliates | $328,709 | $347,793 | -$19,084 | | Total Assets | $379,250 | $383,501 | -$4,251 | | Credit Facility, net | $— | $8,661 | -$8,661 | | Total Stockholders' equity | $352,887 | $348,482 | +$4,405 | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Condensed Consolidated Statements of Income | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | General and administrative | $7,494 | $5,933 | $19,157 | $16,967 | | Equity income in affiliates | $9,437 | $8,930 | $15,922 | $24,527 | | Net income | $3,288 | $3,504 | $530 | $9,785 | | Basic EPS | $0.05 | $0.05 | $0.01 | $0.14 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity | Metric (in thousands) | Dec 31, 2022 | Sep 30, 2023 | | :-------------------- | :----------- | :----------- | | Total Stockholders' equity | $348,482 | $352,887 | | Stock-based compensation (9 months) | N/A | $3,327 | | Net income (9 months) | N/A | $530 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash (used) provided by operating activities | $(9,535) | $8,680 | -$18,215 | | Net cash provided (used) by investing activities | $35,000 | $(27) | +$35,027 | | Net cash used by financing activities | $(9,000) | $— | -$9,000 | | Net increase in cash and cash equivalents | $16,465 | $8,653 | +$7,812 | | Cash and cash equivalents, end of period | $33,469 | $15,269 | +$18,200 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the basis of presentation and significant accounting policies [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) - The interim financial statements are unaudited and prepared under GAAP for interim reporting, requiring review with the 2022 10-K[17](index=17&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) - **No material changes** to accounting policies from 2022 10-K[18](index=18&type=chunk) - Assessing impact of FASB ASU No 2023-06 on disclosure improvements, effective only if SEC removes related requirements by June 30, 2027[19](index=19&type=chunk) [Note 3. Other Current Assets](index=9&type=section&id=Note%203.%20Other%20Current%20Assets) Other Current Assets | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Insurance proceeds receivable | $14,200 | $13,100 | | Total other current assets | $15,935 | $16,871 | - Insurance proceeds receivable relates to the U.S Class Action lawsuit settlement[21](index=21&type=chunk) [Note 4. Accounts Payable and Other Accrued Liabilities](index=11&type=section&id=Note%204.%20Accounts%20Payable%20and%20Other%20Accrued%20Liabilities) Accounts Payable and Other Accrued Liabilities | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Legal settlement payable | $21,000 | $21,000 | | Total accounts payable and other current liabilities | $26,363 | $26,358 | - Legal settlement payable is for the U.S Class Action lawsuit[24](index=24&type=chunk) [Note 5. Related Party Transactions](index=11&type=section&id=Note%205.%20Related%20Party%20Transactions) - Company earned **$1,250 thousand in management fees** from LGJV for Q3 2023 and Q3 2022, and **$3,750 thousand** for the nine months ended Sep 30, 2023 and 2022[25](index=25&type=chunk) - Management fee increased to **$6,000 thousand per annum** effective October 24, 2023[25](index=25&type=chunk) [Note 6. Stockholders' Equity](index=11&type=section&id=Note%206.%20Stockholders'%20Equity) Stock-Based Compensation | Stock-Based Compensation (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock Options | $1,873 | $682 | $2,980 | $1,936 | | Restricted share units | $187 | $— | $187 | $— | | Total stock-based compensation | $2,122 | $739 | $3,327 | $2,099 | - **1,132,520 stock options** granted in Q3 2023 (weighted-average fair value $2.93), including compensation for 2022 and 2023 due to blackout[29](index=29&type=chunk) - **925,172 RSUs** granted in Q3 2023 (fair value $5.04), with varying vesting dates due to 2022 blackout[35](index=35&type=chunk) - Total unrecognized stock-based compensation expense as of September 30, 2023, was **$2,843 thousand**, to be recognized over 2.1 years[31](index=31&type=chunk) [Note 7. Net Income per Share](index=14&type=section&id=Note%207.%20Net%20Income%20per%20Share) Net Income per Share | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.05 | $0.05 | $0.01 | $0.14 | | Diluted EPS | $0.05 | $0.05 | $0.01 | $0.14 | - Stock options were excluded from diluted EPS calculation due to **anti-dilutive effect**, and PSUs were excluded as they did not meet issuance criteria[40](index=40&type=chunk) [Note 8. Fair Value Measurements](index=14&type=section&id=Note%208.%20Fair%20Value%20Measurements) - Fair value hierarchy prioritizes inputs: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs), **Level 3** (unobservable inputs)[44](index=44&type=chunk)[45](index=45&type=chunk) - Initial investment in affiliates is classified as **Level 3 fair value**, based on internally developed assumptions with few observable inputs[47](index=47&type=chunk) [Note 9. Commitments, Contingencies and Guarantees](index=16&type=section&id=Note%209.%20Commitments,%20Contingencies%20and%20Guarantees) - U.S Class Action lawsuit filed Feb 22, 2022, alleging false/misleading statements regarding Cerro Los Gatos mine mineral resources[50](index=50&type=chunk) - Agreement in principle to settle U.S Class Action for **$21 million**, with Gatos Silver funding no more than **$6.8 million**, pending court approval[52](index=52&type=chunk) - Canadian Class Action lawsuit filed March 11, 2022, with ongoing settlement discussions; court hearing tentatively set for March 2024[53](index=53&type=chunk)[54](index=54&type=chunk) [Note 10. Debt](index=17&type=section&id=Note%2010.%20Debt) - Repaid full outstanding balance of **$9,000 thousand** on Credit Facility on July 21, 2023[59](index=59&type=chunk) - **$50,000 thousand available** for withdrawal under Credit Facility, with an additional **$25,000 thousand accordion feature**[59](index=59&type=chunk) - Company was **in compliance with all Credit Facility covenants** as of September 30, 2023[57](index=57&type=chunk) [Note 11. Segment Information](index=18&type=section&id=Note%2011.%20Segment%20Information) - Company operates in a single industry: acquisition, exploration, and development of primarily silver mineral interests[60](index=60&type=chunk) - Reportable segments are **Mexico** (including LGJV investment) and **Corporate**[60](index=60&type=chunk) [Note 12. Investment in Affiliates](index=18&type=section&id=Note%2012.%20Investment%20in%20Affiliates) Investment in Affiliates | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Equity income in affiliates | $9,437 | $8,930 | $15,922 | $24,527 | - Received **$35,000 thousand capital distribution** from LGJV on July 20, 2023[63](index=63&type=chunk) - Updated mineral reserve and resource estimate extended Cerro Los Gatos mine life by **2.75 years**, reducing DDA expense by **$4,331 thousand** for Q3 2023[62](index=62&type=chunk) [Note 13. Subsequent Events](index=23&type=section&id=Note%2013.%20Subsequent%20Events) - LGJV made a **$35,000 thousand capital distribution** on October 30, 2023; Company's share was **$24,500 thousand**[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and operational performance for the period ended September 30, 2023 [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) - Report contains forward-looking statements about future mineral production, costs, cash flows, capital expenditures, and exploration[75](index=75&type=chunk)[76](index=76&type=chunk) - Forward-looking statements are subject to risks and uncertainties, and **actual results may differ materially**[79](index=79&type=chunk)[80](index=80&type=chunk) [Third Quarter and Year to Date 2023 Highlights](index=25&type=section&id=Third%20Quarter%20and%20Year%20to%20Date%202023%20Highlights) This section details key financial and operational results for Gatos Silver and the LGJV for Q3 and YTD 2023 [Gatos Silver Highlights](index=25&type=section&id=Gatos%20Silver%20Highlights) Gatos Silver Financials | Metric (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $3.3 | $3.5 | $0.5 | $9.8 | | EBITDA | $3.6 | $4.2 | $1.3 | $11.2 | - Cash balance at Sep 30, 2023, was **$33.5 million** (vs $17.0 million at Dec 31, 2022); increased to **$57.7 million** by Oct 31, 2023, after a $24.5 million LGJV capital distribution[82](index=82&type=chunk) [LGJV Operational Highlights](index=26&type=section&id=LGJV%20Operational%20Highlights) LGJV Production | Production (Q3 2023 vs Q3 2022) | 2023 | 2022 | Change | | :------------------------------ | :--- | :--- | :----- | | Silver (million oz) | 2.2 | 2.7 | -18.5% | | Lead (million lbs) | 9.5 | 12.2 | -22.1% | | Zinc (million lbs) | 13.8 | 17.8 | -22.5% | | Mill throughput (tonnes/day) | 2,916 | 2,862 | +1.9% | - **Lower production** primarily due to lower ore grades, as expected in the mine plan[85](index=85&type=chunk) - Zinc concentrate fluorine leach plant commissioned in July 2023[85](index=85&type=chunk) - Updated mineral reserve and resource estimate extended Cerro Los Gatos mine life by **2.75 years**[85](index=85&type=chunk) [LGJV Financial Highlights](index=26&type=section&id=LGJV%20Financial%20Highlights) LGJV Financials | Metric (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $67.0 | $73.9 | $195.2 | $218.7 | | Cost of sales | $31.4 | $28.6 | $83.3 | $81.6 | | LGJV net income | $15.1 | $13.0 | $28.5 | $42.4 | | EBITDA | $31.2 | $39.7 | $98.4 | $117.6 | LGJV All-In Sustaining Costs | AISC per payable silver ounce | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Co-product AISC | $17.64 | $13.13 | $15.81 | $14.15 | | By-product AISC | $14.71 | $10.04 | $11.40 | $9.49 | - Q3 LGJV net income increased due to **lower income tax expense** and **lower depreciation, depletion, and amortization expense**[85](index=85&type=chunk) [2023 Guidance Update](index=27&type=section&id=2023%20Guidance%20Update) This section outlines the revised full-year 2023 production and cost guidance 2023 Production Guidance | Production Guidance (Full Year 2023) | Original Guidance | Revised Guidance | Change (Low End) | Change (High End) | | :----------------------------------- | :---------------- | :--------------- | :--------------- | :---------------- | | Silver (million oz) | 7.4 - 8.2 | 8.8 - 9.3 | +19% | +13% | | Silver equivalent (million oz) | 12.4 - 13.8 | 13.8 - 14.6 | +11% | +6% | - Zinc and gold production expected near **low end** of original guidance; lead production in **upper half**[90](index=90&type=chunk) - Full year co-product and by-product AISCs expected in **lower half** of original guidance ranges ($15.50-$17.50 and $11.00-$13.00, respectively)[91](index=91&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the operational results for both Gatos Silver and the LGJV [Results of operations Gatos Silver](index=28&type=section&id=Results%20of%20operations%20Gatos%20Silver) Gatos Silver Results | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | General and administrative | $7,494 | $5,933 | $19,157 | $16,967 | | Equity income in affiliates | $9,437 | $8,930 | $15,922 | $24,527 | | Net income | $3,288 | $3,504 | $530 | $9,785 | - Increase in general and administrative expenses primarily due to **$1.8 million non-cash stock-based compensation** in Q3 2023[94](index=94&type=chunk)[98](index=98&type=chunk) - Decrease in nine-month net income mainly due to **lower LGJV net income** (affecting equity income) and **higher G&A**[99](index=99&type=chunk)[101](index=101&type=chunk) [Results of operations LGJV](index=31&type=section&id=Results%20of%20operations%20LGJV) LGJV Results | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $67,038 | $73,926 | $195,162 | $218,730 | | Cost of sales | $31,446 | $28,625 | $83,255 | $81,550 | | Depreciation, depletion and amortization | $16,712 | $19,943 | $59,558 | $52,340 | | Income tax (recovery) expense | $(884) | $6,702 | $9,814 | $22,488 | | Net income | $15,053 | $12,961 | $28,500 | $42,394 | - Q3 revenue decreased by **9%** due to lower sales volumes and a **29% decrease** in average realized zinc price, partly offset by higher silver and lead prices[109](index=109&type=chunk) - Q3 DDA expense decreased by **16%** due to increased mineral reserves and extended mine life[113](index=113&type=chunk) - Q3 income tax recovery of **$0.9 million** (vs $6.7 million expense in 2022) due to reduction in valuation allowance on deferred tax assets[116](index=116&type=chunk) - Nine-month revenue decreased by **11%** due to lower sales volumes and a **36% decrease** in average zinc price[120](index=120&type=chunk) - Nine-month DDA expense increased by **14%** due to commissioning of new facilities, partly offset by Q3 reduction from mine life extension[126](index=126&type=chunk) [Cash Flows](index=39&type=section&id=Cash%20Flows) This section analyzes the cash flow activities for both Gatos Silver and the LGJV [Gatos Silver Cash Flows](index=39&type=section&id=Gatos%20Silver%20Cash%20Flows) Gatos Silver Cash Flows | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided (used) by Operating activities | $(9,535) | $8,680 | | Net cash provided (used) by Investing activities | $35,000 | $(27) | | Net cash used by Financing activities | $(9,000) | $— | | Total change in cash | $16,465 | $8,653 | | Cash and cash equivalents, end of period | $33,469 | $15,269 | | Free cash flow | $25,465 | $8,653 | - Cash used by operating activities in 2023 (vs provided in 2022) largely due to a **$15.9 million net dividend** received from LGJV in 2022[135](index=135&type=chunk) - Investing activities provided **$35 million cash** due to capital distribution from LGJV[135](index=135&type=chunk) - Financing activities used **$9 million** for repayment of Credit Facility[136](index=136&type=chunk) [LGJV Cash Flows](index=40&type=section&id=LGJV%20Cash%20Flows) LGJV Cash Flows | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $103,789 | $120,000 | | Net cash used by investing activities | $(41,160) | $(61,903) | | Net cash used by financing activities | $(50,532) | $(39,712) | | Increase in cash and cash equivalents | $12,097 | $18,385 | | Cash and cash equivalents, end of period | $47,033 | $38,665 | | Free cash flow | $62,629 | $58,097 | - Decrease in cash from operating activities primarily due to **lower revenue**[139](index=139&type=chunk) - Decrease in cash used by investing activities due to **lower capital expenditures**[140](index=140&type=chunk) - Increase in cash used by financing activities due to **$50 million capital distribution** to partners in July 2023[141](index=141&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, credit facilities, and ability to meet future obligations Cash Position | Metric (in millions) | Sep 30, 2023 | Dec 31, 2022 | Oct 31, 2023 (Subsequent Event) | | :------------------- | :----------- | :----------- | :------------------------------ | | Cash and cash equivalents | $33.5 | $17.0 | $57.7 | - Increase in cash due to **$35 million capital distribution** from LGJV, partly offset by **$9 million Credit Facility repayment** and G&A expenses[142](index=142&type=chunk) - **$50 million available** under Credit Facility, with an additional **$25 million accordion feature**[142](index=142&type=chunk) - Company believes it has **sufficient cash and access to borrowings** for at least the next 12 months[143](index=143&type=chunk) [Contractual Obligations](index=40&type=section&id=Contractual%20Obligations) - **No changes** to contractual obligations from 2022 10-K[144](index=144&type=chunk) [Critical Accounting Policies](index=42&type=section&id=Critical%20Accounting%20Policies) - Refer to Note 2 and 2022 10-K for critical accounting policies and estimates[146](index=146&type=chunk) [Jumpstart Our Business Startups Act of 2012](index=42&type=section&id=Jumpstart%20Our%20Business%20Startups%20Act%20of%202012) - Gatos Silver, as an "emerging growth company," **opted out** of the extended transition period for new accounting standards[147](index=147&type=chunk) - Company will comply with new accounting standards on the same dates as other public companies; decision is **irrevocable**[147](index=147&type=chunk) [Non-GAAP Financial Measures](index=42&type=section&id=Non-GAAP%20Financial%20Measures) - Non-GAAP measures (EBITDA, Cash Costs, AISC) are used to evaluate operating performance and provide additional information to investors[148](index=148&type=chunk)[149](index=149&type=chunk) - AISC is calculated based on World Gold Council guidance and includes direct/indirect operating costs plus sustaining capital expenditures[149](index=149&type=chunk)[150](index=150&type=chunk) - Reconciliations of GAAP expenses to non-GAAP cash costs and AISC are provided[151](index=151&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Gatos Silver is not required to provide these disclosures - Company is a smaller reporting company and is **not required to provide disclosure** on market risk[161](index=161&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were not effective due to material weaknesses in internal control over financial reporting - Disclosure controls and procedures were **not effective** as of September 30, 2023, due to material weaknesses in internal control over financial reporting[163](index=163&type=chunk) - Control and procedure enhancements were performed over the preparation and review of 2023 mineral reserves and mineral resource estimates[164](index=164&type=chunk) [PART II - OTHER INFORMATION](index=46&type=section&id=Part%20II%20-%20Other%20Information) [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in two class-action lawsuits related to alleged false statements about mineral resources - U.S Class Action lawsuit filed Feb 22, 2022, alleging false/misleading statements regarding Cerro Los Gatos mine mineral resources[169](index=169&type=chunk) - Agreement in principle to settle U.S Class Action for **$21 million**, with Gatos Silver funding no more than **$6.8 million**, pending court approval[170](index=170&type=chunk) - Canadian Class Action lawsuit filed March 11, 2022, with ongoing settlement discussions; court hearing tentatively set for March 2024[171](index=171&type=chunk)[172](index=172&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the Company's 2022 10-K - **No material changes** to risk factors disclosed in the 2022 10-K[173](index=173&type=chunk) - Factors described in the 2022 10-K could cause actual results to differ materially from forward-looking statements[173](index=173&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and Inline XBRL documents - Exhibits include Section 302 and 1350 Certifications, and Inline XBRL documents[176](index=176&type=chunk)

Financial Performance & Liquidity - Gatos Silver had a net cash position of $36 million as of July 31, 2023[3, 20] - The company has a $50 million revolving credit facility fully available with an accordion for up to an additional $25 million[17] - LGJV's cash balance increased by $47.9 million since December 31, 2022[19] - LGJV distributed $50 million in cash to partners in July 2023[19] Production & Cost Guidance - The company is targeting 12.4 to 13.8 million ounces of silver equivalent production for FY 2023[4] - H1 2023 silver production reached 4.43 million ounces, representing 56% of the guidance mid-point[5] - H1 2023 silver equivalent production was 6.99 million ounces, which is 53% of the guidance mid-point[5] - All-in sustaining costs (co-product basis) for H1 2023 were $14.94 per silver equivalent ounce, representing 91% of the guidance mid-point[5] Mine Life Extension - The company is targeting a 1 to 2-year CLG extension from near-mine resource conversion in Q3 2023[1] - An additional 3 to 4-year life extension is targeted in 2024 from the South-East Deeps drilling results[1] - The company plans to release a new CLG life of mine plan before the end of Q3 2023[28]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to (Registrant's telephone number, including area code) Commission File Number: 001-39649 GATOS SILVER, INC. (Exact name of registrant as specified in i ...