Q4 2023 Gatos Silver Inc Earnings Call
The keypad, if you would like to withdraw your question Press Star one again at this time all participant lines have been placed on mute for the duration of the presentation to prevent any background noise.
Turning your attention to slide too. Please know today's call contains forward looking statements various risks and uncertainties may cause actual results to very got a silver does not assume the obligation to update any forward looking statements I.
I would now like to turn the call over to avail. Andres. Please go ahead.
Thank you all brighter and good morning, everyone.
Turning to slide three I'd like to highlight three points for the quarter.
Number one we continued to further strengthen our balance sheet.
Increasing the cash balance while remaining debt free including at the 70 per cent Owens was Scott that's right venture.
Andrea will speak to this been more detail, but I want to highlight of gas. So silvers free cash flow of 2020 $22 billion in the fourth quarter and continuing distributions received in the first quarter of this year.
If you would like to withdraw your question Press Star one again at this time all participant lines have been placed on mute for the duration of the presentation to prevent any background noise.
Number two point I want to highlight is that operations continue to perform very well with the <unk> setting another record for throughput rate.
We ended the year within our upper upwardly revised production guidance range and we finished the year at the lower end of our call guidance range are all in sustaining costs.
Turning your attention to slide two please note today's call contains forward looking statements various risks and uncertainties may cause actual results to vary got to silver does not assume the obligation to update any forward looking statements.
As a result as a result are free cash flow was approximately 22 million for Q4, and 85 million and that's at the Los Gatos joint venture for for the full year of 2023.
I would now like to turn the call over to Dale Andres. Please go ahead.
Thank you operator, and good morning, everyone.
Turning to slide three I'd like to highlight three points for the quarter.
And the third point is.
Yet again, we're aiming to extend the mine lives by an additional three years when we update our lights on line and the third quarter of 2024, and we continue to drive operational performance with a medium term goal of ramping up production to 3500 tons per day on a sustainable basis.
Number one we continue to further strengthen our balance sheet.
Increasing the cash balance while remaining debt free including at the 70% owned Los Gatos joint venture.
Andre will speak to this in more detail, but I want to highlight at Gaslog silver free cash flow of 2000 $22 million in the fourth quarter and continuing distributions received in the first quarter of this year.
Turning to display the four most your foot in the quarter was over 3000 tons per day, while silver grades improved compared to the prior quarter, which resulted in a 15% increase in silver production of approximately 2.6 million ounces.
Number two point I want to highlight is that operations continue to perform very well with the Cerro Los Gatos mine setting another record for throughput rate.
We ended the year within our upper upwardly revised production guidance range and we finished the year at the lower end of our cost guidance range for all in sustaining costs.
Importantly, we demonstrated in December.
Current capacity of the mill is closer to 3500 tons per day, and we are planning some minor upgrades to make sure. It can sustain those kind of rates.
As a result of our as a result, our free cash flow was approximately 22 million for Q4 and $85 million and Thats at the Los Gatos joint venture for the full year of 2023.
Silver equivalent production, which includes zinc <unk> was 3.9 million office for the quarter.
For 2023, we produce 9.2 million ounces of silver.
And the third point.
Yet again, we're aiming to extend the mine life by an additional three years when we update our life of mine in the third quarter of 2024, and we continue to drive operational performance with our medium term goal of ramping up production to 3500 tonnes per day on a sustainable basis.
14.3 million ounces of silver equivalents.
Cost of sales for the fourth quarter increased by 10% compared to the comparable quarter last year, primarily due to the increased milling rates.
However cost of sales for 2023, we're only 4% higher and all my cash cost basis, we're only 1% higher than in 2023 in 2023 compared to 2022, and that's despite mining and processing, 10% more ton this year over year.
Okay.
Turning to slide four mill throughput in the quarter was over 3000 tonnes per day, while silver grades improved compared to the prior quarter, which resulted in a 15% increase in silver production of approximately $2 6 million ounces.
And that's also despite the strong Mexican peso and inflationary pressures, which we manage the largely all set.
Importantly, we demonstrated in December that the current capacity of the mill is closer to three.
All in sustaining costs are payable ounce of silver for the full year after buying products.
Byproduct credits were $11.33 per ounce compared to $10.24, perhaps in 2022.
Is a great result, considering the lower upon production in 2023.
Turning to slide five shows our production and cost guidance for 2024.
We plan to increase throughput rate <unk>. So is mine to average between 3030 300 tons per day and 2024 with.
With rates expected to increase through the year. That's we focused on ramping up mining raise the bill the extra milk capacity that we approved up in December.
Grace are expected to be lower in the first quarter versus the average grades expected for the full year.
Sustaining capital expenditures are expected to be similar to last year's guidance at 45 million.
The majority of spend on underground development with continued focus on opening up the southeast area.
Exploration and definition drilling spend is expected to increase as we complete the current phase of conversion drilling in the southeast Dietz.
Start to switch our focus to bulk near mine and district targets.
We expect to produce between 8.4 and 9.2 million ounces of silver during 2024 at an online sustaining cost after byproducts of between 950 211 $50 per ounce.
Payable silver.
13.5 to 15 million silver equivalent else's at a 14 to 16 dollar per house on a silver equivalent basis in that sauna co broad basis.
Well now turn the call over to Andre to present, our financial results.
Thank you to all good morning, everyone.
The 70% on both got us joint venture at another great quota.
Cash flow from operations solve approximately $10 two per cent lower than gas legit alright. Thank you for 2022.
The joint venture generated free cash flow.
$2.3 million <unk> 19 per cent more than Q4 2022.
This is due to the capital expenditures offsetting expected lower revenues.
Casually used in investing activities reduced from $20.4 million in 214, 72 $215.9 million for the school that you should notice is that any capital expenditures incurred re.
Resource available drilling total $3 million with a quota with most of the spending focused on the info drilling off the south East East.
For the full year 2053 <unk>.
$41.6 million off just any capital expenditures at 30.5, a modem on resources.
Free Cashflow for 2023 of approximately $85 billion plus 13%.
In the $75 million, a free cash flow generated in 2022.
As a result of the free cash flow generation scheduled distributions made by the joint venture itself $85 million 2023.
$30 billion more than the $55 million of dividends distributed to the partners in 2022.
In addition to the joint venture Might've further quarterly capital distributions do the partners.
Subsequent to the end of the on February 15th.
<unk> seven to look at the financial results of joint venture for the quota.
Revenues decreased by $73.5 million.
North Dakota.
2023.
<unk> before the provisional revenue adjustment for 4% lower in the fourth quarter is the lowest silver settles audience as expected, which are partially offset iron silver prices and higher revenues.
In queue for 2022, we had we recorded a larger positive provisional revenue adjustment, which contributed to love it too.
Q for to ensure need three revenues compared to 2022.
Cost of sales for the four by 10% higher than Q4 2022, primarily as a result.
Resulting in our operating costs.
The L. G. J V was impacted by the strengthening of the Mexican peso against the U S dollar, which was partly offset by productivity improvement and cost reduction initiatives.
Continuous improvement program.
Depreciation depletion amortization expense decreased by approximately 8% primarily due to the increase in mineral reserves at the extension of the mind.
<unk> got a joint venture for the quarter.
Revenues decreased by $73 5 million in the fourth.
An income tax recovery of $1.7 billion was recorded.
Fourth quarter.
2023.
Revenues before the provisional revenue adjustment for <unk>.
Four to 823.
Income tax expense of $40.8 million into 423 to.
Percent lower in the fourth quarter due to lower silver sales volumes as expected, which were partially offset by higher silver prices and higher rate of revenues.
The income tax recovery due to an increase in recognition of the protect assets and additional tax deductions available.
In Q4 2022, we had we recorded a larger positive provisional revenue adjustment, which contributed to lower.
Certain my development <unk> expenditures had been correct.
Finally, the L. G. J V recorded net income approximately $25 million for the quota.
Q4, <unk> revenues compared to 2022.
Yeah.
16% lower than two four to any furniture.
Cost of sales for the quarter were 10% higher than Q4 2022, primarily as a result of higher throughput, resulting in higher operating costs.
I'm moving to <unk>.
The financial results for got the silver.
The algae JV was impacted by the strengthening of the Mexican peso against the U S dollar, which was partly offset by productivity improvements and cost reduction initiatives.
Net income and any temporal advice again sir.
160% in 157% respectively for a quota.
Got a silver recorded net income.
Part of our continuous improvement program.
$3 million or 80 cents per share for Q4 23.
Depreciation depletion and amortization expense decreased by approximately 8% primarily due to the increase in mineral reserves and the extension of the mine life.
<unk> decreased by 40 per cent, primarily as a result of the low and net income recorded at the joint venture.
An income tax recovery of $1 7 million was recorded in Q4 23 compared to income tax expense of $14 8 million in Q4 2022.
Corporate G&A was approximately $2 million lower in Q4 23.
Many due to the audit consulting and seven cost incurred.
The income tax recoveries due to an increase in the recognition of deferred tax assets and additional tax deductions available to us.
In the fourth quarter of 2023 224 22.
For the full yeah.
Certain mine development.
Gentlemen, administrative expenses off 25 6 million compared to.
Expenditures have been cut.
Finally, the algae JV recorded net income of approximately $25 million for the quarter.
$25.5 million in 2022.
Is there any twenty-three general and administrative expenses include.
16% lower than Q4 'twenty to 'twenty two.
Non-cash stock based compensation of 6 million nonrecurring legal fees.
Okay.
Now moving to slide eight.
To review the financial results for the silver.
Fees are 3.2 million costs related to the restatement of the twin if anyone had finished 22 financial statements.
Net income and net income per basic and diluted share are up to 160%.
$2.3 million and some service is up to $100000.
<unk> hundred 57%, respectively for the quarter.
Total silver recorded net income of $12 $3 million or <unk> <unk> per share for Q4.
Bleeding to slide nine.
<unk> <unk> adventure continues to reminded for Ya.
Great.
Equity income and affiliates decreased by 14% primarily as a result of the lower net income recorded at the joint venture.
The L. G. J V ended with a cash balance of $34.3 billion.
Cash balance of $43.1 million at January 31st 2024.
Corporate G&A was approximately $2 million lower in Q4, 2008, mainly due to lower audit consulting and severance costs incurred.
Mentioned earlier, the joint venture capital distribution.
<unk> to its partners.
In the fourth quarter of 2023 compared to Q4 2022.
Just a silver Angela on February 15th 2024.
Of which we received $21 million.
For the full year, we incurred general and administrative expenses of $25 6 million compared to $25 $5 million in 2022.
Got a silver and a 23 three with a cash balance all 50.
$5 billion in cash.
Cash balance of $53.1 million at January 31st for just a few weeks.
In 2023 general and administrative expenses included noncash stock based compensation of $6 million.
Before the receipt of the additional 21 million dollar capital distribution.
Nonrecurring legal defense fees of $3 2 million costs related to the restatement of the finished anyone it's been 22 financial statements.
Venture partner on February 15th.
The company and they'll they'll schedule a joint venture with my 12 physician to continue to execute entrees opportunities.
$2 3 million and some severance is up $200000.
Now I had it back to your desk.
Thanks, Andre and on Slide 10.
Yeah.
Moving to slide nine.
Would like to highlight are updated advice and the mineral reserves that we announced on September six <unk>.
Got a silver as it got us joint venture continue to remain debt free.
Extended our current mine life to the end of 2030.
The LNG JV ended with a cash balance of $34 3 million.
And we continue to believe we have substantial additional upside and we're focused on realize realizing that upside with a target this year to add another three years.
Cash balance of $43 1 million at January 31, 2024.
As I've mentioned earlier, the joint venture by the capital distribution of 30 million to its partners.
We're on track to announce that in the third quarter of 2024.
Cost of silver and over on February 15th 2024 of which we received $21 million.
Since last April we have had numerous drills working on our southeast deep zone with the aim of having the higher grade areas of preferred drill 250 meter spacing for conversion for that reserved and resource update because we have a plan for the third quarter of this year.
Got a silver ended 23 with a cash balance of 65.
$5 million and had a cash balance of $53 1 million at January 31, they need to import.
Just a few weeks before the receipt of the additional $21 million capital distributions paid by the joint venture partner on February 15.
So right now the southeast Dis is our major focus and we currently have seven surface drills focused on that didn't feel drilling.
Okay.
The company and the Los Gatos joint venture remains well positioned to continue to execute contract opportunities.
We also have a four rigs underground focused on definition and resource expansion across the mind.
I will now hand, it back to Doug.
We recently added another surface rig, which is on our <unk> near mind targets, bringing.
Thanks, Andre and on Slide 10 I'd.
I'd like to highlight our updated life of mine and the mineral reserves that we announced on September six that extended our current mine life to the end of 2030 and.
Bringing the total number of drills on site up to 12.
In December we showed our milk is capable of processing 3500 tons per day consistently on an operating basis and we are now advancing future value enhancement projects, including the potential expansion of the 4000 tonnes and of course, that's linked with additional reserve.
And we continue to believe we have substantial additional upside and we're focused on realized realizing that upside with a target this year to add another three years.
We're on track to announce that in the third quarter of.
On the recovery side, we are competing studies for a copper separation circuit and evaluating technology and various options screen, increasing the recovery of silver gold <unk>.
Of 2024.
Since last April we have had numerous drills working on our southeast deep zone with the aim of having the higher grade areas of inferred drilled $2 50.
<unk> meter spacing for conversion.
Turning to spot 11. This figure shows a few of the key targets that are within a few kilometers of the existing mine workings and potentially accessible from existing underground infrastructure.
For that reserve and resource update that we have planned for the third quarter of this year.
So right now the southeast deeps as our major focus and we currently have seven surface drills focus on that infill drilling.
Our geologists have been hard at work for the last couple of years getting this L. P C.
We also have four rigs undergone focused on definition and resource expansion across the mine.
And adding to our lifestyle mine and now in 2024, we are excited by the child's to ramp up the exploration work on the rest of our 103000 Hector airline package.
We recently added another surface rig, which is on our Portugal annual near mine targets, bringing.
Bringing the total number of drills on site up to 12.
We will still be doing a lot of work within three to four kilometers of the line operations.
In December we showed our mill is capable of processing 3500 tonnes per day consistently on an operating basis and we are now advancing future value enhancement projects, including the potential expansion to 4000 tons and of course, that's linked with additional reserve growth.
<unk> will be easiest to bring anything we find in this area close to the mine is a production in a timely manner.
You can clearly see the large number of things, we already know or just within that close range.
We will be getting the drove Rachel beyond this area as well with some very perspective targets from the San Luis area, which is about five kilometers to the northwest of the mind and we have a number of targets further to the northwest about 22 kilometers from the mind and the limits area.
On the recovery side, we are completing studies for our copper separation circuit and evaluating technology and various options for increasing the recovery of silver gold and zinc.
Okay.
Turning to slide 11. This figure shows a few of the key targets that are within a few kilometers of the existing mine workings and potentially accessible from existing underground infrastructure.
So turning to slide 12 in summary, we continue to safely drive Milts report increases together with productivity improvements and cost optimization, which is a core part of our business and operating strategy.
Our geologists have been hard at work for the last couple of years getting the southeast each defined and adding to our life of mine and now in 2024, we're excited by the Charles to ramp up the exploration work on the rest of our 103000 hectare land package.
We remain focused on extending the main line.
And that's why the third quarter of 2024, together with other value enhancing initiatives.
And we continue to be very excited as we start to increase our near mine and district drilling in the March and Hardy perspective, let's catch Us district.
We will still be doing a lot of work within three to four kilometers of the mine operations as it will be easiest to bring anything we find in this area close to the mine into production in a timely manner.
And finally, and importantly, we continue to generate strong operating margins and cash flow with regular distributions expected <unk> joint venture.
You can clearly see the large number of beams, we already know of just within that close range.
Growing cash balance.
We will be getting the drill rigs beyond this area as well with some very perspective targets in the San Luis area, which is about five kilometers to the northwest of the mine.
Well now hand, it back to the operator for questions.
At this time I would like to remind everyone in order to ask a question Sibley Press Star then the number one the odd or telephone keypad will pause for a moment to compile the queue and they roster.
We have a number of targets.
Whether to the northwest about 22 kilometers from the mine and the Linzess area.
So turning to slide 12 in summary, we continue to safely drive mill throughput increases together with productivity improvements and cost optimization.
Okay.
Once you get every one if you would like to ask a question simply press Star then the number one on your telephone keypad.
As a core part of our business and operating strategy.
We remain focused on extending the mine life.
And your first questions from the line of Lucas <unk> with Canaccord. Please go ahead.
And Thats why the third quarter of 2024, together with other value enhancing initiatives.
Lucas sure mine is open.
And we continue to be very excited as we start to increase our near mine and district drilling in the large and highly perspective, Los Gatos District.
Lucas you may need to check your line to see if you place it on mute.
And finally, and importantly, we continue to generate strong operating margins and cash flow with regular distributions expected from the Los Gatos joint venture and a growing cash balance.
Sorry, guys I was on hold pay delancey and thanks for taking my questions.
Okay.
I'm just trying to get.
The.
Can you provide more sort of color on the mail or sorry, the mind debottlenecking efforts that you're undertaking to get you to 3500 times a day.
I'll now hand, it back to the operator for questions.
At this time I would like to remind everyone in order to ask a question simply press Star then the number one to onshore telephone keypad, we will pause for a moment to compile the Q&A roster.
Yeah sure. Thanks, Thanks Lucas.
Right now we have development well ahead of production and so to sustain a mining right above 3000 tons per day, we need to continue to open up a new new areas and cycled through stoves faster than our goal is and who stayed at our mid term goal is to get up to that.
Okay.
Once again, everyone. If you would like to ask a question simply press Star then the number one on your telephone keypad.
3500 ton per day to fill the mill.
And your first question is from the line of Lukas Palmer Todd with Canaccord. Please go ahead.
That's just cycling through the stoves quicker. So it's not really a matter of developing it's more just on a day to day basis equipment productivity is utilizations.
Okay.
Lucas Your line is open.
Making maximum use of our pays plan to to to cycle through both <unk> and long hold stoping faster.
Lucas you may need to check your line to see if you placed it on mute.
Sorry, guys I was on hold.
Hey, Dale and team thanks for taking my questions.
And then importantly, it's opening up the southeast on what we want to make sure of obviously for short periods of time, we can do 3500 tons per day, but our goal is to drive towards that as a long term sustainable race and for that we're gonna need to open up the southeast area and that's a lot of our focus on developments as well.
Okay.
Just wanted to hit on the head.
Can you provide more color on good mill or sorry, the mind debottlenecking efforts that you're undertaking to get you to 3500 tonnes a day.
Yes sure. Thanks, Thanks Lucas.
Gotcha. Thank you and I hope you undertake this drawing and understand more about the <unk> do you think you'll be able to include that sort of 3500 tons a day scenario in your new mind plan later this year.
Right now we have development well ahead of production and so to sustain.
Mining rates above 3000 tonnes per day, we need to continue to open up new areas and cycle through stopes faster than our goal as stated our midterm goal is to get up to that 3500 ton per day to fill the mill.
Yeah like I said, we're making.
Put in our guidance regarding to average between 3030 300, So we're making good progress towards about 3500 ton goal already expected in our in our in our guidance range Uhm.
That's just cycling through the stopes quicker. So it's not really a matter of developing it's more just on a day to day basis equipment productivity is.
But yes, that's what that's what we're going to work for a circus.
Okay. Thank you guys all the best.
Utilizations.
Okay.
Making maximum use of our <unk> plant.
Again, if you would like to ask you questions simply press Star then the number one on your telephone keypad.
To cycle through both cut and fill.
Long haul stoping faster.
And then importantly, it's opening up the southeast zone, what we want to make sure of obviously for short periods of time, we can do 3500 tonnes per day, but our goal is to drive towards that as a long term sustainable rate.
And at the time, there could be no further questions Mister Andres I will turn the call back over to you.
And for that we are going to need to open up the southeast area and Thats a lot of our focus on development as well.
Well thanks for everyone, who participated we are very excited about 2024, we think we're very well positioned to deliver additional shareholder value and we look forward to providing updates as the year progresses. Thanks, everyone.
Got you. Thank you and as you undertake this drilling and understand more about the southeast Steve do you think you'll be able to include that sort of 3500 tonne a day scenario.
Mine plan later this year.
Yeah like I said, we're making.
Okay.
Put in our guidance, we're guiding to average between 3030 300.
This concludes today's conference call you may now disconnect.
[noise] [music].
So we're making good progress towards that 3500 ton goal already expected.
Our guidance range.
But yes, that's what that's what we're going to work towards Lucas.
Great. Thank you guys all the best.
Again, if he would like to ask a question simply press Star then the number one on your telephone keypad.
And at the time they appear to be no further questions. Mr. Andre and I will turn the call back over to you.
Well. Thanks, Thanks for everyone, who participated we are very excited about 2024, we think we're very well positioned to deliver additional shareholder value and we look forward to providing updates as the year progresses. Thanks, everyone.
Okay.
This concludes today's conference call you may now disconnect.
Thanks.