Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gatos Silver Inc (GATO, Financial) reported record revenues, cash flow from operations, and free cash flow for the second quarter of 2024, driven by strong operating performance and higher metal prices.
- The Los Gatos joint venture achieved a record mill throughput, positioning the company well to meet its annual guidance.
- All-in sustaining costs per payable ounce of silver were significantly lower than the previous year and below the guidance range for 2024.
- The company has a strong cash position with nearly $109 million at the end of July, following a $40 million distribution from the joint venture.
- Gatos Silver Inc (GATO) remains debt-free, providing financial flexibility for future growth initiatives.
Negative Points
- Cash costs for the quarter increased by 14% compared to the same period last year, primarily due to higher production rates.
- Cost of sales rose by 24%, driven by increased tonnage of concentrates sold and higher mining and processing costs.
- The company faced inflationary pressures and a strong Mexican peso, which impacted cost performance.
- Income tax expense increased significantly to $12.5 million, reflecting higher taxable income.
- General and administrative expenses rose by $1.7 million, partly due to non-recurring costs such as stock-based compensation and legal fees.
Q & A Highlights
Q: Can you give us any thoughts around the Mexican election in June and any expectations from the incoming administration with respect to mining that might impact you?
A: We are optimistic that the new administration will be more pro-business. The ministerial appointments, including the Minister of Economy, have been pro-business, and the new minister has already met with the mining industry. We don't need immediate permits to continue operating, but we hope for improvements in the industry environment with the new administration.
Q: Can you give us a sense of your exploration priorities and the pace of drilling on near mine targets versus regional exploration now that the infill drilling is wrapped up?
A: We currently have five surface rigs, soon to be six. Two rigs will focus on the Southeast deeps to extend mineralization. The other rigs will focus on greenfield exploration, with plans to drill in the northwest of the property. We are excited about the potential in these areas and plan to increase drilling activity.
Q: Can you remind us about the timing of the rebuild program? Is it still on track to wrap up in H2, and should we expect it to help increase mining rates?
A: The rebuild program started last year and continues into early 2025. We are about 70-80% through, with priority equipment already addressed. The program should conclude by the first quarter of next year. The refreshed equipment fleet, along with operational improvements, will help us reach our medium-term target of 3,500 tonnes per day.
Q: What are your expectations for the new life of mine plan and mineral reserves update?
A: We are on track to provide the updated life of mine plan and mineral reserves in the third quarter of 2024, targeting September. The new plan will incorporate higher throughput rates and additional drilling results, aiming to extend the mine life despite the increased rate.
Q: How is the financial performance of the Los Gatos joint venture impacting Gatos Silver's cash position and future growth plans?
A: The Los Gatos joint venture's strong performance has resulted in robust cash flow, with a cash balance of $108.9 million as of July 31, 2024. This growing cash balance supports future growth initiatives, including exploration and potential expansions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
