NYSE- and TSX-listed Gatos Silver has produced a record 2.39-million silver ounces from its 70%-owned Cerro Los Gatos (CLG) mine, in Mexico, in the first quarter of the year.
This marks a 58% increase compared with the first quarter of last year, which was impacted by a temporary shutdown for two weeks, as a result of a power outage.
Newly appointed CEO Dale Andres attributes the impressive production performance to higher silver grades, higher plant throughput and improved recoveries.
The company also produced 10.3-million pounds of lead and 13.8-million pounds of zinc, representing year-on-year increases of 36% and 58%, respectively, owing to higher ore grades.
Recoveries in silver increased from 85.5% in the first quarter of last year to 89.7% in the first quarter of this year, while lead recoveries increased from 84.5% to 89.2% and zinc recoveries increased from 59.4% to 63.5%.
Given the strong performance of the CLG mine on a continual basis, Gatos anticipates paying a maiden dividend in the second quarter of the year.
The company also plans to increase its plant throughput levels in the second half of this year.
In the quarter under review, Gatos signed a definitive agreement with its joint venture (JV) partner Dowa Metals & Mining to build a new leaching plant for reduced fluorine levels in all zinc concentrates. The construction of the plant is expected to cost $6-million.
As part of the agreement, an initial payment towards the $20-million priority payment owing to Dowa under the partner’s priority distribution agreement has been reduced to $10.3-million, after which each partner will retain its pro rata share of any dividends.
The reduced priority dividend amount reflects a portion of both the construction and future estimated operating costs of the new plant and is dependent on the successful construction and operation of the leaching plant, which is expected to be commissioned in the first half of 2023.
Should the leaching plant construction not occur, or the leaching plant not operate according to certain parameters during the first five years, portions of the $9.7-million priority dividend reduction could be reinstated.
Meanwhile, the partners of the Los Gatos JV reached an agreement with a local energy supplier to provide all of the mine’s electricity requirements from renewable energy sources. This allows CLG to significantly reduce its dependency on fossil fuels and reduce the mine’s carbon footprint.
Gatos says it continues to advance efforts towards publishing an updated life-of-mine plan and mineral resources estimate. The company expects to produce a new CLG financing model, as well as an updated technical report, during the second half of 2022.
MANAGEMENT CHANGES
Andres, who serves as president of the company, has also been appointed CEO, succeeding Stephen Orr, who has retired.
Gatos states that Andres brings to the board three decades of experience in the mining industry. Prior to joining Gatos in June 2021, he worked at Teck Resources, where he oversaw a range of senior responsibilities involving base and precious metals.
CFO Roger Johnson will also be retiring on May 21. Gatos has enlisted the services of executive search firm Korn Ferry to handle the recruitment of a successor.