Executive Summary

Solid operations but mixed financials: LGJV revenue rose 3% year/year to $72.2M while net income fell 20% to $10.2M on lower realized prices and higher costs; Gatos Silver reported EPS of $0.04 and net income of $2.5M, up from $0.01 a year ago .
Throughput beat and guidance bias higher: CLG averaged >3,200 tpd in Q1 (March >3,300 tpd). Management now expects 2024 silver and AgEq production in the top half of prior ranges and AISCs in the lower half of ranges .
Cash generation and distributions remain strong: LGJV free cash flow was $25.5M in Q1; Gatos ended April with $85.4M cash (debt free) after a $17.5M April distribution from LGJV; $50M revolver remains undrawn .
Estimate context: S&P Global consensus data for GATO’s Q1 2024 was unavailable via our feed; vs. estimates not shown.
Near-term stock catalysts: Q3 2024 life-of-mine (LOM) plan update with potentially higher sustainable throughput, a copper circuit decision, and continued distributions/guidance bias to the top/lower halves of ranges .

What Went Well and What Went Wrong

What Went Well
- Record operating rates: “averaged a mill throughput rate of over 3,200 tonnes per day” in Q1; March averaged >3,300 tpd; productivity initiatives and mine plan optimization advancing .
- Guidance skewed favorable: Management expects 2024 silver/AgEq production in the “top half” of ranges and AISC in the “lower half,” reflecting throughput outperformance despite FX/inflation headwinds .
- Cash generation/distributions: LGJV generated $25.5M FCF and distributed $30M in Feb and $25M in April; Gatos cash was $85.4M on April 30, debt free .
What Went Wrong
- Cost pressure and FX headwind: By-product AISC rose to $10.08/oz (from $6.11) on lower realized prices and a stronger Mexican peso; cost of sales up 18% y/y with higher tonnes processed/sold .
- Profitability down y/y at JV: LGJV net income fell 20% to $10.2M; EBITDA down 11% to $35.1M on pricing and cost dynamics; provisional revenue adjustment less negative than Q1'23 but still a drag .
- Higher parent-level G&A (partly nonrecurring): Gatos Silver G&A rose to $7.0M, including $1.7M non-cash SBC and higher legal fees (not expected to recur beyond 2024) .

Financial Results

LGJV (100% basis) – Income statement and cash flow trend

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($M)	$67.0	$73.5	$72.2
Net Income ($M)	$15.0	$24.9	$10.2
EBITDA ($M)	$31.2	$38.6	$35.1
Cash from Operations ($M)	$29.4	$38.2	$37.3
Free Cash Flow ($M)	$14.3	$22.3	$25.5
Co-product AISC ($/AgEq oz payable)	$17.64	$14.73	$14.36
By-product AISC ($/Ag oz payable)	$14.71	$11.12	$10.08

Notes: Q1 y/y profitability declined on lower realized prices and higher costs (including FX), despite higher throughput and volumes .

Gatos Silver (parent) – Earnings and cash flow trend

Metric	Q3 2023	Q4 2023	Q1 2024
Net Income ($M)	$3.3	$12.3	$2.5
Diluted EPS ($)	$0.05	$0.18	$0.04
EBITDA ($M)	$3.6	$11.8	$1.8
Cash from Operations ($M)	($1.7)	($2.5)	$15.1
Free Cash Flow ($M)	$33.3	$22.0	$15.1
G&A ($M)	$7.5	$6.5	$7.0

Comments: Q1’24 parent cash from operations boosted by capital distributions now classified as operating cash flow; cash balance was $70.6M at Mar 31 and $85.4M at Apr 30 (debt free) .

Operating KPIs (CLG 100% basis)

KPI	Q3 2023	Q4 2023	Q1 2024
Tonnes milled	268,312 dmt	277,318 dmt	292,114 dmt
Tonnes per day	2,916 dmt/d	3,014 dmt/d	3,210 dmt/d
Silver grade	285 g/t	318 g/t	284 g/t
Silver production	2.22 Moz	2.6 Moz	2.37 Moz
Silver equivalent production	3.46 Moz	3.9 Moz	3.70 Moz
Co-prod cash cost ($/AgEq oz)	$14.42	$11.26	$11.70
By-prod cash cost ($/Ag oz)	$10.04	$6.02	$6.09
Avg realized silver price ($/oz)	$24.24	$22.36	$22.91

Guidance Changes

Metric	Period	Previous Guidance (Feb 21, 2024)	Current Guidance (May 6, 2024)	Change
Throughput (tpd)	FY 2024	3,000–3,300 tpd	Top half of 3,000–3,300 tpd	Raised within range (top half)
Silver production (Moz)	FY 2024	8.4–9.2	Top half of 8.4–9.2	Raised within range (top half)
Silver equivalent (Moz)	FY 2024	13.5–15.0	Top half of 13.5–15.0	Raised within range (top half)
AISC by-product ($/oz Ag payable)	FY 2024	$9.50–$11.50	Lower half of $9.50–$11.50	Lower half targeted
AISC co-product ($/AgEq oz payable)	FY 2024	$14.00–$16.00	Lower half of $14.00–$16.00	Lower half targeted
Sustaining capex ($M, 100% basis)	FY 2024	~45	~45	Maintained
Exploration + definition ($M)	FY 2024	~18 (9 cap, 9 expensed)	~18 (unchanged)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’23, Q4’23)	Current Period (Q1’24)	Trend
Throughput & debottlenecking	Q3: Optimization of mine plan; strong margins . Q4: Demonstrated mill capacity closer to 3,500 tpd; 2024 avg 3,000–3,300 tpd .	Avg >3,200 tpd; March >3,300 tpd; aiming to sustain 3,500 tpd .	Improving
Costs/AISC & FX	Q3: AISC up; guidance lower half for FY . Q4: Managed inflation/peso; AISC $11.33/oz FY .	AISC to remain lower half of guidance; y/y cost inflation and stronger peso partly offset by productivity .	Mixed; managed headwinds
SE Deeps conversion & LOM	Q3: SE Deeps conversion progressing; exploration ramp-up . Q4: LOM update targeted Q3’24; 12 rigs active .	LOM update still Q3’24; converting higher-grade portions of ~4.5–4.6 Mt inferred; copper circuit decision in Q3 .	Accelerating
Copper circuit & recoveries	Q4: Copper separation circuit studies; recovery tech options .	Decision anticipated in Q3; evaluating tech to increase silver/gold/zinc recoveries .	Pending decision
Capital returns & balance sheet	Q3: $85M 2023 distributions; $24.5M Oct distribution . Q4: $30M Feb 2024 distribution .	$30M Feb and $25M Apr distributions; Gatos cash $85.4M Apr 30; debt free; $50M revolver .	Continuing
Legal/regulatory	Q4: Lower legal fees vs prior year .	Class action settlements funded into escrow; $4.0M company share, insurers $20.0M; final approval expected by end Q2 .	Resolving

Management Commentary

Strategic focus: “Our strong operating performance and cash flow generation continued… averaged a mill throughput rate of over 3,200 tonnes per day… on our way to… 3,500 tonnes per day.” AISC metrics expected “to remain in the lower half of the guidance range” despite FX/inflation .
Financial drivers: “Revenue increased to $72.2 million… higher volumes… offset by significantly lower silver, zinc and lead prices… cost of sales increased by 18%… impacted by the strengthening of the Mexican peso… partly offset by productivity improvements” .
Capital allocation: “Capital distribution of $30 million… further… $25 million [in April]… Gatos Silver… cash balance of $85.4 million at April 30… debt-free… $50 million revolver remains in place” .
Operating improvements: “Switched more mining areas from cut and fill to long hole stoping… equipment rebuild program… targeting… 3,500 tpd” .
Growth pipeline: “Decision [on] copper separation circuit… in the third quarter… evaluating… options for increasing the recovery of silver, gold and zinc” .

Selected quotes:

“Our first quarter production puts us in a strong position… AISC… expected to remain in the lower half of the guidance range” .
“Provisional revenue adjustment was a $900,000 negative… compared to a $13.6 million negative in Q1 2023” .
“Gatos Silver had a cash balance of over $85 million at the end of April” .

Q&A Highlights

SE Deeps grade mix and conversion scope: Management reiterated SE Deeps carries lower silver but higher base metals (notably copper) vs current reserves; target to convert the higher-grade portions of ~4.5–4.6Mt inferred, with final grades contingent on stope design/dilution in ongoing modeling .
LOM plan priorities: Three aims—raise sustainable throughput (toward 3,500 tpd), extend mine life, and add margin via copper circuit decision and recovery improvements .
Capital allocation and growth: With >$85M cash (>$100M incl. share of JV cash), exploration budget at ~$18M in 2024 is scalable if results warrant; management will also look “opportunistically” at external opportunities without necessity to transact .

Estimates Context

S&P Global consensus for Q1 2024 EPS and revenue was unavailable via our data feed for GATO at the time of analysis; therefore, explicit “vs. estimates” comparisons are not shown. This limits the ability to flag beats/misses relative to Street.

Key Takeaways for Investors

Throughput momentum is real and ahead of plan; March >3,300 tpd and 2024 now biased to the top half of production guidance should support sentiment into the Q3 LOM update .
Cost control remains credible despite FX/inflation; AISC tracking to lower half of guidance but y/y increases vs Q1’23 reflect price headwinds and peso strength—monitor MXN/USD sensitivity .
Cash returns from LGJV are durable; two consecutive distributions (Feb, Apr) and rising parent cash provide optionality (exploration acceleration, potential opportunistic M&A) without leverage .
Q3 2024 is a pivotal catalyst window: updated LOM plan (throughput and mine life), copper circuit decision, and potential recovery upgrades can reset medium-term FCF/margin trajectory .
Commodity mix shift: SE Deeps implies lower silver but higher base metals (incl. copper), potentially diversifying revenue streams and influencing by-product credits/AISC over time .
Watch realized price dynamics and provisional adjustments; Q1’24 saw less negative provisional impact than Q1’23, but pricing remains a key swing factor .
Legal overhang abating with escrow funding and expected settlement approvals by end-Q2, simplifying the narrative .

Appendix: Additional Details

Production release highlights: Q1’24 AgEq production 3.70Moz at top end of guidance; throughput +11% y/y; grades lower as planned .
Classification change: Capital distributions reclassified to operating cash flows (restatements filed); no impact on cash balances or JV financials .

Gatos Silver, Inc. (GATO)·Q1 2024 Earnings Summary