Sign in

You're signed outSign in or to get full access.

GS

Gatos Silver, Inc. (GATO)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 EPS was $0.14, up 200% year-over-year from $0.05, with adjusted diluted EPS of $0.21; consolidated net income rose to $9.9M versus $3.3M in Q3 2023 .
  • LGJV (100% basis) delivered revenue of $93.8M (+40% YoY), record EBITDA of $57.2M (+87% YoY), and record free cash flow of $42.6M (+199% YoY); by-product AISC fell to $9.61/oz from $14.71/oz .
  • Guidance raised on Oct 9: 2024 silver production to 9.2–9.7M oz (from 8.4–9.2M), silver equivalent to 14.7–15.5M oz (from 13.5–15.0M), and by-product AISC lowered to $8.50–$10.00/oz (from $9.50–$11.50/oz); co-product AISC maintained at $14–$16/oz .
  • Strategic catalysts: definitive merger agreement with First Majestic (expected close Q1 2025), updated LOM plan adds two years of reserves and 36% higher silver equivalent production, and continued exploration ramp across Los Gatos district .
  • Wall Street consensus estimates from S&P Global were unavailable due to missing mapping; comparisons to consensus cannot be provided at this time (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • “CLG’s strong third quarter 2024 production and cost performance together with higher metal prices resulted in record quarterly free cash flow at the LGJV and a record quarter-end cash balance for Gatos Silver” — CEO Dale Andres .
  • AISC materially improved: by-product AISC dropped 35% YoY to $9.61/oz and co-product AISC fell 9% YoY to $16.13/oz, reflecting higher production volumes and realized prices .
  • Cash position strengthened: Gatos ended Q3 with $116.7M cash (+40% vs Q2-end), aided by $37.9M distributions; LGJV also paid a $40M distribution on Nov 7 (Gatos received $28M) .

What Went Wrong

  • Corporate G&A rose to $10.4M from $7.5M, driven by $5.3M merger-related costs (excluded from adjusted metrics), partially offset by lower stock-based comp and legal/insurance costs .
  • LGJV income tax expense increased to $13.9M vs a recovery of $0.9M last year, reflecting higher taxable income and timing effects .
  • Exploration expense at LGJV increased YoY ($1.6M vs $1.0M), and resource development drilling expenditures remain elevated to support life-of-mine extension efforts .

Financial Results

Consolidated Results (Gatos Silver, Inc.)

MetricQ3 2023Q2 2024Q3 2024
Net Income ($USD Millions)$3.3 $9.2 $9.9
Basic EPS ($USD)$0.05 $0.13 $0.14
Diluted EPS ($USD)$0.05 $0.13 $0.14
Adjusted Net Income ($USD Millions)$3.3 —$15.2
Adjusted Diluted EPS ($USD)$0.05 —$0.21
EBITDA ($USD Millions)$3.2 $8.2 $9.1
Adjusted EBITDA ($USD Millions)$3.2 —$14.4
Free Cash Flow ($USD Millions)$33.3 $11.8 $34.2
Cash And Equivalents ($USD Millions, period-end)—$82.5 $116.7

LGJV (100% basis)

MetricQ3 2023Q2 2024Q3 2024
Revenue ($USD Millions)$67.0 $94.2 $93.8
Net Income ($USD Millions)$15.1 $20.5 $25.7
EBITDA ($USD Millions)$30.6 $54.1 $57.2
Cash from Operations ($USD Millions)$29.4 $54.5 $58.2
Free Cash Flow ($USD Millions)$14.3 $40.8 $42.6
Co-product AISC ($/oz silver eq)$17.64 $15.26 $16.13
By-product AISC ($/oz silver)$14.71 $6.57 $9.61

KPIs (CLG 100% basis)

KPIQ3 2023Q2 2024Q3 2024
Tonnes Milled per Day (dmt)2,916 3,240 3,246
Silver Production (million oz)2.22 2.30 2.42
Silver Equivalent Production (million oz)3.46 3.88 3.84
Zinc Production (million lb)13.8 19.1 16.5
Lead Production (million lb)9.5 12.0 11.4
Gold Production (thousand oz)1.28 1.36 1.45

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Silver Production (M oz)FY 20248.4–9.2 9.2–9.7 Raised
Silver Eq Production (M oz)FY 202413.5–15.0 14.7–15.5 Raised
By-product AISC ($/oz silver)FY 2024$9.50–$11.50 $8.50–$10.00 Lowered
Co-product AISC ($/oz silver eq)FY 2024$14.00–$16.00 $14.00–$16.00 Maintained
Sustaining Capital (CLG, $M)FY 2024~$45 ~$45 (on track) Maintained
Exploration & Resource Dev ($M)FY 2024$18 $18 (on track) Maintained
Base Metals OutputFY 2024Zinc 61–69M lb; Lead 40–46M lb; Gold 4.5–5.5k oz Expected near high end of original ranges Bias Up

Earnings Call Themes & Trends

TopicQ1 2024 (Previous Mentions)Q2 2024 (Previous Mentions)Q3 2024 (Current Period)Trend
Throughput & Mining BottleneckTarget 3,500 tpd medium-term; mining is bottleneck; equipment rebuilds and operational initiatives underway Sixth consecutive quarterly record; 3,240 tpd; continued rebuild and productivity projects Production strong; mill throughput 3,246 tpd; record FCF (press release) Improving throughput; sustained focus
Cost Structure & AISCAISC expected lower half of guidance despite peso strength/inflation By-product AISC at $6.57; co-product just over $15; tracking below guidance midpoint By-product AISC $9.61; co-product $16.13; still favorable YoY Favorable vs 2023; normalized vs Q2
LOM Plan & ReservesUpdate targeted for Q3; aim to increase throughput and extend life; SE Deeps conversion drilling On track to announce in September; higher throughput in plan LOM plan announced Sept 25: adds two years and +36% silver eq production Positive reserve/throughput trajectory
Copper Circuit & RecoveryDetailed engineering; decision expected Q3; exploring recovery improvements Decision in H2; evaluating tech to improve recoveries Copper circuit referenced as ongoing evaluation; recovery focus continues Ongoing evaluation
Exploration ProgramRamp-up near-mine and district; $18M budget; VP exploration appointed Shift to greenfields; 5–6 rigs; San Luis, Central/NW Deeps Further ramp-up with added rigs in Lince area in Nov; 12 rigs total property-wide (per Oct 9 PR) Accelerating
Regulatory/Macro (Mexico)—New administration seen as more pro-business; no immediate permit needs Not discussed in Q3 PR; call occurred Nov 12 Neutral to positive outlook

Management Commentary

  • “We believe we are well positioned to deliver significant value into the combination with First Majestic given the Company’s strong cash position and free cash flow generation together with CLG’s track record of performance, the extended mine plan disclosed in September and ongoing exploration efforts across the broader Los Gatos district.” — CEO Dale Andres .
  • “Site operating unit costs of $96.93/t milled were 8% lower than in Q3 2023 primarily due to higher mill throughput in the quarter.” .
  • “Higher unadjusted and adjusted net income, earnings per share and EBITDA for Q3 2024 were primarily attributable to the higher equity income from the LGJV and higher interest income… G&A expenses were higher in Q3 2024, mainly due to $5.3 million of costs related to the proposed Merger with First Majestic.” .

Q&A Highlights

  • Regulatory outlook: Management viewed Mexico’s incoming administration as more pro-business; highlighted proactive engagement and minimal near-term permitting needs .
  • Exploration priorities and drilling cadence: 5–6 surface rigs with mix of SE Deeps conversion/extension and greenfields; plans to expand drilling to Lince area in Q4 .
  • Equipment rebuild program: Broad underground fleet refresh (trucks/loaders/bolters/jumbos) ~70–80% complete, bulk finishing by Q1 2025 to support mining rates toward 3,500 tpd .

Note: A Q3 2024 earnings call was held Nov 12 per the press release; however, a transcript was not available in our corpus at time of writing .

Estimates Context

  • S&P Global consensus estimates (EPS, revenue) for Q3 2024 were unavailable due to missing CIQ mapping for ticker GATO; therefore, no beat/miss versus Wall Street consensus can be determined at this time (S&P Global data unavailable).

Key Takeaways for Investors

  • Operational performance remains strong with sustained high throughput and improved cost metrics, supporting robust LGJV cash generation and corporate cash accumulation to fund growth and de-risk the merger close .
  • 2024 guidance was raised for silver and silver equivalent volumes and by-product AISC lowered, indicating momentum into year-end; co-product AISC remains within prior range .
  • Updated LOM plan adds two years of reserves and boosts silver equivalent output by 36%, enhancing medium-term production visibility and potential valuation support .
  • Exploration is accelerating across near-mine and district targets (San Luis, Central/NW Deeps, Lince), offering optionality for reserve additions and future throughput .
  • Non-GAAP adjustments (merger-related costs) materially affected reported G&A; focus on adjusted metrics (EPS/EBITDA) is warranted for core performance tracking .
  • Tax expense at LGJV rose with higher profitability; monitor effective tax rate impacts on net income conversion as production and prices remain strong .
  • Near-term trading implications: watch for merger developments, any incremental guidance commentary, and production/price mix that could further compress AISC; lack of visible consensus estimates may reduce headline beat/miss catalysts until mapping is resolved .