BASE METALS

Gatos takes 'significant' step in correcting issues

Gatos Silver has updated its resource and reserve estimates for its Mexican Cerro Los Gatos mine which shows a 30-50% reduction in contained metal compared to an earlier erroneous report.

Canaccord Genuity Capital Markets analyst Michael Fairbairn called the updated estimates and LOM plan, “a step in the right direction”.

Canaccord Genuity Capital Markets analyst Michael Fairbairn called the updated estimates and LOM plan, “a step in the right direction”.

The company also released a life of mine plan for the operations, which sees production of 42.2 million ounces Ag, 379.9 million pounds Zn, 256.4 million lbs Pb, and 29,500oz Au through to 2028.

The company's announcement that the 2020 technical report had errors in it came on 25 January of this year. Since then, Gatos has rebuilt its reserve and resource estimates and, on a preliminary basis, expects the new report to show reductions of 32% silver, 37% zinc, 36% lead, and 35% gold, after accounting for depletion.

The January announcement saw Gatos' share price slump from between C$12 and C$13 (US$8.86 and US$90.6) in the days prior to below C$4 after it was made. The stock has not returned to anywhere near its earlier heights since the fall.

It rose 4% day on day to C$4.32 on 4 October.

Canaccord Genuity Capital Markets analyst Michael Fairbairn called the updated estimates and LOM plan, "a step in the right direction".

On a silver equivalent basis, Gatos LOM plan to 2028 stands at 75.9 million oz, which compares to CG's estimate of 61.3 million oz AgEq through to 2026.

The average annual production of 11.7 million oz AgEq compares to CG's 13.6 million oz.

By-product AISC of US$7.06/oz Ag was higher than the $6.42/oz forecast by CG.

The project has been given an after-tax NPV5% of $377 million, which compares to CG's estimate of $286 million. The price assumptions used were $22/oz Ag, $1.20/lb Zn, $0.90/lb Pb, and $1,700/oz Ag.

"With the technical update now in place, Gatos has removed the major bottleneck preventing it from filing its back financial statements and taken a substantial step towards correcting the issues it has faced over the previous year," Fairbairn said.

"After missing its reporting deadline, Gatos is operating in an Initial Cure Period, allowing trading to continue for six months. Given the time required to complete its updated R&R estimate, Gatos expected that it would not be able to file during this period, and management plans to apply for an extension," he said.

He explained that the extension is at the discretion of the NYS, while its listing on the TSX involves a management cease trade order, which does not have a pending deadline.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.

editions

Mining Journal Intelligence Global Leadership Report 2023: Social licence

Gain insights into social licence trends and best practices from interviews with 20+ top mining company executives and an industrywide survey.