Mr. Dale Andres reports

GATOS SILVER PROVIDES UPDATES ON CERRO LOS GATOS MINERAL RESERVE, MINERAL RESOURCE AND LIFE OF MINE PLAN

Gatos Silver Inc. has released an updated mineral reserve estimate, mineral resource estimate and life of mine (LOM) plan for the Cerro Los Gatos (CLG) mine in which Gatos Silver has a 70-per-cent interest.

All dollar amounts are expressed in U.S. dollars unless otherwise noted.

Highlights:

• CLG 2022 LOM plan summary using only the 2022 mineral reserve (100-per-cent basis): CLG's current reserve mine life continues to 2028;
• Average annual production of 7.4 million ounces of silver with average annual cash flow of $79-million (after tax) through 2028 at price of $22 per ounce silver;
• Average all-in sustaining cost (AISC) of $7.06 per ounce of payable silver, net of byproduct credits;
• Average operating cost of $89.76 per tonne milled;
• Pretax net present value (NPV) at a 5-per-cent discount rate of $491-million ($377-million after tax);
• Recent exploration success demonstrates extension potential that could, with additional drilling, significantly extend the mine life:
  • The company is focused on resource extension drilling at depth in the Northwest and Central zones, in addition to the undeveloped Southeast zone. Drilling highlights from this program include hole GA-SE-467 that intercepted 17 metres (estimated 10.4 metres true width) at 291 grams per tonne silver, 5.55 per cent zinc, 6.14 per cent lead and 1.01 per cent copper;
  • Recent drilling at CLG beneath the Southeast zone (referred to as Southeast Deeps) has discovered both silver-copper and silver-zinc-lead mineralization at depth. Drilling highlights from this program include hole GA-SE-477 that intercepted 7.5 metres (estimated 5.9 metres true width) at 247 g/t Ag, 5.97 per cent Zn and 3.58 per cent Pb, and hole GA-SE-475 that intercepted 16 metres (estimated 12 metres true width) at 135 g/t Ag and 1.34 per cent Cu.
• The company is in the process of transitioning its executive office to Vancouver, B.C., from Denver, Colo., and has an experienced executive management team in place, further strengthened with the appointment of Stephen Bodley, general counsel and chief compliance officer, effective Oct. 16, 2022.

Dale Andres, chief executive officer of Gatos Silver, said:

"We have taken the necessary time to rebuild the 2022 mineral reserve and 2022 mineral resource from the ground up and are pleased to be able to deliver this update to our shareholders. The 2022 LOM plan displays low average all-in sustaining costs and strong cash flow until 2028 from our current reserve.

"Additionally, while still early days, it appears that there is potential to extend mine life as a result of significant mineralization that we have recently discovered in the Southeast Deeps zone, which extends more than 300 metres below the bottom of the 2022 mineral reserve. By adding a new component to our geological interpretation of the mineralization, this new zone opens up geological prospects at depth -- not only below the existing workings, but across our land position. Now that we have the solid foundation with this updated reserve, we can return our attention towards realizing our district-scale upside with further exploration.

"Demonstrated by our excellent operating performance and now with a solid foundation at CLG with one of the industry's lowest-cost operations throughout the 2022 LOM plan, we are well positioned for future growth. I am excited to work with a revitalized and experienced executive leadership team at Gatos Silver, which is bringing a new perspective and depth as we look to grow shareholder value. Moreover, we have added terrific operational and technical talent to the CLG management team to help optimize the operation of the mine. Together with our partner Dowa Metals and Mining, our objectives are to extend the mine life beyond 2028 and to further develop the 103,000-hectare Los Gatos district. The integrated analyses that have gone into this outcome have been comprehensive, and the outcome provides a secure path forward to realizing the true value of CLG. We thank you for your patience as we worked to get it right and can report that we are confident in our ability to execute to the 2022 LOM plan."

2022 updates -- CLG summary

On Jan. 25, 2022, Gatos Silver announced that, following reconciliation work at its CLG mine, the company concluded that there were errors in the technical report entitled "Los Gatos Project, Chihuahua, Mexico" with an effective date of July 1, 2020, in addition to potential overestimation in the then-existing resource model. On a preliminary basis, the company estimated a potential reduction of CLG's mineral reserve ranging from 30 per cent to 50 per cent of the metal content remaining after depletion. Despite the 2020 technical report issues, CLG operations have performed well so far in 2022 as a result of underground drilling, geological mapping and sampling, short-term mine planning, and good operations execution.

Working with independent engineering consultants to better understand the magnitude of the errors and overestimation, it has been determined that the reduction in contained metal of the 2022 mineral reserve compared with the 2020 technical report is as follows: 32 per cent silver, 37 per cent zinc, 36 per cent lead and 35 per cent gold, after accounting for depletion. This reduction is within the bottom half of the 30-per-cent-to-50-per-cent range originally estimated.

The 2022 LOM plan is a reserve plan and reflects current cost estimates for mining only the 2022 mineral reserve using a ground-up approach, including new geological data and interpretation, resource modelling, mine design, and cost modelling. Production and cost guidance for 2023 is expected to be issued in the first quarter of 2023 after detailed planning and budgeting are completed, which is expected to include additional expenditures to further explore the district and support potential extension of the 2022 LOM plan. The company expects to file an updated technical report summary (TRS) prepared in accordance with subpart 1300 of Regulation S-K (S-K 1300) in the United States on the EDGAR section of the Securities and Exchange Commission (SEC) website, and file an updated technical report prepared in accordance with National Instrument 43-101 -- Standards of Disclosure for Mineral Projects in Canada under the company's profile on SEDAR, to support the disclosure regarding the 2022 updates. The 2022 technical reports are expected to be filed in the coming weeks and the company intends to hold a public webcast review of the 2022 technical reports in November.

The company anticipates completing an impairment assessment based on the 2022 mineral reserve in the fourth quarter of 2022 and is working toward completing all outstanding SEC and OSC (Ontario Securities Commission) filings as soon as possible.

2022 mineral reserve and 2022 mineral resource (CLG -- 100-per-cent basis):

• Mineral reserve of 6.07 million tonnes grading 244 g/t silver, 4.48 per cent zinc, 2.14 per cent lead and 0.27 g/t gold containing 47.7 million ounces silver, 599.1 million pounds zinc, 286.7 million pounds lead and 51,800 ounces gold;
• Measured and indicated mineral resource (exclusive of reserves) of 1.94 million tonnes grading 96 g/t silver, 3.01 per cent zinc, 1.56 per cent lead and 0.19 g/t gold;
• Inferred mineral resource (exclusive of reserves) of 2.09 million tonnes grading 113 g/t silver, 4.30 per cent zinc, 2.45 per cent lead and 0.20 g/t gold.

2022 mineral reserve -- CLG

The methodology used to prepare the 2022 updates has been substantially revised from that used to prepare the 2020 technical report. The changes that have been implemented, based on experience through mining operations since 2019, include:

• New geological and geochemical data;
• Updated geological interpretation methodology;
• Updated mineral resource estimation methodology, including correction of the reserve calculation errors disclosed in Gatos Silver's Jan. 25, 2022, press release;
• Updated mining assumptions;
• Updated plant throughput and processing recovery assumptions;
• Updated operating and capital cost assumptions.

2022 mineral resource -- CLG and Esther

The 2022 mineral resource uses additional geological and geochemical data that have been collected since the 2020 technical report up until March 31, 2022, for Cerro Los Gatos and July 31, 2022, for Esther. The 2022 mineral resource for CLG incorporates an additional 36,233 metres of surface resource drilling in 100 holes and 51,279 metres of underground definition drilling in 623 holes. Detailed geological mapping from over 20 cut-and-fill production levels was also available for geological interpretation. The 2022 mineral resource for Esther incorporates an additional 22,565 metres of surface resource drilling in 63 holes.

The 2022 mineral resource uses a different geological modelling methodology than was used for the 2020 technical report. The interpretation of the vein solids that were used to define the estimation domains are now lithology based, rather than grade shells used in the 2020 technical report. The interpretation was completed by local CLG exploration staff in collaboration with the underground mine geologists and the qualified person from Golder Associates. The lithology-based interpretation utilized all available information, including surface drill holes, underground drill holes, underground mapping, mine as-built surveys and mine channel sampling. The geological modelling for the 2022 mineral resource shows more veins but thinner veins in the Central zone and different structural segmentation in the Southeast zone when compared with the geological interpretation in the 2020 technical report. As shown by the recent strong operational performance, the mine is able to successfully extract both long-hole stopes and cut-and-fill stopes with the vein continuity experienced underground.

The 2022 mineral resource uses a different estimation methodology than previously used for the 2020 technical report. The current methodology applies high-grade restrictions specific to individual vein estimation domains. The estimation was completed using ordinary kriging in 3-D, rather than flattened space. The estimation was completed using locally varying anisotropy to account for the variable vein dip. The mineral resource categorization methodology was modified to incorporate proximity to underground geological mapping and drilling, both surface and underground. The estimation was calibrated against production channel sampling and plant production.

Stope optimizations have been generated to restrict the reported mineral resource to areas that demonstrate reasonable prospects of economic extraction.

2022 mineral reserve -- CLG changes and key assumptions

The reserve numbers reported in the 2020 technical report were impacted by two material and compounding errors. First, the block model used in preparation of the reserve estimate was distorted during transfer between software packages, resulting in reduced block dimensions and unestimated spaces between blocks. Second, an incorrect software parameter was used in calculating tonnes and grades within designed stope solids that resulted in any unestimated volume (both planned intentional dilution outside the estimated vein and unestimated spaces resulting from the distortion) being applied at the average mineralized grade instead of zero grade for dilution. The effective result of the combination of these errors is that metal grades were significantly overstated in the 2020 technical report. There were other minor errors identified during the analysis of the 2020 mineral reserve, including overlapping reserve stope solids, incorrect external dilution calculations and the inclusion of a small amount of inferred grades within stope solids. In addition to correcting the errors identified in the 2020 technical report, which was the majority of the reduction, Gatos Silver previously disclosed the need to make additional adjustments in the 2020 mineral reserve. There are multiple factors that have contributed to the remaining adjustments in the 2022 mineral reserve since the 2020 technical report, and these adjustments have been addressed in the new 2022 mineral reserve, with all underlying assumptions modified based on actual operating experience since plant operations commenced in August, 2019.

The factors that have reduced the metal content in the mineral reserve include the Southeast zone infill drilling data, updated geological modelling, updated mining dilution and recovery assumptions, increased operating cost assumptions, and decreased zinc plant recoveries. The factors that have increased the metal content in the mineral reserve include increased plant throughput, increased silver and lead processing recoveries, and higher metal price assumptions compared with the 2020 technical report.

Key assumptions generally

The 2022 updates are based on a variety of estimates and assumptions relating to, among other things, geological interpretation, statistical inferences, commodity prices, mining methodologies, operating and capital costs, plant throughput and processing recoveries, and operating conditions. In particular, material assumptions and risks include those described below and elsewhere in this press release, including metal prices, as well as the company's ability to reduce operating costs, increase ramp development rates and dewater the mine in a cost-effective manner. There can be no assurance that the assumptions underlying the 2022 updates will actualize or be correct, and changes to any of these assumptions or Gatos Silver's inability to achieve these assumptions may result in actual results to deviate significantly from the 2022 updates.

Mine design

Long-hole (LH) mining methods were applied where applicable throughout the mine. The operation has successfully been mining steeper sections of the Central zone using LH mining methods and the company expects to be able to mine appropriate areas of the Southeast zone using the same methodology. The zones that are dipping at less than 55 degrees are still planned to be extracted using cut-and-fill (C+F) methods.

Mineral reserve stopes are planned to be filled using paste fill, cemented rock fill or uncemented rock fill. The paste fill plant is in the final stages of construction and the plant is anticipated to be commissioned in Q4 2022.

Mine dilution and mine recovery estimates are based on recent actual performance, with consideration for business improvement initiatives. These assumptions are applied based on the mining method, stope width, zone inclination and proximity to hangingwall faults.

Operating and sustaining capital cost assumptions are based on recent actual costs with specific allowances for business improvement initiatives under way. Mine operating costs were developed separately for LH and C+F mining methods.

Processing

The 2022 LOM plan is based on an average processing rate of 2,891 tonnes per day, resulting in a mine plan that exhausts current reserves in Q1 2028.

Mineral processing at the current operation uses conventional sulphide flotation, producing separate lead and zinc concentrates. Predicted metallurgical recoveries over the 2022 LOM plan average 89 per cent, 63.4 per cent, 89.4 per cent and 56.9 per cent for silver, zinc, lead and gold, respectively.

A total of 42.4 million ounces of silver, 380 million pounds of zinc, 256 million pounds of lead and 29,500 ounces of gold are estimated to be produced according to the 2022 LOM plan.

CLG's short-term definition drilling and mine plan updates may cause actual results to differ from the 2022 LOM plan schedule shown herein. Gatos Silver provides annual production guidance and quarterly production results, which can vary quarter-over-quarter based on short-term execution plans and constraints. The company expects to provide third quarter production results and any updates to 2022 guidance on or about Oct. 10, 2022. Annual guidance for 2023 is expected to be announced in early 2023 after detailed planning and budgeting for the year are complete. The company cautions investors that guidance might significantly differ from the 2022 LOM plan, and actual results might significantly differ from guidance.

Capital and operating costs

The total sustaining capital cost for the 2022 LOM plan at CLG is estimated at $123.4-million. Sustaining capital costs are summarized herein.

Sustaining capital costs include underground access development to the lower levels in the Central and Northwest zones, and development of the Southeast zone, together with equipment replacements and miscellaneous infrastructure projects, including upgrades to the underground dewatering system as the mine is further developed, a final tailings dam raise to be completed in 2025 and a zinc concentrate fluorine leach plant expected to be commissioned in the first half of 2023.

CLG exploration update

Exploration has continued throughout 2022 on the CLG deposit as well as on regional targets in the Los Gatos joint venture (LGJV) district. Over 63,000 metres of surface drilling have been completed since mid-2021 with a focus on both resource definition and expansion on the CLG deposit, as well as on the adjacent Esther deposit.

Recent drilling in the area beneath the main Southeast zone (referred to as Southeast Deeps) on the CLG deposit has discovered both silver-copper and silver-lead-zinc mineralization down to an elevation of 820 metres above sea level (masl), which is approximately 330 metres in elevation below the bottom of the 2022 mineral reserve.

The drill results for drill holes used in the 2022 mineral resource will be described in the 2022 technical reports. The drill results since the cut-off dates for the 2022 mineral resource estimate, of March 31, 2022, for CLG and July 31, 2022, for Esther, are shown in the following sections.

Resource definition drilling up until early April, 2022, remained focused on the main Southeast zone block that was previously being infill drilled from surface. Drill hole GA-SE-467 showed particularly strong widths and grades, including silver and copper, and further drilling is planned to define the limits of this high-grade zone. The CLG processing plant does not currently recover copper from processed material.

Resource definition drilling is now focused on higher-grade areas of inferred within the 2022 mineral resource. The first two holes in the Central zone, GA-CZ-478 and GA-CZ-479, showed thin but high-grade results. GA-SE-478 intersected higher-than-expected gold, however, the LGJV does not expect this to be representative of mineralization in this area.

Hole GA-SE-463 encountered drilling difficulties and did not reach the projected target. Holes GA-SE-468 and GA-SE-469 drilled above the Antigatos-2 fault and did not intercept significant mineralization.

Southeast Deeps

Resource expansion drilling after April, 2022, has been focused on the Southeast Deeps zone. Since the discovery of Cerro Los Gatos, mineralization has been recognized between the elevations of approximately 1,050 masl and approximately 1,500 masl. The LGJV has recently drilled holes beneath these elevations and intercepted mineralization down to 820 masl.

The intercepts in this deeper zone contain silver, zinc, lead and, in some instances, copper. Most intersected structures contain Ag-Zn-Pb while the deepest structure in drill hole GA-SE-475 is high in Ag-Cu but low in Zn-Pb. The vertical extent of the mineralization and the mix of vein types indicate that Cerro Los Gatos contains stacked mineralization zones. While very early days, the LGJV is excited about the geological implications of this discovery.

Drill hole GA-SE-473 encountered drilling difficulty and did not reach the target. GA-SE-474 was a wedge attempt from GA-SE-472 that was cancelled due to insufficient change of direction. GA-SE-476 and GA-SE-481 are awaiting final assay results. Neither drill hole exhibited visually high content of base metal sulphides.

Regional exploration update

Drill testing was conducted on four regional targets during the second half of 2021 and early 2022.

Esther (LGJV)

The Esther deposit is located approximately three kilometres southwest from the underground access development for CLG. The last five drill holes comprised 1,467 metres of the Esther definition program were returned after the July 31, 2022, cut-off date for the 2022 updates. Of these five drill holes, ES-104 through ES-108, only ES-106 contained a significant intercept.

The LGJV has updated the Esther mineral resource, as shown herein, and plans to complete economic analysis to determine options for this zone.

Cascabel and El Valle (LGJV)

During late 2021 and early 2022, the LGJV drilled the Cascabel and El Valle targets, 1.5 km southwest and 1.5 km west of the CLG underground development, respectively. The LGJV drilled 14 holes for 9,110 metres, with no significant mineralization.

The Cascabel fault is a very strong structural feature and the LGJV still considers the area prospective for hosting mineralization. The LGJV is completing detailed mapping of the area between Cerro Los Gatos and Esther, including the Cascabel and Amber faults. The results of this mapping and the drilling information will be compiled to assess optimal locations for future drilling.

Wall-e/Eva (LGJV)

During 2022, five holes for 2,676 metres were drilled at Wall-e/Eva area, approximately 11 km northwest of CLG.

The first four drill holes contained geological indications that the drilled intercepts were above the potential mineralization zone. The fifth drill hole (DDH-WA-05) was targeted to go below these initial intercepts and intersected Ag-Pb-Zn-Cu mineralization as shown herein. DDH-WA-01 through DDH-WA-04 did not intercept significant mineralization.

The LGJV has now permitted new platforms to drill down beneath the intercept in hole DDH-WA-05 and has completed detailed mapping of the area. The LGJV intends to use this mapping and drilling information to determine the highest priority for the next round of drilling which it expects to commence during Q4 2022.

Santa Valeria (100 per cent Gatos Silver)

During 2021, the company drilled 15 drill holes on the Santa Valeria concession, located 16 km west of the CLG operations, for a total of 4,953 metres drilled. The drilling did not intercept significant mineralization. The area remains of interest to Gatos Silver and work will advance depending on the prospect prioritization analysis that is being implemented for the LGJV property.

Updated district exploration strategy

The LGJV has a large land package covering over 103,000 hectares. Gatos Silver considers the property to be very prospective for hosting other Ag-Zn-Pb-Au-Cu deposits. The LGJV is prioritizing work to maximize the probability of finding the highest-value deposits. Previous exploration work identified 14 different mineralized zones. Work is under way to determine the best targets within those zones and to identify other zones not previously recognized.

The updated approach is focused on two streams. One stream of work has started on the horst (exposed) section of the andesite running from the far northwest of the property and down to Esther and CLG in the centre of the property. The other stream of work is for the area of the basin that is underlain by the andesite.

On the horst section of the andesite, the LGJV exploration team has started detailed mapping between the Wall-e and Amapola areas in the north and the CLG-Cascabel-Esther area in the south. Follow-up drilling is expected over the coming months on Wall-e and Amapola as the new detailed mapping is analyzed with the results of historic and recent drilling.

On the basin section of the andesite, the LGJV has acquired magnetic and radiometric data for the area and is contemplating other geophysical surveys to identify the basement structures. Depending on the results of the geophysical analysis the LGJV is considering some deep stratigraphic holes east of CLG.

Corporate update

Gatos Silver is in the process of transitioning its executive office from Denver, Colo., to Vancouver, B.C., Canada, which is expected to be completed during the fourth quarter of 2022. The transition is expected to require a change in auditor due to licensing requirements. The relocation of the executive office to Vancouver is expected to help the company attract highly qualified talent as the company continues to rebuild the foundation of the business and provide management with better access to the mining community and the company's business partners.

The company has refreshed the executive management team and is pleased to announce the appointment of Stephen Bodley as general counsel and chief compliance officer, effective Oct. 16, 2022. Mr. Bodley brings nearly 30 years of relevant experience to Gatos Silver, serving at both Ma'aden and Sherritt International in similar roles. In addition, the LGJV has significantly strengthened the management team at CLG with the recent appointment of Percy Pascal as the new general manager of operations, together with recent appointments of new leadership for the health, safety, environment and community areas, and in both the mine operations and technical service areas.

Mr. Andres commented: "I am excited to welcome Steve to Gatos Silver as our new general counsel and chief compliance officer. Steve's legal expertise and prior experiences in the mining industry make him the ideal person to lead Gatos Silver's legal function."

At the request of the LGJV and the company's board of directors, an independent review of the 2022 updates was performed by AMC Mining Consultants (Canada) Ltd. Reporting directly to the LGJV and the technical, environmental, health and safety committee of the board, AMC concluded that CLG's 2022 mineral resource and 2022 mineral reserve estimates appear sound, the methods and parameters appear appropriate, and the reported numbers have been replicated.

As announced on Sept. 30, 2022, the company is diligently working to identify and engage an auditor to conduct the audit and review of the financial statements required to be included in its annual report on Form 10-K for the year ended Dec. 31, 2021, its quarterly report on Form 10-Q for the quarter ended March 31, 2022, and its quarterly report on Form 10-Q for the quarter ended June 30, 2022. The company intends to file such SEC reports as soon as practicable and expects to hold its annual shareholder meeting promptly once its annual report has been filed. While the company is continuing to evaluate material weaknesses in its internal controls over financial reporting related to the mineral reserve reporting errors, the company expects that it will determine that at least one material weakness exists. The company is still evaluating the extent of this and other potential material weaknesses. The company's financial statements for the year ended Dec. 31, 2021, and quarters ended March 31, 2022, and June 30, 2022, may be affected by the continuing analysis of the aforementioned mineral reserve matters.

About Gatos Silver Inc.

Gatos Silver is a silver-dominant exploration, development and production company that discovered a new silver-rich and zinc-rich mineral district in southern Chihuahua state, Mexico. As a 70-per-cent owner of the LGJV, the company is primarily focused on operating the mine and mineral processing plant at the LGJV's CLG deposit. The LGJV consists of approximately 103,087 hectares of mineral rights, representing a highly prospective and underexplored district with numerous silver-zinc-lead epithermal mineralized zones identified as priority targets.

Quality assurance

The half core samples from the LGJV's surface exploration drill holes are shipped directly in sealed bags to ALS Laboratories preparation facilities in Chihuahua City, Mexico. Sample batches include intermittent blanks, duplicates and certified standards. After sample preparation in Chihuahua, sample pulps are shipped to ALS in North Vancouver, Canada, for analysis. The remaining half core is retained on site.

Qualified persons

Scientific and technical disclosure in this press release regarding the Cerro Los Gatos and Esther 2022 mineral resource was based upon information prepared by or under the supervision of Ronald Turner, MAusIMM (CP), an employee of Golder Associates. Scientific and technical disclosure in this press release regarding the 2022 mineral reserve, the 2022 LOM plan and other economic analyses that will also be set out in the 2022 technical reports was based upon information prepared by or under the supervision of Paul Gauthier, PEng, an employee of Golder Associates. Scientific and technical disclosure in this press release regarding the metallurgical assumptions for the 2022 LOM plan and other economic analyses that will also be set out in the 2022 technical reports was based upon information prepared by or under the supervision of Adam Johnston, FAusIMM (CP), chief metallurgist with Transmin Metallurgical Consultants (U.K.). Other scientific and technical disclosure in this press release regarding comparisons with the 2020 technical report and the exploration update was approved by Anthony (Tony) Scott, PGeo, vice-president of evaluations and technical services of Gatos Silver. Each of Mr. Turner, MAusIMM (CP), Mr. Gauthier, PEng, Mr. Johnston, FAusIMM (CP), and Mr. Scott, PGeo, is a qualified person, as defined in S-K 1300 and NI 43-101. Mr. Turner, MAusIMM (CP), Mr. Gauthier, PEng, and Mr. Johnston, FAusIMM (CP), are all independent of Gatos Silver and the LGJV. Mr. Scott, PGeo, is an employee of Gatos Silver.

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