Mr. Dale Andres reports

GATOS SILVER REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS

Gatos Silver Inc. has released its second quarter 2023 financial and operating results. The company will host an investor and analyst call on Aug. 9, 2023, details of which are provided in this news release.

The company has a 70-per-cent interest in the Los Gatos joint venture (LGJV), which in turn owns the Cerro Los Gatos (CLG) mine in Mexico. Production for the second quarter of 2023 was previously disclosed on July 10, 2023. The company's reporting currency is U.S. dollars.

Dale Andres, chief executive officer of Gatos Silver, said: "The LGJV continues to generate robust cash flows and perform in line with our expectations, and we remain on track to achieve 2023 guidance at CLG. We are in a strong financial position with the company now debt free and with a strong cash balance. We are progressing well with our planned update to CLG's mineral resource and reserve estimate, which we expect to announce later this quarter, including a new life of mine plan."

Summary

LGJV Q2 2023 results compared with Q2 2022 (100-per-cent basis):

• Revenue of $58.3-million, up 2 per cent from $57.2-million;
• Cost of sales $25.8-million, down 7 per cent from $27.8-million;
• Cash flow from operations of $34.3-million, down 11 per cent from $38.5-million;
• Net income $700,000, down 78 per cent from $3.4-million;
• Sustaining capital $13.1-million, down 41 per cent from $22.2-million;
• EBITDA (earnings before interest, taxes, depreciation and amortization) of $27.5-million, up 29 per cent from $21.4-million (1);
• Free cash flow $19.7-million, up 1 per cent from $19.5-million (1);
• Silver production 2.0 million ounces, down 13 per cent from 2.30 million;
• Silver equivalent production of 3.30 million ounces, down 12 per cent from 3.73 million (2);
• Co-product all-in sustaining costs (AISC) of $17.55 per ounce of payable silver, up 16 per cent from $15.13 (1);
• Byproduct AISC of $14.32 per ounce of payable silver, up 36 per cent from $10.54 (1).

(1) Non-GAAP (generally accepted accounting principles) financial measures.

(2) Silver equivalent production is calculated using prices of $22 per ounce (oz) silver, $1.20 per pound (lb) zinc, 90 cents per lb lead and $1,700 per oz gold.

In Q2 2023, Gatos Silver's net loss was $3.6-million or five cents per share, compared with a net income of $5.2-million or eight cents per share in Q2 2022. The decline is primarily attributable to lower equity income from the LGJV, driven by higher depreciation, depletion and amortization, and income tax expenses. Higher general and administrative expenses for the quarter were attributable in part to auditing and consulting costs for the restatement of financial results, which are non-recurring expenses.

On July 20, 2023, subsequent to the quarter-end, the company received a $35.0-million cash distribution from the LGJV, of which $9.0-million was used to pay the entire outstanding balance of the revolving credit facility. As of July 31, 2023, the company is debt free, with a cash position of $36.0-million and $50-million available under the revolving credit facility. As of July 31, 2023, the LGJV is debt free and has a cash position of $30.1-million.

Financial and operating results

The attached table is select operational and financial information for the three and six months ended June 30, 2023, and June 30, 2022. For a detailed discussion of the three and six months financial and operating results, refer to the Form 10-Q for the quarter ended June 30, 2023, filed on Aug. 8, 2023, on both EDGAR and SEDAR, and posted on the company's website. Totals may not add due to rounding.

2023 guidance unchanged

The company's 2023 production and cost guidance remains unchanged. Silver production was higher in the first half of 2023 than the annual guidance run rate as expected in the mine plan. Based on current mine plan sequencing at CLG, the company expects the quarterly production run rate for silver to be lower and zinc and lead to be slightly higher for the remainder of the year compared with the first half.

Quarterly co-product and byproduct AISCs are expected to be similar to the second quarter for the remainder of the year. The company expects continuing cost reduction initiatives to continue to help offset impacts from the current lower byproduct prices and the stronger Mexican peso.

The company continues to expect sustaining capital expenditures at CLG of $45-million in 2023 ($20.7-million spent in the first half (H1) of 2023). Total exploration and resource definition drilling expenditures are now expected to be $16-million in 2023, up from $13-million previously forecast. Of the $16-million, $13-million is expected to be capitalized as a resource development expenditure. In the first half of 2023, exploration expenditures were $1.1-million and capitalized resource definition drilling expenditures were $7.0-million.

Financial results webcast and conference call

Investors and analysts are invited to attend the financial results webcast and conference call as follows.

Date:  Wednesday, Aug. 9, 2023

Time:  11 a.m. ET

A listen-only webcast will be available.

A direct event registration link (for analysts only) is available.

Dial-in number:  1-888-330-2398 or 1-240-789-2709 (Press the pound key to access an operator.)

An archive of the webcast will be available on the company's website within 24 hours.

About Gatos Silver Inc.

Gatos Silver is a silver-dominant exploration, development and production company that discovered a new silver-and-zinc-rich mineral district in southern Chihuahua state, Mexico. As a 70-per-cent owner of the Los Gatos joint venture, the company is primarily focused on operating the Cerro Los Gatos mine and on growth and development of the Los Gatos district. The LGJV includes approximately 103,000 hectares of mineral rights, representing a highly prospective and underexplored district with numerous silver-zinc-lead epithermal mineralized zones identified as priority targets.

Qualified person

Scientific and technical disclosure in this news release was approved by Anthony (Tony) Scott, PGeo, senior vice-president of corporate development and technical services of Gatos Silver, who is a qualified person as defined in S-K 1300 and National Instrument 43-101.

Non-GAAP financial measures

The company use certain measures that are not defined by GAAP to evaluate various aspects of its business. These non-GAAP financial measures are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.

We seek Safe Harbor.