Mr. Dale Andres reports

GATOS SILVER REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS AND PROVIDES 2024 GUIDANCE

Gatos Silver Inc. has released its fourth quarter and full-year 2023 financial and operating results. The company will host an investor and analyst call on Feb. 21, 2024, details of which are provided below.

The company has a 70-per-cent interest in Los Gatos joint venture, which in turn owns the Cerro Los Gatos mine in Mexico. Production for the fourth quarter of 2023 was previously disclosed on Jan. 9, 2024. The company's reporting currency is U.S. dollars.

Dale Andres, chief executive officer, said: "During the fourth quarter, we continued to add cash to the balance sheet, generated from another quarter of strong operational performance at the LGJV. All-in sustaining cost per silver ounce was at the lower end of 2023 guidance thanks to improved operating efficiencies, which helped to offset inflationary cost pressures and the impact of the stronger Mexican peso.

"For 2024, we expect silver production of 8.4 million ounces to 9.2 million ounces at an AISC, after byproduct credits, of $9.50 to $11.50 per payable ounce produced. On a quarterly basis, we expect production will gradually increase throughout the year as we debottleneck the mine and further optimize the mill at CLG. Conversion drilling of the South-East Deeps inferred resource to extend mine life is progressing well, and the LGJV has started ramping up exploration efforts on near-mine targets in the Los Gatos district."

Summary

LGJV 2023 results (100-per-cent basis):

• CLG life of mine extended by 2.75 years to the end of 2030 with a 46-per-cent increase in total silver production;
• Cost of sales only 4 per cent higher than 2022, despite mining and processing 10 per cent more tonnes year over year;
• Cash from operating activities of $142.0-million and free cash flow of $84.9-million;
• AISC after byproduct credits of $11.33 per payable silver ounce produced on its previously disclosed production of 9.2 million ounces.

Gatos Silver 2023 results:

• Net income of $12.9-million or 19 cents per basic and 18 cents per diluted share;
• Received capital distribution of $59.5-million from the LGJV;
• Cash used by operating activities of $12.0-million and free cash flow of $47.5-million;
• Year-end cash balance of $55.5-million and no debt.

LGJV Q4 2023 results compared with Q4 2022 (100-per-cent basis):

• Revenue of $73.5-million, down 21 per cent from $93.0-million;
• Cost of sales of $28.0-million, up 10 per cent from $25.5-million;
• Net income of $24.9-million, down 16 per cent from $29.8-million;
• Earnings before interest, taxes, depreciation and amortization of $38.6-million, down 38 per cent from $61.9-million;
• Cash from operating activities of $38.2-million, down 2 per cent from $39.1-million;
• Sustaining capital of $11.7-million, down 40 per cent from $19.5-million;
• Free cash flow of $22.3-million, up 19 per cent from $18.7-million;
• Co-product AISC of $14.73 per ounce of payable silver, down 0.5 per cent from $14.80;
• Byproduct AISC of $11.12 per ounce of payable silver, down 8 per cent from $12.13.

Gatos Silver Q4 2023 results compared with Q4 2022:

• Net income of $12.3-million, up 160 per cent from $4.7-million;
• Basic and diluted earnings per share of 18 cents, up 157 per cent from seven cents;
• EBITDA of $11.8-million, up 116 per cent from $5.5-million;
• Cash used in operating activities of $2.5-million, compared with cash provided by operations of $5.9-million;
• Free cash flow of $22.0-million, up 277 per cent from $5.8-million.

For Gatos Silver, higher net income, earnings per share and EBITDA for Q4 2023 were primarily attributable to a decrease in general and administrative expenses and lower legal settlement expenses. The change in operating cash flow was primarily attributable to the dividend payment received in Q4 2022. The increase in free cash flow was a result of the capital distribution received in Q4 2023.

Cash distributions to the LGJV partners in 2023 have been made through capital distributions, which are more tax efficient than distributing cash dividends. As a result, cash distributions are currently shown on the balance sheet as cash flow received from investing activities, as opposed to being included as cash flows from operating activities as in 2022, when dividends were paid by the LGJV.

As of Dec. 31, 2023, the company had a cash balance of $55.5-million, up 226 per cent from $17.0-million a year earlier. The increase in cash was primarily due to receipt of $59.5-million in capital distributions and a $6.0-million management fee from the LGJV, partly offset by general and administrative costs incurred in the year.

As of Jan. 31, 2023, the company had a cash balance of $53.1-million, and the LGJV had a cash balance of $43.1-million. On Feb. 15, 2024, the LGJV made a capital distribution to its partners of $30.0-million, of which the company received $21.0-million.

The company continues to be debt free with $50.0-million available under the revolving credit facility.

Financial and operating results

Attached is select operational and financial information for the three months and years ended Dec. 31, 2023, and 2022. For a detailed discussion of the year ended Dec. 31, 2023, financial and operating results, refer to the Form 10-K for the year ended Dec. 31, 2023, filed on Feb. 20, 2024, on both EDGAR and SEDAR+, and posted on the company's website.

2024 guidance (CLG 100-per-cent basis)

Production and cost guidance for 2024 is shown in an attached table.

Gatos Silver expects plant throughput to average between 3,000 and 3,300 tonnes processed per day in 2024, compared with 2,935 tonnes per day in 2023. Feed grades to the mill are expected to be lower in the first quarter versus the average grades expected during the year. Following previously disclosed mill throughput tests conducted in December, 2023, demonstrating higher capacity with good metallurgical performance, the LGJV plans to continue to strive to achieve sustainably higher plant throughput rates as mine debottlenecking efforts continue with a medium-term target to sustain 3,500 tonnes per day beyond 2024, or 40 per cent above original design capacity.

The company expects sustaining capital expenditures at CLG (100-per-cent basis) to be approximately $45-million in 2024, of which $25-million is for underground development primarily to reach the lower levels of the northwestern and central zones and to further develop access to the southeastern zone. The rest of the capital expenditures is expected to be primarily associated with minor upgrades to the processing plant, equipment replacements and rebuilds, and dewatering and other infrastructure work including projects to help improve operating efficiencies and to support debottlenecking efforts in the mine.

Exploration and definition drilling expenditures are expected to be approximately $18-million in 2024, of which $9-million is expected to be capitalized and incurred on resource development drilling primarily in the South East Deeps zone and $9-million expensed and incurred on greenfield exploration. The LGJV currently has eight active drill rigs on surface and four underground. The primary focus until the end of the first quarter of 2024 is infilling the South East Deeps zone to approximately 50-metre spacing for the 2024 mineral resource and mineral reserve update anticipated to be announced in the third quarter of 2024. After the end of the first quarter, the focus for the surface drilling rigs is expected to shift to other district targets, including Portigueno, San Luis and El Lince.

Financial results webcast and conference call

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

Date:  Wednesday, Feb. 21, 2024

Time:  11 a.m. ET

A listen-only webcast will be available.

Dial-in number:  1-888-500-3691 or 1-646-307-1951

Conference ID:  90079

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 Los Gatos joint venture, the company is primarily focused on operating the Cerro Los Gatos mine and on growth and development of 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 press 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.

We seek Safe Harbor.