Gatos Silver (GATO, GATO.TO) has released the 2023 guidance for its 70% owned Cerro Los Gatos silver mine in Mexico. On a 100% basis, the mine will produce between 7.4 and 8.2 million ounces of silver at an AISC of $11-13 per ounce of silver. The silver-equivalent production rate will be approximately 13 million ounces at an AISC of $15.50-17.50 per ounce, but we prefer to use the pure silver guidance and consider the zinc, lead and gold production as a (valuable) by-product credit.

The silver production will be higher in the first semester than in the second semester based on the mine plan sequencing. That being said, the zinc and lead production will be higher in the second half of the year which means the AISC shouldn’t fluctuate too much throughout the year.

The AISC per ounce includes the anticipated $45M in sustaining capex (which represents about $5-6 per ounce of silver that will be produced). Additionally, the company anticipates drilling expenditures of $13M this year. There currently are eight (!) active drill rigs on the property as five drill rigs are completing a surface drill program while an additional three rigs are working on an underground drill program. The immediate focus is on securing an extension of the mine life but the focus will shift to exploration drilling later this year.

Disclosure: The author has no position in Gatos Silver. Please read our disclaimer.

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