Gatos Silver Explains Delay in Filing 2022 Year-End Financial Statements and Announces Restatement of Previously Issued Financial Statements for Non-Cash Adjustments

VANCOUVER, British Columbia, March 31, 2023 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the “Company”) today explained the delay in the filing of its Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). The Company also announced that it will restate previously issued financial statements of the Company and of the Los Gatos Joint Venture (the “LGJV”) for the year ended December 31, 2021 and the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 (the “Affected Periods”).

Based on a preliminary analysis, the required adjustments are non-cash and primarily relate to the timing and recognition of net deferred tax assets at the 70%-owned LGJV. The Company believes that the net effect of these adjustments would decrease by approximately $4 to $6¹ million its reported net income of $18.3 million for the nine months ended September 30, 2022. As the Company continues to complete its work to finalize the required adjustments, these preliminary results may change.

The Company is now working to restate the previously issued financial statements including recalculation of the net deferred tax assets at the LGJV. The Company currently plans to complete the restatements and file its 2022 Form 10-K by April 17, 2023, but cautions that this timing may be subject to change. The restatements and the 2022 full year financial results are subject to completion of a review and audit by the Company’s independent registered public accounting firm, Ernst & Young LLP.

The restatements will have no effect upon the production or cash flows for Affected Periods, and will not affect guidance for 2023 as issued on February 23, 2023. There is no change to the Company’s cash balance of $15.6 million and the LGJV’s cash balance of $55.5 million reported as at February 28, 2023.

Preliminary Analysis

The Company’s preliminary analysis indicates that the net deferred tax assets understatement originated in 2021. The Company believes that the net effect of these errors would increase its investment in affiliates (LGJV) by $7 to $11 million and increase the previously reported non-cash impairment of $51.6 million in Gatos Silver’s investment in the LGJV by the same amount in 2021. The impairment was attributable to a reduced life of mine and metal content of Gatos Silver’s mineral reserves and resources as previously announced. The Company believes that the net effect of these adjustments on its 2021 net income would be nil.