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Gatos Silver (GATO): Run away like a scalded cat

Just when you think the mining sector can’t get any worse, Gatos Silver (GATO) drops this on the market tonight:

“On a preliminary basis, the Company estimates a potential reduction of the metal content of CLG’s mineral reserve ranging from 30% to 50% of the metal content remaining after depletion. Since the 2020 Technical Report, depletion is 1.3 million tonnes grading 284 g/t silver, 3.9% zinc, 2.3% lead and 0.3 g/t gold that has been processed from July 1, 2020 to December 31, 2021.

The CEO says the company is “disappointed by the preliminary results of the reconciliation work“, prompting thoughts of how Abe Lincoln’s wife must have felt a little let down about her night at the theatre with hubby because we’re not talking about some sketchy tinycap exploreco with an inferred resource run by one of the usual suspects here. This is an economic reserve compiled and signed off by Tetra Tech on the back of which, GATO filed for IPO and raised capital to the tune of $150m. Class action suit? Yes madam and yes sir, bet dollars to donuts on it. Here’s the reserve table in question, from the July 2020 43-101:

Two things:

  • The quickmath on tonnages means there should have been 8.3m tonnes left in the reserve, but GATO now says that’s between 30% and 50% lower. So, if we go with the company’s estimate tonight it leaves between 4.15mt and 5.8mt the reserve. Whaaaaaat?
  • According to tonight’s information, mined mineral has consistently under-graded for all four payable metals compared to the total P+P numbers. Chances are that will now continue, so don’t just put the tonnages under question.

When the subject in question is the criminal incompetence and chutzpah of the mining sector, it’s not often I’m lost for words but GATO tonight has me beat. I’m dumbfounded, this is so pathetic it’s almost funny. And be clear, it won’t stop the rest of the blithering idiots running mining companies (you call them CEOs) from wondering why the wider investment community is turning its back on the sector in droves. Full disclosure: No position in GATO and oh my lucky stars, it’s staying that way.

6 Comments

    Cheeeezez… been looking at that one a couple of times and almost bought in. Yikes, today I’m glad I only hold regular crapy juniors that suck without this level of suckiness.

    Reply

    Hit the skids for a cool 69% today ! Who’d a thunk it……

    Reply

      Anyone with a pocket calculator. But that wasn’t a real question, was it?

      Though only 3 people will ever know and you can think i’m making up stories if you want, my fair price guess this morning with two pals was U$3. Mine plan equity is now basically zero, so price it as a glorified drill play.

      I still can’t get over how bad this is, also the collateral damage for other companies in future financings. A shame on the whole sector.

      Reply

    The funny thing is that nearly 2/3 of reserves was in the proven category, the one with the highest confidence. I am wondering if any investigation of the QP by regulators will be made.

    Reply

    I am surprised this mine got built at all given the very active and vocal local opposition. “Zapata lives!” I wonder whose palms Kaplan greased?

    Reply

    You shouldn’t just mention the IPO, but also the follow-on offering of Q3 2021.

    Since they had been mining for some time at the time of the follow-on offering, did they then know that the reserves were not OK?

    Reply

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