Gatos Silver, Inc.

Star 1 on your telephone. Again, press Star 1 to come to the question queue. Please be advised today's conference is being recorded. If you require any operator assistance, press Star and then 0. I would now like to turn the call over to Gato Silver Chief Executive Officer Steven Orr. Sir, I give it to you.

Thank you very much. Before I begin, I would like to caution our attendees that I'll be making forward-looking statements. And these statements are not guarantees of future performance. I'd like to start the presentation on slide number three. So we've previously mentioned that 2021 is a year of optimization for GatoSilver. Many of the initiatives that we have previously discussed focused on Cerro Los Gatos, But most recently, we executed initiatives to strengthen the Gatos silver balance sheet and provide greater financial flexibility for the company. In July, we entered into a revolving $50 million debt facility with the Bank of Montreal. And it has an accordion feature, which would allow us to expand this up to $100 million. Then in mid-July, we completed a primary equity offering, raising $125 million. Proceeds from the equity offering, along with a modest drawdown from the revolving debt facility and corporate cash, allowed Gato Silver to retire its 70% share of the Cerro Los Gatos term debt facility. And concurrently, our joint venture partner, Doha Metals & Mining, retired their share of the term debt, thereby extinguishing the entire Cerro Los Gatos term debt facility. This frees up additional cash flow from the operation to fund our sustaining capital projects, which will further improve the operating performance and create additional value at Cerro Los Gatos. And we'll discuss all of this in greater detail later in the presentation. And as previously released, Cerro Los Gatos achieved record ore production exceeding its design production rate from the mine, and the processing plant achieved or exceeded design recovery for all four of our revenue metals. Our exploration programs continued during the quarter with 19,000 meters completed at the Cerro Los Gatos Resource Conversion Program since its inception late last year. This program has been successful beyond our expectations, and we actually recently expanded the program. At Santa Valeria, the first phase of that program has been completed and the exploration team is conducting data analysis for the design of a second phase. At Esther, we're in early phases of the program with 3,100 meters of the planned 19,000 meter program completed to date. And we're intercepting mineralization where we expected and pleased with the results. I'd now like to introduce Dale Andrews, President for Dr. Silvery, who will provide detail on our operating performance during the second quarter. Dale, over to you.

Thanks, Steve, and I'll start on slide four. At our Cerro Los Gatos mine, we have a strong and unwavering commitment to safety and to the surrounding communities. We have robust systems in place to ensure we are working consistently to reduce our safety incidents and we continue our constant focus on strengthening our safety culture. Our COVID management protocols are working well and our daily screening and testing program is still in place and the number of vaccinated employees are steadily rising as the rollout continues in Mexico. In fact, today we currently have over 40% of our employees with at least one shot. We recognize that it is essential to conduct our operations in a manner that protects the environment and benefits our local communities. This is not only through employment opportunities, but also education assistance, medical care support, and provision of sustainable clean water. As a priority, we hire our employees locally, and over 20% of our employees are female. We continue to focus on improving the lives of those within our area of influence on the project. And this has been recognized by the government and importantly by the local communities. Turning to slide five, we are very pleased with our record setting performance in the second quarter. In the mine, we had both record tons and grades delivered to the plant, helping to drive record metal production for the quarter. We averaged 2,638 wet tons per day, a 13% improvement over the first quarter in the mine. The mine has consistently delivered expected feed rates to the plant since the shutdown in February caused by a storm-related power outage event we experienced. Contributing to this performance, we completed over 1,700 meters of development work underground with a continued focus on accessing deeper and higher grade portions of the mine in both the northwest and central zones, and to continue to build flexibility into the mine plan as we further optimize. Turning to slide six, we also had record setting performance at our plant operations in the quarter. We processed an average of 2,535 tons per day through the plant, above design capacity, and we know the plant has capacity to do much more. We achieved excellent metallurgical results, helped by the silver grade, which averaged a record 322 grams per ton for the quarter, with recovery of silver at 89%, which is fantastic, and we continue to focus on driving that even higher. recoveries for both lead and zinc were excellent as well. We have lots of improvement initiatives underway, including the use of new reagents to further improve recoveries, and there will be more initiatives to come as we move into the second half of this year. A plan was put in place to make up for the shortfall in the first quarter after the power outage, and we continue to execute very well against that plan. We also continue to maintain the original guidance sets for the year including our cost guidance for both sustaining capital expenditures and all in sustaining costs on a unit cost basis. Slide seven shows some highlights of our record setting performance in the second quarter. As we disclosed in our production release in July, we produced 2.1 million ounces of silver, as well as records for lead and zinc production. To put the quarter's performance into perspective, It is worth noting that our production was a manual run rate significantly higher than the top end of our guidance. So we are making up for that first quarter shortfall. Our cost performance was also excellent with our all in sustaining costs on a byproduct basis, averaging $12.63 per payable ounce of silver. This was helped by the significant increase in production during the quarter, including byproduct volumes and prices. as well as our efforts to control operating and capital costs. Sustaining capital costs are back-end weighted to the second half of 2021, so we do expect these all-in sustaining unit costs to be higher for the next few quarters, but with overall unit costs for the year still anticipated and tracking towards the bottom end of our guidance range. And if it tracks the way it's going, we'll come in under. On an operating cost basis, unit cash costs after byproduct credits were under $3 per payable ounce of silver, showing the cash generation potential of this high-grade deposit as we finish some of our key sustaining projects in 2022 and as we continue to optimize the operation. Turning to slide eight, the table clearly shows the dramatic improvement in the second quarter compared to both the previous quarter and 2020 performance on key production and cost metrics. The annualized rate of silver production achieved in the second quarter was double the rate from 2020 and the all-in sustaining cost of $12.63 per ounce dropped by over a third from the first quarter of this year. Steady feed from underground with much higher grades and excellent plant performance with record recoveries has been key to the success. Looking at the bottom section of the table, showing the breakdown of unit costs, you can see the split between operating unit costs, the byproduct credits, and the sustaining capital portion. Our cash unit cost performance before sustaining capital, as I said, was under $3 per ounce. and a significant improvement in both operating costs and very strong byproduct credits in the second quarter, as you can see. Our focus for the second half of 2021 is to complete our planned sustaining capital projects that are currently in progress, such as the second refrigeration plant and the new underground dewatering system, both of which will support mine production and development work as we go deeper in the mine. together with the next lift of the tailings down to support future production, and all of these projects will be complete by the end of the year. The paste plant project started construction this month, and this is a key project for Cerro Los Gatos, which will both improve flexibility in the mine plan and importantly, reduce operating costs and reduce the amount of tailings sent to the storage facility. The project is expected to be commissioned in the third quarter of 2022, so that's next year, and we are targeting to remain above 2,500 tonnes per day through the plant in the second half of this year as we implement various improvement projects and continue to access lower levels in the mine, which gives us more flexibility. With that, I'll turn it over to Roger Johnson, our Chief Financial Officer.