Gatos Silver, Inc. has announced amendments to its joint venture agreements with Dowa Metals & Mining Co., Ltd. (Dowa) regarding the Los Gatos Joint Venture (LGJV). Effective on January 1, 2025, the amended agreements expand Gatos Silver’s management rights within the LGJV, allowing the company to fully consolidate the financial statements of the LGJV. This is a change from the current method of accounting for its investment in the LGJV under the equity method.
The ownership interests of Gatos Silver and Dowa in the LGJV remain unchanged, with Gatos Silver owning 70% and Dowa owning 30%. The amended agreements also strengthen Dowa’s zinc concentrate offtake rights, amend pre-defined commercial terms, and update the terms for management services provided by Gatos Silver.
Furthermore, the amendments reduce supermajority voting requirements and provide Gatos Silver with a new sole-funding right for significant mine or plant modifications or expansions, among other provisions.
According to Dale Andres, CEO of Gatos Silver, the amended joint venture agreements will allow for full financial consolidation within Gatos Silver, streamlining financial reporting and providing investors with a focused picture of the company’s financial performance. This is especially significant following the anticipated merger with First Majestic, which is expected to close in January 2025.
Gatos Silver is a silver-dominant exploration, development, and production company, primarily focused on operating the Cerro Los Gatos mine and on the growth and development of the Los Gatos district. The LGJV includes approximately 103,000 hectares of mineral rights, representing a highly prospective and under-explored district with numerous silver-zinc-lead epithermal mineralized zones identified as priority targets.
On September 5, 2024, Gatos Silver and First Majestic Silver Corp. announced a definitive merger agreement, through which First Majestic will acquire all of the issued and outstanding common shares of Gatos Silver. The proposed merger aims to consolidate three world-class, producing silver mining districts in Mexico, creating a leading intermediate primary silver producer.
Investors and stockholders are encouraged to review the details of the transaction and relevant documents filed with the U.S. Securities and Exchange Commission (SEC) and Canadian securities regulatory authorities for a comprehensive understanding of the implications of the merger.
The amendments to the joint venture agreements with Dowa represent a significant development for Gatos Silver as it prepares for the anticipated merger with First Majestic. These changes will impact the company’s financial reporting and management rights within the LGJV, offering investors a clearer view of its financial performance. As a result of these announcements, the company's shares have moved 1.2% on the market, and are now trading at a price of $13.99. For more information, read the company's full 8-K submission here.
