Denver, CO

Denver-area mining company reduces silver estimate at Mexico mine by 32%

Matt Whittaker
Ten-ounce silver barsBrian Shamblen / Flickr

By Matt Whittaker / NewsBreak Denver

(Greenwood Village, Colo.) A Denver-area mining company facing a lawsuit after overstating the amount of metal contained at a mine in Mexico revealed the extent of the error this week.

Gatos Silver, which is relocating its executive office to Vancouver, Canada, from Greenwood Village, in January notified shareholders it found errors in a 2020 technical report and “indications that there is an overestimation” of the economically mineable silver, zinc, lead and gold at its Cerro Los Gatos joint venture with Japan-based Dowa Metals & Mining Co.

Gatos said the potential reduction of the metal content of the mineral reserve of the mine ranged from 30% to 50% after factoring in the metal processed from July 2020 through the end of 2021.

After working with independent engineering consultants “to better understand the magnitude of the errors and overestimation,” Gatos this week said the reduction in contained metal is 32 percent for silver, 37 percent for zinc, 36 percent for lead and 35 percent for gold, accounting for depletion from July 1, 2020, to the end of June.

That brings the new mineral reserve estimates to 47.7 million ounces of silver, 599.1 million pounds of zinc, 286.7 million pounds of lead and 51.8 thousand ounces of gold.

In February, investors filed a class-action lawsuit in Colorado district court alleging that Gatos and others defrauded them based on its statement of the mineral content at the mine in documents accompanying the miner’s initial public offering on the stock market.

According to a document filed in district court Tuesday, Gatos and other defendants plan to file a motion to dismiss the lawsuit by Oct. 14. They haven’t done so yet because they’re asking to file a motion that is longer than the default number of pages allowed by the court.

Gatos, which didn’t immediately respond to a request for comment about the lawsuit, also this week announced the appointment of Stephen Bodley as general counsel and chief compliance officer, the latest in a string of management changes since it announced the overestimation.

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Matt Whittaker writes about natural resources industries, including oil and gas, mining, renewable energy, agriculture and cannabis. He's been based in the Denver metro area since 2013. You can follow him on Twitter @mattswhittaker.

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