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Gatos Silver Plunges 69% After Resource Report Errors

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By Sam Boughedda

Investing.com — Shares of Gatos Silver Inc (NYSE:GATO) plunged more than 69% Wednesday after revealing a technical report — the Los Gatos Project, Chihuahua, Mexico report — from July had errors and indications of an overestimation in the existing resource model.

The company estimates a potential reduction ranging from 30% to 50% of the metal content of Cerro Los Gatos' mineral reserve; therefore, "the 2020 Technical Report should not be relied upon."

"The company is working with independent engineering consultants to better understand the magnitude of the overestimation, including conducting a detailed reconciliation of production to previous models and reserve calculation estimates, as well as creating a new Life of Mine ("LOM") plan," Gatos said in its statement.

The company expects the work will be completed in the second half of 2022.

The resource overestimate could result in a credit facility default, leaving Gatos to seek a waiver from its lender. The company has $13 million outstanding under its credit facility as of Dec. 31. However, they believe they have sufficient liquidity to manage the process.

Analysts at RBC Capital and CIBC downgraded the stock. RBC's Michael Siperco said the disclosure "is a significant negative event, and puts our estimates and valuation in question."

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