Gatos Silver Expands Management Rights with Dowa Metals, Targets Financial Efficiency Ahead of Merger
Gatos Silver, Inc. strengthens its position in the Los Gatos Joint Venture with amended agreements.
Overview of the Amendments
Gatos Silver, Inc. has announced enhanced agreements with Dowa Metals & Mining Co. that will improve its management rights within the Los Gatos Joint Venture (LGJV), effective January 1, 2025. These amendments allow Gatos Silver to consolidate the LGJV’s results into its financial reports rather than using the previously required equity method. Ownership stakes remain unchanged, with Gatos holding 70% and Dowa 30%. The updated agreements also reinforce Dowa’s zinc concentrate offtake rights and adjust management service terms, including reduced supermajority voting requirements. CEO Dale Andres noted that these changes will streamline financial reporting and benefit the company as it moves toward a merger with First Majestic Silver, scheduled for January 2025.
Benefits of the Agreement
- The amendments grant Gatos Silver greater management control in the LGJV and facilitate full consolidation of financial statements, simplifying reporting.
- Dowa’s strengthened zinc concentrate offtake rights introduce stability and reliable commercial terms aligned with global benchmarks.
- The company now possesses a new right to solely fund significant upgrades or expansions at mines or plants, enhancing its operational capacity.
- The changes set the stage for a strategic merger with First Majestic Silver, aligning Gatos Silver for growth in the competitive silver mining industry.
Challenges Ahead
- Expanded offtake rights for Dowa could restrict Gatos Silver’s financial flexibility.
- The revised supermajority voting requirements may limit Gatos Silver’s control within the joint venture.
- Gatos Silver’s dependence on the merger with First Majestic introduces a level of uncertainty regarding its future profitability and operations.
Common Questions
What are the main changes in the agreements with Dowa?
The amendments enhance Gatos Silver’s management rights and enable full financial consolidation of the LGJV.
What are the ownership percentages for Gatos Silver and Dowa in the LGJV?
Gatos Silver holds a 70% stake, while Dowa maintains a 30% stake in the Los Gatos Joint Venture.
When will the new agreements take effect?
The updated agreements will become effective on January 1, 2025.
How do these changes affect Gatos Silver’s financial reporting?
The amendments will lead to streamlined financial reporting by allowing full consolidation of the LGJV’s financial information.
What is the importance of the Gatos Silver and First Majestic merger?
This merger aims to create a leading intermediate silver producer by merging three significant mining areas in Mexico.
Disclaimer: This summary is based on a press release from GlobeNewswire. Full details can be found in the original release.
Hedge Fund Activities Around $GATO
In the latest quarter, 65 institutional investors increased their positions in $GATO stock, while 49 reduced their holdings.
- CONDIRE MANAGEMENT, LP decreased its holdings by 2,885,139 shares (-53.9%) in Q3 2024.
- ALPINE ASSOCIATES MANAGEMENT INC. increased its stake by 1,327,472 shares (+inf%) in Q3 2024.
- MIRAE ASSET GLOBAL INVESTMENTS CO., LTD. completely exited its holdings, removing 1,292,645 shares (-100.0%) in Q2 2024.
- QUBE RESEARCH & TECHNOLOGIES LTD added 1,228,409 shares (+683.5%) to its portfolio in Q3 2024.
- MACKENZIE FINANCIAL CORP reduced its shares by 1,176,972 shares (-88.6%) in Q3 2024.
- MAGNETAR FINANCIAL LLC boosted its holdings with an addition of 950,648 shares (+inf%) in Q3 2024.
- FMR LLC decreased its position by 858,392 shares (-50.3%) in Q3 2024.
To monitor hedge fund activities, visit Quiver Quantitative’s institutional holdings dashboard.
Full Press Release
VANCOUVER, British Columbia, Dec. 19, 2024 (GLOBE NEWSWIRE) – Gatos Silver, Inc. (NYSE/TSX: GATO) today announced it has entered into amended agreements with Dowa Metals & Mining Co., Ltd. regarding the Los Gatos Joint Venture. These agreements will be effective starting January 1, 2025, expanding Gatos Silver’s management rights and allowing for full consolidation of the financial statements for the LGJV, replacing the equity method currently used. The ownership interests remain at 70% for Gatos and 30% for Dowa.
The amended agreements also enhance Dowa’s zinc concentrate offtake rights, adjusting commercial terms based on global benchmarks, and outline commitments concerning concentrate production and quality. Furthermore, updates to management service terms, decreased supermajority voting requirements, and an exclusive funding right for significant modifications or expansions have been included.
“Since its establishment 10 years ago, the Los Gatos Joint Venture has experienced great success,” remarked CEO Dale Andres. “These amended agreements build upon our successful foundation, allowing full consolidation that will provide a clearer picture of our financial performance, particularly as we approach our merger with First Majestic slated for January 2025.”
Important Information for Investors and Stockholders about the Transaction and Where to Find It
This news release does not constitute an offer to buy or sell securities of First Majestic Silver Corp. or Gatos Silver, nor does it solicit any vote or approval. This release may be seen as soliciting material related to First Majestic’s planned acquisition of Gatos Silver’s outstanding shares. In connection with this acquisition, First Majestic filed a registration statement with the U.S. SEC that includes a Proxy Statement of Gatos Silver and a Prospectus of First Majestic.
Gatos Silver and First Majestic Move Forward with Merger Plans
Key Dates and Documentation for Shareholders
The registration statement on Form F-4 related to the Merger was made effective by the SEC on December 2, 2024. Following this, Gatos Silver submitted a Proxy Statement/Prospectus to the SEC on December 3, 2024, starting the mailing process to its stockholders on December 6, 2024. Concurrently, First Majestic filed an Information Circular on December 10, 2024, for the proposed Merger with Canadian securities authorities and began distributing meeting materials to its shareholders on the same day. This announcement is not intended to replace any documents filed with the SEC or Canadian regulatory bodies regarding the ongoing Merger.
It is essential for investors and security holders of Gatos Silver and First Majestic to carefully review the Proxy Statement/Prospectus and the Management Proxy Circular, as well as any future amendments or supplements, before making any voting or investment decisions. These documents will provide vital information about the Merger, the companies involved, and related matters.
Free copies of the Proxy Statement/Prospectus and relevant SEC filings can be accessed on the SEC’s website at www.sec.gov. For Canadian documents, investors can visit the Canadian Securities Administrators’ site at www.sedarplus.com. Additional information from First Majestic can be found on their website at www.firstmajestic.com, or by contacting their investor relations team. Gatos Silver’s filings are also available on their website or through their investor relations team.
Details on Merger Participants
Directors, executive officers, and employees of First Majestic and Gatos Silver may be participants in the proxy solicitation for the proposed Merger. Details about individuals considered participants, including their interests in the companies, are included in the Proxy Statement/Prospectus and other relevant documents filed with regulatory authorities. A comprehensive overview of First Majestic’s directors and executive officers is available in their Notice of Annual Meeting of Shareholders and the 2024 Proxy Statement, filed on April 15, 2024. Gatos Silver’s director and executive information can be found in their Annual Report on Form 10-K for the year ended December 31, 2023, which was filed on February 20, 2024, and amended on May 6, 2024, alongside Gatos Silver’s 2024 Proxy Statement from April 25, 2024.
The Company Behind the Merger: Gatos Silver
Gatos Silver is an exploration and production company specializing in silver. It identified a silver and zinc-rich district in southern Chihuahua State, Mexico. With a 70% stake in the LGJV, Gatos Silver focuses on managing the Cerro Los Gatos mine and advancing the exploration of the Los Gatos district, which covers about 103,000 hectares of mineral rights—a region with numerous identified mineralized zones.
On September 5, 2024, Gatos Silver and First Majestic announced a definitive merger agreement, whereby First Majestic will acquire all common shares of Gatos Silver. This merger aims to combine three prominent silver mining regions in Mexico to enhance their position as a leading silver producer. Further details regarding the merger are available on Gatos Silver’s website at www.gatossilver.com.
Forward-Looking Statements Warning
This news release contains forward-looking statements under U.S. and Canadian securities regulations concerning future events involving First Majestic and/or Gatos Silver. These statements are based on management’s good faith assumptions regarding future developments. However, actual results may significantly differ from these expectations due to various risks and uncertainties. Investors should not overly rely on these forward-looking statements as there are no guarantees about their accuracy. For more insight into potential risks affecting First Majestic’s results, please refer to relevant sections in their Annual Information Form and Gatos Silver’s Annual Report on Form 10-K, both available on the SEC website at www.sec.gov/edgar and on their respective company websites.
First Majestic and Gatos Silver may update these forward-looking statements as required by law, but they do not commit to doing so otherwise.
Contact Information for Investors and Media
André van Niekerk
Chief Financial Officer
investors@gatossilver.com
(604) 424 0984
This article originally appeared on Quiver News; read the full story for more insights.
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