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Gatos Silver, Inc. (NYSE:GATO) provided a bi-weekly default status report as mandated by National Policy 12-203 due to delays in filing its financial reports. The company disclosed ongoing delays in filing its Form 10-K for the year ended December 31, 2021 and interim Form 10-Q filings for 2022. The firm appointed Ernst & Young LLP as its independent auditor, expecting all delays to be resolved by the end of Q1 2023. Material weaknesses in internal controls over financial reporting were also identified. The Ontario Securities Commission has implemented cease trade orders to ensure compliance.
Positive
Appointment of Ernst & Young as independent auditor, potentially enhancing credibility.
Plans to resolve delayed financial reports by end of Q1 2023.
Negative
Ongoing delays in filing essential financial reports.
Identification of material weaknesses in internal controls over financial reporting.
VANCOUVER, British Columbia--(BUSINESS WIRE)--
Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the “Company”) is providing this bi-weekly default status report in accordance with National Policy 12-203 - Management Cease Trade Orders (“NP 12-203”). In its March 18, 2022 news release (the “Notice”), the Company announced the delay in the filing of its annual report on Form 10-K for the year ended December 31, 2021, which includes its audited consolidated financial statements as at and for the year ended December 31, 2021, together with the auditor’s report thereon and the notes thereto, its management’s discussion and analysis for the year ended December 31, 2021 relating to the audited annual financial statements, and the Chief Executive Officer and Chief Financial Officer certificates relating to its annual filings by the filing deadline of March 31, 2022. In its May 13, 2022 news release, the Company announced the delay in the filing of its interim financial filings on Form 10-Q for the quarterly period ended March 31, 2022, which includes interim financial statements as at and for the quarterly period ended March 31, 2022, together with its management’s discussion and analysis for the quarterly period ended March 31, 2022 relating to the interim financial statements, and the Chief Executive Officer and Chief Financial Officer certificates relating to its interim filings by the filing deadline of May 16, 2022. In its August 5, 2022 news release, the Company announced the delay in filing its interim financial filings on Form 10-Q for the quarterly and year to date periods ended June 30, 2022, which includes interim financial statements as at June 30, 2022 and for the quarterly and year to date periods ended June 30, 2022, together with its management’s discussion and analysis for the quarterly period ended June 30, 2022 relating to the interim financial statements, and the Chief Executive Officer and Chief Financial Officer certificates relating to its interim filings by the filing deadline of August 15, 2022. In its November 11, 2022 news release, the Company announced the delay in filing its interim financial filings on Form 10-Q for the quarterly and year to date periods ended September 30, 2022, which includes interim financial statements as at September 30, 2022 and for the quarterly and year to date periods ended September 30, 2022, together with its management’s discussion and analysis for the quarterly period ended September 30, 2022 relating to the interim financial statements, and the Chief Executive Officer and Chief Financial Officer certificates relating to its interim filings by the filing deadline of November 14, 2022.
On November 14, 2022, the Company announced the appointment of Ernst & Young LLP (“EY”) as the Company’s independent registered public accounting firm, effective immediately. EY will be auditing and reporting on the Company's consolidated financial statements for the financial years ended December 31, 2021 and December 31, 2022, including review of the Company’s quarterly unaudited interim financial information for 2022. The Company expects all delayed filings, including the audit of the financial statements required to be included in its annual report on Form 10-K for the year ended December 31, 2021, and the reviews of its quarterly reports on Forms 10-Q for the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022, to be completed before the end of the first quarter of 2023. The Company expects to hold its annual shareholders’ meeting once such public reports have been filed.
As previously disclosed, in connection with its ongoing review of the mineral reserve reporting errors and its preparation of its 2021 annual financial statements and 2022 interim financial statements, the Company has identified material weaknesses in its internal controls over financial reporting. The Company has determined that the material weaknesses relate to its failures to design and maintain (i) an effective control environment commensurate with the financial reporting requirements of a public company in the United States and Canada, and (ii) effective controls over the assessment of certain key assumptions, inputs and outputs contained in its 2020 Technical Report. The Company is continuing to assess the impact of these material weaknesses and whether any other material weaknesses exist. The Company expects to provide additional information in its upcoming public reports. On January 9, 2023, the Company engaged a third-party expert to assist management in documenting key processes related to the Company’s internal control environment, designing and implementing an effective risk assessment and monitoring program to identify risks of material misstatements and ensuring that the internal controls have been appropriately designed to address and effectively monitor identified risks.
A management cease trade order was granted by the Ontario Securities Commission on April 1, 2022 (the “Original MCTO”) and the Ontario Securities Commission granted additional management cease trade orders on April 12, 2022 and July 7, 2022 (the “Additional MCTOs” and together with the Original MCTO, the “MCTO”).
Pursuant to NP 12-203, the Company must file bi-weekly status reports in the form of further news releases during the period from the Notice until the MCTO is revoked. The Company reports that since the Notice: (i) there have been no material changes regarding the information contained in the Notice that have not been disclosed in a bi-weekly default status report or in a news release referenced therein; (ii) there have been no failures by the Company in fulfilling its stated intentions with respect to satisfying the provisions of the alternative information guidelines under NP 12-203; and (iii) there has not been any specified default subsequent to the defaults announced in the Notice and the news releases dated May 13, 2022, August 5, 2022 and November 11, 2022.
About Gatos Silver
Gatos Silver is a silver dominant exploration, development and production company that discovered a new silver and zinc-rich mineral district in southern Chihuahua State, Mexico. As a 70% owner of the Los Gatos Joint Venture (“LGJV”), the Company is primarily focused on operating the mine and mineral processing plant at the LGJV’s Cerro Los Gatos deposit. The LGJV consists of approximately 103,087-hectares of mineral rights, representing a highly prospective and under-explored district with numerous silver-zinc-lead epithermal mineralized zones identified as priority targets.
Forward-Looking Statements
This press release may contain certain information that may constitute “forward-looking statements” and “forward looking information”(collectively, “forward-looking statements”) within the meaning of U.S. and Canadian securities laws. The forward-looking statements contained herein include statements about the timing for filing of the Company’s interim financial information on Forms 10-Q and the Company’s annual report on Form 10-K, and timing for holding the annual shareholder meeting. While the Company has based these forward-looking statements on its current expectations about future events, the statements are not guarantees of the Company’s future performance and are subject to risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, assumptions and factors include, amongst others, the evaluation of material weaknesses in its internal controls and timing for completing the audit and review of financial statements. Further, although the Company has attempted to identify factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. As there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements, readers should not place undue reliance on forward-looking statements.
What recent actions has Gatos Silver taken regarding its financial reporting?
Gatos Silver has appointed Ernst & Young as its independent auditor and expects to resolve delays in filing essential financial reports by the end of Q1 2023.
What impact do the material weaknesses in Gatos Silver's internal controls have?
The material weaknesses may affect the accuracy of financial reporting and investor confidence.
What are the management cease trade orders related to Gatos Silver?
The Ontario Securities Commission issued management cease trade orders due to Gatos Silver's delays in filing financial reports.
When does Gatos Silver plan to hold its annual shareholders' meeting?
Gatos Silver intends to hold its annual shareholders' meeting after all delayed public reports have been filed.
What financial documents is Gatos Silver currently delayed in filing?
Gatos Silver is delayed in filing its Form 10-K for the year ended December 31, 2021, and interim Form 10-Q filings for 2022.
