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Published: 2021-05-07

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 001-39649

GATOS SILVER, INC.

(Exact name of registrant as specified in its charter)

Delaware

27-2654848

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

8400 E. Crescent Parkway, Suite 600

Greenwood Village, CO 80111

(Address of principal executive offices) (Zip Code)

(303) 784-5350

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

GATO

New York Stock Exchange

Toronto Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company


	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x The Company has 700,000,000 shares of common stock, par value $0.001, authorized of which 59,409,052 were issued and outstanding as of May 3, 2021.



		TABLE OF CONTENTS

			Page

				Part I - FINANCIAL INFORMATION
Item 1.				Financial Statements (Unaudited)	3
				Condensed Consolidated Balance Sheets	3
				Condensed Consolidated Statements of Operations	4
				Condensed Consolidated Statements of Shareholders' Equity (Deficit)	5
				Condensed Consolidated Statements of Cash Flows	6
				Notes to Condensed Consolidated Financial Statements	7
Item 2.				Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.				Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.				Controls and Procedures	26
				Part II - OTHER INFORMATION
Item 1.				Legal Proceedings	27
Item 1A.				Risk Factors	27
Item 2.				Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.				Defaults Upon Senior Securities	27
Item 4.				Mine Safety Disclosures	27
Item 5.				Other Information	27
Item 6.				Exhibits	28

	2



		PART I – FINANCIAL INFORMATION

Item 1.			Financial Statements
GATOS SILVER, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(In thousands, except for share and per share amounts)
					March 31,	December 31,
					2021		2020
ASSETS
Current Assets
Cash and cash equivalents				$					31,031	$	150,146
Related party receivables						5,235		1,727
Other current assets						3,300		3,879
Total current assets									39,566	155,752
Non-Current Assets
Investment in affiliates									226,060		109,597
Other non-current assets						54			61
Total Assets				$					265,680 $	265,410
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other accrued liabilities				$		3,539	$	4,024
Shareholders' Equity
Common Stock, $0.001 par value; 700,000,000 shares authorized; 59,409,052 and 59,183,076 shares outstanding as ofMarch 31, 2021 and December 31, 2020
						108			108
Paid-in capital									412,103		409,728
Accumulated deficit					(149,043)		(147,423)
Treasury stock, at cost, 144,589 shares as of March 31, 2021 and December 31, 2020									(1,027)		(1,027)
Total shareholders' equity									262,141	261,386
Total Liabilities and Shareholders' Equity				$					265,680 $	265,410

										See accompanying notes to the condensed consolidated financial statements.

	3



GATOS SILVER, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(In thousands, except for share and per share amounts)

			Three Months Ended
			March 31,
			2021			2020
Expenses
Exploration		$	224 $	171
General and administrative			3,603	837
Amortization					7	8
Total expenses			3,834	1,016
Other (income) expense
Equity (income) loss in affiliates			(2,701)			13,445
Arrangement fees			506	1,575
Other (income) loss					(19)	5
Net other (income) expense			(2,214)			15,025
Net loss from continuing operations		$	1,620 $			16,041
Net loss from discontinued operations					-	1,780
Net loss		$	1,620 $			17,821
Net loss per share:
From continuing operations, basic and diluted(1)		$	0.03 $	0.40
From discontinued operations, basic and diluted(1)		$			- $	0.04
Basic and diluted(1)		$	0.03 $	0.44
Weighted average shares outstanding:
Basic and diluted(1)			59,473,566			40,505,079

(1) Prior period results have been adjusted to reflect the two-for-one reverse split in October 2020.

							See accompanying notes to the condensed consolidated financial statements.

	4


GATOS SILVER, INC.CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)(In thousands, except for share amounts)
		Number		Amount
	Common												Treasury	Common	Treasury	Paid-in	Accumulated
												Stock								Stock	Stock	Stock	Capital	Deficit	Total
Balance at December 31, 2020												59,183,076	144,589 $	108 $	(1,027) $	409,728 $		(147,423) $	261,386
Stock-based compensation		-	-	-	-	1,078			-	1,078
Issuance of common stock		182,453	-	-	-	1,559			-	1,559
DSUs converted to common stock		43,523	-	-	-		-		-		-
Other		-	-	-	-	(262)			-	(262)
Net loss		-	-	-	-		-	(1,620)		(1,620)
Balance at March 31, 2021												59,409,052	144,589 $	108 $	(1,027) $	412,103 $		(149,043) $	262,141

		Number(1)		Amount
	Common												Treasury	Common	Treasury	Paid-in	Accumulated
												Stock								Stock	Stock	Stock	Capital	Deficit	Total
Balance at December 31, 2019												40,323,430	144,589 $	80 $	(1,027) $	375,921 $		(225,583) $	149,391
Stock-based compensation		-	-	-	-	1,031			-	1,031
DSU compensat ion		-	-	-	-	61			-	61
Net loss		-	-	-	-		-	(17,821)		(17,821)
Balance at March 31, 2020												40,323,430	144,589 $	80 $	(1,027) $	377,013 $		(243,404) $	132,662
(1) Prior period results have been adjusted to reflect the two-for-one reverse split in October 2020.
												See accompanying notes to the condensed consolidated financial statements.

														5



GATOS SILVER, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(In thousands)

			Three Months Ended
				March 31,
			2021			2020
OPERATING ACTIVITIES
Net loss		$	(1,620) $			(17,821)
Plus net loss from discontinued operations				-	1,780
Adjustments to reconcile net loss to net cash used by operating activities :
Amortization				7	8
Stock-based compensation expense			1,139		975
Equity (income) loss in affiliates			(2,701)			13,445

Changes in operating assets and liabilities:
Receivables from related-parties			(3,508)			(1,991)
Accounts payable and other accrued liabilities			(485)		455
Other current assets				579	(127)
Operating cash flows from discontinued operations				-		(1,445)
Net cash used by operating activities			(6,589)			(4,721)

INVESTING ACTIVITIES
Investment in affiliates			(113,823)			(2,574)
Investing cash flows from discontinued operations				-	(6)
Net cash used by investing activities			(113,823)			(2,580)

FINANCING ACTIVITIES
Financing costs			(262)		(229)
Issuance of common stock			1,559		-
Net cash provided by (used by) financing activities			1,297		(229)
Net decrease in cash and cash equivalents			(119,115)			(7,530)
Cash and cash equivalents, beginning of period			150,146		9,085
Cash and cash equivalents, end of period			31,031		1,555
Less cash of discontinued operations				-	350
Cash of continuing operations, end of period		$	31,031 $		1,205

Supplemental disclosure of noncash transactions:
Director compensation		$		- $	61

							See accompanying notes to the condensed consolidated financial statements.

	6



GATOS SILVER, INC.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In thousands, except share, per share, option, and stock unit amounts) 1.
Description of Business
Organization and Nature of Business
Gatos Silver, Inc. (“Gatos Silver” or “the Company”) is a silver dominant production, development and exploration, company that discovered a new silver and
zinc-rich mineral district in southern Chihuahua State, Mexico.
The Company’s primary efforts are focused on the operation of the Los Gatos Joint Venture (“LGJV”) in Chihuahua, Mexico. On January 1, 2015, the
Company entered into the LGJV to develop the Los Gatos District (“LGD”) with Dowa Metals and Mining Co., Ltd. (“Dowa”). The LGJV operating entities consistof Minera Plata Real S. de R.L. de C.V (“MPR”), Operaciones San Jose del Plata S. de R.L. de C.V. and Servicios San Jose del Plata S. de R.L. de C.V. (collectivelythe “LGJV Entities”). The LGJV completed an advanced definitional drilling and decline development program in 2016, a feasibility study in January 2017 and atechnical update to the feasibility study in July 2020. Dowa completed its $50,000 funding requirement on April 1, 2016 thereby acquiring a 30% interest in theLGJV and the right to purchase future zinc-concentrate production at market rates. In May 2019, Dowa increased its ownership interest by 18.5% to 48.5% throughthe conversion of the Dowa MPR Loan to equity. On March 11, 2021, the Company repurchased the 18.5% interest from Dowa. See Note 8 — Commitments,Contingencies and Guarantees for further discussion. As of March 31, 2021, the LGJV ownership is 70.0% Gatos Silver and 30.0% Dowa.
On September 1, 2019, the LGJV commenced commercial production of its two concentrate products: a lead concentrate and a zinc concentrate. The LGJV’s
lead and zinc concentrates are currently sold to third-party customers.
The Company continues to perform additional definitional drilling to further define and expand mineralization of the Cerro Los Gatos deposit, and will be
performing definitional and exploratory drilling at the nearby Esther deposit. On December 5, 2020, the LGJV began the first infill and extensional drilling programat the Cerro Los Gatos deposit.
The Company’s other regional Mexico exploration efforts are conducted through its wholly-owned subsidiary, Minera Luz del Sol S. de R.L. de C.V. (“MLS”).
In March 2021, the Company commenced a 5,400-meter exploration program on the Santa Valeria property.

Discontinued Operations
In October 2020, the Company completed the distribution of its wholly-owned subsidiary, Silver Opportunity Partners LLC (“SOP”), and SOP has been
presented as discontinued operations in the Company’s condensed consolidated financial statements. See Note 9 – Discontinued Operations for additional detail.

2.	Summary of Significant Accounting Policies
Basis of Consolidation and Presentation
The financial statements represent the condensed consolidated financial position and results of operations of Gatos Silver, Inc. and its subsidiary, MLS. Unless
the context otherwise requires, references to Gatos Silver or the Company mean Gatos Silver, Inc. and its consolidated subsidiary. All equity interest in theCompany’s wholly-owned subsidiary, SOP, was distributed to its stockholders in October 2020. The accounts for SOP have been presented as discontinuedoperations in the accompanying interim condensed consolidated financial statements.
The interim condensed consolidated financial statements are unaudited, but include all adjustments, consisting of normal recurring entries, which are necessary
for a fair presentation for the dates and periods presented. Interim results are not necessarily indicative of results for a full year. The financial statements have beenprepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, they do notinclude all financial information and disclosures required by GAAP for complete financial statements and should be read in conjunction with the audited consolidatedfinancial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 10-K”).

	7



Summary of Significant Accounting Policies
The consolidated financial statements for the year ended December 31, 2020 disclose those accounting policies considered significant in determining results of
operations and financial position. There have been no material changes to, or in the application of, the accounting policies previously identified and described in the2020 10-K.

Recent Accounting Pronouncements
The Company has adopted the provisions of Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) and ASU No. 2019-12, Income Taxes
(Topic 740). These provisions did not have a material impact on the financial statements.

3.	Property, Plant and Equipment, net
Mineral Properties Mining Concessions
In Mexico, mineral concessions from the Mexican government can only be held by Mexican nationals or Mexican-incorporated companies. The concessions
are valid for 50 years and are extendable provided the concessions are kept in good standing. For concessions to remain in good standing a semi-annual fee must bepaid to the Mexican government and an annual report describing the work accomplished on the property must be filed. These concessions may be cancelled withoutpenalty with prior notice to the Mexican government. MLS is the concession holder of a series of claims titles granted by the Mexican government. The rights tocertain concessions are held through exploration agreements with purchase options, as discussed below:

Santa Valeria Concession
The Company is required to make a production royalty payment of 1% of the net smelter returns on production. The Company may terminate the agreement
upon prior notice.

4.	Accounts Payable and Other Accrued Liabilities

	March 31,	December 31,
		2021	2020
				Accounts payable	$	324 $	560
				Accrued expenses		2,385	1,240
				Accrued compensation		570	1,964
				Other		260	260
				Total accounts payable and other current liabilities	$	3,539 $	4,024

5.	Related-Party Transactions
LGJV
The Company has a services agreement with the LGJV to provide certain consulting and administrative services. The Company earned $1,250 and $1,200
under this agreement for the three months ended March 31, 2021 and 2020, respectively, and received nil in cash from the LGJV under this agreement for the threemonths ended March 31, 2021 and 2020. The Company had receivables under this agreement of $2,450 and $5,950 as of March 31, 2021 and 2020, respectively. TheCompany also incurs certain LGJV costs and provides short term advances that are reimbursed by the LGJV.

SSMRC
The Company has a Management Services Agreement with Sunshine Silver Mining & Refining Corporation (“SSMRC”) (formerly named Silver Opportunity
Partners Corporation), pursuant to which the Company provides certain executive and managerial advisory services to SSMRC until terminated by either party.SSMRC reimburses the Company for costs of such services. The Company earned $16 and nil from SSMRC under this agreement for the three months ended March31, 2021 and 2020, respectively, all of which was receivable as of March 31, 2021.

					8



6.	Stockholders’ Equity

The Company is authorized to issue 700,000,000 shares of $0.001 par value common stock and 50,000,000 shares of $0.001 par value preferred stock.
Stock Option Transactions
	The Company’s stock options have a contractual term of 10 years and entitle the holder to purchase shares of the Company’s common stock. The options
granted to the Company’s employees and LGJV personnel prior to 2020 have a requisite service period of four years and vest in equal annual installments. Starting in2020, the options granted to the Company’s employees and LGJV personnel have a requisite service period of three years. The options granted to non-employeedirectors prior to 2020 have a requisite service period of one year and vest in equal monthly installments. The options granted to non-employee directors in January2020 have a requisite service period of one and a half years and vest in monthly installments.
	The Company did not grant any stock options during the three months ended March 31, 2021. The Company granted 798,333 stock options during the three
months ended March 31, 2020. The weighted-average grant-date fair value per share was $6.62 for the three months ended March 31, 2020. The Company received$1,559 from stock options exercised during the three months ended March 31, 2021.
	Total unrecognized stock-based compensation expense as of March 31, 2021 was $7,931 which is expected to be recognized over a weighted average period of
2.1 years.

	Stock option activity for the three months ended March 31, 2021 is summarized in the following tables:
			Weighted-Average
		Director and Employee Options	Shares		Exercise Price
	Outstanding at December 31, 2020			5,411,930 $	12.52
	Granted		- $		-
	Exercised			182,453 $	8.54
	Forfeited			23,250 $	12.00
	Outstanding at March 31, 2021			5,206,227 $	12.66
	Vested at March 31, 2021			3,329,954 $	14.82

			Weighted-Average
		LGJV Personnel Options	Shares		Exercise Price
	Outstanding at December 31, 2020		43,676 $		7.23
	Outstanding and vested at March 31, 2021		43,676 $		7.23
Deferred Stock Unit Transactions
	Deferred stock units (“DSUs”) are awarded to directors at the discretion of the Board of Directors. The DSUs are fully vested on the grant date and each DSU
entitles the holder to receive one share of the Company’s common stock upon departure from the Company. The fair value of the DSUs are equal to the fair value ofthe Company’s common stock on the grant date.

						9


	At March 31, 2021, there were 225,152 DSUs outstanding. The Company granted 85,961 and 5,103 DSUs during the three months ended March 31, 2021 and
2020, respectively. For the three months ended March 31, 2021, 43,523 DSUs were converted to common stock upon termination of the holders’ consultingagreements.

7.	Fair Value Measurements
The Company establishes a framework for measuring the fair value of financial assets and liabilities and nonfinancial assets and liabilities which are measured
at fair value on a recurring (annual) basis in the form of a fair value hierarchy that prioritizes the inputs into valuation techniques used to measure fair value into threebroad levels. This hierarchy gives the highest priority to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs. Further, financialassets and liabilities should be classified by level in their entirety based upon the lowest level of input that was significant to the fair value measurement. The threelevels of the fair value hierarchy are as follows:
Level 1: Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. Level 2: Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable
inputs either directly related to the asset or liability or derived principally from corroborated observable market data.
Level 3: Unobservable inputs due to the fact there is little or no market activity. This entails using assumptions in models which estimate what market
participants would use in pricing the asset or liability.

Financial Assets and Liabilities
At March 31, 2021 and December 31, 2020, the Company’s financial instruments consist of cash and cash equivalents, receivables, accounts payable and other
current liabilities. The carrying amounts of these financial instruments approximate fair value due to their short maturities.

Non-Financial Assets and Liabilities
The Company discloses and recognizes its non-financial assets and liabilities at fair value on a non-recurring basis. The estimated fair value for these non-
financial liabilities are classified as Level 3 of the fair value hierarchy, as the valuation was determined based on internally developed assumptions that marketparticipants would use in the pricing of such assets without observable inputs and no market activity.
The Company recorded its initial investment in affiliates at fair value. The estimated fair value for this non-financial asset is classified as Level 3 of the fair
value hierarchy, as the valuation was determined based on internally developed assumptions with few observable inputs and no market activity.

8.	Commitments, Contingencies and Guarantees
In determining its accruals and disclosures with respect to loss contingencies, the Company will charge to income an estimated loss if information available
prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount ofthe loss can be reasonably estimated. Legal expenses associated with the commitments and contingencies are expensed as incurred. If a loss contingency is notprobable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material losscould be incurred.
The Company’s mining and exploration activities are subject to various laws, regulations and permits governing the protection of the environment. These laws,
regulations and permits are continually changing and are generally becoming more restrictive. The Company has made, and expects to make in the future,expenditures to comply with such laws, regulations and permits, but cannot predict the full amount of such future expenditures.
In July 2017, the LGJV Entities entered into a loan agreement (the “Term Loan”) with Dowa whereby the LGJV Entities could borrow up to $210,000 for LGD
development, with a maturity date of December 29, 2027. Interest on the Term Loan accrues daily at LIBOR plus 2.35% per annum, with the interest to be added tothe amount borrowed until commencement of production. During 2018, the LGJV paid Dowa a $4,200 closing fee. Commencing June 30, 2021, 14 consecutive semi-annual equal payments of the aggregate principal and capitalized interest begin. The Company is required to pay an arrangement fee on the borrowing, calculated as2% per annum of 70% of the outstanding principal balance, payable in semi-annual installments, on that date which is two business days prior to June 30 andDecember 31 each fiscal year until maturity, commencing after the initial drawdown which occurred in July 2018. The Term Loan also requires additional principalpayments equal to 70% of excess cash flows (as defined). As of March 31, 2021, the LGJV had $222,783 outstanding under the Term Loan.

		10


On January 23, 2018, the LGJV entered into a loan agreement (the “Dowa MPR Loan”) with Dowa whereby the LGJV could borrow up to $65,700 to continue
LGD development. Interest on this loan accrued daily at LIBOR plus 1.5% per annum and was added to the amount borrowed. The amount borrowed plus accruedinterest was due the earlier of June 30, 2019, or upon LGD’s substantial completion. If the Company’s 70% portion of the Dowa MPR Loan was not repaid in full onor before the due date, Dowa could elect to convert all or a portion of the principal amount into additional LGJV ownership at a favorable conversion rate.
The Company contributed $18,200 to the LGJV in May 2019 to provide funding for a partial repayment of principal and interest related to the Dowa MPR
Loan. In late May 2019, the Dowa MPR Loan was fully extinguished with a cash payment of $18,200 and the conversion of the remaining $50,737 of principal andinterest. The conversion of the remaining principal and interest increased Dowa’s ownership in the LGJV entities by 18.5% to 48.5%. On March 11, 2021, theCompany repurchased the 18.5% interest from Dowa, for a total consideration of $71,550, including Dowa holding costs of this incremental interest, increasing theCompany’s ownership in the LGJV to 70.0%. These transactions resulted in a $47,400 higher basis than the underlying net assets of the LGJV Entities. This basisdifference is being amortized over the LGJV Entities proven and probable reserves.
On May 30, 2019, the LGJV entered into a working capital facility agreement ( the “WCF”) with Dowa whereby the LGJV could borrow up to $60,000 to fund
the working capital and sustaining capital requirements of the LGD. Interest on this loan accrued daily at LIBOR plus 3.0% per annum and all outstanding principaland interest was to mature on June 28, 2021. The Company was required to pay an arrangement fee on the borrowing, calculated as 15.0% per annum of 70.0% of theaverage daily principal amount outstanding under the WCF during such fiscal quarter. On March 11, 2021, the full $60,000 amount outstanding under the WCF wasextinguished of which the Company’s pro-rata capital contribution to the LGJV was $42,000.
The Company has guaranteed 70% of the outstanding principal and accrued interest of the Term Loan in the event of default by the LGJV. The Company has
guaranteed the payment of all obligations, including accrued interest, under the LGJV equipment loan agreements. As of March 31, 2021, the LGJV had $11,141outstanding under the LGJV equipment loan agreements, net of unamortized debt discount of $28, with varying maturity dates through August 2023.

9.	Discontinued Operations

In October 2020, the Company completed the distribution of its reportable U.S. segment, which was comprised of SOP. To effect the distribution, the Company
distributed, on a pro rata basis, all equity interest of SOP to its stockholders of record immediately prior to completion of the initial public offering. Shareholdersreceived approximately 0.10594 shares of common stock of SOP for every share of the Company’s common stock held. SOP became a wholly owned subsidiary of anewly created Delaware corporation named Silver Opportunity Partners Corporation, subsequently renamed to SSMRC.
The results of operations for SOP have been reflected as discontinued operations in the condensed consolidated statement of operations for the quarter ended
March 31, 2020, and consist of the following:

			March 31,
				2020
		Operating Expenses of Discontinued Operations
		Exploration	$	111
		Pre-development		516
		General and administrative		561
		Amortization		593
		Total expenses		1,781
		Other Income of Discontinued Operations
		Other income		(1)
		Net loss of discontinued operations	$	1,780

	11



The cash flow activity from discontinued operations for the quarter ended March 31, 2020 have been reflected as discontinued operations in the condensed
consolidated statement of cash flows for the quarter ended March 31, 2020, and consist of the following:

			March 31,
				2020
		Discontinued Operating Activities
		Net loss	$		(1,780)
		Adjustments to reconcile net loss to net cash used by operating activities:
		Amortization		593
		Stock compensation expense		56
		Accretion expense		27
		Changes in operating assets and liabilities:
		Accounts payable and other accrued liabilities		(220)
		Other current assets		(121)
		Net cash used by operating activities of discontinued operations			(1,445)
		Investing Activities of Discontinued Operations
		Purchase of property, plant and equipment		(6)
		Net cash used by investing activities of discontinued operations		(6)

10.	Segment Information

The Company operates in a single industry as a corporation engaged in the acquisition, exploration and development of silver mineral interests. The Company
has mineral property interests in Mexico. The Company’s reportable segments are based on the Company’s mineral interests and management structure and includeMexico and Corporate segments. The Mexico segment engages in the development and exploration on the Company’s Mexican mineral properties and includes theCompany’s investment in the LGJV. Financial information relating to the Company’s segments is as follows:

							Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
							Mexico			Corporate		Total		Mexico							Corporate				Total
Exploration						$	224 $				- $	224 $	171 $	- $						171
General and administrative							154				3,449	3,603	61	776						837
Amortization									-		7	7							-	8			8
Arrangement fees									-		506	506							-	1,575		1,575
Equity (gain) loss in affiliates							(2,701)				-	(2,701)	13,445	-									13,445
Net other (income) loss							14				(33)	(19)	11	(6)						5
Total assets						$	42,197 $								223,483 $	265,680 $	42,363 $	64,549 $						106,912

11. Investment in Affiliate
During the three months ended March 31, 2021 and 2020, the Company recognized $2,701 of income and a $13,445 loss, respectively, on its investment in the
LGJV Entities, representing its ownership share of the LGJV Entities’ results. The equity income or loss in affiliate includes amortization of the carrying value of theinvestment in excess of the underlying net assets of the LGJV Entities. This basis difference is being amortized over the LGJV Entities proven and probable reserves.

											12


The LGJV Entities combined balance sheets as of March 31, 2021 and December 31, 2020, and the combined statements of income (loss) for the three months
ended March 31, 2021 and 2020 are as follows:

	LOS GATOS JOINT VENTURE
		COMBINED BALANCE SHEETS (UNAUDITED)
			(in thousands)

						March 31,		December 31,
							2021		2020
					ASSETS
					Current Assets
					Cash and cash equivalents	$	5,441 $		1,676
					Receivables		4,550		3,988
					Inventories		10,408		10,315
					VAT receivable		48,089		50,732
					Other current assets		3,481		2,891
					Total current assets		71,969		69,602
					Non-Current Assets
					Mine development, net		206,824		202,874
					Property, plant and equipment, net		194,239		196,942
					Total non-current assets		401,063		399,816
					Total Assets	$	473,032 $		469,418
					LIABILITIES AND OWNERS' CAPITAL
					Current Liabilities
					Accounts payable and accrued liabilities	$	31,973 $		35,767
					Related party payable		5,258		1,703
					Accrued interest		1,609		101
					Unearned revenue			-	3,276
					Equipment loans		7,017		7,084
					Dowa Term Loan		31,826		31,826
					Working Capital Facility			-	60,000
					Total current liabilities		77,683		139,757
					Non-Current Liabilities
					Dowa Term Loan		187,978		187,767
					Equipment loans		4,096		6,120
					Reclamation obligations		12,390		12,162
					Total non-current liabilities		204,464		206,049
					Owners' Capital
					Capital contributions		331,368		271,368
					Paid-in capital		16,786		16,366
					Accumulated deficit		(157,269)		(164,122)
					Total owners' capital		190,885		123,612
					Total Liabilities and Owners' Capital	$	473,032 $		469,418

				13



	LOS GATOS JOINT VENTURE
		COMBINED STATEMENTS OF INCOME (LOSS) [UNAUDITED]
			(in thousands)

					Three Months Ended
						March 31,
						2021			2020
				Sales	$	46,330 $		18,913
				Expenses
				Cost of sales		19,805		18,276
				Royalties		884	301
				Exploration		649	264
				General and administrative		3,246	2,745
				Depreciation, depletion and amortization		10,949		11,717
						35,533		33,303
				Other expense
				Interest expense		2,117	3,553
				Accretion expense		228	212
				Other income		(30)	(109)
				Foreign exchange loss		1,630	5,861
						3,945	9,517
				Net Income (Loss)	$	6,852 $		(23,907)

14



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
		The following discussion should be read in conjunction with the Company’s consolidated financial statements and related notes and other information
included elsewhere in this Form 10-Q (the “Report”) and the Company’s audited consolidated financial statements and notes thereto as of and for the year endedDecember 31, 2020 and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” both of which are contained in ourAnnual Report on Form 10-K for the year ended December 31, 2020 (the “2020 10-K”), filed with the Securities and Exchange Commission (“SEC”) on March 29,2021. Forward-Looking Statements
		This Report contains statements that constitute “forward looking information” and “forward-looking statements” within the meaning of U.S. and Canadian
securities laws. Forward-looking statements are often identified by words such as ‘‘may,’’ ‘‘might,’’ ‘‘could,’’ ‘‘would,’’ ‘‘achieve,’’ ‘‘budget,’’ ‘‘scheduled,’’‘‘forecasts,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential’’ or ‘‘continue,’’ the negative of these terms and othercomparable terminology. These forward-looking statements may include, but are not limited to, those relating to projections of our future financial performance, ouranticipated growth strategies and anticipated trends in our industry, production from the Cerro Los Gatos Mine (“CLG”), our expectations relating to furtherexploration of the Los Gatos District and the Santa Valeria property, estimated calculations of mineral reserves and resources at our properties, anticipated expenses,tax benefits, future strategic infrastructure development at the CLG and our requirements for additional capital.
		All forward-looking statements speak only as of the date on which they are made. These statements are not a guarantee of future performance and involve
certain risks, uncertainties and assumptions concerning future events that are difficult to predict. Therefore, actual future events or results may differ materially fromthese statements. Important factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include, butare not limited to, the following:
		•
		we have a history of negative operating cash flows and net losses and we may never achieve or sustain profitability;

		•	we are dependent on two principal projects for our future operations;

		•	the LGJV has debt and may incur further debt in the future, which could adversely affect the LGJV’s and our financial health and ability to obtainfinancing in the future and pursue certain business opportunities;

		•	mineral reserve and mineral resource calculations at the CLG and the Los Gatos District are only estimates and actual production results may varysignificantly from the estimates;

		•	our mineral exploration efforts are highly speculative in nature and may be unsuccessful;

		•	actual capital costs, operating costs, production and economic returns may differ significantly from those we have anticipated and there are noassurances that any future development activities will result in profitable mining operations;

		•	our operations involve significant risks and hazards inherent to the mining industry;

		•	the title to some of the mineral properties may be uncertain or defective;

		•	the widespread outbreak of the COVID-19 pandemic and any other health epidemics, communicable diseases or public health crises could alsoadversely affect us, particularly in regions where we conduct our business operations;

		•	the prices of silver, zinc and lead are subject to change and a substantial or extended decline in the prices of silver, zinc or lead could materially andadversely affect our revenues and the value of our mineral properties;

		•	the Mexican government, as well as local governments, extensively regulate mining operations, which impose significant actual and potential costs onus, and future regulation could increase those costs, delay receipt of regulatory refunds or limit our ability to produce silver and other metals;

	15



	•	our operations are subject to additional political, economic and other uncertainties not generally associated with U.S. operations; and

	•	we are required to obtain, maintain and renew environmental, construction and mining permits, which is often a costly and time-consuming process andmay ultimately not be possible.

	These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and information included in this
Report and those described from time to time in our filings with the SEC, including, but not limited to, our 2020 10-K. These risks and uncertainties, as well as otherrisks of which we are not aware or which we currently do not believe to be material, may cause our actual future results to be materially different than thoseexpressed in our forward-looking statements. Undue reliance should not be placed on these forward-looking statements. We do not undertake any obligation to makeany revisions to these forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events,except as required by law. Certain forward-looking statements are based on assumptions, qualifications and procedures which are set out only in the Los GatosTechnical Report. For a complete description of assumptions, qualifications and procedures associated with such information, reference should be made to the fulltext of the Los Gatos Technical Report.

Overview
	We are a U.S.-based precious metals production, development and exploration company with the objective of becoming a premier silver producer. We are
currently focused on the production and continued development of the CLG and the further exploration and development of the Los Gatos District:
	•
	The CLG, located within the Los Gatos District, Chihuahua, Mexico, consists of a 2,500 tpd polymetallic mine and processing facility that commencedproduction on September 1, 2019. For the three months ended March 31, 2021, the CLG mined 209,832 tonnes and processed 203,479 tonnes ataverage grades of 261 g/t silver, 0.32 g/t gold, 2.0% lead and 3.24% zinc, with metallurgical recovery of 85.0% silver, 60.2% gold, 87.4% lead and71.2% zinc. A total of 6,312 tonnes of lead concentrate were produced at average grades of 6,314 g/t silver, 5.6 g/t gold, 54.8% lead and 12.9% zinc,with metallurgical recovery of 75.0% silver, 54.1% gold, 84.9% lead and 12.3% zinc. A total of 7,036 tonnes of zinc concentrate were produced ataverage grades of 757 g/t silver, 0.56 g/t gold, 1.4% lead and 55.2% zinc, with metallurgical recovery of 10.0% silver, 6.1% gold, 2.5% lead and 58.9%zinc. The Los Gatos Technical Report, which has an effective date of July 1, 2020, estimates that the deposit contains approximately 9.6 million dilutedtonnes of proven and probable mineral reserves (or approximately 6.7 million diluted tonnes of proven and probable mineral reserves on a 70.0% basis),with approximately 6.4 million diluted tonnes of proven mineral reserves (or approximately 4.5 million diluted tonnes of proven mineral reserves on a70.0% basis) and approximately 3.3 million diluted tonnes of probable mineral reserves (or approximately 2.3 million diluted tonnes of probablemineral reserves on a 70.0% basis). Average proven and probable mineral reserve grades are 306 g/t silver, 0.35 g/t gold, 2.76% lead and 5.65% zinc.

	•	The Los Gatos District, located in Chihuahua, Mexico, is located approximately 120 kilometers south of Chihuahua City and is comprised of a 103,087hectares land position, constituting a new mining district. The Los Gatos District consists of 14 mineralized zones, which include three identified silver,lead and zinc deposits that contain mineral resources—the CLG, the Esther deposit and the Amapola deposit—as well as 11 additional high prioritytargets defined by high grade drill intersections and over 150 kilometers of outcropping quartz and calcite veins. The area is characterized by apredominant silver, lead and zinc epithermal mineralization. On September 1, 2019, the LGJV commenced production at the CLG. A core component ofthe LGJV’s business plan is to explore the highly prospective, underexplored Los Gatos District with the objective of identifying additional mineraldeposits that can be mined and processed, possibly utilizing the CLG plant infrastructure.
COVID-19 Pandemic
	In March 2020, the World Health Organization declared COVID-19 a global pandemic. The COVID-19 pandemic temporarily affected our operations in
2020 in part due to the loss of revenue resulting from the 45-day temporary suspension of all nonessential activities at the LGJV’s CLG site and the expensesassociated with the development and implementation of COVID-19 protocols. We believe we have taken appropriate steps to minimize the risk to our employees andto maintain normal business operations. We may take further actions as may be required by government authorities or as we determine are in the best interests of ouremployees and business partners which may cause additional closures of some or all of our operations in the future.
		16



	While the full impact of this pandemic is unknown, we are closely monitoring the developments of the outbreak and continually assessing the potential
impact on our business. Any prolonged disruption of our operations and closure of facilities could result in additional costs incurred, production and developmentdelays, cost overruns and operational restart costs that would negatively impact our business, financial condition and results of operations. The degree to which thepandemic impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain, continuously evolvingand in many cases cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity and the actions to contain the virus or treatits impact, such as the efficacy of vaccines (particularly with respect to emerging strains of the virus). Accordingly, there remains significant uncertainty about theduration and extent of the impact of the COVID-19 pandemic. See “Item 1A. Risk Factors” in the 2020 10-K for additional risks we face due to the COVID-19pandemic. Exploration Drilling Programs
	In December 2020, the LGJV commenced a 90-hole, 27,000-meter exploration program to convert CLG’s established 3.2 million tonnes of inferred
resources to the measured and indicated category and to discover additional resources along the northwest and southeast extensions of the CLG deposit. To date, 30holes have been drilled.
	In 2021, the LGJV intends to initiate a second exploration program to expand resources throughout the Los Gatos District. The initial target is an estimated
19,000-meter campaign at the Esther deposit, to expand its initial NI 43-101 compliant indicated resource of 0.46 million tonnes at 133 g/t silver, 2.1% zinc, 0.7%lead and inferred resource of 2.29 million tonnes at 98 g/t silver, 3.0% zinc, and 1.6% lead. Esther is located about four kilometers from CLG and contains similarstyles of mineralization and geochemistry. The Company believes that further drilling may materially expand the size and mineral tenor of this resource.
	In March 2021, the Company commenced an 18-hole, 5,400-meter exploration program on its wholly-owned Santa Valeria property. The Santa Valeria
target has been developed through regional geologic work by the Company’s exploration team, which defined a large basin structure hosting the mineralization zoneswithin the Los Gatos District. Santa Valeria is geologically comparable to CLG, and the Company believes it may contain similar mineral content. To date, two drillholes have been completed. Components of Results of Operations Operating Expenses Exploration Expenses
	We conduct exploration activities under mining concessions in Mexico. We expect exploration expenses to increase significantly as we continue to expand
our exploration activities at the Los Gatos District and our other exploration properties. Our exploration expenses primarily consist of drilling costs, lease concessionpayments, assay costs and other geological and support costs at our exploration properties. General and Administrative Expenses
	Our general and administrative expenses consist of salaries and benefits, stock compensation, professional and consultant fees, insurance and other general
administration costs. Our general and administrative expenses have increased and are expected to further increase significantly as we operate as a public company.We expect higher costs related to salaries, benefits, stock compensation, legal fees, compliance and corporate governance, accounting and audit expenses, stockexchange listing fees, transfer agent and other shareholder-related fees, directors’ and officers’ and other insurance costs, and other administrative costs. We are partyto a Management Services Agreement with SSMRC, pursuant to which we will provide certain executive and managerial advisory services to SSMRC. SSMRCreimburses us for costs of providing such services.

		17



Equity (Income) Loss in Affiliates
	Our equity (income) loss in affiliates relates to our proportional share of net income or loss incurred from the LGJV and the amortization of the basis
difference between our investment in the LGJV and the net assets of the LGJV. LGJV Arrangement Fee
	Our LGJV arrangement fee consists of arrangement fees related to the Term Loan and the WCF with Dowa. The arrangement fees are based on a fixed 1%
and 15% rate for the Term Loan and the WCF, respectively, and 70% of the outstanding principal of the respective facility. These arrangement fees are solely ourresponsibility. On March 11, 2021, the WCF was extinguished and thus we do not expect to incur LGJV arrangement fees in future periods with respect to the WCF,but will continue to incur LGJV arrangement fees with respect to the Term Loan as long as such loan remains outstanding. Income Taxes
	As we have incurred substantial losses from our exploration and pre-development activities, we may receive further benefits in the form of deferred tax
assets that can reduce our future income tax liabilities, if it is more likely than not that the benefit will be realized before expiration. Historically, we have notrecognized these potential benefits in our financial statements and have fully reserved for such net deferred tax assets, as we believe it is more likely than not that thefull benefit of these net deferred tax assets will not be realized before expiration. Royalties
	Exploration activities are conducted on the Los Gatos District mining concessions and on the Company’s 100% owned Santa Valeria concessions in Mexico.
Mineral and concession lease payments are required to be paid to various entities to secure the appropriate claims or surface rights. Certain of these agreements alsohave royalty payments that were triggered when we began producing and selling metal-bearing concentrate. Results of Operations
	The following table presents certain information relating to our operating results for the three months ended March 31, 2021 and 2020. In accordance with
generally accepted accounting principles in the United States (‘‘GAAP’’), these financial results represent the consolidated results of operations of our Company andits subsidiary (in thousands).

		18



			Three Months Ended
				March 31,
			2021			2020
	Expenses
	Exploration	$		224 $	171
	General and administrative		3,603		837
	Amortization			7	8
							Total expenses		3,834		1,016

	Other expense (income)
	Equity (income) loss in affiliates		(2,701)			13,445
	Arrangement fees			506	1,575
	Other (income) loss			(19)	5
							Net other expense (income)		(2,214)			15,025
	Net loss from continuing operations	$	1,620 $			16,041
							Net loss from discontinued operations			-	1,780
	Net loss	$	1,620 $			17,821
Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
	For the three months ended March 31, 2021, we incurred a net loss from continuing operations of $1,620 thousand compared to a net loss of $16,041
thousand for the three months ended March 31, 2020. The $14,421 thousand decrease in net loss from continuing operations was primarily attributable to $16,146thousand change in equity (income) loss in affiliates from the LGJV operations, partially offset by the $2,766 thousand increase in general and administrativeexpense due to higher legal and consulting costs and directors and officers insurance premiums related to public company governance and reporting requirements,and increased stock-based compensation expense.
	The LGJV’s operating income, which is recognized using the equity method of accounting in our financial statements for the three months ended March 31,
2021, resulted primarily from: the increase in our ownership in the LGJV from 51.5% to 70.0% on March 11, 2021; mining and processing activities operating neardesigned throughput for the three months ended March 31, 2021, compared to the ramp-up to designed throughput during the three months ended March 31, 2020;and significantly higher metals prices for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Liquidity and Capital Resources
	As of March 31, 2021 and December 31, 2020, we had cash and cash equivalents of $31,031 thousand and $150,146 thousand, respectively, and working
capital of $36,027 thousand and $151,728 thousand, respectively. The decrease in cash and cash equivalents and working capital were primarily due to our $71,550thousand repurchase of the 18.5% interest in the LGJV from Dowa and a $42,000 thousand capital contribution to the LGJV to extinguish our 70% share of the WCF.As a result, our ownership in the LGJV increased to 70.0% and Dowa’s ownership returned to 30% on March 11, 2021.
	On October 30, 2020, we completed our initial public offering (the “IPO”) of 21,430,000 shares of common stock at a public offering price of $7.00 per
share, resulting in net proceeds of $134,800 thousand, after deducting underwriting discounts and commissions and expenses payable by us. On November 10, 2020,we issued and sold an additional 3,214,500 shares of common stock at a public offering price of $7.00 per share, pursuant to the exercise in full of the underwriters’over-allotment option, resulting in net proceeds of $20,900 thousand, after deducting underwriting discounts and commissions and expenses payable by us.

								19


	We did not have any related party debt as of March 31, 2021 or December 31, 2020. We have no outstanding lines of credit or other bank financing
arrangements. We guarantee 70.0% of the Term Loan and all of the LGJV equipment loans as of March 31, 2021. We have certain arrangement fees obligationsrelated to the CLG as detailed in the “LGJV Arrangement Fee” above.
	We believe we have sufficient cash and resources to carry out our business plans for at least the next 12 months. We are focused on our forward-looking
liquidity needs. We are evaluating our ongoing fixed cost structure as well as decisions related to project retention, advancement and development. We will likely berequired to raise capital or take other measures to fund future exploration and development. Significant development activities, if warranted, will require that wearrange for financing in advance of planned expenditures. In addition, we expect to continue to increase our current financial resources with external financings aslong as our long-term business needs require us to do so. There can be no assurance that external financing will be available to us on acceptable terms, or at all. Wemanage liquidity risk through the management of our capital structure.
	We may be required to provide funds to the LGJV to support operations at the CLG which, depending upon the circumstances, may be in the form of equity,
various forms of debt, joint venture funding or some combination thereof. There can be no assurance that additional funds will be available to us on acceptable terms,or at all. If we raise additional funds by issuing equity or convertible securities, substantial dilution to existing stockholders may result. Additionally, if we raiseadditional funds by incurring new debt obligations, the terms of the debt may require significant cash payment obligations, as well as covenants and specific financialratios that may restrict our ability to operate our business.

Dowa Debt Agreements
	Dowa Term Loan On July 11, 2017, we entered into the Term Loan with Dowa whereby the LGJV could borrow up to $210,000 thousand to finance the development of the
Los Gatos project, with a maturity date of December 29, 2027. Interest accrues daily at LIBOR plus 2.35% per annum, and the interest was added to the amountborrowed until production commenced at the Los Gatos project. The LGJV is obligated to pay 14 consecutive semi-annual payments totaling the aggregate principalamount and capitalized interest beginning June 30, 2021, with payments made two business days prior to the end of each June and December. We guarantee 70.0% ofthe Term Loan and are required to pay an arrangement fee on the borrowing, calculated as 2% per annum on 70% of the outstanding principal balance, payable insemi-annual installments. The Term Loan contains affirmative and negative covenants reasonably customary for similar facilities, with which the LGJV is incompliance in all material respects as of March 31, 2021.
	Los Gatos Working Capital Facility On May 30, 2019, we entered into the WCF with the LGJV and Dowa, under which Dowa agreed to provide a maximum of $60,000 thousand for the benefit
of the LGJV, with a maturity date of June 28, 2021. Interest payable under the WCF was LIBOR plus 3% per annum and was payable by the LGJV. We guaranteed70% of this facility and were required to pay an arrangement fee on the borrowing, calculated as 15.0% per annum on 70.0% of the average daily principal amountoutstanding during the relevant fiscal quarter. The full principal amount of the WCF was drawn down by the LGJV as of September 2019. On March 11, 2021, weand Dowa contributed $42,000 thousand and $18,000 thousand, respectively, in capital to the LGJV extinguishing the WCF.
		20


Cash Flows
	The following table presents our sources and uses of cash for the periods indicated:
			Three Months Ended
				March 31,
							2021	2020
									(in thousands)
		Net cash provided by (used by)
		Operating activities	$	(6,589) $		(4,721)
		Investing activities		(113,823)			(2,580)
		Financing activities		1,297	(229)
		Total change in cash	$	(119,115) $			(7,530)


	Cash used by operating activities was $6,589 thousand and $4,721 thousand for the three months ended March 31, 2021 and 2020, respectively. The $1,868
thousand increase was primarily due to the higher general and administrative costs, partially offset by lower arrangement fees associated with the extinguishment ofthe WCF.
	Cash used by investing activities was $113,823 thousand and $2,580 thousand for the three months ended March 31, 2021 and 2020, respectively. The
$111,243 thousand increase was primarily due to the $71,550 thousand acquisition of the 18.5% interest in the LGJV from Dowa and the $42,000 pro-rata capitalcontribution to the LGJV for the extinguishment of the WCF in March 2021.
	Cash provided by (used by) financing activities was $1,297 thousand and $(229) thousand for the three months ended March 31, 2021 and 2020,
respectively. The $1,526 thousand increase was primarily related to the $1,559 thousand in proceeds from the issuance of common stock from the exercise of stockoptions. Results of LGJV Operations
	The following table presents information relating to the LGJV’s financial condition as of March 31, 2021 and December 31, 2020, and the operating results
for the three months ended March 31, 2021 and 2020 in accordance with GAAP. Pursuant to the purchase of the 18.5% interest from Dowa on March 11, 2021, ourcurrent ownership of the LGJV is 70.0%.

							21



		LOS GATOS JOINT VENTURE
			COMBINED BALANCE SHEETS (UNAUDITED)
				(in thousands)

					March 31,	December 31,
						2021		2020
	ASSETS
	Current Assets
	Cash and cash equivalents				$	5,441 $	1,676
	Receivables					4,550	3,988
	Inventories								10,408	10,315
	VAT receivable								48,089	50,732
	Other current assets					3,481	2,891
										Total current assets		71,969	69,602
	Non-Current Assets
	Mine development, net								206,824	202,874
	Property, plant and equipment, net								194,239	196,942
										Total non-current assets		401,063	399,816
	Total Assets				$				473,032 $	469,418
	LIABILITIES AND OWNERS' CAPITAL
	Current Liabilities
	Accounts payable and accrued liabilities				$				31,973 $	35,767
	Related party payable					5,258	1,703
	Accrued interest					1,609		101
	Unearned revenue					-	3,276
	Equipment loans					7,017	7,084
	Dowa Term Loan								31,826	31,826
	Working Capital Facility					-	60,000
										Total current liabilities		77,683	139,757
	Non-Current Liabilities
	Dowa Term Loan								187,978	187,767
	Equipment loans					4,096	6,120
	Reclamation obligations								12,390	12,162
										Total non-current liabilities		204,464	206,049
	Owners' Capital
	Capital contributions								331,368	271,368
	Paid-in capital								16,786	16,366
	Accumulated deficit								(157,269)	(164,122)
										Total owners' capital		190,885	123,612
	Total Liabilities and Owners' Capital				$				473,032 $	469,418
	At March 31, 2021 and December 31, 2020, the LGJV had current assets of $71,969 thousand and $69,602 thousand, respectively. The increase in total
current assets was primarily due to an increase in cash and cash equivalents and trade receivables generated from operations, partially offset by a decrease in valueadded tax receivables primarily from a weakening Mexican Peso. At March 31, 2021 and December 31, 2020, the LGJV had noncurrent assets of $401,063 thousandand $399,816 thousand, respectively. The increase in noncurrent assets was due to sustaining capital expenditures, primarily for mine development at the CLG,partially offset by depletion and depreciation for the three months ended March 31, 2021.
											22



	At March 31, 2021 and December 31, 2020, the LGJV had current liabilities of $77,683 thousand and $139,757 thousand, respectively. The decrease in
current liabilities was primarily due to the extinguishment of the $60,000 thousand WCF on March 11, 2021. At March 31, 2021 and December 31, 2020, the LGJVhad noncurrent liabilities of $204,464 thousand and $206,049 thousand, respectively. The decrease in non-current liabilities was primarily due to scheduled paymentson equipment loans.

		LOS GATOS JOINT VENTURE
			COMBINED STATEMENTS OF INCOME (LOSS) [UNAUDITED]
				(in thousands)


						Three Months Ended
							March 31,
						2021			2020
	Sales				$	46,330 $			18,913

	Expenses
	Cost of sales					19,805			18,276
	Royalties						884	301
	Exploration						649	264
	General and administrative					3,246		2,745
	Depreciation, depletion and amortization					10,949			11,717
						35,533			33,303
	Other expense
	Interest expense					2,117		3,553
	Accretion expense						228	212
	Other income						(30)	(109)
	Foreign exchange loss					1,630		5,861
						3,945		9,517
	Net Income (Loss)				$	6,852 $			(23,907)
	For the three months ended March 31, 2021, the LGJV had net income of $6,852 thousand compared to a net loss of $23,907 thousand for the three months
ended March 31, 2020. The change in net income (loss) was primarily due to increased revenue as a result of higher metal prices and higher production rates, lowerinterest expense due to decreasing interest rates, and a lower foreign exchange loss due to the strengthening Mexican Peso.
	The following table presents summarized information relating to the LGJV’s cash flows for the three months ended March 31, 2021 and 2020.

										23



		LOS GATOS JOINT VENTURE
			COMBINED STATEMENT OF CASH FLOWS
				(in thousands)

						Three Months Ended
							March 31,
							2021			2020
					Net cash provided by (used by)
					Operating activities	$	23,335 $	7,950
					Investing activities		(17,596)		(8,170)
					Financing activities		(1,974)	662
					Total change in cash	$	3,765 $	442

										Cash provided by operating activities was $23,335 thousand and $7,950 thousand for the three months ended March 31, 2021 and 2020, respectively. The
$15,385 thousand increase in cash provided by operating activities was primarily due to the increase in revenue for the three months ended March 31, 2021 comparedto the prior year period, partially offset by increased payments to vendors.
										Cash used by investing activities was $17,596 thousand and $8,170 thousand for the three months ended March 31, 2021 and 2020, respectively. The $9,426
thousand increase in cash used was primarily due to higher sustaining capital expenditures for property, plant and equipment and mine development.
										Cash (used by) provided by financing activities was $(1,974) thousand and $662 thousand for the three months ended March 31, 2021 and 2020,
respectively. The $2,636 thousand change in financing cash flows was primarily due to the $2,574 thousand related party loan to the LGJV during the three monthsended March 31, 2020. Non-GAAP Financial Measures
										Non-GAAP financial measures are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and
should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicativeof operating profit or cash flow from operations as determined under GAAP. Cash Costs and All-In Sustaining Costs
										Cash costs and all-in sustaining costs (“AISC”) are non-GAAP measures. AISC was calculated based on guidance provided by the World Gold Council
(“WGC”). WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other miningcompanies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as definitional differences ofsustaining versus expansionary (i.e. non-sustaining) capital expenditures based upon each company’s internal policies. Current GAAP measures used in the miningindustry, such as cost of sales, do not capture all of the expenditures incurred to discover, develop and sustain production. Therefore, we believe that cash costs andAISC are non-GAAP measures that provide additional information to management, investors and analysts that aid in the understanding of the economics of theCompany’s operations and performance compared to other producers and provides investors visibility by better defining the total costs associated with production.

	24


	Cash costs include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and
other plant costs, treatment and refining costs, general and administrative costs, royalties and mining production taxes. AISC includes total production cash costsincurred at the LGJV’s mining operations plus sustaining capital expenditures. The Company believes this measure represents the total sustainable costs of producingsilver from current operations and provides additional information of the LGJV’s operational performance and ability to generate cash flows. As the measure seeks toreflect the full cost of silver production from current operations, new project and expansionary capital at current operations are not included. Certain cashexpenditures such as new project spending, tax payments, dividends, and financing costs are not included.

Reconciliation of expenses (GAAP) to cash costs (non-GAAP), co-product all-in sustaining costs before by-product credits (non-GAAP) and by-product all-insustaining costs after by-product credits (non-GAAP)
	The table below presents a reconciliation between the most comparable GAAP measure of expenses to the non-GAAP measures of (i) cash costs, (ii) co-
product all-in sustaining costs and (iii) by-product all-in sustaining costs for our operations.

			Three Months Ended
(in thousands, except unit costs)			March 31, 2021
Expenses		$			35,533
Depreciation, depletion and amortization					(10,949)
Exploration1				(649)
Treatment and refining costs2				6,635
Cash costs		$			30,570
Sustaining capital					12,216
All-in sustaining costs		$			42,786
By-product credits3					(16,879)
All-in sustaining costs, net of by-product credits		$			25,907
Cash costs, net of by-product credits		$			13,691

Payable ounces of silver equivalent4				2,010
Co-product cash cost per ounce of payable silver equivalent		$		15.21
Co-product all-in sustaining cost per ounce of payable silver equivalent		$		21.29

Payable ounces of silver				1,311
By-product cash cost per ounce of payable silver		$		10.44
By-product all-in sustaining cost per ounce of payable silver		$		19.76
1 Exploration costs are not related to current operations.2 Represent reductions on customer invoices and included in Sales of the LGJV combined statement of income (loss).3 By-product credits reflect realized metal prices of zinc, lead and gold for the applicable period.4 Silver equivalents utilize the average realized prices during the three months ended March 31, 2021 of $24.15/oz silver, $1.16/lb zinc, $0.93/lb lead and $1,812/ozgold. Off-balance sheet arrangements
	During the periods presented, we did not, and we currently do not, have any significant off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures orcapital resources that is material to our shareholders.

Critical Accounting Policies
	Please refer to Note 2 – Summary of Significant Accounting Policies in our consolidated financial statements included in this Report and the 2020 10-K for
discussion of our critical accounting policies and estimates. Jumpstart Our Business Startups Act of 2012
	The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) permits us, as an “emerging growth company,” to take advantage of an extended
transition period to comply with new or revised accounting standards applicable to public companies. We have elected to “opt out” of this provision and, as a result,we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies that are notemerging growth companies. The decision to opt out of the extended transition period under the JOBS Act is irrevocable. Item 3. Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk
	We engage in the production of silver and concentrates containing silver, lead, zinc, antimony and gold at the CLG and commenced production on
September 1, 2019. Accordingly, we expect the principal source of future revenue to be the sale of silver, and to a lesser extent, lead and zinc. A significant andsustained decrease in the price of these metals from current levels could have a material and negative impact on our business, financial condition and results ofoperations.

						25



Foreign Currency Risk
	Although most of our expenditures are in U.S. dollars, certain purchases of labor, operating supplies and capital assets are denominated in other currencies,
primarily the Mexican peso. As a result, currency exchange fluctuations may impact the costs of our operations.

Concentration of Risk
	We have placed nearly all of our cash investments with a single, high-quality financial institution. All cash equivalents are invested in high-quality, short-
term money market instruments, including certificates of deposit. At no time have we had funds invested in asset-backed commercial paper. We have not experiencedany losses on our cash investments.

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures
	We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated tomanagement, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Ourmanagement, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedurespursuant to Exchange Act Rule 13a-15(b). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controlsand procedures were effective as of March 31, 2021.

Changes in Internal Control over Financial Reporting
	There have not been any changes in the Company’s internal control over financial reporting that occurred during the first quarter of 2021 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Effectiveness of Controls
	Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent
all errors and fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter howwell designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control systemmust reflect resource constraints, which require management to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, ifany, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdownscan occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more peopleor by management’s override of the control.
	The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that
any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes inconditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system,misstatements due to error or fraud may occur and not be detected.

		26



	PART II – OTHER INFORMATION

Item 1. Legal Proceedings
			We are, from time to time, involved in legal proceedings of a nature considered normal to our business. We believe that none of the litigation in which we
are currently involved, or have been involved since the beginning of our most recently completed financial year, individually or in the aggregate, is material to ourconsolidated financial condition, cash flows or results of operations. See Note 9 – Commitments, Contingencies and Guarantees in our consolidated financialstatements included in this Report for additional information regarding our assessment of contingencies related to legal matters. Item 1A. Risk Factors
			Factors that could cause our actual results to differ materially from those in this Report include, but are not limited to, any of the risks described in the 2020
10-K. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors notcurrently known to us or that we currently deem immaterial may also adversely affect us. As of the date of this Report, there have been no material changes to therisk factors disclosed in the 2020 10-K. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Unregistered Sales of Equity Securities
			During the quarter ended March 31, 2021, the Company did not issue any shares of its common stock or other equity securities that were not registered
under the Securities Act of 1933, as amended.

Use of Proceeds
			On October 27, 2020, the SEC declared effective the Company’s registration statement on Form S-1 (No. 333-249224), as amended, filed in connection with
the Company’s IPO. There has been no material change in the planned use of proceeds from the IPO as described in the Company’s final prospectus, filed with theSEC on October 29, 2020 pursuant to Rule 424(b) under the Securities Act.
			As of March 31, 2021, the Company has used approximately $119,310 thousand of the net proceeds from the IPO, including (i) $71,550 thousand for the
repurchase of the 18.5% interest in the LGJV from Dowa; (ii) $42,000 thousand for the capital contribution to the LGJV to extinguish the Company’s 70% share ofthe WCF; and (iii) $5,760 thousand for working capital and general corporate purposes.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers
			During the quarter ended March 31, 2021, there were no purchases made by or on behalf of the Company or any affiliated purchaser of the Company’s
common stock. Item 3. Defaults Upon Senior Securities
			None.
Item 4. Mine Safety Disclosures
			Not applicable.
Item 5. Other Information
			None.
		27


Item 6. Exhibits
	3.1
		Amended and Restated Certificate of Incorporation of Gatos Silver, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Reporton Form 8-K filed October 30, 2020)
	3.2	Amended and Restated By-Laws of Gatos Silver, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filedOctober 30, 2020)
	10.1	Confirmation Agreement, dated March 9, 2021, among Minera Plata Real, S. de R.L. de C.V., Operaciones San Jose de Plata, S. de R.L. de C.V.,Servicios San Jose de Plata, S. de R.L. de C.V., Gatos Silver, Inc. and Dowa Metals and Mining Co., Ltd. (incorporated by reference to Exhibit 10.1of the Company’s Current Report on Form 8-K filed March 12, 2021)
	31.1*	Section 302 Certification of Chief Executive Officer
	31.2*	Section 302 Certification of Chief Financial Officer
	32.1** Section 1350 Certification101.INS*
		XBRL Instance Document
	101.SCH*	XBRL Taxonomy Extension Schema Document
	101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
*
	Filed herewith
**	Furnished herewith

			SIGNATURES

	Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

				GATOS SILVER, INC.
				(Registrant)

May 7, 2021				By:	/s/ Stephen Orr
						Stephen Orr
						Chief Executive Officer
May 7, 2021
				By:	/s/ Roger Johnson
						Roger Johnson
						Chief Financial Officer

				28


	EXHIBIT 31.1

		CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Stephen Orr, certify that: 1.
			I have reviewed this quarterly report on Form 10-Q of Gatos Silver, Inc.;
2.
			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
			The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:

			a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;

			b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

			c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

			d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and
5.
			The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

			a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and

			b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.
Date: May 7, 2021
					By:	/s/ Stephen Orr
						Stephen Orr
						Chief Executive Officer


	EXHIBIT 31.2

		CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Roger Johnson, certify that: 1.
			I have reviewed this quarterly report on Form 10-Q of Gatos Silver, Inc.;
2.
			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
			The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:

			a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;

			b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

			c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

			d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and
5.
			The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

			a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and

			b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.
Date: May 7, 2021
					By:	/s/ Roger Johnson
						Roger Johnson
						Chief Financial Officer


EXHIBIT 32.1

	CERTIFICATION PURSUANT TO
		18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
		SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

				In connection with the Quarterly Report on Form 10-Q of Gatos Silver, Inc. (the “Company”) for the quarterly period ended March 31, 2021, as filed with the
			Securities and Exchange Commission on the date hereof (the “Report”), Stephen Orr, as Chief Executive Officer of the Company, and Roger Johnson, as ChiefFinancial Officer of the Company, each hereby certifies, pursuant to and solely for the purpose of 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge and belief, that:
				(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
			/s/ Stephen Orr
			Stephen Orr
			Chief Executive Officer
			May 7, 2021
			/s/ Roger Johnson

			Roger Johnson
			Chief Financial Officer
			May 7, 2021