UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20222023
☐ | 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: 001-34857
Gold Resource Corporation
(Exact Name of Registrant as Specified in its charter)
Colorado | 84-1473173 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
7900 E. Union Ave, Suite 320, Denver, Colorado 80237
(Address of Principal Executive Offices) (Zip Code)
(303) 320-7708
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
a | ||
Title of each class | Trading Symbol | Name of each exchange where registered |
Common Stock | GORO | NYSE American |
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 the preceding 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 past 90 days.Yes⌧No◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-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⌧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 emerging growth company. See 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 or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act◻
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No⌧
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 88,398,10988,694,038 shares of common stock outstanding as of October 28, 2022.November 2, 2023.
GOLD RESOURCE CORPORATION
FORM 10-Q
Table of Contents
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Condensed Consolidated Interim Financial Statements and Notes | 3 | ||
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Gold Resource Corporation
1
THIRD QUARTER 20222023 HIGHLIGHTS
Highlights for the three months ended September 30, 20222023 are summarized below and discussed further in our under Item 2—Management’s Discussion and Analysis:Analysis of Financial Condition and Results of Operations:
Financial
Don David Gold Mine
● |
There were no lost time incidents during the |
quarter. The year-to-date |
● | In the third quarter of |
● |
Back Forty Project
● |
Financial
● | The Company has $6.7 million in cash as of September 30, 2023, and zero debt. |
● |
● | Working capital was $13.8 million as of |
● | Total cash cost after co-product credits for the quarter was $1,839 per gold equivalent (“AuEq”) ounce and |
1Further information regarding the Mexican Chamber of Mines benchmark can be found at https://www.camimex.org.mx/index.php/estadisticas/Seguridad
Gold Resource Corporation
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
GOLD RESOURCE CORPORATION
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(U.S. dollars in thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | |
| | As of | | As of | | As of | | As of | ||||
| | September 30, | | December 31, | | September 30, | | December 31, | ||||
| Note | 2022 | | 2021 | Note | 2023 | | 2022 | ||||
ASSETS | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 22,531 | | $ | 33,712 | | $ | 6,706 | | $ | 23,675 |
Accounts receivable, net | | | 3,741 | | | 8,672 | | | 4,714 | | | 5,085 |
Inventories, net | 4 | | 13,593 | | | 10,361 | 4 | | 10,442 | | | 13,500 |
Promissory note | 6 | | 3,575 | | | 3,885 | ||||||
Prepaid expenses and other current assets | 7 | | 4,457 | | | 2,285 | 6 | | 7,038 | | | 3,839 |
Zinc zero cost collar | 17 | | 432 | | | - | ||||||
Total current assets | | | 48,329 | | | 58,915 | | | 28,900 | | | 46,099 |
Property, plant and mine development, net | 8 | | 149,232 | | | 156,771 | ||||||
Property, plant, and mine development, net | 7 | | 144,194 | | | 152,563 | ||||||
Deferred tax assets, net | 5 | | 11,589 | | | 5,927 | ||||||
Other non-current assets | | | 1,977 | | | 76 | 8 | | 5,009 | | | 5,509 |
Total assets | | $ | 199,538 | | $ | 215,762 | | $ | 189,692 | | $ | 210,098 |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | |
Accounts payable | | $ | 11,267 | | $ | 13,308 | | $ | 10,240 | | $ | 13,329 |
Income taxes payable, net | | | 567 | | | 6,801 | ||||||
Mining royalty taxes payable, net | | | 3,156 | | | 2,975 | | | 1,015 | | | 3,945 |
Zinc zero cost collar | 17 | | - | | ��� | 1,844 | ||||||
Contingent consideration | 12 | | 2,209 | | | 2,211 | ||||||
Accrued expenses and other current liabilities | 9 | | 4,476 | | | 4,731 | 9 | | 1,637 | | | 5,197 |
Total current liabilities | | | 19,466 | | | 29,659 | | | 15,101 | | | 24,682 |
Reclamation and remediation liabilities | 11 | | 3,232 | | | 3,112 | 11 | | 12,349 | | | 10,366 |
Gold and silver stream agreements | 10 | | 43,201 | | | 42,560 | ||||||
Gold and silver stream agreements liability | 10 | | 44,703 | | | 43,466 | ||||||
Deferred tax liabilities, net | 5 | | 11,826 | | | 13,126 | 5 | | 14,269 | | | 15,151 |
Contingent consideration | 12 | | 4,036 | | | 4,603 | 12 | | 2,138 | | | 2,179 |
Other non-current liabilities | 9 | | 2,133 | | | 1,952 | 9 | | 1,618 | | | 2,490 |
Total liabilities | | | 83,894 | | | 95,012 | | | 90,178 | | | 98,334 |
Shareholders' equity: | | | | | | | | | | | | |
Common stock - $0.001 par value, 200,000,000 shares authorized: | | | | | | | | | | | | |
88,398,109 and 88,338,774 shares outstanding at September 30, 2022 and December 31, 2021, respectively | | | 89 | | | 89 | ||||||
88,628,365 and 88,398,109 shares outstanding at September 30, 2023 and December 31, 2022, respectively | | | 89 | | | 89 | ||||||
Additional paid-in capital | | | 110,736 | | | 110,153 | | | 111,734 | | | 111,024 |
Retained earnings | | | 11,874 | | | 17,563 | ||||||
(Accumulated deficit) retained earnings | | | (5,254) | | | 7,706 | ||||||
Treasury stock at cost, 336,398 shares | | | (5,884) | | | (5,884) | | | (5,884) | | | (5,884) |
Accumulated other comprehensive loss | | | (1,171) | | | (1,171) | | | (1,171) | | | (1,171) |
Total shareholders' equity | | | 115,644 | | | 120,750 | | | 99,514 | | | 111,764 |
Total liabilities and shareholders' equity | | $ | 199,538 | | $ | 215,762 | | $ | 189,692 | | $ | 210,098 |
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)
3
GOLD RESOURCE CORPORATION
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended | | For the three months ended | | For the nine months ended | ||||||||||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||||||||||||||
| Note | 2022 | | 2021 | | 2022 | | 2021 | Note | 2023 | | 2022 | | 2023 | | 2022 | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Sales, net | 3 | $ | 23,869 | | $ | 29,029 | | $ | 106,350 | | $ | 87,133 | 3 | $ | 20,552 | | $ | 23,869 | | $ | 76,587 | | $ | 106,350 |
Cost of sales: | | | | | | | | | | | | | | | | | | | | | | | | |
Production costs | | | 19,380 | | | 17,216 | | | 61,176 | | | 51,982 | | | 18,957 | | | 19,380 | | | 59,109 | | | 61,176 |
Depreciation and amortization | | | 6,609 | | | 3,521 | | | 19,829 | | | 11,299 | | | 5,790 | | | 6,609 | | | 19,518 | | | 19,829 |
Reclamation and remediation | | | 58 | | | 47 | | | 181 | | | 152 | | | 216 | | | 58 | | | 611 | | | 181 |
Total cost of sales | | | 26,047 | | | 20,784 | | | 81,186 | | | 63,433 | | | 24,963 | | | 26,047 | | | 79,238 | | | 81,186 |
Mine gross (loss) profit | | | (2,178) | | | 8,245 | | | 25,164 | | | 23,700 | | | (4,411) | | | (2,178) | | | (2,651) | | | 25,164 |
Costs and expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative expenses | | | 1,799 | | | 2,355 | | | 5,618 | | | 6,070 | | | 1,764 | | | 1,799 | | | 5,087 | | | 5,618 |
DDGM exploration expenses | | | 1,143 | | | 1,805 | | | 3,190 | | | 3,660 | ||||||||||||
Back Forty Project expenses | | | 3,830 | | | - | | | 6,925 | | | - | ||||||||||||
Restructuring expenses | | | - | | | - | | | - | | | 496 | ||||||||||||
Mexico exploration expenses | | | 1,540 | | | 1,143 | | | 3,974 | | | 3,190 | ||||||||||||
Michigan Back Forty Project expenses | | | 420 | | | 3,830 | | | 1,265 | | | 6,925 | ||||||||||||
Stock-based compensation | 16 | | 450 | | | 30 | | | 1,617 | | | 711 | 16 | | (102) | | | 450 | | | 502 | | | 1,617 |
Realized and unrealized (gain) loss on zinc zero cost collar | 17 | | (218) | | | 184 | | | 120 | | | 184 | 17 | | - | | | (218) | | | - | | | 120 |
Other expense (income), net | 18 | | 765 | | | (10) | | | 1,817 | | | 543 | ||||||||||||
Other expense, net | 18 | | 1,967 | | | 765 | | | 4,147 | | | 1,817 | ||||||||||||
Total costs and expenses | | | 7,769 | | | 4,364 | | | 19,287 | | | 11,664 | | | 5,589 | | | 7,769 | | | 14,975 | | | 19,287 |
(Loss) income before income taxes | | | (9,947) | | | 3,881 | | | 5,877 | | | 12,036 | | | (10,000) | | | (9,947) | | | (17,626) | | | 5,877 |
Provision for income taxes | 5 | | (217) | | | 2,352 | | | 8,915 | | | 6,697 | ||||||||||||
Net (loss) income | | $ | (9,730) | | $ | 1,529 | | $ | (3,038) | | $ | 5,339 | ||||||||||||
Net (loss) income per common share: | | | | | | | | | | | | | ||||||||||||
Basic and diluted net (loss) income per common share | 19 | $ | (0.11) | | $ | 0.02 | | $ | (0.03) | | $ | 0.07 | ||||||||||||
(Benefit) provision for income taxes | 5 | | (2,659) | | | (217) | | | (4,666) | | | 8,915 | ||||||||||||
Net loss | | $ | (7,341) | | $ | (9,730) | | $ | (12,960) | | $ | (3,038) | ||||||||||||
Net loss per common share: | | | | | | | | | | | | | ||||||||||||
Basic and diluted net loss per common share | 19 | $ | (0.08) | | $ | (0.11) | | $ | (0.15) | | $ | (0.03) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | 19 | | 88,391,220 | | | 74,552,545 | | | 88,358,188 | | | 74,481,281 | ||||||||||||
Diluted | 19 | | 88,391,220 | | | 74,898,520 | | | 88,358,188 | | | 74,842,095 | ||||||||||||
Basic and diluted | 19 | | 88,499,327 | | | 88,391,220 | | | 88,458,276 | | | 88,358,188 |
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)
4
GOLD RESOURCE CORPORATION
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended September 30, 2022 and 2021 | | For the three months ended September 30, 2023 and 2022 | ||||||||||||||||||||||||||||||||||||
| | Number of | | Par Value of | | Additional Paid- | | Retained | | Treasury | | Accumulated | | Total | ||||||||||||||||||||||||||
Balance, June 30, 2021 | | 74,868,322 | | $ | 75 | | $ | 85,269 | | $ | 14,974 | | $ | (5,884) | | $ | (1,171) | | $ | 93,263 | ||||||||||||||||||||
Stock-based compensation | | - | | | - | | | 160 | | | - | | | - | | | - | | | 160 | ||||||||||||||||||||
Common stock issued for vested restricted stock units | | 50,183 | | | - | | | - | | | - | | | - | | | - | | | - | ||||||||||||||||||||
Dividends declared | | - | | | - | | | - | | | (745) | | | - | | | - | | | (745) | ||||||||||||||||||||
Surrender of stock for taxes due on vesting | | (428) | | | - | | | - | | | - | | | - | | | - | | | - | ||||||||||||||||||||
Net income | | - | | | - | | | - | | | 1,529 | | | - | | | - | | | 1,529 | ||||||||||||||||||||
Balance, September 30, 2021 | | 74,918,077 | | $ | 75 | | $ | 85,429 | | $ | 15,758 | | $ | (5,884) | | $ | (1,171) | | $ | 94,207 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | Number of | | Par Value of | | Additional Paid- | | Retained Earnings (accumulated deficit) | | Treasury | | Accumulated | | Total | ||||||
Balance, June 30, 2022 | | 88,709,090 | | $ | 89 | | $ | 110,480 | | $ | 22,488 | | $ | (5,884) | | $ | (1,171) | | $ | 126,002 | | 88,709,090 | | $ | 89 | | $ | 110,480 | | $ | 22,488 | | $ | (5,884) | | $ | (1,171) | | $ | 126,002 |
Stock-based compensation | | - | | | - | | | 285 | | | - | | | - | | | - | | | 285 | | - | | | - | | | 285 | | | - | | | - | | | - | | | 285 |
Common stock issued for vested restricted stock units | | 41,666 | | | - | | | - | | | - | | | - | | | - | | | - | | 41,666 | | | - | | | - | | | - | | | - | | | - | | | - |
Dividends declared | | - | | | - | | | - | | | (884) | | | - | | | - | | | (884) | ||||||||||||||||||||
Dividends declared (1) | | - | | | - | | | - | | | (884) | | | - | | | - | | | (884) | ||||||||||||||||||||
Unclaimed shares related to the Aquila acquisition | | (16,249) | | | - | | | (29) | | | - | | | - | | | - | | | (29) | | (16,249) | | | - | | | (29) | | | - | | | - | | | - | | | (29) |
Net income | | - | | | - | | | - | | | (9,730) | | | - | | | - | | | (9,730) | ||||||||||||||||||||
Net loss | | - | | | - | | | - | | | (9,730) | | | - | | | - | | | (9,730) | ||||||||||||||||||||
Balance, September 30, 2022 | | 88,734,507 | | $ | 89 | | $ | 110,736 | | $ | 11,874 | | $ | (5,884) | | $ | (1,171) | | $ | 115,644 | | 88,734,507 | | $ | 89 | | $ | 110,736 | | $ | 11,874 | | $ | (5,884) | | $ | (1,171) | | $ | 115,644 |
| | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Balance, June 30, 2023 | | 88,804,940 | | $ | 89 | | $ | 111,580 | | $ | 2,087 | | $ | (5,884) | | $ | (1,171) | | $ | 106,701 | ||||||||||||||||||||
Stock-based compensation | | - | | | - | | | 105 | | | - | | | - | | | - | | | 105 | ||||||||||||||||||||
Common stock issued for vested restricted stock units | | 41,668 | | | - | | | - | | | - | | | - | | | - | | | - | ||||||||||||||||||||
Issuance of stock, net of issuance costs (2) | | 130,199 | | | - | | | 56 | | | - | | | - | | | - | | | 56 | ||||||||||||||||||||
Surrender of stock for taxes due on vesting | | (12,044) | | | - | | | (7) | | | - | | | - | | | - | | | (7) | ||||||||||||||||||||
Net loss | | - | | | - | | | - | | | (7,341) | | | - | | | - | | | (7,341) | ||||||||||||||||||||
Balance, September 30, 2023 | | 88,964,763 | | $ | 89 | | $ | 111,734 | | $ | (5,254) | | $ | (5,884) | | $ | (1,171) | | $ | 99,514 |
(1) | Cash dividends declared and paid per share was $0.01 for the three months ended September 30, 2022. On February 13, 2023, the Company announced the suspension of future quarterly dividends to protect our balance sheet and to focus capital resources on exploration and growth opportunities. |
(2) | An aggregate of 130,199 shares of the Company’s common stock were sold through the At The Market Agreement (“ATM”) during the three months ended September 30, 2023, for net proceeds to the Company, after deducting the Agent’s commissions and other expenses, of $0.1 million. There were no ATM sales during the three months ended September 30, 2022. Please also see Note—13 Shareholder’s Equity in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited) for additional information. |
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
Statements
GOLD RESOURCE CORPORATION
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the nine months ended September 30, 2022 and 2021 | | For the nine months ended September 30, 2023 and 2022 | ||||||||||||||||||||||||||||||||||||
| | Number of | | Par Value of | | Additional Paid- | | Retained | | Treasury | | Accumulated | | Total | | Number of | | Par Value of | | Additional Paid- | | Retained Earnings (accumulated deficit) | | Treasury | | Accumulated | | Total | ||||||||||||
Balance, December 31, 2020 | | 74,713,356 | | $ | 75 | | $ | 84,865 | | $ | 12,653 | | $ | (5,884) | | $ | (1,171) | | $ | 90,538 | ||||||||||||||||||||
Balance, December 31, 2021 | | 88,675,172 | | $ | 89 | | $ | 110,153 | | $ | 17,563 | | $ | (5,884) | | $ | (1,171) | | $ | 120,750 | ||||||||||||||||||||
Stock-based compensation | | - | | | - | | | 506 | | | - | | | - | | | - | | | 506 | | - | | | - | | | 952 | | | - | | | - | | | - | | | 952 |
Net stock options exercised | | 217,718 | | | - | | | 263 | | | - | | | - | | | - | | | 263 | | - | | | - | | | (331) | | | - | | | - | | | - | | | (331) |
Common stock issued for vested restricted stock units | | 52,797 | | | - | | | - | | | - | | | - | | | - | | | - | | 80,169 | | | - | | | - | | | - | | | - | | | - | | | - |
Dividends declared | | - | | | - | | | - | | | (2,234) | | | - | | | - | | | (2,234) | | - | | | - | | | - | | | (2,651) | | | - | | | - | | | (2,651) |
Surrender of stock for taxes due on vesting | | (65,794) | | | - | | | (205) | | | - | | | - | | | - | | | (205) | ||||||||||||||||||||
Net income | | - | | | - | | | - | | | 5,339 | | | - | | | - | | | 5,339 | ||||||||||||||||||||
Balance, September 30, 2021 | | 74,918,077 | | $ | 75 | | $ | 85,429 | | $ | 15,758 | | $ | (5,884) | | $ | (1,171) | | $ | 94,207 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Balance, December 31, 2021 | | 88,675,172 | | $ | 89 | | $ | 110,153 | | $ | 17,563 | | $ | (5,884) | | $ | (1,171) | | $ | 120,750 | ||||||||||||||||||||
Stock-based compensation | | - | | | - | | | 952 | | | - | | | - | | | - | | | 952 | ||||||||||||||||||||
Stock options exercised - settled in cash | | - | | | - | | | (331) | | | - | | | - | | | - | | | (331) | ||||||||||||||||||||
Common stock issued for vested restricted stock units | | 80,169 | | | - | | | - | | | - | | | - | | | - | | | - | ||||||||||||||||||||
Dividends declared | | - | | | - | | | - | | | (2,651) | | | - | | | - | | | (2,651) | ||||||||||||||||||||
Unclaimed shares related to the Aquila acquisition | | (16,249) | | | - | | | (29) | | | - | | | - | | | - | | | (29) | | (16,249) | | | - | | | (29) | | | - | | | - | | | - | | | (29) |
Surrender of stock for taxes due on vesting | | (4,585) | | | - | | | (9) | | | - | | | - | | | - | | | (9) | | (4,585) | | | - | | | (9) | | | - | | | - | | | - | | | (9) |
Net income | | - | | | - | | | - | | | (3,038) | | | - | | | - | | | (3,038) | ||||||||||||||||||||
Net loss | | - | | | - | | | - | | | (3,038) | | | - | | | - | | | (3,038) | ||||||||||||||||||||
Balance, September 30, 2022 | | 88,734,507 | | $ | 89 | | $ | 110,736 | | $ | 11,874 | | $ | (5,884) | | $ | (1,171) | | $ | 115,644 | | 88,734,507 | | $ | 89 | | $ | 110,736 | | $ | 11,874 | | $ | (5,884) | | $ | (1,171) | | $ | 115,644 |
| | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Balance, December 31, 2022 | | 88,734,507 | | $ | 89 | | $ | 111,024 | | $ | 7,706 | | $ | (5,884) | | $ | (1,171) | | $ | 111,764 | ||||||||||||||||||||
Stock-based compensation | | - | | | - | | | 672 | | | - | | | - | | | - | | | 672 | ||||||||||||||||||||
Common stock issued for vested restricted stock units | | 130,238 | | | - | | | - | | | - | | | - | | | - | | | - | ||||||||||||||||||||
Issuance of stock, net of issuance costs (2) | | 130,199 | | | - | | | 56 | | | - | | | - | | | - | | | 56 | ||||||||||||||||||||
Surrender of stock for taxes due on vesting | | (30,181) | | | - | | | (18) | | | - | | | - | | | - | | | (18) | ||||||||||||||||||||
Net loss | | - | | | - | | | - | | | (12,960) | | | - | | | - | | | (12,960) | ||||||||||||||||||||
Balance, September 30, 2023 | | 88,964,763 | | $ | 89 | | $ | 111,734 | | $ | (5,254) | | $ | (5,884) | | $ | (1,171) | | $ | 99,514 |
(1) | Cash dividends declared and paid per share were $0.03 for the nine months ended September 30, 2022. On February 13, 2023, the Company announced the suspension of future quarterly dividends to protect our balance sheet and to focus capital resources on exploration and growth opportunities. |
(2) | An aggregate of 130,199 shares of the Company’s common stock were sold through the ATM Agreement during the nine months ended September 30, 2023, for net proceeds to the Company, after deducting the Agent’s commissions and other expenses, of $0.1 million. There were no ATM sales during the nine months ended September 30, 2022. Please also see Note—13 Shareholder’s Equity in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited) for additional information. |
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
| | |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)
6
GOLD RESOURCE CORPORATION
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
(Unaudited)
| | | | | | | | | | | | |
| | For the nine months ended September 30, | | For the nine months ended September 30, | ||||||||
| Note | 2022 | | 2021 | Note | 2023 | | 2022 | ||||
Cash flows from operating activities: | | | | | | | | | | | | |
Net income | | $ | (3,038) | | $ | 5,339 | ||||||
Adjustments to reconcile net income to net cash from operating activities: | | | | | | | ||||||
Net loss | | $ | (12,960) | | $ | (3,038) | ||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | | | ||||||
Deferred income tax benefit | | | (1,101) | | | (74) | | | (5,520) | | | (1,101) |
Depreciation and amortization, including amortization in reclamation | | | 19,936 | | | 11,405 | ||||||
Depreciation and amortization, including accretion in reclamation | | | 19,586 | | | 19,936 | ||||||
Stock-based compensation | | | 1,617 | | | 711 | | | 502 | | | 1,617 |
Other operating adjustments | 21 | | (1,294) | | | 475 | 21 | | 1,210 | | | (1,294) |
Changes in operating assets and liabilities: | | | | | | | | | | | | |
Accounts receivable | | | 4,931 | | | (721) | | | 371 | | | 4,931 |
Inventories | | | (2,339) | | | (810) | | | 1,580 | | | (2,339) |
Prepaid expenses and other current assets | | | (1,404) | | | (1,038) | | | 300 | | | (1,404) |
Accounts payable and other accrued liabilities | | | (3,032) | | | 2,730 | | | (5,619) | | | (3,032) |
Mining royalty and income taxes payable, net | | | (6,362) | | | 3,855 | | | (6,452) | | | (6,362) |
Net cash provided by operating activities | | | 7,914 | | | 21,872 | ||||||
Net cash (used in) provided by operating activities | | | (7,002) | | | 7,914 | ||||||
| | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | |
Capital expenditures | | | (14,123) | | | (15,217) | | | (9,751) | | | (14,123) |
Equity investment | | | (1,743) | | | - | | | - | | | (1,743) |
Proceeds from the sale of gold and silver rounds | | | 533 | | | - | | | - | | | 533 |
Net cash used in investing activities | | | (15,333) | | | (15,217) | | | (9,751) | | | (15,333) |
| | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | |
Proceeds (for) from the exercise of stock options | | | (376) | | | 263 | ||||||
Cash settlement of options exercise | | | - | | | (376) | ||||||
Dividends paid | | | (2,651) | | | (2,481) | | | - | | | (2,651) |
Proceeds from the ATM sales | | | 56 | | | - | ||||||
Other financing activities | | | - | | | 3 | | | (23) | | | - |
Net cash used in financing activities | | | (3,027) | | | (2,215) | ||||||
Net cash provided by (used in) financing activities | | | 33 | | | (3,027) | ||||||
Effect of exchange rate changes on cash and cash equivalents | | | (735) | | | (301) | | | (249) | | | (735) |
| | | | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | | | (11,181) | | | 4,139 | ||||||
Net decrease in cash and cash equivalents | | | (16,969) | | | (11,181) | ||||||
Cash and cash equivalents at beginning of period | | | 33,712 | | | 25,405 | | | 23,675 | | | 33,712 |
Cash and cash equivalents at end of period | | $ | 22,531 | | $ | 29,544 | | $ | 6,706 | | $ | 22,531 |
| | | | | | | | | | | | |
| | | | | | | ||||||
Supplemental Cash Flow Information | | | | | | | | | | | | |
Interest expense paid | | $ | - | | $ | - | ||||||
Income and mining taxes paid | | $ | 16,411 | | $ | 2,772 | | $ | 7,064 | | $ | 16,411 |
Non-cash investing activities: | | | | | | | ||||||
Change in capital expenditures in accounts payable | | $ | (836) | | $ | (72) | ||||||
Change in estimate for asset retirement costs | | $ | - | | $ | 7 | ||||||
Non-cash investing or financing activities | | | | | | | ||||||
Balance of capital expenditures in accounts payable | | $ | 392 | | $ | 877 |
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)
7
GOLD RESOURCE CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTSSTATEMENTS
September 30, 20222023
(Unaudited)
1. Basis of Preparation of Financial Statements
The Condensed Consolidated Interim Financial Statements (“interim financial statements”) of Gold Resource Corporation and its subsidiaries (collectively, the “Company”) are unaudited and have been prepared in accordance with the rules of the Securities and Exchange Commission (“SEC”) for interim statements. Certain information and footnote disclosures required by United States Generally Accepted Accounting Principles (“U.S. GAAP”) have been condensed or omitted as permitted by such rules, althoughrules. However, the Company believes that the disclosures included are adequate to make the information presented not misleading. In the opinion of management, all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim financial statements have been included. The results reported in these interim financial statements aredo not necessarily indicative ofindicate the results that may be reported for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 20212022 included in the Company’s annual report on Form 10-K.10-K (the “2022 Annual Report”). The year-end balance sheet data was derived from the audited financial statements. Unless otherwise noted, there have been no material changes to the footnotes from those accompanying the audited consolidated financial statements contained in the 2022 Annual Report.
In connection with the preparation of the Company’s annual report on Form 10-K.financial statements for the period ended September 30, 2023, the Company’s management identified an immaterial error in prior period financial statements, whereby deferred tax liabilities and deferred tax assets attributable to different tax-paying components of the entity or to different tax jurisdictions were incorrectly offset. The Company has corrected the consolidated balance sheets as of December 31, 2022, March 31, 2023, and June 30, 2023, for this immaterial error. The effects of these revisions are as follows:
Revision to the Consolidated Balance Sheet as of December 31, 2022 (unaudited):
| | | | | | | | |
| As filed as of | | | | Revised as of | |||
| December 31, | | Adjustments | | December 31, | |||
| 2022 | | | | 2022 | |||
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Total current assets | $ | 46,099 | | $ | - | | $ | 46,099 |
Property, plant, and mine development, net | | 152,563 | | | - | | | 152,563 |
Deferred tax assets, net | | - | | | 5,927 | | | 5,927 |
Other non-current assets | | 5,509 | | | - | | | 5,509 |
Total assets | $ | 204,171 | | $ | 5,927 | | $ | 210,098 |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Total current liabilities | $ | 24,682 | | $ | - | | $ | 24,682 |
Reclamation and remediation liabilities | | 10,366 | | | - | | | 10,366 |
Gold and silver stream agreements liability | | 43,466 | | | - | | | 43,466 |
Deferred tax liabilities, net | | 9,224 | | | 5,927 | | | 15,151 |
Contingent consideration | | 2,179 | | | - | | | 2,179 |
Other non-current liabilities | | 2,490 | | | - | | | 2,490 |
Total liabilities | | 92,407 | | | 5,927 | | | 98,334 |
Shareholders' equity: | | | | | | | | |
Total shareholders' equity | | 111,764 | | | - | | | 111,764 |
Total liabilities and shareholders' equity | $ | 204,171 | | $ | 5,927 | | $ | 210,098 |
Certain items inAdditionally, the prior period’s consolidated financial statementsCompany revised Note 22 to reflect the impact of the above correction on the Company’s Oaxaca, Mexico segment.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and notes have been reclassified to conformNotes (Unaudited)
8
Revision to the current presentation. These reclassifications had no effect onCondensed Consolidated Balance Sheet (unaudited) as of March 31, 2023:
| | | | | | | | |
| As filed as of | | | | Revised as of | |||
| March 31, | | Adjustments | | March 31, | |||
| 2023 | | | | 2023 | |||
Deferred tax assets, net | $ | - | | $ | 7,300 | | $ | 7,300 |
Total assets | $ | 195,201 | | $ | 7,300 | | $ | 202,501 |
Deferred tax liabilities, net | $ | 7,719 | | $ | 7,300 | | $ | 15,019 |
Total liabilities | $ | 84,210 | | $ | 7,300 | | $ | 91,510 |
Total liabilities and shareholders' equity | $ | 195,201 | | $ | 7,300 | | $ | 202,501 |
Revision to the reported resultsCondensed Consolidated Balance Sheet (unaudited) as of operations.June 30, 2023:
| | | | | | | | |
| As filed as of | | | | Revised as of | |||
| June 30, | | Adjustments | | June 30, | |||
| 2023 | | | | 2023 | |||
Deferred tax assets, net | $ | - | | $ | 9,951 | | $ | 9,951 |
Total assets | $ | 191,072 | | $ | 9,951 | | $ | 201,023 |
Deferred tax liabilities, net | $ | 4,674 | | $ | 9,951 | | $ | 14,625 |
Total liabilities | $ | 84,371 | | $ | 9,951 | | $ | 94,322 |
Total liabilities and shareholders' equity | $ | 191,072 | | $ | 9,951 | | $ | 201,023 |
2. Recently Adopted Accounting Standards
Recent accounting pronouncements issued have been evaluated and do not presently impact our financial statements and supplemental data.statements.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
8
3. Revenue
The Company derives its revenue from the sale of doré and concentrates. The following table presents the Company’s net sales for each period presented, disaggregated by source:
| | | | | | | | | | | | | | | | | | | | | | | | | ||
| | For the three months ended September 30, | | For the nine months ended September 30, | | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||||||||||||
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | ||||||||||
| | (in thousands) | | (in thousands) | | (in thousands) | | (in thousands) | ||||||||||||||||||
Doré sales, net | | | | | | | | | | | | | | | | | | | | | | | | | ||
Gold | | $ | 1,517 | | $ | 1,634 | | $ | 5,245 | | $ | 6,816 | | $ | 417 | | $ | 1,517 | | $ | 2,685 | | $ | 5,245 | ||
Silver | | | 46 | | | 38 | | | 123 | | | 643 | | | 19 | | | 46 | | | 120 | | | 123 | ||
Less: Refining charges | | | (18) | | | (21) | | | (35) | | | (112) | | | (3) | | | (18) | | | (45) | | | (35) | ||
Total doré sales, net | | | 1,545 | | | 1,651 | | | 5,333 | | | 7,347 | | | 433 | | | 1,545 | | | 2,760 | | | 5,333 | ||
Concentrate sales | | | | | | | | | | | | | | | | | | | | | | | | | ||
Gold | | | 7,592 | | | 8,709 | | | 35,983 | | | 22,904 | | | 7,273 | | | 7,592 | | | 25,844 | | | 35,983 | ||
Silver | | | 4,266 | | | 6,179 | | | 15,497 | | | 19,443 | | | 4,900 | | | 4,266 | | | 18,082 | | | 15,497 | ||
Copper | | | 2,164 | | | 2,447 | | | 8,969 | | | 9,547 | | | 2,049 | | | 2,164 | | | 7,792 | | | 8,969 | ||
Lead | | | 2,075 | | | 3,641 | | | 9,670 | | | 8,641 | | | 2,060 | | | 2,075 | | | 7,807 | | | 9,670 | ||
Zinc | | | 10,003 | | | 9,187 | | | 40,672 | | | 27,193 | | | 6,283 | | | 10,003 | | | 23,762 | | | 40,672 | ||
Less: Treatment and refining charges | | | (2,842) | | | (2,307) | | | (8,710) | | | (8,098) | | | (2,785) | | | (2,842) | | | (9,255) | | | (8,710) | ||
Total concentrate sales, net | | | 23,258 | | | 27,856 | | | 102,081 | | | 79,630 | | | 19,780 | | | 23,258 | | | 74,032 | | | 102,081 | ||
Realized (loss) gain - embedded derivative, net (1) | | | (1,212) | | | (246) | | | 814 | | | 204 | | | (633) | | | (1,212) | | | 249 | | | 814 | ||
Unrealized gain (loss) - embedded derivative, net | | | 278 | | | (232) | | | (1,878) | | | (48) | | | 972 | | | 278 | | | (454) | | | (1,878) | ||
Total sales, net | | $ | 23,869 | | $ | 29,029 | | $ | 106,350 | | $ | 87,133 | | $ | 20,552 | | $ | 23,869 | | $ | 76,587 | | $ | 106,350 |
(1) | Copper, lead, and zinc are co-products. In the Realized (loss) gain - embedded derivative, net, there |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
9
respectively, in the Realized (loss) gain - embedded derivative, net, related to the co-products for the three and nine months ended September 30, |
4. Inventories, net
At September 30, 20222023 and December 31, 2021,2022, inventories, net, consisted of the following:
| | | | | | | | | | | | |
| | As of | | As of | | As of | | As of | ||||
| | September 30, | | December 31, | | September 30, | | December 31, | ||||
| | 2022 | | 2021 | | 2023 | | 2022 | ||||
| | (Unaudited) | | | | |||||||
| | (in thousands) | | (in thousands) | ||||||||
Stockpiles - underground mine | | $ | 655 | | $ | - | | $ | 69 | | $ | 597 |
Concentrates | | | 3,574 | | | 2,048 | | | 2,301 | | | 3,271 |
Doré, net | | | 641 | | | 452 | | | 366 | | | 653 |
Subtotal - product inventories | | | 4,870 | | | 2,500 | | | 2,736 | | | 4,521 |
Materials and supplies (1) | | | 8,723 | | | 7,861 | | | 7,706 | | | 8,979 |
Total | | $ | 13,593 | | $ | 10,361 | | $ | 10,442 | | $ | 13,500 |
(1) | Net of reserve for obsolescence of |
5. Income Taxes
The Company recorded an income tax benefit of $2.7 million and $4.7 million, respectively, for the three and nine months ended September 30, 2023. For the three and nine months ended September 30, 2022, the Company recorded an income tax benefit of $0.2 million and income tax expense $8.9 million, respectively, for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, the Company recorded an income tax expense of $2.4 million and $6.7$8.9 million, respectively. In accordance with applicable
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
9
accounting rules, the interim provision for taxes is calculated using the estimated consolidated annual effective tax rate. The consolidated effective tax rate is a function of the combined effective tax rates for the jurisdictions in which the Company operates. Variations in the relative proportions of jurisdictional income could result in fluctuations to the Company’s consolidated effective tax rate. At the federal level, the Company’s income in the U.S. is taxed at 21%, and a 5% withholding tax applies to dividends received from Mexico. TheIncome in Mexico income is taxed at 37.5% (30% income tax and 7.5% mining tax), and CanadaCanada’s income is taxed at 26.5%, which results in a consolidated effective tax rate above statutory U.S. Federal rates. The U.S. and Canadian jurisdictions do not currently generate taxable income.
Please also see Note—23 Subsequent Events in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited).
Mexico Mining Taxation
Mining entities in Mexico are subject to two mining duties, in addition to the 30% Mexico corporate income tax. The first istax: (i) a “special” mining duty of 7.5% of taxable income as defined under Mexican tax law (also referred to as “mining royalty tax”) on extraction activities performed by concession holders.holders, and (ii) the “extraordinary” mining duty of 0.5% on gross revenue from the sale of gold, silver, and platinum. The mining royalty tax is generally applicableapplies to earnings before income tax, depreciation, depletion, amortization, and interest,interest. In calculating the mining royalty tax, there are no Gold Resource Corporation deductions related to depreciable costs from operational fixed assets. However, prospecting and it is considered an income tax for purposes of financial reporting. The second isexploration expenses are amortized using a 0.5% mining duty over sales of gold and silver, but this duty is not considered an income tax for financial reporting purposes and reported as production cost.10% rate in a 10-year straight line. Both duties are tax deductible for Mexico income tax purposes.
On January 1, 2022, the 2022 Tax Reform became As a result, our effective in Mexico, which included several amendmentstax rate applicable to the Income Tax Law relevant to tax deductions. For 2022, a depreciation rate of 5% per year was established for construction of facilities, additions, repairs, improvements, adaptations, as well as any other construction performed in a mining lot, in accordance with Article 12 of theCompany’s Mexican Mining Law.
operations is higher than Mexico’s statutory rate.
The Company periodically transfers funds from its Mexican wholly-ownedwholly owned subsidiary to the U.S. in the form ofas dividends, which are subject to a 10% Mexico withholding tax, unless otherwise provided per a tax treaty. The current U.S.-Mexico tax treaty limits the dividend withholding tax between these countries to 5%, as long as certainspecific requirements are met. Based on the Company’s understanding that it meets these requirements, the Company pays a 5% withholding tax on dividends paid from Mexico. The estimated annual effective tax rate reflects the impact of the planned annual dividends for 2022 is reflected in the estimated annual effective tax rate.2023. As of September 30, 2022,2023, the Company recorded $0.8a $0.1 million deferred tax liability related to the 5% withholding tax on funds available for transfer to the U.S. as dividends in the future andare no longer deemed to be permanently reinvested in Mexico.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
10
If these funds are distributed to the U.S. from Mexico in the future, at that time, they will be subject to the 5% dividend withholding tax payment upon distribution.
AsIn October 2023, the Company received a notification from the Mexican Tax Administration Services (“SAT”) with a sanction of 331 million pesos (approximately $18 million) as the result of a 2015 tax audit that began in 2021. The 2015 tax audit performed by SAT encompassed various tax aspects, including but not limited to intercompany transactions, mining royalty tax, and extraordinary mining tax. Management is in process of assessing this tax notification to better evaluate possible outcomes. Management believes the 2015 tax return was prepared correctly and that as of September 30, 2022,2023, the Company believes that it has no liability for uncertain tax positions.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
10
6. Promissory Note
A promissory note was acquired in the Aquila Resources, Inc. (“Aquila”) acquisition. In October 2021, Aquila sold its Wisconsin assets to Green Light Metals in return for a C$4.9 million ($3.9 million) promissory note. In June, an amended agreement was executed. Under the amended promissory note, Green Light Metals is to deliver C$4.9 million in Green Light Metal common shares once Green Light Metals goes public, or private shares of Green Light Metals at the maturity date of December 31, 2022, whichever occurs first. The shares are expected to represent approximately 20% to 28% of the total outstanding shares of Green Light Metals. Due to the short maturity of the promissory note, the carrying amount approximates the fair value, and likewise, no interest and collateral is required. Until maturity, the Company will record unrealized foreign currency gain or loss on the promissory note.
7.6. Prepaid Expenses and Other Current Assets
At September 30, 20222023 and December 31, 2021,2022, prepaid expenses and other current assets consisted of the following:
| | | | | | | | | | | | |
| | As of | | As of | | As of | | As of | ||||
| | September 30, | | December 31, | | September 30, | | December 31, | ||||
| | 2022 | | 2021 | | 2023 | | 2022 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Advances to suppliers | | $ | 1,019 | | $ | 188 | | $ | 492 | | $ | 867 |
Prepaid insurance | | | 2,019 | | | 1,222 | | | 1,764 | | | 1,298 |
Prepaid income tax | | | 3,693 | | | 432 | ||||||
Other current assets | | | 1,419 | | | 875 | | | 1,089 | | | 1,242 |
Total | | $ | 4,457 | | $ | 2,285 | | $ | 7,038 | | $ | 3,839 |
In MexicoPrepaid income tax
Mexican tax statutes specify that the current year tax prepayments be calculated based on a coefficient for prior year earnings, regardless of current year results. However, starting in the third quarter, these same statutes allow companies to request a reduction of the coefficient, which adjusts for losses experienced in the current year. DDGM applied for this reduction, and when approved, the Company expects that no more tax prepayments will be required this year, and a tax refund of approximately $3 Million is expected next year after filing the 2023 tax return.
Other current assets
A value added (“IVA”) tax in Mexico is assessed on the sales of products and purchases of materials and services. Businesses owe IVA taxes as the business sells a product and collects IVA taxes from its customers. Likewise, businesses are generally entitled to recover the taxes they have paid related to purchases of materials and services, either as a refund or credit to IVA tax payable. Amounts recorded as IVA taxes in the consolidated financial statements represent the net estimated IVA tax payable or receivable, since there is a legal right of offset of IVA taxes. As of September 30, 2022,2023, this resulted in a smallan asset balance ($0.6 million), which isof $0.8 million, included in Other current assets above.assets.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
11
8.7. Property, Plant, and Mine Development, net
At September 30, 20222023 and December 31, 2021, property, plant2022, Property, Plant, and mine development,Mine Development, net consisted of the following:
| | | | | | |
| | As of | | As of | ||
| | September 30, | | December 31, | ||
| | 2022 | | 2021 | ||
| | (in thousands) | ||||
Asset retirement costs | | $ | 1,065 | | $ | 1,065 |
Construction-in-progress (1) | | | 300 | | | 15,854 |
Furniture and office equipment | | | 1,719 | | | 1,685 |
Land | | | 9,033 | | | 9,230 |
Mineral interest | | | 79,543 | | | 79,964 |
Light vehicles and other mobile equipment | | | 2,328 | | | 2,224 |
Machinery and equipment | | | 40,119 | | | 33,213 |
Mill facilities and infrastructure | | | 35,917 | | | 24,973 |
Mine Development | | | 102,457 | | | 92,138 |
Software and licenses | | | 1,552 | | | 1,592 |
Subtotal | | | 274,033 | | | 261,938 |
Accumulated depreciation and amortization | | | (124,801) | | | (105,167) |
Total | | $ | 149,232 | | $ | 156,771 |
| | | | | | |
| | As of | | As of | ||
| | September 30, | | December 31, | ||
| | 2023 | | 2022 | ||
| | (in thousands) | ||||
Asset retirement costs | | $ | 7,449 | | $ | 7,449 |
Construction-in-progress | | | 440 | | | 351 |
Furniture and office equipment | | | 1,782 | | | 1,732 |
Land | | | 9,033 | | | 9,033 |
Mineral interest | | | 79,543 | | | 79,543 |
Light vehicles and other mobile equipment | | | 2,126 | | | 2,327 |
Machinery and equipment | | | 42,770 | | | 41,343 |
Mill facilities and infrastructure | | | 36,394 | | | 35,917 |
Mine Development | | | 113,519 | | | 105,263 |
Software and licenses | | | 1,554 | | | 1,552 |
Subtotal (1) | | | 294,610 | | | 284,510 |
Accumulated depreciation and amortization | | | (150,416) | | | (131,947) |
Total | | $ | 144,194 | | $ | 152,563 |
(1) | Includes accrued capital expenditures of |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
11
The Company recorded depreciation and amortization expense of $6.6$5.8 million and $19.8$19.5 million, respectively, for the three and nine months ended September 30, 20222023, as compared to $3.5$6.6 million and $11.3$19.8 million, respectively, for the same periods ended September 30, 2021.2022.
8. Other Non-current Assets
At September 30, 2023 and December 31, 2022, other non-current assets consisted of the following:
| | | | | | |
| | As of | | As of | ||
| | September 30, | | December 31, | ||
| | 2023 | | 2022 | ||
| | (in thousands) | ||||
Investment in Maritime | | $ | 1,211 | | $ | 1,559 |
Investment in Green Light Metals | | | 3,608 | | | 3,611 |
Other non-current assets | | | 190 | | | 339 |
Total | | $ | 5,009 | | $ | 5,509 |
Investment in Maritime
On September 22, 2022, the Company invested Canadian Dollar (“C$”) 2.4 million (or $1.7 million) in the common shares of Maritime Resources Corp. The 47 million shares purchased represented 9.9% of the issued and outstanding shares of Maritime. As of September 30, 2023 and December 31, 2022, the fair value of the investment was $1.2 and $1.6 million, respectively.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
12
Investment in Green Light Metals
A promissory note was acquired in the Aquila Resources Inc. (“Aquila”) acquisition on December 10, 2021. In October 2021, Aquila sold its Wisconsin assets to Green Light Metals in return for a C$4.9 million ($3.9 million) promissory note. In December 2022, an amended agreement was executed (1) amending the maturity date to December 28, 2022, (2) clarifying the definition of “qualified financing,” which set the value to C$0.40 per share for the common shares that were to be issued at maturity; and (3) adding a top-up provision that would result in additional common shares being issued to the Company if any Green Light Metals financing was raised at less than C$0.40 per share before March 31, 2023, essentially preventing dilution and ensuring that the total value of the Green Light Metals shares held by the Company at March 31, 2023 remains at C$4.9 million.
Upon maturity on December 28, 2022, the Company received 12,250,000 private shares of Green Light Metals, which settled the promissory note. The shares received represented 28.5% ownership in Green Light Metals at the time. After this settlement and before March 31, 2023, additional financing was raised by Green Light Metals at C$0.40 per share. Therefore, the top-up provision was not triggered, and no additional shares were received. The Company’s ownership in Green Light Metals as of September 30, 2023 is approximately 28.0%. As of both September 30, 2023 and December 31, 2022, the fair value of this equity investment was $3.6 million.
9. Accrued Expenses and Other Liabilities
At September 30, 20222023 and December 31, 2021,2022, accrued expenses and other liabilities consisted of the following:
| | | | | | | | | | | | |
| | As of | | As of | | As of | | As of | ||||
| | September 30, | | December 31, | | September 30, | | December 31, | ||||
| | 2022 | | 2021 | | 2023 | | 2022 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Accrued royalty payments | | $ | 1,769 | | $ | 1,743 | | $ | 771 | | $ | 1,787 |
Share-based compensation liability - current | | | 79 | | | - | ||||||
Employee profit sharing obligation | | | 2,028 | | | 1,888 | | | 64 | | | 2,206 |
Other payables | | | 679 | | | 1,100 | | | 723 | | | 1,204 |
Total accrued expenses and other current liabilities | | $ | 4,476 | | $ | 4,731 | | $ | 1,637 | | $ | 5,197 |
| | | | | | | | | | | | |
Accrued non-current labor obligation | | $ | 1,166 | | $ | 920 | | $ | 1,221 | | $ | 1,050 |
Share-based compensation liability | | | 835 | | | 206 | | | 336 | | | 884 |
Other long-term liabilities | | | 132 | | | 826 | | | 61 | | | 556 |
Total other non-current liabilities | | $ | 2,133 | | $ | 1,952 | | $ | 1,618 | | $ | 2,490 |
10. Gold and Silver Stream Agreements
The following table presents the Company’s liabilities related to the Gold and Silver Stream Agreements as of September 30, 20222023 and December 31, 2021:2022:
| | | | | | | | | | | | |
| | As of | | As of | | As of | | As of | ||||
| | September 30, | | December 31, | | September 30, | | December 31, | ||||
| | 2022 | | 2021 | | 2023 | | 2022 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Liability related to the Gold Stream Agreement | | $ | 20,506 | | $ | 20,364 | | $ | 20,951 | | $ | 20,881 |
Liability related to the Silver Stream Agreement | | | 22,695 | | | 22,196 | | | 23,752 | | | 22,585 |
Total liability | | $ | 43,201 | | $ | 42,560 | | $ | 44,703 | | $ | 43,466 |
Periodic interest expense will be incurred based on an implied interest rate. The implied interest rate is determined based on the timing and probability of future production and an 8%a 6% discount rate. Interest expense is recorded to the Condensed Consolidated Interim Statements of Operations, and the gold and silver stream agreement liability onis recorded in the Condensed Consolidated Interim Balance Sheet. These liabilities approximate fair value.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
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Gold Streaming Agreement
In November 2017, Aquila entered into a stream agreement with Osisko Bermuda Limited (“OBL”), a wholly-ownedwholly owned subsidiary of Osisko Gold Royalties Ltd (TSX & NYSE: OR), pursuant to which OBL agreed to commit approximately $55 million to Aquila through a gold stream purchase agreement. In June 2020, Aquila amended its agreement with Osisko, reducing the total committed amount to $50 million, as well asand adjusting certain milestone dates under the gold stream to align with the current project development timeline. Aquila had received a total of $20 million of the committed funds at the time of the Gold Resource Corporation acquisition. RemainingThe remaining deposits from OBL are $5 million upon receipt of permits required for the developmentto develop and operation ofoperate the Back Forty Project and $25 million upon the first drawdown of an appropriate project debt finance facility. OBL has been provided a general security agreement over the Back Forty Project, which consists of the subsidiaries of Gold Resource Acquisition Sub,Sub. Inc., a 100% owned subsidiary of Gold Resource Corporation. The initial term of the agreement is for 40 years, automatically renewable for successive ten-year periods. The agreement is subject to certain operating and financial covenants, which are in good standing as of September 30, 2022.2023.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
12
The $20 million received from OBL through September 30, 20222023 is shown as a long-term liability on the Condensed Consolidated Interim Balance Sheet, along with an implied interest. The implied interest rate is applied on the OBL advance payments and calculated on the total expected life-of-mine production to be deliverable using the gold and silver metal prices as of September 30, 2023 and a discount rate of 6% (as supported in the Back Forty Project Preliminary Economic Assessment) at the five-year average street consensus metal prices (based on the median) evaluated as of December 31, 2021 and is discounted at 8.0%S-K 1300 Technical Report Summary). As the remaining $30 million deposit is subject to the completion of certainspecific milestones and the satisfaction of certain other conditions, this amount is not reflected on the Condensed Consolidated Interim Balance Sheet.
Per the terms of the gold stream agreement, OBL will purchase 18.5% of the refined gold from Back Forty (the “Threshold Stream Percentage”) until the Company has delivered 105,000 ounces of gold (the “Production Threshold”). Upon satisfaction of the Production Threshold, the Threshold Stream Percentage will be reduced to 9.25% of the refined gold (the “Tail Stream”). In exchange for the refined gold delivered under the Stream Agreement, OBL will pay the Company ongoing payments equal to 30% of the spot price of gold on the day of delivery, subject to a maximum payment of $600 per ounce. Where the market price of gold is greater than the price paid, the difference realized from the sale of the gold will be applied againstas a repayment of the deposit received from Osisko.
(See Note 12—Commitments and Contingencies in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited) for additional information.)
Silver Stream Agreement
Through a series of contracts, Aquila executed a silver stream agreement with OBL to purchase 85% of the silver produced and sold at the Back Forty Project. A total of $17.2 million has been advanced under the agreement as of September 30, 2022.2023. There are no future deposits remainingto receive under the agreement. The initial term of the agreement is for 40 years, automatically renewable for successive ten-year periods. The agreement is subject to certain operating and financial covenants, which are in good standing as of September 30, 2022.
2023.
Per the terms of the silver stream agreement, OBL will purchase 85% of the silver produced from the Back Forty Project at a fixed price of $4 per ounce of silver. Where the market price of silver is greater than $4 per ounce, the difference realized from the sale of the silver will be applied againstas a repayment of the deposit received from Osisko.
The $17.2 million received from OBL through September 30, 20222023 is shown as a long-term liability on the Condensed Consolidated Interim Balance Sheet along with an implied interest. (See Note 12—Commitments and Contingencies in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited) for additional information.)
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
14
11. Reclamation and Remediation
The following table presents the changes in reclamation and remediation obligations for the nine months ended September 30, 20222023 and the year ended December 31, 2021:2022:
| | | | | | | | | | | | |
| | 2022 | | 2021 | | 2023 | | 2022 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Reclamation liabilities – balance at beginning of period | | $ | 1,833 | | $ | 1,890 | | $ | 1,949 | | $ | 1,833 |
Foreign currency exchange loss (gain) | | | 25 | | | (57) | ||||||
Foreign currency exchange loss | | | 192 | | | 116 | ||||||
Reclamation liabilities – balance at end of period | | | 1,858 | | | 1,833 | | | 2,141 | | | 1,949 |
| | | | | | | | | | | | |
Asset retirement obligation – balance at beginning of period | | | 1,279 | | | 1,208 | | | 8,417 | | | 1,279 |
Changes in estimate (1) | | | - | | | 6,384 | ||||||
Liability for Aquila drillhole capping (2) | | | 404 | | | - | ||||||
Accretion | | | 77 | | | 109 | | | 547 | | | 668 |
Foreign currency exchange loss (gain) | | | 18 | | | (38) | ||||||
Foreign currency exchange loss | | | 840 | | | 86 | ||||||
Asset retirement obligation – balance at end of period | | | 1,374 | | | 1,279 | | | 10,208 | | | 8,417 |
Total period end balance | | $ | 3,232 | | $ | 3,112 | | $ | 12,349 | | $ | 10,366 |
(1) | In 2022, the Company updated its closure plan study, which resulted in a $6.4 million increase in the estimated liability and asset retirement costs. This increase is a result of formalizing a tailings storage facility closure plan, the addition of the dry stack facility and the filtration plant, and the increase of inflation in Mexico. |
(2) | As of December 31, 2022, the Company reported the liability to remediate exploration drill holes at the Back Forty Project in Michigan, USA in other non-current liabilities. As of March 31, 2023, this liability was reclassified to non-current reclamation and remediation liabilities. Upon completion of the optimization work and the related mine closure plan, an asset for asset retirement obligation and corresponding liability for reclamation and remediation will be recorded. |
The Company’s undiscounted reclamation liabilities of $1.9$2.1 million and $1.8$1.9 million as of September 30, 20222023 and December 31, 2021,2022, respectively, are related to the Don David Gold Mine in Mexico. These represent reclamation liabilities that were expensed through 2013 before proven and probable reserves were established and the Company was considered to be a development stage entity; therefore, most of the costs, including asset retirement costs, were not allowed to be capitalized as part of our Property, Plant, &and Mine Development.
The Company’s asset retirement obligations reflect the additions to the asset for reclamation and remediation costs in Property, Plant, &and Mine Development, post 2013 development stage status, which are discounted using a credit adjusted
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
13
risk-free rate of 8%. As of September 30, 20222023 and December 31, 2021,2022, the Company’s asset retirement obligation was $10.2 million and $8.4 million, respectively, primarily related to the Don David Gold Mine in Mexico was $1.4 millionMexico.
For the Back Forty Project in the third quarter of 2023, the Company capped 26 drillholes as required by state law. The remaining 50 study holes are not expected to be capped in the next 12 months and $1.3 million, respectively.are shown as long-term liability.
12. Commitments and Contingencies
Commitments
As of September 30, 20222023 and December 31, 2021,2022, the Company has equipment purchase commitments of approximately $1.2$1.7 million and $0.4$1.2 million, respectively.
Contingent Consideration
With the Aquila acquisition, the Company assumed a contingent consideration related to the December 30, 2013, Aquila acquisition of 100% of the shares of HudBay Michigan Inc. (“HMI”), a subsidiary of HudBay Minerals Inc. (“HudBay”), effectively giving Aquila 100% ownership in the Back Forty Project (the “HMI Acquisition”). Pursuant to the HMI Acquisition, HudBay’s 51% interest in the Back Forty Project was acquired in consideration for the issuance of common shares of Aquila, future milestone payments tied to the development of the Back Forty Project, and a 1% net
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
15
smelter return royalty on production from certain land parcels in the project. The issuance of shares and 1% net smelter obligations were settled before the Company acquired Aquila.
The contingent consideration is composed of the following in Canadian dollars:
The value of future installments is based on C$9 million tied to the development of the Back Forty project as follows:
a. | C$3 million payable on completion of any form of financing for purposes including the commencement of construction of the Back |
b. | C$2 million payable in cash 90 days after the commencement of commercial production; |
c. | C$2 million payable in cash 270 days after the commencement of commercial production; and |
d. | C$2 million payable in cash 450 days after the commencement of commercial production. |
The value of the contingent consideration as of September 30, 20222023 was $4.0 million.$4.3 million, including $2.2 million in current liabilities and $2.1 million in non-current liabilities. As the Company has the option to pay the first milestone payment of C$3 million ($2.2 million) in 2023 in order to prevent the repurchase of 51% ownership by HMI, this portion is presented as a current liability, with $2.1 million remaining in long-term liability. The contingent consideration will beis adjusted for the foreign currency translation, time value of money and the likelihood of the milestone payments. Any future changes in the value of the contingent consideration will be recognized in the Condensed Consolidated Interim Statements of Operations.
Other Contingencies
The Company has certain other contingencies resulting from litigation, claims, and other commitments that areand is subject to a variety ofvarious environmental and safety laws and regulations incidents relatedincident to the ordinary course of business. The Company currently has no basis to conclude that any or all of such contingencies will materially affect its financial position, results of operations, or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in current accruals recorded by the Company, and thereCompany. There can be no assurance that theirthe ultimate disposition of contingencies will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
With the successful acquisition of Aquila Resources Inc. on December 10, 2021, the Company assumed substantial liabilities that relate to the gold and silver stream agreements with Osisko Bermuda Limited (see Note 10 - Gold and Silver Stream Agreements).Limited. Under the agreements, Osisko deposited a total of $37.2 million upfront in exchange for a portion of the future gold and silver production from the Back Forty Project. The stream agreements contain customary provisions regarding default and security. In the event that our subsidiary defaults under the stream agreements, including by failing to achieve commercial production by an agreed uponat a future date, it may be required to repay the deposit plus accumulated interest
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
14
at a rate agreed with Osisko. If it fails to do so, Osisko may be entitled to enforce theirits remedies as a secured party and take possession of the assets that comprise the Back Forty Project.
13. Shareholders’ Equity
The Company’s At The Market Offering Agreement with H.C. Wainwright & Co., LLC (the “Agent”), which was entered into in November 2019 (the “ATM Agreement”), pursuant to which the Agent agreed to act as the Company’s sales agent with respect to the offer and sale from time to time of the Company’s common stock having an aggregate gross sales price of up to $75.0 million, was renewed in June 2023. An aggregate of 130,199 shares of the Company’s common stock were sold through the ATM Agreement during both the three and nine months ended September 30, 2023, for net proceeds to the Company, after deducting the Agent’s commissions and other expenses, of $0.1 million. There were no ATM sales during the three and nine months ended September 30, 2022.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
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No dividends were declared and paid in 2023. During the three and nine months ended September 30, 2022, the Company declared and paid dividends of $0.01 per common share and $0.03 per common share for an aggregate total of $0.9 million and $2.7 million, respectively. During the three and nine months ended September 30, 2021, the Company declared dividends of $0.01 per common share and $0.03 per common share, respectively, and paid an aggregate total of $0.7 million and $2.5 million, respectively. As of September 30, 2022, there are 88,398,109 issued and outstanding shares of common stock.
14. Derivatives
Embedded Derivatives
Concentrate Sales
Concentrate sales contracts contain embedded derivatives due to the provisional pricing terms for unsettled shipments. At the end of each reporting period, the Company records an adjustment to accounts receivable and revenue to reflect the mark-to-market adjustments for outstanding provisional invoices based on forward metal prices. Please see Note—20 Fair Value Measurement in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited)for additional information on the realized and unrealized gain (loss) recorded to adjust accounts receivable and revenue.
The following table summarizes the Company’s unsettled sales contracts at September 30, 20222023 with the quantities of metals under contract subject to final pricing occurringexpected to occur through November 2022:December 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | | Total | | Gold | | Silver | | Copper | | Lead | | Zinc | | | Total | ||||||||||
| | (ounces) | | (ounces) | | (tonnes) | | (tonnes) | | (tonnes) | | | | | (ounces) | | (ounces) | | (tonnes) | | (tonnes) | | (tonnes) | | | | ||||||||||
Under contract | | | 4,784 | | | 253,342 | | | 282 | | | 1,647 | | | 3,373 | | | | | | 3,361 | | | 274,538 | | | 165 | | | 2,278 | | | 2,106 | | | |
Average forward price (per ounce or tonne) | | $ | 1,741 | | $ | 19.52 | | $ | 7,738 | | $ | 2,011 | | $ | 3,474 | | | | | $ | 1,934 | | | 23.63 | | | 8,256 | | | 2,138 | | | 2,445 | | | |
Unsettled sales contracts value (in thousands) | | $ | 8,329 | | $ | 4,945 | | $ | 2,182 | | $ | 3,312 | | $ | 11,718 | | $ | 30,486 | | $ | 6,500 | | $ | 6,487 | | $ | 1,362 | | $ | 4,870 | | $ | 5,149 | | $ | 24,368 |
Other Derivatives
Zinc zero cost collar
Derivative instruments that are not designated as hedging instruments are required to be recorded on the balance sheet at fair value. Changes in fair value will impact the Company’s earnings through mark-to-market adjustments until the physical commodity is delivered or the financial instrument is settled. The fair value does not reflect the realized or cash value of the instrument.
As of September 30,December 31, 2022, the Company’s derivatives not designated as hedges consist of zinc zero cost collars usedhedge program concluded, but the Company may utilize similar programs in the future to manage its near-term exposure to cash flow variability from zinc price risks. A zero cost collar is a combination of two options: a sold call option and a purchased put option. The Company sold call options to establish the ceiling price of $3,500 per tonne of zinc that the Company will receive for the contracted zinc volume of 1,950 tonnes for October through December 2022. The purchased put establishes the floor price of $3,200 per tonne of zinc that the Company will receive for the same contracted tonnes and period of time.
Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. Otherwise, any fair value gains or losses are recognized in earnings in the current period. The London Metal Exchange (“LME”) average zinc price of $3,660 per tonne during the nine months ended September 30, 2022 exceeded the call option ceiling of $3,313 per tonne, resulting in a realized loss of $2.4 million. The zinc price forward curve as of September 30, 2022 is below the put option ceiling, resulting in a $0.4 million asset on the remaining 1,950 tonnes. The asset recognized resulted in an unrealized gain of $2.3 million for the nine months ended September 30, 2022.
metal prices.
The Company manages credit risk by selecting counterparties believed to be financially strong, by entering into netting arrangements with counterparties, and by requiring other credit risk mitigants, as appropriate. The Company actively
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
15
evaluates the creditworthiness of its counterparties, assigns appropriate credit limits, and monitors credit exposures against those assigned limits.
15. Employee Benefits
Effective October 2012, the Company adopted a profit sharingprofit-sharing plan (the “Plan”), which covers all U.S. employees. The Plan meets the requirements of a qualified retirement plan pursuant to the provisions of Section 401(k) of the Internal Revenue Code. The Plan also providesallows eligible employees the opportunity to make tax deferred contributions to a retirement trust account up to 50%90% of their qualified wages, subject to the IRS annual maximums.
Under Mexican law, employees are entitled to receive statutory profit sharing (Participacion(Participación a los Trabajadores de las Utilidades or “PTU”) payment.payments. The required cash payment to employees in the aggregate is equal to 10% of their employer’s profit subject to PTU, which differs from profit determined under U.S. GAAP. Please see Note 9—Accrued Expenses and Other Liabilities in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited)for additional information.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
17
16. Stock-Based Compensation
The Company’s compensation program comprises three main elements: base salary, an annual short-term incentive plan (“STIP”) cash award, and long-term equity-based incentive compensation (“LTIP”) in the form of performance sharedeferred stock units (“PSUs”DSUs”), restricted stock units (“RSUs”), stock options, and deferred stockperformance share units (“DSUs”PSUs”).
The Gold Resource Corporation 2016 Equity Incentive Plan (the “Incentive Plan”) allows for the issuance of up to 5 million shares of common stock in the form of incentive and non-qualified stock options, stock appreciation rights, RSUs, stock grants, stock units, performance shares, performance share units,PSUs, and performance cash. Additionally, pursuant to the terms of the Incentive Plan, any award outstanding under the prior plan that is terminated, expired, forfeited, or canceled for any reason will be available for grant under the Incentive Plan.
Effective January 1, 2021,DSUs of nil and 278,663, respectively, were granted to the Company’s Board of Directors onduring the recommendation of the Compensation Committee, implemented a program to issue DSUs. DSUs are qualifying instruments under the terms of the Company’s Incentive Planthree and therefore do not require additional shareholder approval. The vesting and settlement terms of the DSUs are determined by the Compensation Committee at the time the DSUs are awarded.
nine months ended September 30, 2023. DSUs of nil and 214,357 were granted to the Board of Directors during the three and nine months ended September 30, 2022, respectively. DSUs of nilare vested immediately and 130,000 were granted to the Board of Directors during the three and nine months ended September 30, 2021, respectively. DSUs are redeemable in cash or shares at the earlierearliest of 10 years or upon the eligible directors’ termination. Termination is deemed to occur on the earliest ofof: (1) the date of voluntary resignation or retirement of the director from the Board; (2) the date of death of the director; or (3) the date of removal of the director from the Board whether by shareholder resolution, failure to achieve re-election, or otherwise; and on which date the director is not a director or employee of the Company or any of its affiliates. These awards contain a cash settlement feature and are therefore classified as a liability and are marked to fair valuemarket each reporting period.
The Company may also issue DSUs for directors in lieu of board fees at their request. During the three and nine months ended September 30, 2023, respectively, 32,323 and 63,624 DSUs were granted in lieu of board fees that are also subject to mark-to-market adjustment. During the three and nine months ended September 30, 2022, respectively, there were 3,746 and 10,454 DSUs granted in lieu of board fees that are also subjectfees. Additionally, during the first quarter of 2023, executives were granted 212,407 DSUs in lieu of half of their STIP cash bonus for 2022.
During the three and nine months ended September 30, 2023, 49,589 and 373,489 DSUs were redeemed, respectively, for the cash value of $31 thousand and $0.3 million. There were no DSU redemptions during the same periods in 2022.
As of September 30, 2023 and 2022, the non-current liability balances related to mark-to-market adjustment. BothDSUs were $0.2 million and $0.6 million, respectively. For the three and nine months ended September 30, 2023, the changes in liabilities related to DSUs resulted in $0.1 million and $20 thousand credit, respectively, to stock-based compensation expense. For the three and nine months ended September 30, 2022, the changes in liabilities related to DSUs resulted in $13 thousand and $0.4 million stock-based compensation expense, respectively.
RSUs of nil and 779,192 were granted during the three and nine months ended September 30, 2021, respectively, there were 1,960 DSUs granted in lieu of board fees that are also subject to mark-to-market adjustment. As of September 30, 2022 and 2021, the liability balance related to DSUs was $0.6 million and $0.2 million,2023, respectively.
RSUs of nil and 611,681 were granted during the three and nine months ended September 30, 2022, respectively. No RSUs were granted duringDuring the three and nine months ended September 30, 2021.2023, a total of 41,668 and 237,193 RSUs vested, respectively, for which 29,624 and 100,057 common shares were issued, respectively, with a fair value of $16,886 and $78,867, respectively. During the three and nine months ended September 30, 2023, a total of RSUs of 12,044 and 30,181, respectively, were withheld for taxes due to net settlement, and nil and 106,955 RSUs, respectively, were deferred. During the three and nine months ended September 30, 2022, a total of 41,666 and 119,467 RSUs vested, respectively, from which 41,666 and 80,169 RSUs were redeemed, respectively, issuing 41,666 and 75,584 common shares with an intrinsic value and a fair value of $74,165 and $138,101, respectively. During the three and nine months ended September 30, 2021,2022, nil and 39,298 RSUs were deferred.
No stock options were granted nor exercised during the three and nine months ended September 30, 2023. Stock options of nil and 320,816 were granted during the three and nine months ended September 30, 2022, respectively. Stock options of nil and 355,000, respectively, a total of 50,183were exercised during the three and 52,797 RSUs vested and redeemed, and 49,755 and 52,369 common sharesnine months ended September 30, 2022. The exercises in 2022 were issued with an intrinsic value and a fair value of $0.1 million and $0.1 million, respectively. settled in cash.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)1618
PSUs of nil and 534,890, respectively, were granted during the three and nine months ended September 30, 2023. PSUs of nil and 695,041, respectively, were granted during the three and nine months ended September 30, 2022. PSUs cliff vest usually in three years based on the relative and absolute total shareholder return of a predetermined peer group and are expected to be settled in cash.
During the three and nine months ended September 30, 2023, there were 250,522 and 349,005 PSUs, respectively, forfeited due to employee terminations. There were no forfeitures during the same periods in 2022.
As of September 30, 2023 and 2022, the current liability balances related to PSUs were $0.1 million and nil, respectively, and the non-current liability balances related to PSUs were $0.1 million and $0.2 million, respectively.
Stock-based compensation expense for the periods presented is as follows:
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2023 | | 2022 | | 2023 | | 2022 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Deferred stock units | | | (89) | | | 13 | | | (20) | | | 383 |
Restricted stock units | | | 95 | | | 161 | | | 422 | | | 465 |
Stock options | | $ | 10 | | $ | 124 | | $ | 250 | | $ | 523 |
Performance stock units | | | (118) | | | 152 | | | (150) | | | 246 |
Total | | $ | (102) | | $ | 450 | | $ | 502 | | $ | 1,617 |
The Company’s STIP for its management team provides annual cash payable upon achievement of specified performance metrics. As of September 30, 2023, the Company accrued $1.0 million payable in cash related to the 2023 STIP program.
Stock options of nil and 320,816 were granted during the three and nine months ended September 30, 2022, respectively. Stock options of nil and 600,000 were granted during the three and nine months ended September 30, 2021, respectively. Stock options of nil and 355,000, respectively, were exercised during the three and nine months ended September 30, 2022. These exercises were settled in cash. No stock options were exercised during the three months ended September 30, 2021. During the nine months ended September 30, 2021, stock options to purchase an aggregate of 217,718 shares of the Company’s common stock were exercised at a weighted average exercise price of $1.31 per share.
PSUs of nil and 695,041 were granted during the three and nine months ended September 30, 2022, respectively. No PSUs were granted during the three and nine months ended September 30, 2021. PSUs cliff vest usually in three years based on the relative total shareholder return of a predetermined peer group and are expected to be settled in cash.
Stock-based compensation expense for the periods presented is as follows:
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2022 | | 2021 | | 2022 | | 2021 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Stock options | | $ | 124 | | $ | 74 | | $ | 523 | | $ | 436 |
Restricted stock units | | | 161 | | | 87 | | | 465 | | | 71 |
Performance stock units | | | 152 | | | - | | | 246 | | | - |
Deferred stock units | | | 13 | | | (131) | | | 383 | | | 204 |
Total | | $ | 450 | | $ | 30 | | $ | 1,617 | | $ | 711 |
The Company has a short-term incentive plan (“STIP”) for its management team that provides annual cash payable upon achievement of specified performance metrics. As of September 30, 2022, we accrued $0.7 million payable in cash related to the 2022 STIP program.
17. Zinc Zero Cost Collar
During the three and nine months ended September 30, 20222023 and 2021,2022, the realized and unrealized (gains) losses related to the Company’s Zinc Zero Cost Collarzinc zero cost collar are the following:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||||||||||
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | ||||||||
| | (in thousands) | | (in thousands) | | (in thousands) | | (in thousands) | ||||||||||||||||
Realized (gain) loss on zinc zero cost collar | | $ | (61) | | $ | 40 | | $ | 2,396 | | $ | 40 | | $ | - | | $ | (61) | | $ | - | | $ | 2,396 |
Unrealized (gain) loss on zinc zero cost collar | | | (157) | | | 144 | | | (2,276) | | | 144 | ||||||||||||
Unrealized gain on zinc zero cost collar (1) | | | - | | | (157) | | | - | | | (2,276) | ||||||||||||
Total | | $ | (218) | | $ | 184 | | $ | 120 | | $ | 184 | | $ | - | | $ | (218) | | $ | - | | $ | 120 |
(1) | Gains and losses due to changes in fair value are non-cash in nature until such time that they are realized through cash transactions. |
On May 18, 2021, the Company entered into a Trading Agreement with Auramet International LLC that governs nonexchange traded, over-the-counter, spot, forward and option transactions on both a deliverable and non-deliverable basis involving various metals and currencies. Gains and losses due to changes in fair value are non-cash in nature until such time that they are realized through cash transactions. Please see Note 14—Derivatives in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited)for additional information. As of September 30,December 31, 2022, the zinc zero cost collar wasCompany’s hedge program concluded, but the Company may utilize similar programs in an asset position ($0.4 million), while in prior periods we had a liability relatedthe future to the program.manage near-term exposure to cash flow variability from metal prices.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)1719
18. Other Expense, net
Other expense, net, for the periods presented consisted of the following:
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2022 | | 2021 | | 2022 | | 2021 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Unrealized currency exchange loss (gain) (1) | | $ | 678 | | $ | (59) | | $ | 1,200 | | $ | 257 |
Realized currency exchange (gain) loss | | | (34) | | | 24 | | | 125 | | | (35) |
Realized and unrealized loss (gain) from gold and silver rounds, net | | | 9 | | | 54 | | | (19) | | | 86 |
Employee benefit obligation (2) | | | - | | | - | | | - | | | 700 |
Interest on streaming liabilities | | | 257 | | | - | | | 567 | | | - |
Other (income) expense | | | (145) | | | (29) | | | (56) | | | (465) |
Total | | $ | 765 | | $ | (10) | | $ | 1,817 | | $ | 543 |
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2023 | | 2022 | | 2023 | | 2022 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Unrealized currency exchange (gain) loss (1) | | $ | 260 | | $ | 678 | | $ | 599 | | $ | 1,200 |
Realized currency exchange loss | | | (7) | | | (34) | | | 302 | | | 125 |
Realized and unrealized loss (gain) from gold and silver rounds, net | | | 2 | | | 9 | | | (1) | | | (19) |
Loss on disposal of fixed assets | | | - | | | - | | | 12 | | | - |
Interest on streaming liabilities (2) | | | 688 | | | 257 | | | 1,237 | | | 567 |
Severance (3) | | | 664 | | | - | | | 1,541 | | | - |
Other expense (income) | | | 360 | | | (145) | | | 457 | | | (56) |
Total | | $ | 1,967 | | $ | 765 | | $ | 4,147 | | $ | 1,817 |
(1) | Gains and losses due to changes in fair value are non-cash in nature until such time that they are realized through cash transactions. For additional information regarding the Company’s fair value measurements and investments, please see Note 20—Fair Value Measurementin Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited) for additional information. |
(2) |
(3) | This is due to an organized reduction of workforce and leadership change at DDGM in Mexico. |
19. Net IncomeLoss per Common Share
Basic net income per common share is calculated based on the weighted average number of common shares outstanding for the period. Diluted earnings per common share are calculated based on the assumption that stock options and other dilutive securities outstanding, which have an exercise price less than the average market price of the Company’s common shares during the period, would have been exercised on the later of the beginning of the period or the date granted and that the funds obtained from the exercise were used to purchase common shares at the average market price during the period. All of the Company’s RSUs and DSUs are considered to be dilutive in periods with net income.
The effect of the Company’s dilutive securities is calculated using the treasury stock method, and only those instruments that result in a reduction in net income per common share are included in the calculation. Options to purchase 2.11.1 million shares of common stock at weighted average exercise pricesprice of $3.52 and$2.98 were outstanding as of September 30, 2023, but had no dilutive effect due to the net loss for the period. Options to purchase 2.1 million shares of common stock at a weighted average exercise pricesprice of and $5.11$3.52 were outstanding as of September 30, 2022 and 2021, respectively, but were not included inhad no dilutive effect due to the computation of diluted weighted average common shares outstanding, asnet loss for the exercise price of the options exceeded the average price of the Company’s common stock during the reporting period, and therefore are anti-dilutive.
period.
Basic and diluted net income per common share is calculated as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended | | For the three months ended | | For the nine months ended | ||||||||||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||||||||||||||
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | ||||||||
Numerator: | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (in thousands) | | $ | (9,730) | | $ | 1,529 | | $ | (3,038) | | $ | 5,339 | ||||||||||||
Net loss (in thousands) | | $ | (7,341) | | $ | (9,730) | | $ | (12,960) | | $ | (3,038) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | | | | | | | | | | | | | |
Basic weighted average shares of common stock outstanding | | | 88,391,220 | | | 74,552,545 | | | 88,358,188 | | | 74,481,281 | | | 88,499,327 | | | 88,391,220 | | | 88,458,276 | | | 88,358,188 |
Dilutive effect of share-based awards | | | - | | | 345,975 | | | - | | | 360,814 | | | - | | | - | | | - | | | - |
Diluted weighted average common shares outstanding | | | 88,391,220 | | | 74,898,520 | | | 88,358,188 | | | 74,842,095 | | | 88,499,327 | | | 88,391,220 | | | 88,458,276 | | | 88,358,188 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted net (loss) income per common share | | $ | (0.11) | | $ | 0.02 | | $ | (0.03) | | $ | 0.07 | ||||||||||||
Basic and diluted net loss per common share | | $ | (0.08) | | $ | (0.11) | | $ | (0.15) | | $ | (0.03) |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)1820
20. Fair Value Measurement
Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
Level 2 | Quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and |
Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. These assets and liabilities are remeasured for each reporting period. The following table setstables set forth certain of the Company’s assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 20222023 and December 31, 2021:2022:
| | | | | | | | | | | | | | | | |
| | As of | | As of | | | | As of | | As of | | | ||||
| | September 30, | | December 31, | | Input Hierarchy Level | | September 30, | | December 31, | | Input Hierarchy Level | ||||
| | 2022 | | 2021 | | | | 2023 | | 2022 | | | ||||
| | (in thousands) | | | | (in thousands) | | | ||||||||
Cash and cash equivalents | | $ | 22,531 | | $ | 33,712 | | Level 1 | | $ | 6,706 | | $ | 23,675 | | Level 1 |
Accounts receivable, net | | $ | 3,741 | | $ | 8,672 | | Level 2 | | $ | 4,714 | | $ | 5,085 | | Level 2 |
Investment in equity securities | | $ | 1,716 | | $ | - | | Level 1 | ||||||||
Derivative asset - zinc zero cost collar | | $ | 432 | | $ | - | | Level 2 | ||||||||
Derivative liability - zinc zero cost collar | | $ | - | | $ | (1,844) | | Level 2 | ||||||||
Contingent consideration | | $ | (4,036) | | $ | (4,603) | | Level 3 | ||||||||
Gold and silver stream agreements | | $ | (43,201) | | $ | (42,560) | | Level 3 | ||||||||
Investment in equity securities-Maritime | | $ | 1,211 | | $ | 1,559 | | Level 1 | ||||||||
Investment in equity securities-Green Light Metals | | $ | 3,608 | | $ | 3,611 | | Level 3 |
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents: Cash and cash equivalents consist primarily of cash deposits and are valued at cost, which approximatesapproximating fair value.
Accounts receivable, net: Accounts receivable, net includesinclude amounts due to the Company for deliveries of concentrates and doré sold to customers, net of embedded derivatives mark-to-market value of $1.7 million as of September 30, 2022, and nil as of December 31, 2021.customers. Concentrate sales contracts provide for provisional pricing as specified in such contracts. These sales contain an embedded derivative related to the provisional pricing mechanism which is bifurcated and are accounted for as a derivative. At the end of each reporting period, the Company records an adjustment to sales to reflect the mark-to-market of outstanding provisional invoices based on the forward price curve. Because these provisionally priced sales have not yet settled as of the reporting date, the mark-to-market adjustment related to these invoices is included in accounts receivable as of each reporting datedate.
At September 30, 2023 and December 31, 2022, the Company had an unrealized gain of $0.1 million and an unrealized gain of $0.6 million, respectively, included in its accounts receivable on the accompanying Condensed Consolidated Interim Balance Sheets related to mark-to-market adjustments.adjustments on the embedded derivatives. Please see Note 14—Derivatives in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited)for additional information.
Investment in equity securitiessecurities—Maritime: On September 22, 2022, Gold Resource Corporation invested C$2.4 million (or $1.7 million) in the common shares of Maritime Resources Corp. (“Maritime”), ticker symbol MAE.V on TSX-V, in a private placement. The 47 million shares purchased represent less than 10% of the issued and outstanding shares of Maritime. As of September 30, 2022,2023, the share price of Maritime was the sameC$0.035, compared to C$0.045 as at the time of purchase; andDecember 31, 2022; therefore, noan unrealized gain or loss of $0.4 million was recorded.recorded, offset by a small foreign exchange gain.
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
19
Derivative liability - zinc zero cost collar: Derivatives are carried at fair value and on a net basis as a legal right of offset exists with the same counterparty. The valuation is using the Black Scholes model as applied to zinc call options and considers interest rate forecast, market volatility, and the zinc forward price curve for each respective hedge period. Any fair value gains or losses are recognized in earnings in the current period. The fair value does not reflect the realized or cash value of the instrument. Mark-to-market adjustments are made until the physical commodity is delivered or the financial instrument is settled. At each reporting period Management evaluates the unrealized gain (loss) on the derivatives instruments based on average London Metal Exchange forward underlying price over a period from the trade date to the payment date.
For the zinc zero cost collar, when the prior month LME average zinc price is greater than the call price, positions settling in the period are recorded as a realized gain or loss, and unsettled positions are recorded as an unrealized gain or loss.
Contingent consideration: For September 30, 2022, a time value of money calculation was utilized to value the contingent consideration. Each milestone payment was assessed separately. Key risks including permitting, feasibility study, commercial production, and timing were each assigned a probability weighting based on the likelihood of occurrence, and a 60.75% overall probability was used. The change in the fair value since December 31, 2021 is contributable to unrealized foreign currency exchange adjustment. Please see Note 12—Commitments and Contingencies for additional information.
Gold and silver stream agreements: The gold and silver stream liabilities are carried at fair value. The discounted cash flow model that was used to determine the fair value utilizes significant unobservable inputs, such as the probability and timing of permitting, feasibility study, and commercial production. Also, a periodic interest expense is recorded based on an implied interest rate. The implied interest rate is determined based on a 67.5% probability of future production and an 8% discount rate. The change in the fair value since December 31, 2021 is contributable to the implied interest. Please see Note 10—Gold and Silver Stream Agreements for additional information.
Gains and losses related to changes in the fair value of these financial instruments were included in the Company’s Condensed Consolidated Interim Statements of Operations as shown in the following table:
| | | | | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | | Statements of Operations Classification | |||||||||
| | 2022 | | 2021 | | | 2022 | | 2021 | | | ||||
| Note | (in thousands) | | | |||||||||||
Realized and unrealized derivative (loss) gain, net | 14 | $ | (934) | | $ | (478) | | | $ | (1,064) | | $ | 156 | | Sales, net |
Realized gain (loss) on zinc zero cost collar | 17 | $ | 61 | | $ | (40) | | | $ | (2,396) | | $ | (40) | | Realized and unrealized loss on zinc zero cost collar |
Unrealized gain (loss) on zinc zero cost collar | 17 | $ | 157 | | $ | (144) | | | $ | 2,276 | | $ | (144) | | Realized and unrealized loss on zinc zero cost collar |
Realized/Unrealized Derivatives
The following tables summarize the Company’s realized/unrealized derivatives for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the three months ended September 30, 2022 | | | | | | | | | | | | | | | | | | |
Realized loss | | $ | (198) | | $ | (141) | | $ | (158) | | $ | (88) | | $ | (627) | | $ | (1,212) |
Unrealized (loss) gain | | | (95) | | | (81) | | | 108 | | | 96 | | | 250 | | | 278 |
Total realized/unrealized derivatives, net | | $ | (293) | | $ | (222) | | $ | (50) | | $ | 8 | | $ | (377) | | $ | (934) |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
20
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the three months ended September 30, 2021 | | | | | | | | | | | | | | | | | | |
Realized (loss) gain | | $ | (110) | | $ | (295) | | $ | (4) | | $ | 72 | | $ | 91 | | $ | (246) |
Unrealized gain (loss) | | | 28 | | | (11) | | | (16) | | | (84) | | | (149) | | | (232) |
Total realized/unrealized derivatives, net | | $ | (82) | | $ | (306) | | $ | (20) | | $ | (12) | | $ | (58) | | $ | (478) |
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the nine months ended September 30, 2022 | | | | | | | | | | | | | | | | | | |
Realized (loss) gain | | $ | (16) | | $ | 13 | | $ | (173) | | $ | (32) | | $ | 1,022 | | $ | 814 |
Unrealized (loss) gain | | | (96) | | | 30 | | | 3 | | | (103) | | | (1,712) | | | (1,878) |
Total realized/unrealized derivatives, net | | $ | (112) | | $ | 43 | | $ | (170) | | $ | (135) | | $ | (690) | | $ | (1,064) |
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the nine months ended September 30, 2021 | | | | | | | | | | | | | | | | | | |
Realized (loss) gain | | $ | (133) | | $ | (123) | | $ | 63 | | $ | 146 | | $ | 251 | | $ | 204 |
Unrealized gain (loss) | | | 58 | | | 10 | | | (24) | | | (63) | | | (29) | | | (48) |
Total realized/unrealized derivatives, net | | $ | (75) | | $ | (113) | | $ | 39 | | $ | 83 | | $ | 222 | | $ | 156 |
21. Supplementary Cash Flow Information
Other operating adjustments and write-downs within the net cash provided by operations on the Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2022 and 2021 consisted of the following:
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2022 | | 2021 | | 2022 | | 2021 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Unrealized loss (gain) on gold and silver rounds | | $ | 8 | | $ | 55 | | $ | (54) | | $ | 86 |
Unrealized foreign currency exchange loss (gain) | | | 678 | | | (59) | | | 1,200 | | | 257 |
Unrealized (gain) loss on zinc zero cost collar | | | (157) | | | 144 | | | (2,276) | | | 144 |
Other | | | 4 | | | (106) | | | (164) | | | (12) |
Total other operating adjustments | | $ | 533 | | $ | 34 | | $ | (1,294) | | $ | 475 |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)
21
22. Segment Reporting
As of September 30, 2022, the Company has organized its operations into three geographic regions: Oaxaca, Mexico, Michigan, U.S.A., and Corporate and Other. Oaxaca, Mexico represents the Company’s only production stage property. Michigan, U.S.A. is an advanced exploration stage property. Intercompany revenue and expense amounts have been eliminated within each segment in order to report on the basis that management uses internally for evaluating segment performance. The Company’s business activities that are not considered production stage or advanced exploration stage properties are included in Corporate and Other.
The following table shows selected information from the Consolidated Balance Sheets relating to the Company’s segments (in thousands):
| | | | | | | | | | | | |
| | Oaxaca, | | Michigan, | | Corporate | | Consolidated | ||||
As of September 30, 2022 | | | | | | | | | | | | |
Total current assets | | $ | 41,848 | | $ | 3,911 | | $ | 2,570 | | $ | 48,329 |
Total non-current assets | | | 59,908 | | | 89,347 | | | 1,954 | | | 151,209 |
Total assets | | $ | 101,756 | | $ | 93,258 | | $ | 4,524 | | $ | 199,538 |
Total current liabilities | | | 15,893 | | | 2,636 | | | 937 | | | 19,466 |
Total non-current liabilities | | | 2 | | | 62,706 | | | 1,720 | | | 64,428 |
Total shareholders' equity | | | 85,861 | | | 27,916 | | | 1,867 | | | 115,644 |
Total liabilities and shareholders' equity | | $ | 101,756 | | $ | 93,258 | | $ | 4,524 | | $ | 199,538 |
| | | | | | | | | | | | |
As of December 31, 2021 | | | | | | | | | | | | |
Total current assets | | $ | 50,057 | | $ | 5,528 | | $ | 3,330 | | $ | 58,915 |
Total non-current assets | | | 66,756 | | | 90,018 | | | 73 | | | 156,847 |
Total assets | | $ | 116,813 | | $ | 95,546 | | $ | 3,403 | | $ | 215,762 |
Total current liabilities | | | 25,833 | | | 2,459 | | | 1,367 | | | 29,659 |
Total non-current liabilities | | | 1,436 | | | 63,438 | | | 479 | | | 65,353 |
Total shareholders' equity | | | 89,544 | | | 29,649 | | | 1,557 | | | 120,750 |
Total liabilities and shareholders' equity | | $ | 116,813 | | $ | 95,546 | | $ | 3,403 | | $ | 215,762 |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—Unaudited
22
Investment in equity securities—Green Light Metals: Upon maturity on December 28, 2022, the Company received 12,250,000 private shares of Green Light Metals, which settled the promissory note receivable from Green Light Metals. The following table shows selected information fromshares received represented approximately 28.5% ownership at the time. Management chose to account for this investment using the fair value option; therefore, these securities are carried at fair value. As of September 30, 2023, the value of this equity investment was C$4.9 million ($3.6 million). The value of the issued shares was determined to be C$0.40 per share, which was based on the significant unobservable input of Green Light Metals recent equity transactions. For the nine months ended September 30, 2023, there have been no gains or losses on the value of the shares the Company received, other than some foreign exchange loss.
Gains and losses related to changes in the fair value of these financial instruments were included in the Company’s Condensed Consolidated Interim Statements of Operations, relating toas shown in the Company’s segments (in thousands):following table:
| | | | | | | | | | | | |
| | Oaxaca, | | Michigan, | | Corporate | | Consolidated | ||||
For the three months ended September 30, 2022 | | | | | | | | | | | | |
Sales, net | | $ | 23,869 | | $ | - | | $ | - | | $ | 23,869 |
Total mine cost of sales, including depreciation | | | 26,016 | | | 21 | | | 10 | | | 26,047 |
Exploration expense | | | 1,143 | | | 3,830 | | | - | | | 4,973 |
Total other costs and expenses, including G&A | | | (105) | | | 349 | | | 2,552 | | | 2,796 |
Provision for income taxes | | | (1,235) | | | - | | | 1,018 | | | (217) |
Net loss | | $ | (1,950) | | $ | (4,200) | | $ | (3,580) | | $ | (9,730) |
| | | | | | | | | | | | |
For the three months ended September 30, 2021 | | | | | | | | | | | | |
Sales, net | | $ | 29,029 | | $ | - | | $ | - | | $ | 29,029 |
Total mine cost of sales, including depreciation | | | 20,784 | | | - | | | - | | | 20,784 |
Exploration expense | | | 1,802 | | | - | | | 3 | | | 1,805 |
Total other costs and expenses, including G&A | | | 122 | | | - | | | 2,437 | | | 2,559 |
Provision for income taxes | | | 2,089 | | | - | | | 263 | | | 2,352 |
Net income (loss) | | $ | 4,232 | | $ | - | | $ | (2,703) | | $ | 1,529 |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | | Statements of Operations Classification | |||||||||
| | 2023 | | 2022 | | | 2023 | | 2022 | | | ||||
| Note | (in thousands) | | | |||||||||||
Realized and unrealized derivative gain (loss), net | 14 | $ | 339 | | $ | (934) | | | $ | (205) | | $ | (1,064) | | Sales, net |
Realized gain (loss) on zinc zero cost collar | 17 | $ | - | | $ | 61 | | | $ | - | | $ | (2,396) | | Realized and unrealized (gain) loss on zinc zero cost collar |
Unrealized gain on zinc zero cost collar | 17 | $ | - | | $ | 157 | | | $ | - | | $ | 2,276 | | Realized and unrealized (gain) loss on zinc zero cost collar |
| | | | | | | | | | | | | |||||
| | Oaxaca, Mexico | | Michigan, USA (1) | | Corporate and Other | | Consolidated | |||||||||
For the nine months ended September 30, 2022 | | | | | | | | | | | | | |||||
Sales, net | | $ | 106,350 | | $ | - | | $ | - | | $ | 106,350 | |||||
Total mine cost of sales, including depreciation | | | 81,105 | | | 54 | | | 27 | | | 81,186 | |||||
Exploration expense | | | 3,190 | | | 6,925 | | | - | | | 10,115 | |||||
Total other costs and expenses, including G&A | | | 1,019 | | | 787 | | | 7,366 | | | 9,172 | |||||
Provision for income taxes | | | 7,634 | | | - | | | 1,281 | | | 8,915 | |||||
Net income (loss) | | $ | 13,402 | | $ | (7,766) | | $ | (8,674) | | $ | (3,038) | |||||
| | | | | | | | | | | | | |||||
For the nine months ended September 30, 2021 | | | | | | | | | | | | | |||||
Sales, net | | $ | 87,133 | | $ | - | | $ | - | | $ | 87,133 | |||||
Total mine cost of sales, including depreciation | | | 63,433 | | | - | | | - | | | 63,433 | |||||
Exploration expense | | | 3,642 | | | - | | | 18 | | | 3,660 | |||||
Total other costs and expenses, including G&A | | | 655 | | | - | | | 7,349 | | | 8,004 | |||||
Provision for income taxes | | | 6,434 | | | - | | | 263 | | | 6,697 | |||||
Net income (loss) | | $ | 12,969 | | $ | - | | $ | (7,630) | | $ | 5,339 | |||||
| | | | | | | | | | | | |
Realized/Unrealized Derivatives
The following tables summarize the Company’s realized/unrealized derivatives for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the three months ended September 30, 2023 | | | | | | | | | | | | | | | | | | |
Realized gain (loss) | | $ | 10 | | $ | 16 | | $ | (38) | | $ | 19 | | $ | (640) | | $ | (633) |
Unrealized (loss) gain | | | (40) | | | (34) | | | 38 | | | (129) | | | 1,137 | | | 972 |
Total realized/unrealized derivatives, net | | $ | (30) | | $ | (18) | | $ | - | | $ | (110) | | $ | 497 | | $ | 339 |
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the three months ended September 30, 2022 | | | | | | | | | | | | | | | | | | |
Realized loss | | $ | (198) | | $ | (141) | | $ | (158) | | $ | (88) | | $ | (627) | | $ | (1,212) |
Unrealized (loss) gain | | | (95) | | | (81) | | | 108 | | | 96 | | | 250 | | | 278 |
Total realized/unrealized derivatives, net | | $ | (293) | | $ | (222) | | $ | (50) | | $ | 8 | | $ | (377) | | $ | (934) |
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the nine months ended September 30, 2023 | | | | | | | | | | | | | | | | | | |
Realized gain (loss) | | $ | 251 | | | 361 | | | 8 | | | 167 | | | (538) | | $ | 249 |
Unrealized (loss) gain | | | (121) | | | (339) | | | (18) | | | (139) | | | 163 | | | (454) |
Total realized/unrealized derivatives, net | | $ | 130 | | $ | 22 | | $ | (10) | | $ | 28 | | $ | (375) | | $ | (205) |
| | | | | | | | | | | | | | | | | | |
| | Gold | | Silver | | Copper | | Lead | | Zinc | | Total | ||||||
For the nine months ended September 30, 2022 | | | | | | | | | | | | | | | | | | |
Realized (loss) gain | | $ | (16) | | $ | 13 | | $ | (173) | | $ | (32) | | $ | 1,022 | | $ | 814 |
Unrealized (loss) gain | | | (96) | | $ | 30 | | $ | 3 | | $ | (103) | | $ | (1,712) | | | (1,878) |
Total realized/unrealized derivatives, net | | $ | (112) | | $ | 43 | | $ | (170) | | $ | (135) | | $ | (690) | | $ | (1,064) |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes—UnauditedNotes (Unaudited)
22
21. Supplementary Cash Flow Information
Other operating adjustments and write-downs within the net cash provided by operations on the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 consisted of the following:
| | | | | | |
| | For the nine months ended September 30, | ||||
| | 2023 | | 2022 | ||
| | (in thousands) | ||||
Unrealized gain on gold and silver rounds | | $ | (3) | | $ | (54) |
Unrealized foreign currency exchange loss | | | 599 | | | 1,200 |
Unrealized gain on zinc zero cost collar | | | - | | | (2,276) |
Other | | | 614 | | | (164) |
Total other operating adjustments | | $ | 1,210 | | $ | (1,294) |
22. Segment Reporting
As of September 30, 2023, the Company has organized its operations into three geographic regions: Oaxaca, Mexico, Michigan, U.S.A., and Corporate and Other. Oaxaca, Mexico represents the Company’s only production stage property. Michigan, U.S.A. is an advanced exploration stage property. Intercompany revenue and expense amounts have been eliminated within each segment in order to report the net income (loss) on the basis that management uses internally for evaluating segment performance. The Company’s business activities that are not considered production stage or advanced exploration stage properties are included in Corporate and Other.
The following table shows selected information from the Condensed Consolidated Interim Balance Sheets relating to the Company’s segments (in thousands):
| | | | | | | | | | | | |
| | Oaxaca, | | Michigan, | | Corporate | | Consolidated | ||||
As of September 30, 2023 | | | | | | | | | | | | |
Total current assets | | $ | 26,547 | | $ | 130 | | $ | 2,223 | | $ | 28,900 |
Total non-current assets | | | 66,199 | | | 93,224 | | | 1,369 | | | 160,792 |
Total assets | | $ | 92,746 | | $ | 93,354 | | $ | 3,592 | | $ | 189,692 |
Total current liabilities | | $ | 11,042 | | | 2,520 | | | 1,539 | | $ | 15,101 |
Total non-current liabilities | | | 13,178 | | | 61,368 | | | 531 | | | 75,077 |
Total shareholders' equity | | | 68,526 | | | 29,466 | | | 1,522 | | | 99,514 |
Total liabilities and shareholders' equity | | $ | 92,746 | | $ | 93,354 | | $ | 3,592 | | $ | 189,692 |
| | | | | | | | | | | | |
As of December 31, 2022 | | | | | | | | | | | | |
Total current assets | | $ | 38,032 | | $ | 272 | | $ | 7,795 | | $ | 46,099 |
Total non-current assets | | | 69,269 | | | 92,927 | | | 1,803 | | | 163,999 |
Total assets | | $ | 107,301 | | $ | 93,199 | | $ | 9,598 | | $ | 210,098 |
Total current liabilities | | $ | 20,035 | | $ | 3,352 | | $ | 1,295 | | $ | 24,682 |
Total non-current liabilities | | | 11,460 | | | 60,648 | | | 1,544 | | | 73,652 |
Total shareholders' equity | | | 75,806 | | | 29,199 | | | 6,759 | | | 111,764 |
Total liabilities and shareholders' equity | | $ | 107,301 | | $ | 93,199 | | $ | 9,598 | | $ | 210,098 |
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
23
The following table shows selected information from the Condensed Consolidated Interim Statements of Operations relating to the Company’s segments (in thousands):
| | | | | | | | | | | | |
| | Oaxaca, | | Michigan, | | Corporate | | Consolidated | ||||
For the nine months ended September 30, 2023 | | | | | | | | | | | | |
Sales, net | | $ | 76,587 | | $ | - | | $ | - | | $ | 76,587 |
Total mine cost of sales, including depreciation | | | 77,395 | | | 65 | | | 1,778 | | | 79,238 |
Exploration expense | | | 3,974 | | | 1,265 | | | - | | | 5,239 |
Total other costs and expenses, including G&A | | | 869 | | | 981 | | | 7,886 | | | 9,736 |
Income taxes benefit | | | (3,911) | | | (479) | | | (276) | | | (4,666) |
Net loss | | $ | (1,740) | | $ | (1,832) | | $ | (9,388) | | $ | (12,960) |
| | | | | | | | | | | | |
For the nine months ended September 30, 2022 | | | | | | | | | | | | |
Sales, net | | $ | 106,350 | | $ | - | | $ | - | | $ | 106,350 |
Total mine cost of sales, including depreciation | | | 81,105 | | | 54 | | | 27 | | | 81,186 |
Exploration expense | | | 3,190 | | | 6,925 | | | - | | | 10,115 |
Total other costs and expenses, including G&A | | | 1,019 | | | 787 | | | 7,366 | | | 9,172 |
Provision for income taxes | | | 7,634 | | | - | | | 1,281 | | | 8,915 |
Net income (loss) | | $ | 13,402 | | $ | (7,766) | | $ | (8,674) | | $ | (3,038) |
| | | | | | | | | | | | |
| | Oaxaca, | | Michigan, | | Corporate | | Consolidated | ||||
For the three months ended September 30, 2023 | | | | | | | | | | | | |
Sales, net | | $ | 20,552 | | $ | - | | $ | - | | $ | 20,552 |
Total mine cost of sales, including depreciation | | | 24,359 | | | 23 | | | 581 | | | 24,963 |
Exploration expense | | | 1,540 | | | 420 | | | - | | | 1,960 |
Total other costs and expenses, including G&A | | | 166 | | | 767 | | | 2,696 | | | 3,629 |
Income taxes benefit | | | (2,349) | | | (42) | | | (268) | | | (2,659) |
Net loss | | $ | (3,164) | | $ | (1,168) | | $ | (3,009) | | $ | (7,341) |
| | | | | | | | | | | | |
For the three months ended September 30, 2022 | | | | | | | | | | | | |
Sales, net | | $ | 23,869 | | $ | - | | $ | - | | $ | 23,869 |
Total mine cost of sales, including depreciation | | | 26,016 | | | 21 | | | 10 | | | 26,047 |
Exploration expense | | | 1,143 | | | 3,830 | | | - | | | 4,973 |
Total other costs and expenses, including G&A | | | (105) | | | 349 | | | 2,552 | | | 2,796 |
(Benefit) provision for income taxes | | | (1,235) | | | - | | | 1,018 | | | (217) |
Net loss | | $ | (1,950) | | $ | (4,200) | | $ | (3,580) | | $ | (9,730) |
.
23. Subsequent Events
Subsequent to the current quarter end, in October 2023, the Company received a notification from the Mexican Tax Administration Services with a sanction of 331 million pesos (approximately $18 million) as the result of a 2015 tax audit that began in 2021. The 2015 tax audit performed by SAT encompassed various tax aspects, including but not limited to intercompany transactions, mining royalty tax, and extraordinary mining tax. Management is in process of assessing this tax notification to better evaluate possible outcomes. Management believes the 2015 tax return was prepared correctly. Please also see Note—5 Income Taxes in Item 1—Condensed Consolidated Interim Financial Statements and Notes (unaudited).
Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
24
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion summarizes the results of operations of Gold Resource Corporation and its subsidiaries (“we”, “our”,we,” “our,” “us,” or “us”the “Company”) for the three and nine months ended September 30, 20222023 and compares those results with the three and nine months ended September 30, 2021.2022. It also analyzes the Company’s financial condition as of September 30, 20222023, and compares it to the financial condition as of December 31, 2021.2022. This discussion should be read in conjunction with management’s discussion and analysis and the audited consolidated financial statements and footnotes for the year ended December 31, 2021 contained in our annual report on Form 10-K.
the 2022 Annual Report.
The discussion also presents certain non-GAAP financial measures that are important to management in its evaluation of our operating results, and which are used by management to compare our performance with what we perceive to be peer group mining companies and are relied on as part of management’s decision-making process. Management believes these measures may also be important to investors in evaluating our performance. For a detailed description of each of the non-GAAP financial measures and a reconciliation to GAAP financial measures, please see the discussion below under “Non-GAAP Measures.” Also see Forward-Looking Statements at the end of this Item 2 for important information regarding statements contained herein.
Overview
Gold Resource Corporation is a mining company that pursues gold, silver, and other metal projects that are expected to achieve both low operating costs and high returns on capital. The Don David Gold Mine is our cornerstone asset comprised of six properties. The Company’s focus is to unlock the significant upside potential of this asset through optimization of the current operations, growing the existing resource by investing in exploration drilling, and identifying new opportunities near existing infrastructure. The primary mineral production comes from the Arista underground mine. This mine supplies ore to our processing facilities to produce gold and silver doré and copper, lead, and zinc concentrates that also contain gold and silver.
The Back Forty Project, when developed, is expected to produce gold and silver doré and copper and zinc concentrates bearing gold and silver. Optimization work related to metallurgy and the economic model was completed during the third quarter of 2023 and the Company filed the Back Forty Project Technical Report Summary (S-K 1300) on October 26, 2023. Results of the work indicate a more robust economic project with no planned impacts to wetlands that is more protective of the environment, which should facilitate a successful mine permitting process. The Board continues to evaluate options in order to develop the Back Forty Project.
Review of Strategic Alternatives
Notwithstanding the technical successes noted above, in light of the continued challenges facing the Company, the Company’s Board of Directors has decided to initiate a formal review process, with the assistance of outside financial and legal advisors, to evaluate strategic alternatives for the Company. The comprehensive process will begin immediately and will evaluate a broad range of options to maximize shareholder value, including a potential sale of the Company.
There is no deadline or definitive timetable for completion of the strategic alternatives review process and there can be no assurance regarding the results or outcome of this review. The Company does not intend to comment further on this strategic review process until it has been completed or the Company determines that a disclosure is required by law or otherwise deemed appropriate.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
| | |
Removing Loose Rock | | DDGM has focused on safety, efficiency, and cost-saving initiatives, while emphasizing strong leadership and collaboration. The safety efforts have resulted in zero lost time injuries for the quarter and a significantly lower Lost Time Injury Frequency Rate of 0.11 compared to Cámara Minera de México’s average of 0.89. Leadership training programs have been successfully implemented, empowering leaders to enhance team productivity and safety. Union leaders and contractors have actively participated in safety programs, fostering a cooperative work community. While production maintained tonnage levels similar to the first quarter, a significant portion of the material came from lower levels with a decreased Net Smelter Return. Mining these sections was necessary to integrate transverse long-hole stoping in the fourth quarter, which is expected to impact mining costs positively. To ensure long-term sustainability and profitability, DDGM has implemented cost-saving measures, including a 10% reduction in headcount, minimizing crusher usage during peak hours, improving mining cycle efficiencies, and enhancing drilling and bolting processes. These measures optimize operations without compromising safety or productivity. Lastly, DDGM's persistent commitment to safety, efficiency, leadership development, collaboration with unions and contractors, and cost-saving initiatives positions the company for continued success. The company remains dedicated to delivering value to shareholders, while maintaining responsible and sustainable mining practices. |
2023 DDGM Exploration Update
Our portfolio of properties that make up the Don David Gold Mine are located along a 55-kilometer trend of the San Jose structural corridor in the Sierra Madre Sur mountain range. This northwest trending structural corridor spans three historic mining districts within the state of Oaxaca. Regional surface exploration activity continues on several properties with a goal of defining additional priority drill targets, demonstrating our commitment to long-term investment in Oaxaca, Mexico.
Underground exploration (expansion) and underground infill drilling continued during the third quarter of 2023, where access is available, using five diamond-drill rigs from various locations within the Arista mine. Expansion drilling was conducted to (1) further test the Three Sisters and Gloria vein systems, as well as other newly identified vein targets in the Arista North vein system including the Splay 31 and Marena North veins, and (2) infill drilling in the central-north Switchback deposit and in the Three Sisters and Gloria vein systems to further define and expand Mineral Reserves and Mineral Resources in these areas.
The underground drill program continues to advance our 2023 exploration objectives of identifying new mineralization and defining and upgrading additional mineral resources that were identified during the previous drilling campaign. These recent drill results will be incorporated into a 2023 resource estimate update. Preliminary calculations show a positive increase in tonnage with higher grades in both the Arista and Switchback vein deposits, along with an increase to the inferred resources of the Gloria and Three Sisters vein systems.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
During the third quarter of 2023, eight exploration drill holes were completed, for a total of 3,343 meters, while 54 infill drill holes were completed for 9,374 meters. The positive results from the ongoing exploration drilling campaign have validated the additional investment of capital in exploration during 2023 and have further bolstered the area’s potential for future mineral exploration.
Exploration drilling in the third quarter of 2023 continued to target the following zones at the Arista mine:
o | The northwest extension of the Switchback system at depth and along strike, where we have confirmed the continuation of the system, which now extends for over 1,100 meters along a northeast-southwest strike, remaining open in both directions as well as up- and down-dip. |
o | The Three Sisters vein system, in conjunction with the recently discovered Gloria vein system, continued to be drill targeted in the third quarter of 2023. The Three Sisters and Gloria vein systems have now been defined over a strike length of more than 700 meters, with both systems remaining open along a northwest-southeast strike and at depth. |
o | Exploration drilling got underway during the third quarter to test the northwest extension of the Arista vein system, targeting the Splay 31 and Marena North veins in particular. This drilling occurs approximately 100 meters northwest of the historic Arista mine working limits. Vein intercepts drilled during the third quarter show visual mineralized continuity (along strike and at depth) in the projections of the northwest trending Arista veins (i.e., Splay 31, Marena North) northwest of areas previously modeled and outside the current resource shell. The projected intersection of the western terminus of the Gloria vein with the northwest trending Arista vein system is becoming an increasingly exciting future exploration target at DDGM. |
o | In the third quarter of 2023, infill drilling was focused on Levels 27 and 28 in the central and north Switchback vein system. This drilling successfully confirmed the continuity and economic viability of the Susana North, Soledad North, Salamanca, and Sagrario veins along strike to the northwest and down-dip of the current Switchback deposit and outside current resource shells. Additionally, infill drilling began late in the third quarter on the Three Sisters vein system and the Splay 31 vein of the North Arista vein system, with the aim of upgrading inferred resources to the indicated category. Due to their proximity to existing mine infrastructure, these areas will provide efficient and quick access to near-term mine production opportunities. |
|
|
Hole No. 523080: Marena North vein (386.91 – 395.09 m; 8.18 m) |
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
Regional exploration during the third quarter of 2023 continued to focus on evaluating and prioritizing advanced stage projects located along the 55-kilometer trend in the San Jose structural corridor. These projects include Alta Gracia, Margaritas, Chamizo, El Rey, and Jabali, all situated within the 55.1 square kilometers of concession holdings controlled by the Don David Gold Mine. Additionally, other prospects in the vicinity of the Arista mine are being re-evaluated for near-term potential, with the goal of defining additional priority drill targets. A regional geologic map to outline of the DDGM concession holdings with the advanced stage project locations is provided below.
Regional Geologic Map Showing Advanced Stage Exploration Project Locations
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
Results of Operations
Don David Gold Mine
Mine activities during the third quarter of 2023 included development and ore extraction from the Arista mine.
The following table summarizes certain production statistics about our Don David Gold Mine for the periods indicated:
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2023 | | 2022 | | 2023 | | 2022 | ||||
Arista Mine | | | | | | | | | | | | |
Milled | | | | | | | | | | | | |
Tonnes Milled | | | 116,626 | | | 110,682 | | | 346,857 | | | 375,367 |
Grade | | | | | | | | | | | | |
Average Gold Grade (g/t) | | | 1.52 | | | 1.98 | | | 1.82 | | | 2.57 |
Average Silver Grade (g/t) | | | 73 | | | 80 | | | 85 | | | 75 |
Average Copper Grade (%) | | | 0.32 | | | 0.37 | | | 0.35 | | | 0.37 |
Average Lead Grade (%) | | | 1.29 | | | 1.59 | | | 1.56 | | | 1.86 |
Average Zinc Grade (%) | | | 3.24 | | | 4.21 | | | 3.61 | | | 4.38 |
Recoveries | | | | | | | | | | | | |
Average Gold Recovery (%) | | | 77.9 | | | 82.9 | | | 79.7 | | | 84.3 |
Average Silver Recovery (%) | | | 89.7 | | | 91.3 | | | 91.0 | | | 92.7 |
Average Copper Recovery (%) | | | 74.5 | | | 72.8 | | | 77.0 | | | 75.0 |
Average Lead Recovery (%) | | | 69.5 | | | 71.0 | | | 74.1 | | | 76.3 |
Average Zinc Recovery (%) | | | 85.2 | | | 83.7 | | | 84.8 | | | 83.5 |
Combined | | | | | | | | | | | | |
Tonnes Milled (1) | | | 116,626 | | | 110,682 | | | 347,917 | | | 376,625 |
Tonnes Milled per Day (2) | | | 1,557 | | | 1,361 | | | 1,455 | | | 1,492 |
Metal production (3) | | | | | | | | | | | | |
Gold (ozs.) | | | 4,443 | | | 5,851 | | | 16,251 | | | 26,355 |
Silver (ozs.) | | | 247,159 | | | 261,256 | | | 859,651 | | | 842,636 |
Copper (tonnes) | | | 276 | | | 296 | | | 946 | | | 1,030 |
Lead (tonnes) | | | 1,048 | | | 1,249 | | | 3,996 | | | 5,342 |
Zinc (tonnes) | | | 3,223 | | | 3,901 | | | 10,629 | | | 13,745 |
Metal produced and sold (3) | | | | | | | | | | | | |
Gold (ozs.) | | | 3,982 | | | 5,478 | | | 14,777 | | | 22,605 |
Silver (ozs.) | | | 208,905 | | | 225,012 | | | 777,977 | | | 722,041 |
Copper (tonnes) | | | 245 | | | 282 | | | 904 | | | 976 |
Lead (tonnes) | | | 947 | | | 1,056 | | | 3,681 | | | 4,450 |
Zinc (tonnes) | | | 2,571 | | | 2,943 | | | 8,772 | | | 10,892 |
Percentage payable metal (3) | | | | | | | | | | | | |
Gold (%) | | | 90 | | | 94 | | | 91 | | | 86 |
Silver (%) | | | 85 | | | 86 | | | 90 | | | 86 |
Copper (%) | | | 89 | | | 95 | | | 96 | | | 95 |
Lead (%) | | | 90 | | | 85 | | | 92 | | | 83 |
Zinc (%) | | | 80 | | | 75 | | | 83 | | | 79 |
(1) | During the first and second quarter of 2022 and during the first quarter of 2023, tonnes milled includes 1,043, 215, and 1,060 purchased tonnes, respectively, related to a collaborative initiative with a local community to ensure the proper environmental treatment and storage of the material. |
(2) | Based on actual days the mill operated during the period. |
(3) | The difference between what we report as "ounces/tonnes produced" and "payable ounces/tonnes sold" is attributable to the difference between the quantities of metals contained in the concentrates we produce versus the portion of those metals actually paid for according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades and recoveries, which impact the amounts of metals contained in concentrates produced and sold. |
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Third quarter 2023 compared to third quarter 2022
Production
During the three months ended September 30, 2023, total tonnes milled of 116,626 were 5% higher than in the same period in 2022. Metal production for gold, silver, copper, lead, and zinc decreased by 24%, 5%, 7%, 16%, and 17%, respectively, during the three months ended September 30, 2023 as compared to the same period last year as a result of the lower tonnes processed and lower metal grades as expected and in line with the 2023 mine plan.
Grades & Recoveries
During the three months ended September 30, 2023, all of the ore processed came from the Arista underground mine with an average gold grade of 1.52 g/t and silver grade of 73 g/t, compared to 1.98 g/t and 80 g/t, respectively, for the same period in 2022. In 2023, the average gold and silver grades were 23% and 9% lower, respectively. As shown in the Technical Report Summary for DDGM incorporated by reference in the 2022 Annual Report (the “Technical Report Summary”), grades are expected to decline in 2023 in line with the life of mine average shown in the estimates of mineral reserves (as defined by subpart 1300 of Regulation S-K, “Mineral Reserve”) and mineral resources (as defined by subpart 1300 of Regulation S-K, “Mineral Resource”) tables contained therein (the “Mineral Reserve and Mineral Resource Tables”). As grades decline, recoveries are expected to decline as well. Our base metals average grades during the three months ended September 30, 2023 were 0.32% for copper, 1.29% for lead, and 3.24% for zinc. Copper, lead, and zinc grades were 14%, 19%, and 23% lower, respectively, than in the same period in 2022.
Gold and silver recoveries for the three months ended September 30, 2023 were 77.9% and 89.7%, respectively, reflecting a 6% decrease for gold and a 2% decrease for silver over the same period in 2022. The mineralization in the third quarter of 2023 was different from the same period in 2022, containing high quartz. Quartz has an adverse effect on the floatation. Some of the gold is encapsulated in the quartz and is lost due to the fact it cannot be recovered in the flotation circuit. Copper, lead, and zinc recoveries for the three months ended September 30, 2023 were 74.5%, 69.5%, and 85.2%, respectively. While recoveries for the three months ended September 30, 2023 for both copper and zinc increased by 2%, recoveries for lead decreased by 2% compared to the same period in 2022. As shown in the Technical Report Summary incorporated by reference in the 2022 Annual Report, future recoveries and grades are expected to align with the life of mine average shown in the Mineral Reserve and Mineral Resource Tables.
Year-to-date 2023 compared to year-to-date 2022
Production
During the nine months ended September 30, 2023, total tonnes milled of 346,857 were 8% lower than during the same period in 2022. Metal production for gold, copper, lead, and zinc decreased by 38%, 8%, 25%, and 23%, respectively, during the nine months ended September 30, 2023 as compared to the same period last year, as a result of the lower tonnes processed and lower metal grades as expected and in line with the 2023 mine plan. Metal production for silver increased by 2% during the nine months ended September 30, 2023 as compared to the same period last year due to higher silver grades.
Grades & Recoveries
During the nine months ended September 30, 2023, the majority of ore processed came from the Arista underground mine with an average gold grade of 1.82 g/t and silver grade of 85 g/t, compared to 2.57 g/t and 75 g/t, respectively, for the same period in 2022. The average gold grade was 29% lower, and the average silver grade was 13% higher in 2023. As shown in the Technical Report Summary incorporated by reference in the 2022 Annual Report, grades are expected to decline in 2023 in line with the life of mine average shown in the Mineral Reserve and Mineral Resource Tables. As grades decline, recoveries are expected to decline as well. Our base metals average grades during the nine months ended September 30, 2023 were 0.35% for copper, 1.56% for lead, and 3.61% for zinc. Copper, lead, and zinc grades were 5%, 16%, and 18% lower, respectively, than in the same period in 2022.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
30
Gold and silver recoveries for the nine months ended September 30, 2023 were 79.7% and 91.0%, respectively, reflecting a 5% decrease for gold and a 2% decrease for silver over the same period in 2022. In 2023, we encountered different mineralization, containing zones of high quartz. Quartz has an adverse effect on the floatation. Some of the gold is encapsulated in the quartz and is lost due to the fact it cannot be recovered in the flotation circuit. Copper, lead, and zinc recoveries for the nine months ended September 30, 2023 were 77.0%, 74.1%, and 84.8%, respectively. While recoveries for copper and zinc for the nine months ended September 30, 2023 increased by 3% and 2%, respectively, recoveries for lead decreased by 3% compared to the same period in 2022. As shown in the Technical Report Summary incorporated by reference in the 2022 Annual Report, future recoveries and grades are expected to align with the life of mine average shown in the Mineral Reserve and Mineral Resource Tables.
Sales Statistics
The following table summarizes certain sales statistics about the Don David Gold Mine operations for the periods indicated:
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2023 | | 2022 | | 2023 | | 2022 | ||||
Net sales | | | | | | | | | | | | |
Gold | | $ | 7,690 | | $ | 9,109 | | $ | 28,529 | | $ | 41,228 |
Silver | | | 4,919 | | | 4,312 | | | 18,202 | | | 15,620 |
Copper | | | 2,049 | | | 2,164 | | | 7,792 | | | 8,969 |
Lead | | | 2,060 | | | 2,075 | | | 7,807 | | | 9,670 |
Zinc | | | 6,283 | | | 10,003 | | | 23,762 | | | 40,672 |
Less: Treatment and refining charges | | | (2,788) | | | (2,860) | | | (9,300) | | | (8,745) |
Realized and unrealized gain (loss) - embedded derivative, net | | | 339 | | | (934) | | | (205) | | | (1,064) |
Total sales, net | | $ | 20,552 | | $ | 23,869 | | $ | 76,587 | | $ | 106,350 |
Metal produced and sold | | | | | | | | | | | | |
Gold (ozs.) | | | 3,982 | | | 5,478 | | | 14,777 | | | 22,605 |
Silver (ozs.) | | | 208,905 | | | 225,012 | | | 777,977 | | | 722,041 |
Copper (tonnes) | | | 245 | | | 282 | | | 904 | | | 976 |
Lead (tonnes) | | | 947 | | | 1,056 | | | 3,681 | | | 4,450 |
Zinc (tonnes) | | | 2,571 | | | 2,943 | | | 8,772 | | | 10,892 |
Average metal prices realized (1) | | | | | | | | | | | | |
Gold ($ per oz.) | | $ | 1,934 | | $ | 1,627 | | $ | 1,948 | | $ | 1,823 |
Silver ($ per oz.) | | $ | 23.61 | | $ | 18.54 | | $ | 23.86 | | $ | 21.65 |
Copper ($ per tonne) | | $ | 8,185 | | $ | 7,115 | | $ | 8,624 | | $ | 9,015 |
Lead ($ per tonne) | | $ | 2,196 | | $ | 1,882 | | $ | 2,166 | | $ | 2,166 |
Zinc ($ per tonne) | | $ | 2,195 | | $ | 3,186 | | $ | 2,648 | | $ | 3,828 |
Gold equivalent ounces sold | | | | | | | | | | | | |
Gold Ounces | | | 3,982 | | | 5,478 | | | 14,777 | | | 22,605 |
Gold Equivalent Ounces from Silver | | | 2,550 | | | 2,564 | | | 9,529 | | | 8,575 |
Total AuEq oz | | | 6,532 | | | 8,042 | | | 24,306 | | | 31,180 |
(1) | Average metal prices realized vary from the market metal prices due to final settlement adjustments from our provisional invoices when they are settled. Our average metal prices realized will therefore differ from the average market metal prices in most cases. |
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
31
Third quarter 2023 compared to third quarter 2022
The key drivers of the production and financial results for the third quarter of 2023, as compared to the third quarter of 2022, relate to the higher tonnes mined and changes in metal grades. These results align with the 2023 mine plan and were considered in the 2023 guidance disclosed in the 2022 Annual Report. Financial results have also been impacted unfavorably by the strengthening Mexican peso and the lower zinc price realized in 2023.
Metal Sold
During the three months ended September 30, 2023, gold sales of 3,982 ounces, silver sales of 208,905 ounces, copper sales of 245 tonnes, lead sales of 947 tonnes, and zinc sales of 2,571 tonnes decreased by 27%, 7%, 13%, 10% and 13% respectively, as compared to the same period in 2022.
Average metal prices realized
During the three months ended September 30, 2023, the average metal prices were $1,934 per ounce for gold, $23.61 per ounce for silver, $8,185 per tonne for copper, $2,196 per tonne for lead, and $2,195 per tonne for zinc. Compared to the same period in 2022, the average metal price for gold, silver, copper, and lead increased by 19%, 27%, 15%, and 17%, respectively, while the average metal price zinc decreased 31%.
Year-to-date 2023 compared to year-to-date 2022
Key drivers in the production and financial results for the nine months ended September 30, 2023, as compared to the same period in 2022, relate to the lower tonnes mined and changes in metal grades. These results align with the 2023 mine plan and were considered in the 2023 guidance disclosed in the 2022 Annual Report. Financial results have also been impacted unfavorably by the strengthening Mexican peso and the lower zinc price realized in 2023.
Metal Sold
During the nine months ended September 30, 2023, gold sales of 14,777 ounces, copper sales of 904 tonnes, lead sales of 3,681 tonnes, and zinc sales of 8,772 tonnes decreased by 35%, 7%, 17%, and 19%, respectively, as compared to the same period in 2022. Silver sales of 777,977 ounces increased by 8% during the nine months ended September 30, 2023 compared to the same period in 2022.
Average metal prices realized
During the nine months ended September 30, 2023, the average metal prices were $1,948 per ounce for gold, $23.86 per ounce for silver, $8,624 per tonne for copper, $2,166 per tonne for lead, and $2,648 per tonne for zinc. Compared to the same period in 2022, the average metal price for gold and silver increased by 7% and 10%, respectively, while the average metal price for copper and zinc decreased by 4% and 31%, respectively. The average price for lead was the same as in the comparable period in 2022.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Financial Measures
The following table summarizes certain financial data of the Company for the periods indicated:
| | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||
| | 2023 | | 2022 | | 2023 | | 2022 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Doré and concentrate sales | | $ | 23,001 | | $ | 27,663 | | $ | 86,092 | | $ | 116,159 |
Less: Treatment and refining charges | | | (2,788) | | | (2,860) | | | (9,300) | | | (8,745) |
Realized/unrealized derivatives, net | | | 339 | | | (934) | | | (205) | | | (1,064) |
Sales, net | | | 20,552 | | | 23,869 | | | 76,587 | | | 106,350 |
Total cost of sales | | | 24,963 | | | 26,047 | | | 79,238 | | | 81,186 |
Mine gross (loss) profit | | | (4,411) | | | (2,178) | | | (2,651) | | | 25,164 |
Other costs and expenses, including tax: | | | 2,930 | | | 7,552 | | | 10,309 | | | 28,202 |
Net loss | | $ | (7,341) | | $ | (9,730) | | $ | (12,960) | | $ | (3,038) |
| | | | | | | | | | | | |
Other Non-GAAP Financial Measures: | | | | | | | | | | | | |
Total cash cost after co-product credits per AuEq oz sold (1) | | $ | 1,839 | | $ | 1,103 | | $ | 1,210 | | $ | 314 |
Total consolidated all-in sustaining cost after co-product credits per AuEq oz sold (1) | | $ | 2,669 | | $ | 1,838 | | $ | 1,852 | | $ | 944 |
Total all-in cost after co-product credits per AuEq oz sold (1) | | $ | 3,001 | | $ | 2,457 | | $ | 2,082 | | $ | 1,329 |
(1) | For a detailed description of each of the non-GAAP financial measures and a reconciliation to GAAP financial measures, please see the discussion below under “
The following table summarizes certain
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations Third quarter
During the three months ended September 30, Average metal
During the three months ended September 30, Year-to-date 2023 compared to year-to-date 2022
Key drivers in the
Average metal prices realized During the nine months ended September 30, 2023, the average metal prices were $1,948 per ounce for gold, $23.86 per ounce for silver, $8,624 per tonne for copper, $2,166 per tonne for lead, and $2,648 per tonne for zinc. Compared to the same period in 2022, the average metal price for gold and silver increased by 7% and 10%, respectively, while the average metal price for copper and zinc decreased by 4% and 31%, respectively. The Gold Resource Corporation—Management’s Discussion and Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations Financial Measures The following table summarizes certain financial data of the Company for the periods indicated:
|