10-Q 1 goro-20230930x10q.htm 10-Q
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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, 2023

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

Graphic

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.YesNo

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). YesNo

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). YesNo

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 88,694,038 shares of common stock outstanding as of November 2, 2023.

GOLD RESOURCE CORPORATION

FORM 10-Q

Table of Contents

Page

Third Quarter 2023 Highlights

2

Part I - FINANCIAL INFORMATION

3

Item 1.

Condensed Consolidated Interim Financial Statements and Notes

3

3

4

5

7

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.

Controls and Procedures

51

Part II - OTHER INFORMATION

51

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

52

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

52

Item 3.

Defaults upon Senior Securities

52

Item 4.

Mine Safety Disclosures

52

Item 5.

Other Information

52

Item 6.

Exhibits

52

Signatures

53

Graphic

Processing Plant at Night

Gold Resource Corporation
1

THIRD QUARTER 2023 HIGHLIGHTS

Highlights for the three months ended September 30, 2023 are summarized below and discussed further under Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Don David Gold Mine

There were no lost time incidents during the quarter. The year-to-date Lost Time Injury Frequency Rate (“LTIFR”) safety record is 0.11, which is significantly lower than the Mexican average of 0.89 (in US equivalent). Safety at Gold Resource Corporation is paramount. Even with a good track record at the Don David Gold Mine (“DDGM”), the Company continues to strive each quarter for improved measures, awareness, and training.
In the third quarter of 2023, the Don David Gold Mine produced and sold a total of 6,532 gold equivalent (“AuEq”) ounces, comprised of 3,982 gold ounces and 208,905 silver ounces at an average sales price per ounce of $1,934 and $24, respectively.
The DDGM diamond drilling program continued as planned during the third quarter, using five drill rigs with encouraging results. Drilling continued to advance on two fronts: (1) Infill drilling designed to upgrade Inferred resources to the Indicated category; and (2) Expansion drilling with the objective of identifying additional Inferred resources via step-out drilling. The drilling during the third quarter was successful in testing the northern extensions of the Splay 31 and Marena North veins of the Arista system, as well as in expanding the Three Sisters and Gloria vein systems to the northwest and down-dip (Switchback system).

Back Forty Project

Optimization work related to the metallurgy and the economic model for the Back Forty Project in Michigan, USA was completed, and the Company released the Technical Report Summary for the Back Forty Project as Exhibit 96.1 to Form 8-K filed 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.

Financial

The Company has $6.7 million in cash as of September 30, 2023, and zero debt.
Net loss was $7.3 million or $0.08 per share for the quarter, which was after a significant push on exploration development and underground drilling.
Working capital was $13.8 million as of September 30, 2023.
Total cash cost after co-product credits for the quarter was $1,839 per gold equivalent (“AuEq”) ounce and total all-in sustaining cost (“AISC”) after co-product credits for the quarter was $2,669 per AuEq ounce. The year-to-date total cash cost after co-product credits was $1,210, and the total AISC after co-product credits was $1,852. (See Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Measures below for a reconciliation of non-GAAP measures to applicable GAAP measures).

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

September 30, 

December 31,

Note

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

$

6,706

$

23,675

Accounts receivable, net

4,714

5,085

Inventories, net

4

10,442

13,500

Prepaid expenses and other current assets

6

7,038

3,839

Total current assets

28,900

46,099

Property, plant, and mine development, net

7

144,194

152,563

Deferred tax assets, net

5

11,589

5,927

Other non-current assets

8

5,009

5,509

Total assets

$

189,692

$

210,098

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

10,240

$

13,329

Mining royalty taxes payable, net

1,015

3,945

Contingent consideration

12

2,209

2,211

Accrued expenses and other current liabilities

9

1,637

5,197

Total current liabilities

15,101

24,682

Reclamation and remediation liabilities

11

12,349

10,366

Gold and silver stream agreements liability

10

44,703

43,466

Deferred tax liabilities, net

5

14,269

15,151

Contingent consideration

12

2,138

2,179

Other non-current liabilities

9

1,618

2,490

Total liabilities

90,178

98,334

Shareholders' equity:

Common stock - $0.001 par value, 200,000,000 shares authorized:

88,628,365 and 88,398,109 shares outstanding at September 30, 2023 and December 31, 2022, respectively

89

89

Additional paid-in capital

111,734

111,024

(Accumulated deficit) retained earnings

(5,254)

7,706

Treasury stock at cost, 336,398 shares

(5,884)

(5,884)

Accumulated other comprehensive loss

(1,171)

(1,171)

Total shareholders' equity

99,514

111,764

Total liabilities and shareholders' equity

$

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 (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

September 30, 

September 30, 

Note

2023

2022

2023

2022

Sales, net

3

$

20,552

$

23,869

$

76,587

$

106,350

Cost of sales:

Production costs

18,957

19,380

59,109

61,176

Depreciation and amortization

5,790

6,609

19,518

19,829

Reclamation and remediation

216

58

611

181

Total cost of sales

24,963

26,047

79,238

81,186

Mine gross (loss) profit

(4,411)

(2,178)

(2,651)

25,164

Costs and expenses:

General and administrative expenses

1,764

1,799

5,087

5,618

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

(102)

450

502

1,617

Realized and unrealized (gain) loss on zinc zero cost collar

17

-

(218)

-

120

Other expense, net

18

1,967

765

4,147

1,817

Total costs and expenses

5,589

7,769

14,975

19,287

(Loss) income before income taxes

(10,000)

(9,947)

(17,626)

5,877

(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 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 (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, 2023 and 2022

Number of
Common
Shares

Par Value of
Common
Shares

Additional Paid-
in Capital

Retained

Earnings (accumulated deficit)

Treasury
Stock

Accumulated
Other
Comprehensive
Loss

Total
Shareholders'
Equity

Balance, June 30, 2022

88,709,090

$

89

$

110,480

$

22,488

$

(5,884)

$

(1,171)

$

126,002

Stock-based compensation

-

-

285

-

-

-

285

Common stock issued for vested restricted stock units

41,666

-

-

-

-

-

-

Dividends declared (1)

-

-

-

(884)

-

-

(884)

Unclaimed shares related to the Aquila acquisition

(16,249)

-

(29)

-

-

-

(29)

Net loss

-

-

-

(9,730)

-

-

(9,730)

Balance, September 30, 2022

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

Gold Resource Corporation—Condensed Consolidated Interim Financial Statements and Notes (Unaudited)
5

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, 2023 and 2022

Number of
Common
Shares

Par Value of
Common
Shares

Additional Paid-
in Capital

Retained

Earnings (accumulated deficit)

Treasury
Stock

Accumulated
Other
Comprehensive
Loss

Total
Shareholders'
Equity

Balance, December 31, 2021

88,675,172

$

89

$

110,153

$

17,563

$

(5,884)

$

(1,171)

$

120,750

Stock-based compensation

-

-

952

-

-

-

952

Net stock options exercised

-

-

(331)

-

-

-

(331)

Common stock issued for vested restricted stock units

80,169

-

-

-

-

-

-

Dividends declared (1)

-

-

-

(2,651)

-

-

(2,651)

Unclaimed shares related to the Aquila acquisition

(16,249)

-

(29)

-

-

-

(29)

Surrender of stock for taxes due on vesting

(4,585)

-

(9)

-

-

-

(9)

Net loss

-

-

-

(3,038)

-

-

(3,038)

Balance, September 30, 2022

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 (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, 

Note

2023

2022

Cash flows 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

(5,520)

(1,101)

Depreciation and amortization, including accretion in reclamation

19,586

19,936

Stock-based compensation

502

1,617

Other operating adjustments

21

1,210

(1,294)

Changes in operating assets and liabilities:

Accounts receivable

371

4,931

Inventories

1,580

(2,339)

Prepaid expenses and other current assets

300

(1,404)

Accounts payable and other accrued liabilities

(5,619)

(3,032)

Mining royalty and income taxes payable, net

(6,452)

(6,362)

Net cash (used in) provided by operating activities

(7,002)

7,914

Cash flows from investing activities:

Capital expenditures

(9,751)

(14,123)

Equity investment

-

(1,743)

Proceeds from the sale of gold and silver rounds

-

533

Net cash used in investing activities

(9,751)

(15,333)

Cash flows from financing activities:

Cash settlement of options exercise

-

(376)

Dividends paid

-

(2,651)

Proceeds from the ATM sales

56

-

Other financing activities

(23)

-

Net cash provided by (used in) financing activities

33

(3,027)

Effect of exchange rate changes on cash and cash equivalents

(249)

(735)

Net decrease in cash and cash equivalents

(16,969)

(11,181)

Cash and cash equivalents at beginning of period

23,675

33,712

Cash and cash equivalents at end of period

$

6,706

$

22,531

Supplemental Cash Flow Information

Income and mining taxes paid

$

7,064

$

16,411

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 (Unaudited)
7

GOLD RESOURCE CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

September 30, 2023
(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. 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 do not necessarily indicate 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, 2022 included in the Company’s annual report on Form 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 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

Additionally, the Company 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 (Unaudited)
8

Revision to the Condensed 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 Condensed Consolidated Balance Sheet (unaudited) as of 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.

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, 

2023

2022

2023

2022

(in thousands)

(in thousands)

Doré sales, net

Gold

$

417

$

1,517

$

2,685

$

5,245

Silver

19

46

120

123

Less: Refining charges

(3)

(18)

(45)

(35)

Total doré sales, net

433

1,545

2,760

5,333

Concentrate sales

Gold

7,273

7,592

25,844

35,983

Silver

4,900

4,266

18,082

15,497

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

(2,785)

(2,842)

(9,255)

(8,710)

Total concentrate sales, net

19,780

23,258

74,032

102,081

Realized (loss) gain - embedded derivative, net (1)

(633)

(1,212)

249

814

Unrealized gain (loss) - embedded derivative, net

972

278

(454)

(1,878)

Total sales, net

$

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 is $0.7 million loss and $0.4 million loss, respectively, related to these co-products for the three and nine months ended September 30, 2023. There is $0.9 million and $0.8 million gain,

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, 2022.

4. Inventories, net

At September 30, 2023 and December 31, 2022, inventories, net, consisted of the following:

As of

As of

September 30, 

December 31, 

2023

2022

(Unaudited)

(in thousands)

Stockpiles - underground mine

$

69

$

597

Concentrates

2,301

3,271

Doré, net

366

653

Subtotal - product inventories

2,736

4,521

Materials and supplies (1)

7,706

8,979

Total

$