Gold Resource Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Gold Resource operates the Don David Gold Mine (DDGM) in Oaxaca, Mexico; its Back Forty project in Michigan is at an advanced exploration/development stage. Financial statements are unaudited.
Financial and operating performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net sales | $20.6 million | $23.9 million | $76.6 million | $106.4 million |
| Mine gross profit (loss) | $(4.4) million | $(2.2) million | $(2.7) million | $25.2 million |
| Net income (loss) | $(7.3) million | $(9.7) million | $(13.0) million | $(3.0) million |
| Net loss per share | $(0.08) | $(0.11) | $(0.15) | $(0.03) |
- Q3 DDGM production and sales totaled 6,532 gold-equivalent ounces (3,982 gold ounces and 208,905 silver ounces). Gold, silver, copper, lead and zinc sales volumes were lower year over year; gold and silver grades and gold recovery also declined.
- Q3 total cash cost after co-product credits was $1,839 per AuEq ounce and consolidated all-in sustaining cost (AISC) was $2,669 per AuEq ounce. Nine-month figures were $1,210 and $1,852, respectively. These are non-GAAP measures and may not be comparable across companies.
- For the nine months, operating cash flow was $(7.0) million, investing cash flow $(9.8) million, and capital expenditures $9.8 million. Cash fell by $17.0 million from year-end 2022 to $6.7 million.
- At September 30, cash was $6.7 million, working capital $13.8 million, and the company reported no debt. Separately, the balance sheet includes $44.7 million of gold and silver stream-agreement liabilities; these are not described as conventional debt.
- Total assets were $189.7 million and total liabilities $90.2 million. Current assets were $28.9 million and current liabilities $15.1 million.
Changes versus comparable periods
- Q3 sales fell 14% year over year; nine-month sales fell 28%. Nine-month mine results shifted from $25.2 million gross profit to a $2.7 million gross loss, and the net loss widened by $10.0 million.
- Lower gold and base-metal grades, reduced sales volumes, lower zinc prices, higher power costs and the stronger Mexican peso pressured results. The company said gold grades are expected to trend toward the reserve estimate’s 1.14 g/t life-of-mine average; actual grades and recoveries may vary.
- Nine-month operating cash flow moved from $7.9 million provided in 2022 to $7.0 million used in 2023. Working capital declined $7.6 million from December 31, 2022.
- Quarterly net loss was smaller than in Q3 2022, primarily because of a larger income tax benefit; this did not prevent a quarterly mine gross loss.
Outlook, commentary and material items
- Management stated it expects liquidity to cover known obligations and potential cash requirements for the next 12 months. It also cited long-term Back Forty development and financing needs; project financing was not expected to be required before 2024.
- 2023 capital and exploration investment guidance was $15–18 million, including $9–11 million for sustaining investments and $6–7 million for growth investments. The filing does not provide a clear numerical production or earnings forecast.
- DDGM exploration continued with five drill rigs. Management described encouraging results and preliminary resource-estimate calculations showing potential tonnage and inferred-resource increases; these are not final reserve or production outcomes.
- Back Forty optimization work was completed, and a technical report summary was filed October 26, 2023. Management said the revised project economics were more robust and the plan avoided wetland impacts. Permitting, financing and development remain uncertain.
- The board initiated a formal strategic-alternatives review with outside advisers, including consideration of a potential sale. There is no stated timetable or assurance of an outcome.
- In October 2023, after quarter-end, Mexico’s tax authority notified the company of a 331 million peso sanction (approximately $18 million) related to a 2015 tax audit. Management is assessing the notice, believes the return was prepared correctly, and recorded no uncertain-tax-position liability as of September 30, 2023.
- Other notable items include $1.5 million of nine-month severance expense tied to workforce and leadership changes, suspension of quarterly dividends announced in February 2023, and an immaterial correction to prior-period deferred-tax balance-sheet presentation.
- Risks include metal-price and foreign-exchange volatility, operating costs and mine grades/recoveries, project permitting and financing, geological and operational uncertainty, and the unresolved Mexican tax matter. A community injunction concerning certain concessions remains without a final ruling; DDGM does not conduct the specified work on the affected lands.
Key facts for investors to verify
- Whether DDGM grades, recoveries, production volumes and unit costs improve or deteriorate, and how they compare with management’s mine-plan expectations.
- Cash consumption, liquidity and working-capital trends, including whether operations can remain self-funding at current production and metal prices.
- The status, potential financial exposure and any subsequent developments in the Mexican tax sanction notice.
- Back Forty permitting, project economics, financing requirements and the terms or outcome of the strategic-alternatives review.
- The nature and obligations of the $44.7 million stream-agreement liability, alongside the company’s statement that it has no debt.