2023
ANNUAL REPORT
Form 10K
Creating Value Responsibly, Respectfully and
Resourcefully
Letters to Shareholders
Dear Shareholders,
During 2023, a challenging year, the Board and Management team worked together focusing on the most important
operational issues that could improve performance and shareholder returns. These efforts resulted in a smaller and
more efficient workforce, management team and board of directors that will continue to align the company objectives
with shareholders’ interests without sacrificing on safety or corporate governance.
In 2024, we will continue to work through a lower than historical annual production output while we chart a course to
the higher-grade resources discovered in last year’s drilling campaign. Metal prices have been working in our favor
during the first quarter and more recently, the foreign exchanges rates have been improving as well that have a
positive economic impact on our Mexican operations.
We shall strive to maintain a safe, fair and diversified workplace, with attention to our environment stewardship along
with a continuance to contribute to our local communities in a significant way. Reflective of our 2024 objectives, there
has been little change to our compensation policies, and we have taken measures to limit stock-based compensation
and dilution during a period of share price underperformance.
To ensure the long-term success of the company, the board has mandated to management that capital resources,
which would otherwise have been applied to dividends, be redirected to our exploration program at the Don David
Gold Mine. We remain committed to a maintaining a disciplined balance sheet with a focus to expand our mineral
resources and cash balance through exploration, improved operational returns and potentially an accretive merger
and acquisition target.
We are grateful for the continued support of our shareholders and various stakeholders throughout 2023 and onto
2025.
Kind regards,
Ron Little
Interim Chair, Gold Resource Corporation
Letters to Shareholders
Dear Shareholders,
As the President and Chief Executive Officer of Gold Resource Corporation, I’m proud of the team that we have
established and what we accomplished during a very difficult year. Throughout the year, we continued to build on a
strong foundation for the Company and further identify the best path forward that will ensure sustainability of
operations and create long term value for our Gold Resource shareholders and the communities in which we operate.
I must reiterate that we have an excellent technical and management team and that we have the right people in
place to successfully drive Gold Resource Corporation as we move through and beyond 2024.
Exploration activities at our Mexico operation, the Don David Gold Mine, during 2023 resulted in positive results and
increased the grade of the material in reserves and resources. This exploration work will continue into 2024, including
in the areas of mineralization known as the Three Sisters, Gloria, and Morena areas, from which will form a large
part of the Company’s future. Steps have also been made during the year by our operations team to identify and
implement cost reduction practices and improve our existing processes and procedures. We have undergone a
series of testing throughout our plant to find ways to increase recovery and we are seeing positive results from this
review. We have also continued to significantly improve our adherence to safety standards and expand the training
programs for employees.
In October 2023, we published our preliminary economic analysis of the Back Forty project, and it confirmed our
initial assumptions of the project when we acquired it. The new project layout and mine plan has a much lower
environmental impact and carries a life of mine NPV at 6% discount of $215 million using very conservative
commodity prices and demonstrates the economic viability of the project. The company will continue to monitor the
economic environment to determine the best time to move forward with the Back Forty project.
For our stakeholder base, including our investors, our strategy is to provide optimal near and long-term value by
unlocking the full potential from our assets and execution on strategic growth opportunities. The foundation to
achieve this objective for near- and long-term will center around the Don David Gold Mine and identifying other
strategic growth opportunities. For Mexico operations, our focus is to identify and progress on highly prospective
underground exploration targets, optimize mine sequencing, and achieve maximum mill processing efficiencies.
Concerning other strategic growth opportunities, we will work to identify accretive targets with an emphasis on
leveraging bullish commodity prices, generating free cash flow, and limiting jurisdictional risk.
While we did experience some challenges in 2023, we were able to focus on areas within our control to continue to
lay out a strong foundation from which to deliver positive operational results and grow the Company. I look forward
to reporting on our progress throughout the year.
Kind regards,
Allen Palmiere
President & CEO, Gold Resource Corporation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For the transition period from __________ to ___________
Commission File Number: 001-34857
Gold Resource Corporation
(Exact name of registrant as specified in its charter)
Colorado
(State or other jurisdiction of
incorporation or organization)
84-1473173
(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:
Title of each class
Common Stock, $0.001 par value
Trading Symbol
GORO
Name of each exchange on which registered
NYSE American
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Securities registered pursuant to Section 12(g) of the Act:
None
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, smaller reporting company, or an emerging growth company. See definition of
“large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
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 the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The aggregate market value of the common stock of Gold Resource Corporation held by non-affiliates as of June 30, 2023, the last business day of the registrant’s most recently completed second
fiscal quarter, was $55,611,099 based on the closing price of the common stock of $0.63 as reported on the NYSE American.
As of March 20, 2024, there were 88,757,610 shares of the registrant’s common stock outstanding.
Portions of the Definitive Proxy Statement to be filed pursuant to Regulation 14A for the registrant’s 2024 annual meeting of shareholders will be filed no later than 120 days after the close of
Registrant’s fiscal year ended December 31, 2023, and are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
2023 Highlights
PART I
Business
ITEM 1:
Risk Factors
ITEM 1A:
ITEM 1C:
Cybersecurity
ITEM 1B: Unresolved Staff Comments
ITEM 2:
ITEM 3:
ITEM 4:
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
ITEM 5:
Market For Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 6:
ITEM 7:
ITEM 7A: Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
ITEM 8:
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9:
ITEM 9A:
Controls and Procedures
ITEM 9B: Other Information
ITEM 9C: Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
PART III
ITEM 10:
ITEM 11:
ITEM 12:
ITEM 13:
ITEM 14:
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
ITEM 15:
ITEM 16:
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
PART IV
Gold Resource Corporation
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2023 HIGHLIGHTS
Highlights for the full-year ended December 31, 2023 are summarized below and discussed further in our Management’s
Discussion and Analysis:
Corporate and Financial:
The Company closed the year with a $6.3 million cash balance as at December 31, 2023. The decrease of $17.4 million
from December 31, 2022 is mainly attributable to a cash outflow of $12.5 million for capital investments and a cash outflow
of $5.2 million from operating activities for 2023, which included $7.8 million of income tax payments for the tax years
2022 and 2023, exploration investment of $4.2 million at the Don David Gold Mine (“DDGM”), and $1.6 million in
spending on the Back Forty Project optimization work, offset by a $0.2 million increase in the value of cash due to the
strengthening of the peso.
Working capital at December 31, 2023, was $15.2 million, a 29% decrease from the December 31, 2022, working capital
of $21.4 million. The decrease is primarily driven by the decline in cash balance discussed above.
DDGM total cash costs (after co-product credits) and total all-in sustaining cost per gold equivalent (“AuEq”)1 ounce sold
were $1,250 and $1,630, respectively. See Item 7. 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.
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.
On February 13, 2023, the Company announced the suspension of future quarterly dividends to protect the balance sheet
and to focus capital resources on exploration and resource and reserve development.
In November 2023, the Company’s Board of Directors 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, which
is ongoing, is evaluating a broad range of options to maximize shareholder value, including a potential sale or merger of
the Company.
Don David Gold Mine:
The DDGM safety program aims to bolster the overall health and safety culture of our employees.
In 2023, two incidents resulting in lost time were recorded. Despite their low potential for harm, comprehensive
investigations were conducted, and requisite measures were implemented accordingly.
The full-year lost time injury frequency rate per million hours was 0.96, which is substantially below the 3.95 Camimex
(Mexican Chamber of Mines) benchmark.2
DDGM received the Mexican Empresa Socialmente Responsable (“ESR”) award in 2023 for the ninth consecutive year.
DDGM produced and sold a total of 31,085 gold equivalent ounces, comprising of 18,534 gold ounces and 1,036,229 silver
ounces, sold at an average price per ounce of $1,955 and $23.68, respectively.
During the year, our exploration program was executed as planned, maintaining a dual focus on both infill and expansion
drilling, with encouraging results from targets in the Switchback, Arista, and Three Sisters vein systems. The 2023
expansion (step-out) drilling program proved highly successful, culminating in the discovery of the Gloria vein system,
located immediately north of the Three Sisters system, as well as successfully testing the projected northern extensions of
the Splay 31 and Marena North veins of the Arista system.
The Company purchased over two thousand tonnes of tailings material for $0.3 million from a third-party mining operation
as a collaborative initiative with the local community at the end of 2022. Some of this material was processed in early 2023
to ensure the proper environmental treatment and storage of the material.
During the fourth quarter of 2023, negotiations were successfully undertaken to decrease the royalty fee from 5% to 3% for
the mining claims at La Tehuana, El Aguila, and Mina El Aire.
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 filed the Back Forty Project Technical Report Summary, which was prepared in accordance
with subpart 1300 of Regulation S-K (“S-K 1300”), as Exhibit 96.1 to the Form 8-K filed on October 26, 2023 (the “Back
Forty Project Technical Report Summary”). 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.
1 Gold equivalent is determined by taking gold ounces produced and sold, plus silver ounces produced and sold, converted to gold equivalent ounces
using the gold to silver average realized price ratio for the period.
2 Further information regarding the Mexican Chamber of Mines benchmark can be found at
https://camimex.org.mx/sostenibilidad2023/indicadores.html. Information contained therein is not a part of this report and is not incorporated by
reference herein.
Gold Resource Corporation
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FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. We use the words “anticipate,” “continue,” “likely,” “estimate,”
“expect,” “may,” “could,” “will,” “project,” “should,” “believe” and similar expressions (including negative and
grammatical variations) to identify forward looking statements. Such forward-looking statements include, without
limitation, statements regarding:
Our strategy for significant future investment in exploration and development activities in Oaxaca, Mexico;
The anticipated beneficial impacts of the dry stack tailings facility;
Our 2024 guidance for payable production, cash costs per ounce after co-product credits, and all-in sustaining
costs per ounce after co-product credits;
Expectations regarding 2024 DDGM and Back Forty investment;
Expectations regarding 2024 general and administrative costs;
The expected timing for the Back Forty Project, permitting, detailed engineering, and project financing;
Expectations regarding the likelihood of a successful mine permitting process at the Back Forty Project;
Expectations regarding sources and uses of cash during the twelve months ending December 31, 2024;
Future exploration plans at DDGM;
Compliance with existing legal and regulatory requirements, including future asset reclamation costs;
Estimates of Mineral Resources (“Mineral Resources”) and Mineral Reserves (“Mineral Reserves”);
The sufficiency of our water rights;
Our expectations regarding the future payment of dividends;
Our expectation for the outcome of the 2015 DDGM tax audit;
Anticipated grades from future production at DDGM;
Our ability to locate another customer to purchase our products if the relationship with our existing customers
is interrupted; and
Our ability to satisfy our obligations and other potential cash requirements over the next twelve months.
Forward-looking statements are neither historical facts nor assurances of future performance. Rather, they are based
only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies,
projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements
relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to
predict, and many of which are outside of our control. Our actual results and financial condition may differ materially
from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking
statements. Important factors that could cause our actual results and financial condition to differ materially from those
indicated in the forward-looking statements include, among others, the following:
The extent of the impact of any pandemic, including the duration, spread, severity, and any repeated resurgence
of a pandemic, the duration and scope of related government orders and restrictions, the impact on our
employees, and the extent of the impact of a pandemic on our mining operations;
Commodity price fluctuations;
Mine protests and work stoppages;
Rock formations, faults and fractures, water flow, possible CO2 gas exhalation, or other unanticipated
geological challenges;
Unexpected changes in business and economic conditions, including supply chain challenges, the rate of
inflation, and their impact on operating and capital costs;
Changes in interest rates and currency exchange rates;
The Company’s inability to secure financing when needed;
Adverse technological changes and cybersecurity threats;
Unanticipated increases in our operating costs and other costs of doing business;
Access to land and availability of materials, equipment, supplies, labor and supervision, power, and water;
Gold Resource Corporation
3
Interpretation of drill hole results and the geology, grade, and continuity of mineralization;
Results of current and future feasibility studies;
Litigation by private parties or regulatory action by governmental entities;
Acts of God, such as floods, earthquakes, and any other natural disasters;
The uncertainty of Mineral Resource and Mineral Reserve estimates; and
Such other factors are discussed below under “Risk Factors”.
Many of these factors are beyond our ability to control or predict. Although we believe that the expectations
reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be
materially incorrect due to known and unknown risks and uncertainties. You should not unduly rely on any of our forward-
looking statements. These statements speak only as of the date of this annual report on Form 10-K. Except as required by
law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or
developments. All subsequent written and oral forward-looking statements attributable to us and persons acting on our
behalf are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this annual
report on Form 10-K.
Gold Resource Corporation
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ITEM 1.
BUSINESS
History and Organization
PART I
In this report, “Company,” “GRC,” “our,” “us,” and “we” refer to Gold Resource Corporation together with its
subsidiaries, unless the context otherwise requires. See Item 2. Properties—Glossary for additional definitions.
Gold Resource Corporation was organized under the laws of Colorado, USA on August 24, 1998. Since 2010, GRC
has produced gold and silver doré and copper, lead, and zinc concentrates in Oaxaca, Mexico at our subsidiary, Don David
Gold Mexico S.A. de C.V. (“Don David Gold Mine” or “DDGM”). The Don David Gold Mine holds six (6) properties
which are all located in what is known as the San Jose structural corridor. Our properties span 55 continuous kilometers
of this structural corridor, which include three historic mining districts in Oaxaca.
On December 10, 2021, the Company successfully completed the acquisition of all the issued and outstanding
common shares of Aquila Resources Inc (the “Aquila Transaction”). Aquila’s principal asset is its 100% interest in the
Back Forty Project located in Menominee County, Michigan, USA. The Back Forty Project has a polymetallic (gold,
silver, copper, lead, and zinc) Volcanogenic Massive Sulfide deposit. The Back Forty Project controls surface and mineral
rights through ownership and leases with the State of Michigan. 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 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 that could lead to the development of the 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 is evaluating 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
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Mexico Production Stage Properties:
The primary production stage properties at DDGM commenced operations in 2010. The current operations include
the Arista underground mine and the DDGM processing facility. The DDGM processing facility currently produces doré
and metal concentrates from ore mined at the Arista Mine. The Arista Mine was expanded in 2016 with the development
of the Switchback vein system. The Arista Mine portal is located approximately two kilometers from the processing
facility. Additionally, underground mining at the Alta Gracia mine was conducted from 2017 to 2019. Alta Gracia is
approximately 32 kilometers from the processing facilities.
The Arista and Alta Gracia mines include a total of approximately 30,000 hectares of mining concessions, access
roads from a major highway, haul roads, a processing facility and adjoining buildings, an assay lab, a now depleted open
pit, underground mines, tailings facilities, and other infrastructure. Please see Item 2. Properties for additional information.
Mexico Exploration Prospects:
The current company land package sits within the highly prospective 55-kilometer-long San Jose structural corridor,
in Oaxaca, Mexico. Multiple volcanic domes of various scales, and likely non-vented intrusive domes, dominate the district
geology. These volcanogenic features are imposed on a pre-volcanic basement of sedimentary rocks. Gold and silver, as
well as base metal mineralization in this district is related to the manifestations of this classic volcanogenic system and is
considered epithermal in character. The Company intends to advance organic growth and to unlock the value of the mine,
existing infrastructure, and our large property position by continuing to invest in exploration and development. Please see
Item 2. Properties for additional information.
Gold Resource Corporation
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Back Forty Project:
Processing Plant at Night
There is a long history of exploration at the Back Forty Project. After acquisition of Aquila and the Back Forty
Project by the Company in 2021, optimization work was initiated to address the mine’s footprint, potential for an
underground mine, wetland mitigation, and other key construction and design decisions. This optimization work related
to a change in mine design, tailings relocation, metallurgy, and the economic model was completed, and the Company
filed the Back Forty Project Technical Report Summary 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 that could lead to the development of the
Project. Please see Item 2. Properties for additional information.
Before the Aquila Transaction, Aquila’s common shares were traded on the Toronto Stock Exchange (“TSX”) under
the ticker symbol AQA. Effective December 10, 2021, Aquila ceased to be a reporting issuer in British Columbia, Alberta,
Saskatchewan, Ontario, and Nova Scotia. At the same time, GRC became a reporting issuer in British Columbia, Alberta,
Saskatchewan, Ontario, and Nova Scotia by virtue of the completion of the acquisition. As a Canadian Issuer, GRC is now
required to file reports on the System for Electronic Document Analysis and Retrieval (“SEDAR”) in Canada. All financial
statements filed on SEDAR will conform to United States Generally Accepted Accounting Principles (“U.S. GAAP”).
Administrative Offices:
Our principal executive offices are located at 7900 E. Union Ave, Suite 320, Denver, Colorado 80237, and our
telephone number is (303) 320-7708. The Company maintains a website at www.goldresourcecorp.com. Information on
our website is not incorporated into this annual report on Form 10-K and is not a part of this report. The U.S. Securities
Gold Resource Corporation
7
and Exchange Commission (“SEC”) maintains an internet site (www.sec.gov) on which the reports that we file with the
SEC are available to review. The SEC filings can also be accessed through our website.
2023 Developments
For the year ended December 31, 2023, the Company reported a net loss of $16.0 million. The loss is mainly
attributable to a high inflationary environment and the strengthening of the Mexican Peso, which resulted in higher
production and capital costs (including but not limited to energy, payroll, services, and equipment costs). Financial results
for 2023 include revenue of $97.7 million and mine gross loss of $5.3 million. The Company achieved solid production
results for the year totaling 20,328 gold ounces, 1,142,138 silver ounces, 1,287 copper tonnes, 5,068 lead tonnes, and
13,513 zinc tonnes, as planned, despite achieving lower production than in 2022 due to mine planning.
For the ninth consecutive year, the DDGM received the
prestigious ESR award from the Mexican Center for Philanthropy
(“CEMEFI”). Awards are given to organizations that demonstrate a
commitment to supporting social and environmental protection
programs within their local communities.
Our 2023 exploration activities were focused on drilling at
the Arista and Switchback vein systems in the Arista Mine. During
the year, we completed 168 underground diamond drill holes
totaling 36,350 meters, including 18 expansion drill holes totaling
10,293 meters and 150 infill drill holes totaling 26,057 meters in the
Arista mine. In addition to exploration drilling, 520 meters of drift
development was completed to support the expansion and infill
drilling programs.
During 2023, exploration was strategically directed towards
infill and expansion drilling of multiple high-grade, polymetallic
epithermal veins within the Switchback vein system, both up- and
down-dip and along strike of existing workings, as well as in the
Three Sisters and newly discovered Gloria vein systems to define
additional Mineral Reserves and Mineral Resources. The Gloria
vein system, located near existing mine infrastructure and comprised
of no fewer than three distinct veins, is located between and north of
the Arista and Switchback vein systems. Both the Gloria and Three
Sisters vein systems will be a primary focus of the 2024 drilling
program. The 2023 drilling program successfully targeted the
expansion of the Arista vein system along strike to the north-west,
with particular focus on the Splay 31 and Marena North veins, to
define additional Mineral Resources. Surface exploration activity during 2023 focused on the Alta Gracia property with
the interpretation of surface mapping and soil geochemistry results received late 2022. This work has identified several
targets for future follow-up exploration activity. Our continued investment in exploration efforts demonstrate our
commitment to long-term investment in Oaxaca, Mexico.
Ninth consecutive ESR award
For the Back Forty Project, work in 2023 focused on the optimization of the mine design, project layout, metallurgy,
and the economic model which was completed and filed by the Company in a Technical Report Summary 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 that could lead to the development of the Project.
In June 2023, the petition by the Menominee Indian Tribe of Wisconsin (“MITW”) to have an area along the
Menominee River registered as a cultural landscape with the Keeper of the National Register of Historic Places was
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approved. Anaem Omot is an area around the Menominee River known as the Sixty Islands. This area is known to have
culturally significant archeological findings. The Company helped identify these artifacts to ensure that proper procedures
are deployed to protect cultural resources and to avoid and mitigate intrusions to the cultural landscape, as required. In
addition to identifying these culturally significant resources, the Company has incorporated them into the Back Forty
Project designs and permitting strategy.
We are also monitoring the U.S. Army Corps of Engineers’ review of a petition by the MITW to have the
Menominee River designated as Navigable under Section 10 of the Rivers and Harbor Act. The MITW asked the
Environmental Protection Agency and the U.S. Army Corps of Engineers’ to revisit whether they—as opposed to the state
of Michigan—should exercise authority over Aquila’s Back Forty permit applications. In response to a petition from the
MITW, the U.S. Army Corps of Engineers is updating its navigability study on the Menominee River, which is expected
to be completed in 2025.
2024 Guidance
The Company’s focus continues to be on unlocking the value of the Arista mine, existing infrastructure, and large
property position in Oaxaca, Mexico.
Measure
Metals Produced & Sold
Cash Costs after co-product credits per gold
equivalent AuEq ounce (1)
2024 Guidance
13,000 to 15,000 Gold Ounces
1,250,000 to 1,400,000 Silver Ounces
29,500 to 31,500 Gold Equivalent Ounces
$1,100 to $1,300
All-in Sustaining Costs after co-product
credits per AuEq ounce (1) (2)
DDGM: $1,450 to $1,650
Consolidated: $1,600 to $1,800
Capital Investment
Exploration Investment
$6.8 to $8.0 million (Sustaining Capital)
$2.0 to $3.0 million (Sustaining Capitalized Exploration)
$0.5 to $0.8 million (Non-Sustaining Capitalized Exploration)
DDGM: $2.0 to $3.5 million (Non-Sustaining Exploration Expense)
Back Forty: $0.7 to $0.9 million
General and Administrative Costs (“G & A”)
$5.0 to $6.0 million, excluding Stock-based Compensation
(1) Calculations of cash cost after co-product credits per gold equivalent ounce and all-in sustaining cost after co-product credits per gold
equivalent ounce are non-GAAP financial measures. Please see Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Non-GAAP Measures below for a complete reconciliation of the non-GAAP measures to U.S. GAAP.
(2) Co-product credits directly impact the Cash Costs and AISC per AuEq ounce calculation. Guidance is based on approximately 3,600 tonnes
of lead sold at a $0.95 per pound metal price, approximately 1,000 tonnes of copper sold at a $3.80 per pound metal prices, and approximately
10,200 tonnes of zinc sold at a $1.15 per pound metal price.
The table above contains forward-looking projections about our financial condition, results of operations, and
business. These projections are subject to numerous assumptions, risks, and uncertainties, which are discussed in Item 1A.
Risk Factors. Because these projections are subject to risks and uncertainties, actual results may differ materially from
those expressed or implied. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Non-GAAP Measures below for a discussion of the calculation of Cash Costs per Ounce and All-in Sustaining
Costs per Ounce, which are non-GAAP measures.
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Dividends
In February 2023, we announced the suspension of our quarterly dividend until such time that it may become
practicable to reinstate. Please see Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchase of Equity Securities for additional information regarding our Dividend Policy.
Insurance
Our business is capital intensive and requires ongoing investment for the replacement, modernization, or expansion
of equipment and facilities. For more information, please see Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources below. We maintain insurance policies against
property loss and business interruption and insure against most risks that are typical in the operation of our business in
amounts that we believe to be reasonable. Such insurance, however, contains exclusions and limitations on coverage,
particularly with respect to property loss, environmental liability, and political risk. There can be no assurance that claims
would be paid under such insurance policies in connection with a particular event. Please see Item 1A. Risk Factors below
for additional information.
Competitive Business Conditions
The acquisition of gold and silver properties is subject to intense competition. Identifying and evaluating potential
mining prospects is a costly and time-consuming endeavor. In 2021, we successfully acquired the Back Forty Project as
discussed above. We expect to continue our significant investment in exploration and growth activities in the future;
however, competition for acquiring mineral prospects will continue to be intense.
Government Regulations and Permits
In connection with mining, milling, and exploration activities in Mexico, we are subject to Mexican federal, state,
and local laws and regulations governing the protection of the environment, including laws and regulations relating to the
protection of air and water quality, hazardous waste management, mine reclamation, as well as the protection of
endangered or threatened species. The government department responsible for environmental protection in Mexico is
Secretaria de Medio Ambiente y Recursos Naturales (“SEMARNAT”). SEMARNAT has broad authority over
environmental regulations and standards. Potential areas of environmental consideration for mining companies, such as
ours, include but are not limited to acid rock drainage, cyanide containment and handling, contamination of water sources,
dust, and noise.
For operations at our Don David Gold Mine, we have secured and continue to maintain various regulatory permits
from federal, state, and local agencies. These governmental and regulatory permits generally govern the processes being
used to operate, the stipulations concerning air quality, water issues, hazardous and waste management, and the plans and
obligations for reclamation of the properties at the conclusion of operations. These laws and regulations are continually
changing and are generally becoming more restrictive.
Our production stage mines in Mexico have reclamation plans in place that we believe meet all applicable legal and
regulatory requirements. As of December 31, 2023, $11.4 million has been accrued on our Consolidated Balance Sheets
for reclamation costs relating to our production and exploration stage properties in Mexico. In addition, we accrued $0.4
million for drill-hole capping in Michigan.
The State of Michigan has been delegated authority under federal environmental law to issue all necessary
environmental permits required for the Back Forty project. The State of Michigan’s “Natural Resource Environmental
Protection Act” provides rules and regulations for the State Department of Environment, Great Lakes and Energy (EGLE)
to issue permits for mining, treated wastewater discharge, air emissions, and related environmental permits necessary for
the project.
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Customers
During the year ended December 31, 2023, three customers accounted for 98% of our revenue from DDGM. In the
event that our relationship with any of the customers is interrupted for any reason, we believe that we would be able to
locate another entity to purchase our products in a timely manner on substantially similar terms. However, any interruption
could temporarily disrupt the sale of our principal products and materially adversely affect our operating results. We
periodically review our options for alternative sales outlets to mitigate the concentration of risk in case of any unforeseen
disruptions.
Human Capital Resources
We value excellence and recognize that embracing the diverse backgrounds, skills, and perspectives of the local
workforce will lead to a competitive advantage. We are committed to leading by example and maintaining a fair and
inclusive work environment built on mutual respect and integrity. Diversity means understanding, accepting, respecting,
and valuing differences among people regardless of age, gender, race, ethnicity, culture, religion or spiritual practices,
disabilities, sexual orientation, gender identity, family status, or veteran status.
We believe we have good morale and a dedicated workforce. Our human capital resources objectives include, as
applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing employees and new hires. The
principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees and directors by
granting stock-based compensation awards that align employee compensation with shareholder returns.
DDGM Employee Housing
As of December 31, 2023, the Company had 488 employees at DDGM. There were 16 full-time corporate
employees, three of whom serve as executive officers, and three full-time employees in Michigan who are fully dedicated
to progressing the Back Forty Project.
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ITEM 1A.
RISK FACTORS
Our business, and the mining industry in general, is influenced by significant risks and uncertainties. These risks
include those described below and may include additional risks and uncertainties not presently known to us or that we
currently deem immaterial. Our business, financial condition, and results of operations could be materially adversely
affected by any of these risks, and the trading price of our common stock could decline by virtue of these risks. These risks
should be read in conjunction with the other information in this annual report on Form 10-K.
Financial Risks
Our results of operations, cash flows, and the value of our properties are highly dependent on the market prices
of gold, silver, and certain base metals, and these prices can be volatile.
The profitability of our mining operations and the value of our mining properties are directly related to the market
price of gold, silver, copper, lead, and zinc. The price of gold and silver may also significantly influence the market price
of our common stock. The market prices of these metals historically have fluctuated significantly and are affected by
numerous factors beyond our control, including (i) global or regional consumption patterns; (ii) supply of and demand for
silver and gold on a worldwide basis; (iii) speculative and hedging activities; (iv) expectations for inflation; (v) political
and economic conditions; (vi) supply of, and demand for, consumables required for extraction and processing of metals,
and (vii) general economic conditions worldwide. Over the last five years (as reported on the London Bullion Market
Association using the London PM Fix for gold and silver), gold prices have fluctuated from a low of $1,270 per ounce to
a high of $2,078 per ounce, and silver prices have fluctuated from a low of $12.01 per ounce to a high of $29.59 per ounce.
On December 28, 2023, The London PM Fix gold price was $2,078 per ounce and on December 29, 2023, the London PM
silver price was $23.79 per ounce.
Currently, we do not use hedging transactions with respect to any of our metal production. Accordingly, we are
fully exposed to price fluctuations in precious metals. In the event metal prices decline or remain low for prolonged periods
of time, we might be unable to develop our exploration properties, which may materially adversely affect our results of
operations, financial performance, and cash flows. An asset impairment charge may result from the occurrence of
unexpected adverse events that impact our estimates of expected cash flows generated from our mining operations or the
market value of our non-producing properties, including a material diminution in the price of metals.
We may not achieve profitability.
Our DDGM property is the only property we own that produces revenue, and it may not generate sufficient cash
flow to cover our operating, development, exploration, general and administrative, and other costs due to certain risk
factors. Unexpected interruptions in our mining business may cause us to incur losses, or the revenue that we generate
from extraction may not be sufficient to fund continuing operations, including exploration and mine development costs.
Our failure to generate future profits may materially adversely affect the price of our common stock, and stockholders may
lose all or part of their investment. Metal prices and foreign currency rates have a significant impact on our profit margin,
and there is no assurance that we will be profitable in the future. Please see Item 1A. Risk Factors—General Risks – Our
results of operations, cash flows, and the value of our properties are highly dependent on the market prices of gold, silver,
and certain base metals and these prices can be volatile.
We may not have access to sufficient future capital.
We may be required to expend significant funds to develop, access, and determine if Mineral Reserves exist at any
of our non-producing properties, continue exploration, and if warranted, develop our existing properties and identify and
acquire additional properties to diversify our property portfolio.
Our ability to obtain necessary funding for these purposes, in turn, depends upon several factors, including our
historical and prospective results of operations, the status of the national and worldwide economy, the price of gold, silver,
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and other metals, the condition of the debt and equity markets, the costs associated with extracting and acquiring minerals,
and the market value for our common stock. We may not be successful in generating or obtaining the required financing,
or if we can obtain such financing, such financing may not be on terms that are favorable to us and our shareholders. We
also may be unable to obtain funding by monetizing additional non-core exploration or other assets at an acceptable price.
We cannot provide assurance we will be able to obtain financing to fund our general and administrative costs and
other working capital needs to fund our continuing business activities in the future on favorable terms or at all. Failure to
obtain financing could result in delay or indefinite postponement of further mining operations, exploration, and
construction, as well as the possible partial or total loss of our interest in our properties.
Our ability to recognize the benefits of deferred tax assets is dependent on future cash flows and taxable income.
We recognize deferred tax assets when the tax benefit is more likely than not to be realized; otherwise, a valuation
allowance is applied against deferred tax assets. Assessing the recoverability of deferred tax assets requires management
to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based
on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that
future cash flows and taxable income differ significantly from estimates, our ability to realize the deferred tax assets could
be impacted. Additionally, future changes in tax laws could limit our ability to realize the future tax benefits represented
by our deferred tax assets.
Our accounting and other estimates may be imprecise.
Preparing financial statements requires management to make estimates and assumptions that affect the reported
amounts and related disclosure of assets, liabilities, revenue, and expenses at the date of the consolidated financial
statements and reporting periods. The more significant areas requiring the use of management assumptions and estimates
relate to:
Mineral Resources that are the basis for future income and cash flow estimates;
Mineral Reserves that are the basis for units-of-production depreciation, depletion, and amortization
calculations;
Future ore grades, throughput, and recoveries;
Future metals prices;
Future capital and operating costs;
Environmental, reclamation, and closure obligations;
Gold and Silver Stream Agreements;
Contingent Consideration Liabilities;
Permitting and other regulatory considerations;
Asset impairments;
The valuation of our investments in equity securities;
Asset acquisition accounting, including the valuation of the transaction and related instruments;
Future foreign exchange rates, inflation rates, and applicable tax rates; and
Deferred tax asset valuation allowance.
Future estimates and actual results may differ materially from these estimates as a result of using different
assumptions or conditions. For additional information, see Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
We may be required to repay a significant amount if we default under certain gold and silver stream agreements.
In connection with the Aquila Transaction, the Company assumed substantial liabilities related to the gold and silver
stream agreements with Osisko Bermuda Limited (“Osisko”). 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
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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 upon date, it may be required
to repay the deposit plus accumulated interest at a rate agreed with Osisko. If the Company fails to do so, Osisko may elect
to enforce its remedies as a secured party and take possession of the assets that comprise the Back Forty Project.
Operational Risks
Our production is derived from a single operating unit, and any interruptions or stoppages in our mining
activities at that operating unit would materially adversely affect our revenue.
We are dependent on revenues from a single operating unit to fund our operations. Any interruption in our ability
to mine this location, such as a labor strike, natural disaster, or loss of permits would negatively impact our ability to
generate revenue following such interruption. Additionally, if we are unable to develop additional mines economically,
we will eventually deplete the body of mineralized material and will no longer generate cash flow sufficient to fund our
operations. A decrease in, or cessation of, our mining operations at this operating unit would materially adversely affect
our financial performance and may eventually cause us to cease operations.
Since our current property portfolio is limited to one operating unit, our ability to be profitable over the long-
term will depend on our ability to (1) expand the known Arista and Switchback vein systems and /or identify, explore,
and develop additional properties in Mexico, (2) successfully develop the Back Forty Project in Michigan, USA, or (3)
acquire and develop an alternative project.
Gold and silver producers must continually replace reserves depleted by production to maintain production levels
over the long-term and provide a return on invested capital. Depleted reserves can be replaced in several ways, including
expanding known ore bodies, locating new deposits, or acquiring interests in reserves from third parties. Exploration is
highly speculative in nature, capital intensive, involves many risks, and frequently unproductive. Our current or future
exploration programs may not result in new mineralization. Even if significant mineralization is discovered, it will likely
take many years from the initial phases of exploration until commencement of production, during which time the economic
feasibility of production may change.
From time to time, we may acquire mineral interests from other parties. Such acquisitions are based on an analysis
of a variety of factors, including historical exploration results, estimates and assumptions regarding the extent of
mineralized material and/or reserves, the timing of production from such reserves, and cash and other operating costs. In
addition, we may rely on data and reports prepared by third parties, which may contain information or data that we are
unable to independently verify or confirm. All of these factors are uncertain and may impact our ability to develop the
mineral interests.
As a result of these uncertainties, our exploration programs and any acquisitions which we may pursue may not
result in the expansion or replacement of our current production with new ore reserves or operations, which could have a
material adverse effect on our business, prospects, results of operations, and financial position.
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Increased operating and capital costs could materially adversely affect our results of operations.
Costs at our mining properties are subject to fluctuation due to a number of factors, such as variable ore grade,
changing metallurgy, and revisions to mine plans in response to the physical shape and location of the ore body, as well
as the age and utilization rates for the mining and processing-related facilities and equipment. In addition, costs are affected
by the price and availability of input commodities, such as fuel, electricity, labor, chemical reagents, explosives, steel,
concrete, and mining and processing related equipment and facilities. Commodity costs are often subject to volatile price
movements, including increases that could make mineral extraction less profitable. Further, changes in laws and
regulations can affect commodity prices, uses, and transport. Reported costs may also be affected by changes in accounting
standards. A material increase in costs could significantly affect our results of operations and operating cash flow.
We could have significant increases in capital and operating costs over the next several years in connection with
developing new projects in challenging jurisdictions and sustaining and/or expanding existing mining and processing
operations. Costs associated with capital expenditures may increase in the future as a result of factors beyond our control,
such as inflation. Increased capital expenditures may have an adverse effect on the results of operations and cash flow
generated from existing operations, as well as the economic returns anticipated from new projects, or may make the
development of future projects uneconomic.
Competition in the mining industry is intense, and we have limited financial and personnel resources with which
to compete.
In the mining industry, competition for desirable properties, investment capital, and human capital is intense.
Numerous companies headquartered in the United States, Canada, and worldwide compete for properties and human
capital on a global basis. We are a small participant in the mining industry due to our limited financial and human capital
resources. We presently operate with a limited number of people, and we anticipate operating in the same manner going
forward. We compete with other companies in our industry to hire qualified employees and consultants when needed to
operate our mines successfully and to advance our exploration properties. We may be unable to attract the necessary human
capital to fully explore, and if warranted, develop our properties and be unable to acquire other desirable properties. We
believe that competition for acquiring mineral properties, as well as the competition to attract and retain qualified human
capital, will continue to be intense in the future.
Estimates of proven and probable Mineral Reserves and measured and indicated Mineral Resources are
uncertain, and the volume and grade of ore actually recovered may vary from our estimates.
The proven and probable Mineral Reserves stated in this report represent the amount of gold, silver, copper, lead,
and zinc that we estimated at December 31, 2023, that could be economically and legally extracted or produced at the time
of the reserve determination. Estimates of proven and probable Mineral Reserves and measured and indicated Mineral
Resources are subject to considerable uncertainty. Such estimates are largely based on the prices of gold, silver, copper,
lead, and zinc, as well as interpretations of geologic data obtained from drill holes and other exploration techniques. These
prices and interpretations are subject to change. If we determine that certain of our estimated Mineral Reserves or Mineral
Resources have become uneconomic, we may be forced to reduce our estimates. Actual production from proven and
probable Mineral Reserves may be significantly less than we expect. There can be no assurance that estimates of Mineral
Resources will be upgraded to Mineral Reserves or may ultimately be extracted.
Any material changes in Mineral Reserve or Mineral Resource estimates and grades of mineralization may affect
the economic viability of our current operations, our decision to place a new property into production, and/or such
property’s return on capital. There can be no assurance that mineral recoveries in small-scale laboratory tests will be
duplicated in a large-scale on-site operation in a production environment. Declines in market prices for contained metals
may render portions of our Mineral Reserve or Mineral Resource estimates uneconomic and result in reduced reported
mineralization or materially adversely affect the commercial viability of one or more of our properties. Any material
reductions in estimates of mineralization, or of our ability to extract this mineralization, could have a material adverse
effect on our results of operations or financial condition.
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Products processed from our operating mines or other mines in the future could contain higher than expected
contaminants, thereby negatively impacting our financial condition.
Contracts for treatment charges paid to smelters and refineries include penalties for certain deleterious elements that
exceed contract limits. If the material mined from our operating mines includes higher than expected contaminants, this
will result in higher treatment expenses and penalty charges that could increase our costs and negatively impact our
business, financial condition, and results of operations. This could occur due to unexpected variations in the occurrence of
these elements in the material mined, problems that occur during blending of material from various locations in the mine
prior to processing, and other unanticipated events.
Continuation of our mining and processing activities is dependent on the availability of sufficient water supplies
to support our mining activities.
Water is critical to our business, and the increasing pressure on water resources requires us to consider both current
and future conditions in our management approach. Across the globe, water is a shared and regulated resource. Mining
operations require significant quantities of water for mining, ore processing, and related support facilities. Many of our
properties in Mexico are in areas where water is scarce, and competition among users for continuing access to water is
significant. Continuous production and mine development depend on our ability to acquire and maintain water rights and
defeat claims adverse to current water use in legal proceedings. Although we believe that our operations currently have
sufficient water rights and claims to cover operating demands, we cannot predict the potential outcome of future legal
proceedings relating to water rights, claims, and uses. Water shortages may also result from weather or environmental and
climate impacts beyond our control. Shortages in water supply could result in production and processing interruptions. In
addition, the scarcity of water in certain regions could result in increased costs to obtain sufficient quantities of water to
conduct our operations. The loss of some or all water rights, in whole or in part, ongoing shortages of water to which we
have rights, or significantly higher costs to obtain sufficient quantities of water (or the failure to procure sufficient
quantities of water) could result in our inability to maintain mineral extraction at current or expected levels, require us to
curtail or shut down mining operations, and prevent us from pursuing expansion or any development opportunities. Laws
and regulations may be introduced in some jurisdictions where we operate, which could also limit access to sufficient
water resources, thus materially adversely affecting our operations.
The nature of mineral exploration, mining, and processing activities involves significant hazards, a high degree
of risk, and the possibility of uninsured losses.
Exploration for and the production of minerals is highly speculative and involves greater risk than many other
businesses. Many exploration programs do not result in the discovery of mineralization, and any mineralization discovered
may not be of sufficient quantity or quality to be profitably mined. Our operations are, and any future mining operations
or construction we may conduct will be, subject to all of the operating hazards and risks normally incident to exploring for
and mining of mineral properties, such as, but not limited to:
Fluctuation in production costs that make mining uneconomic;
Fluctuation in commodity prices;
Social, community, or labor force disputes resulting in work stoppages or delays, or related loss of social
acceptance of community support;
Changes to legal and regulatory requirements;
Unanticipated variations in grade and other geologic problems;
Environmental hazards, noxious fumes, and gases;
Ground and water conditions;
Difficult surface or underground conditions;
Industrial accidents;
Security incidents;
Failure of unproven or evolving technologies or loss of information integrity or data;
Metallurgical and other processing problems;
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Mechanical and equipment performance problems;
Failure of pit walls, dams, declines, drifts, and shafts;
Unusual or unexpected rock formations;
Personal injury;
Pandemics;
Fire, flooding, cave-ins, seismic activity, landslides, or other inclement weather conditions, including those
impacting operations or the ability to access and supply sites; and
Decrease in the value of mineralized material due to lower gold, silver, and metal prices.
These occurrences could result in damage to—or destruction of—mineral properties, processing facilities, and
equipment; personal injury or death; environmental damage; reduced extraction and processing; delays in mining; asset
write-downs; monetary losses; and possible legal liability. Although we maintain insurance in amounts that we consider
reasonable for general commercial liability claims, physical assets at our Arista and Alta Gracia mines, and risks inherent
in the conduct of our business, this insurance contains exclusions and limitations on coverage and will not cover all
potential risks associated with mining and exploration activities. As such, the related liabilities might exceed policy limits.
As a result of any or all of the foregoing, we could incur significant liabilities and costs that may exceed the limits of our
insurance coverage or that we may elect not to insure against because of premium costs or other reasons, which could
materially adversely affect our results of operations and financial condition. We may also not be insured against all
interruptions to our operations. Losses from these or other events may cause us to incur significant costs which could
materially adversely affect our financial condition and our ability to fund activities on our properties. A significant loss
could force us to reduce or suspend our operations and development.
Revenue from the sale of metal concentrate may be materially adversely affected by loss or damage during
shipment and storage at our buyer’s facilities.
We rely on third-party transportation companies to transport our metal concentrate to the buyer’s facilities for
processing and further refining. The terms of our sales contracts with the buyers require us to rely, in part, on assay results
from samples of our metal concentrate that are obtained at the buyer’s warehouse to determine the final sales value for our
metals. Once the metal concentrate leaves our processing facility, we no longer have direct custody and control of these
products. Theft, loss, road accidents, improper storage, fire, natural disasters, tampering, or other unexpected events while
in transit or at the buyer’s location may lead to the loss of all or a portion of our metal concentrate products. Such losses
may not be covered by insurance and may lead to a delay or interruption in our revenue, and as a result, our operating
results may be materially adversely affected.
A significant delay or disruption in sales of doré or concentrates as a result of the unexpected disruption in
services provided by smelters or refiners could have a material adverse effect on results of operations.
We rely on third-party smelters and refiners to refine and process and, in some cases, purchase, the gold and silver
doré and copper, lead, and zinc concentrate produced from our mines. Access to smelters and refiners on economic terms
is critical to our ability to sell our products to buyers and generate revenues. We periodically enter into agreements with
smelters and refiners, some of which operate their smelting or refining facilities outside the United States, and we believe
we currently have contractual arrangements with a sufficient number of smelters and refiners so that the loss of any one
refiner or smelter would not significantly or materially impact our operations or our ability to generate revenues.
Nevertheless, services provided by a refiner or smelter may be disrupted by operational issues, new or increased tariffs,
duties or other cross-border trade barriers, the bankruptcy or insolvency of one or more smelters, or refiners or the inability
to agree on acceptable commercial or legal terms with a refiner or smelter. Such an event or events may disrupt an existing
relationship with a refiner or smelter, or result in the inability to create a contractual relationship with a refiner or smelter,
which may leave us with limited, uneconomical, or no access to smelting or refining services for short or long periods of
time. Any such delay or loss of access may significantly impact our ability to sell doré and concentrate products. We
cannot ensure that alternative smelters or refiners would be available or offer comparable terms if the need for them arose
or that we would not experience delays or disruptions in sales that would materially adversely affect the results of
operations.
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We rely on contractors to conduct a significant portion of our exploration, development, and construction
projects.
A significant portion of our development and construction projects are currently conducted in whole or in part by
contractors. As a result, our operations are subject to a number of risks, some of which are outside our control, including:
Negotiating agreements with contractors on acceptable terms;
New foreign or domestic legislation limiting or altering the ability to utilize contractors or outsourced resources;
The difficulty and inherent delay in replacing a contractor and its equipment in the event that either party
terminates the agreement;
Reduced control and oversight over those aspects of the work which are the responsibility of the contractor;
Failure of a contractor to perform under its agreement;
Interruption of development and construction or increased costs in the event that a contractor ceases its business
due to insolvency or other unforeseen events;
Injuries or fatalities on the job as a result of the failure to implement or follow adequate safety measures;
Failure of a contractor to comply with applicable legal and regulatory requirements, to the extent it is
responsible for such compliance; and
Problems of a contractor managing its workforce, labor unrest, or other related employment issues.
In addition, we may incur liability to third parties as a result of the actions of our contractors. The occurrence of
one or more of these risks could materially adversely affect our results of operations and financial position.
Risks Related to our Exploration Activities
The exploration of our mineral properties is highly speculative in nature, involves substantial expenditures, and
is frequently non-productive.
Mineral exploration is highly speculative in nature and frequently results in no or very little return on amounts
invested in evaluating a particular property. The probability of an individual prospect ever having Mineral Reserves that
meets the requirements of S-K 1300 is low. Even if we do eventually discover Mineral Reserves or Mineral Resources on
our exploration properties, there can be no assurance that we can develop a mine and extract those minerals. Substantial
expenditures are required to (i) establish the existence of a potential ore body through drilling and metallurgical and other
testing techniques; (ii) determine metal content and metallurgical recovery processes to process metal from the ore; (iii)
determine the feasibility of mine development and production; and (iv) construct, renovate or expand mining and
processing facilities. If we discover a deposit or ore at a property, it usually takes several years from the initial phases of
exploration until mineral extraction is possible, if at all. During this time, the economic feasibility of a project may change
because of increased costs, lower metal prices, or other factors. As a result of these uncertainties, our exploration programs
may not result in the identification of proven and probable Mineral Reserves in sufficient quantities to justify developing
a particular property.
We have and may in the future acquire additional mining properties; and our business may be negatively
impacted if Mineral Reserves are not located on acquired properties or if we are unable to successfully execute and/or
integrate the acquisitions.
We have in the past, and may in the future, acquire additional mining properties. There can be no assurance that
reserves will be identified on any properties that we acquire. We may experience negative impacts on the trading price of
our common stock or on our ability to access capital if we successfully complete acquisitions of additional properties and
reserves are not located on these properties.
In December 2021, we acquired the Back Forty Project when we purchased Aquila Resources Inc. The acquisition
may result in various material adverse impacts on our business and the trading price of our common stock. Adverse impacts
may include, without limitation, the risk that the acquisition does not achieve the expected benefits, increased cash
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outflows, the unavailability of capital to develop the project, and the risk of potential material adverse tax consequences
for our company and shareholders. Additional risks, difficulties, and uncertainties may result from the separation of
previously co-mingled businesses, including necessary ongoing relationships. While we have invested significant time,
money, and equity in acquiring the Back Forty Project, there can be no assurance that the Back Forty Project will be
permitted or will ultimately be productive.
The success of any future acquisition would depend on a number of factors, including, but not limited to:
Identifying suitable candidates for acquisition and negotiating acceptable terms;
Obtaining approval from regulatory authorities and potentially our shareholders;
Implementing our standards, controls, procedures, and policies at the acquired business and addressing any
pre-existing liabilities or claims involving the acquired business; and
To the extent the acquired operations are in a country where we have not operated historically, understanding
the regulations and challenges of operating in that new jurisdiction.
There can be no assurance that we will be able to successfully conclude any acquisitions, or that any acquisition
will achieve the anticipated synergies or other anticipated positive results. Any material problems that we encounter in
connection with such an acquisition could have a material adverse effect on our business, results of operations, and
financial position. These factors may materially adversely affect the trading price of our common stock.
Regulatory Risks
Our operations are subject to ongoing permitting requirements, which could result in the delay, suspension, or
termination of our operations.
Our operations, including our ongoing exploration drilling programs and mining, require ongoing permits from
governmental and local authorities. We may also be required to obtain certain property rights to access or use our
properties. Obtaining or renewing licenses and permits, and acquiring property rights, can be complex and time-consuming
processes. There can be no assurance that we will be able to acquire all required licenses, permits, or property rights on
reasonable terms or in a timely manner, or at all, and that such terms will not be adversely changed; that required extensions
will be granted; or that the issuance of such licenses, permits or property rights will not be challenged by third parties. If
we cannot obtain or maintain the necessary permits, or if there is a delay in receiving future permits, our timetable and
business plan will be materially adversely affected.
Our operating properties located in Mexico are subject to changes in political or economic conditions and
regulations in that country.
The risks with respect to operating in Mexico or other developing countries include, but are not limited to:
nationalization of properties, military repression, extreme fluctuations in currency exchange rates, increased security risks,
labor instability or militancy, mineral title irregularities, and high rates of inflation. In addition, changes in mining or
investment policies or shifts in political attitudes in Mexico may materially adversely affect our business. We may be
affected in varying degrees by government regulation concerning restrictions on production, price controls, export controls,
income taxes, expropriation of property, maintenance of claims, environmental legislation, land use, land claims of local
people, opposition from non-governmental organizations, labor legislation, water use, and mine safety. The effect of these
factors cannot be accurately predicted and may adversely impact our operations.
Most of our properties are subject to extensive environmental laws and regulations, which could materially
adversely affect our business.
Our exploration and mining operations are subject to extensive laws and regulations governing land use and the
protection of the environment, which control the exploration and mining of mineral properties and their effects on the
environment, including air and water quality, mine reclamation, waste generation, handling and disposal, the protection of
different species of flora and fauna, and the preservation of lands. These laws and regulations require us to acquire permits
and other authorizations for conducting certain activities. In many countries, there is relatively new comprehensive
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19
environmental legislation, and the permitting and the authorization process may not be established or predictable. We may
not be able to acquire necessary permits or authorizations on a timely basis, if at all. Delays in acquiring any permit or
authorization could increase the cost of our projects and could suspend or delay the commencement of extraction and
processing of mineralized material.
Environmental legislation in Mexico and in many other countries is evolving in a manner that will require stricter
standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments
of proposed projects, and a heightened degree of responsibility for companies and their officers, directors, and employees.
Future changes in environmental regulation in the jurisdictions where our properties are located may materially adversely
affect our business, make our business prohibitively expensive, or prohibit it altogether. We cannot predict what
environmental legislation or regulations will be enacted or adopted in the future or how future laws and regulations will
be administered or interpreted. Compliance with more stringent laws and regulations, as well as potentially more vigorous
enforcement policies or regulatory agencies or stricter interpretation of existing laws, may (i) necessitate significant capital
outlays, (ii) cause us to delay, terminate, or otherwise change our intended activities with respect to one or more projects,
or (iii) materially adversely affect our future exploration activities.
Climate change and climate change legislation or regulations could impact our business.
We are subject to physical risks associated with climate change, which could seriously harm our results of
operations and increase our costs and expenses. The occurrence of severe adverse weather conditions, including increased
temperatures and droughts, fires, longer wet or dry seasons, increased precipitation, floods, hail, snow, or more severe
storms may have a potentially devastating impact on our operations. Adverse weather may result in physical damage to
our operations, instability of our infrastructure and equipment, washed-out roads to our properties, and altered water and
electricity supply to our projects. Increased temperatures may also decrease worker productivity at our projects and raise
ventilation and cooling costs. Should the impacts of climate change be material in nature or occur for lengthy periods of
time in the areas in which we operate, our financial condition or results of operations could be materially adversely
affected.
Changes in the quantity of water, whether in excess or deficient amounts, may impact exploration and development
activities, mining and processing operations, water storage and treatment facilities, tailings storage facilities, closure and
reclamation efforts, and may increase levels of dust in dry conditions, and land erosion and slope stability in case of
prolonged wet conditions. Increased precipitation and extreme rainfall events may potentially impact tailings storage
facilities by flooding the water management infrastructure, exceeding surface water runoff network capacity, overtopping
the facility, or undermining the slope stability of the structure. Further, increased amounts of water may result in extended
periods of flooding to the mine pits and site infrastructure or may exceed the current water treatment facility capacity to
store and treat water physical conditions, resulting in an unintended overflow either on or off the mine site property.
U.S. and international legislative and regulatory actions intended to ensure the protection of the environment are
constantly changing and evolving in a manner expected to result in stricter standards and enforcement, larger fines and
liability, and potentially increased capital expenditures and operating costs. Transitioning our business to meet regulatory,
societal, and investor expectations may cause us to incur higher costs and lower economic returns than originally estimated
for new exploration projects and development plans of existing operations.
Our continuing reclamation obligations at our operations could require significant additional expenditures.
We are responsible for the reclamation obligations related to disturbances located on all of our properties and have
recorded a liability on our Consolidated Balance Sheets to cover the estimated reclamation obligation. However, there is
a risk that any reserve could be inadequate to cover the actual costs of reclamation when carried out. Continuing
reclamation obligations will require a significant amount of capital. There is a risk that we will be unable to fund these
obligations and that the regulatory authorities may increase reclamation requirements to such a degree that it would not be
commercially reasonable to continue mining and exploration activities, which may materially adversely affect our results
of operations, financial performance, and cash flows.
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Title to mineral properties can be uncertain, and in the event of a dispute regarding the title to our Mexican
properties, it will likely be necessary for us to resolve the dispute in Mexico, where we would be faced with unfamiliar
laws and procedures.
Our ability to explore and operate our properties depends on the validity of our title to that property. Uncertainties
inherent in mineral properties relate to such things as the sufficiency of mineral discovery, proper posting and marking of
boundaries, assessment work and possible conflicts with other claims not determinable from public record. There may be
valid challenges to the title to our properties which, if successful, could impair development and/or operations. The
resolution of disputes in foreign countries can be costly and time consuming. In a foreign country, we face the additional
burden of understanding unfamiliar laws and procedures. Not like in the U.S., we may not be entitled to a jury trial. Further,
to litigate in any foreign country, we would be faced with the necessity of hiring lawyers and other professionals who are
familiar with the foreign laws. For these reasons, we may incur unforeseen costs if we are forced to resolve a dispute in
Mexico or any other foreign country.
In most of the countries where we operate, failure to comply with applicable laws and regulations relating to mineral
right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional
local or foreign parties as joint venture partners. Any such loss, reduction, or imposition of partners could have a material
adverse effect on our financial condition, results of operations, and prospects.
Under the laws of Mexico, Mineral Resources belong to the United States of Mexico, and government concessions
are required to explore for or exploit Mineral Reserves. Mineral rights derive from concessions granted, on a discretionary
basis, by the Ministry of Economy, pursuant to the Mexican mining law and regulations thereunder. Our concessions in
Mexico are subject to continuing government regulation, and failure to adhere to such regulations will result in the
termination of the concession. A title defect could result in losing all or a portion of our right, title, and interest in and to
the properties to which the title defect relates.
Additionally, in 2014, new mining concessions became subject to additional review and approval by the Mexico
Ministry of Energy, and in recent years, the federal government has been reluctant to issue new mining concessions.
Mining concessions in Mexico give exclusive exploration and exploitation rights to the minerals located in the
concessions but do not include surface rights to the real property, which requires that we negotiate the necessary
agreements with surface landowners. Many of our mining properties are subject to the Mexican Ejido system, requiring
us to contract with the local communities surrounding the properties in order to obtain surface rights to land needed in
connection with our mining exploration activities. Please see Item 1A. Risk Factors—Regulatory Risks—Our ability to
develop our Mexican properties is subject to the rights of the Ejido (agrarian cooperatives) who use or own the surface
for agricultural purposes.
Our ability to develop our Mexican properties is subject to the rights of the Ejido (agrarian cooperatives), who
use or own the surface for agricultural purposes.
Our ability to mine minerals is subject to maintaining satisfactory arrangements and relationships with the Ejido for
access and surface disturbances. Ejidos are groups of local inhabitants who were granted rights to conduct agricultural
activities on the property. We must negotiate and maintain a satisfactory arrangement with these residents in order to
disturb or discontinue their rights to farm. While we have successfully negotiated and signed such agreements related to
the DDGM operations, our inability to maintain these agreements or consummate similar agreements for new projects
could impair or impede our ability to successfully explore, develop, and mine the properties, which in turn could materially
adversely affect our future cash flow.
A significant amount of our mining properties are subject to exchange control policies, the effects of inflation,
and currency fluctuations between the U.S. dollar and the Mexican peso.
Our revenue and external funding are primarily denominated in U.S. dollars. However, certain mining, processing,
maintenance, and exploration costs are denominated in Mexican pesos. These costs principally include electricity, labor,
water, maintenance, local contractors, and fuel. The appreciation of the peso against the U.S. dollar increases expenses
and the cost of purchasing capital assets in U.S. dollar terms in Mexico, which can adversely impact our operating results
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and cash flows. Conversely, the depreciation of the Mexican peso decreases operating costs and capital asset purchases in
U.S. dollar terms. When inflation in Mexico increases without a corresponding devaluation of the Mexican peso, our
financial position, results of operations, and cash flows could be materially adversely affected. The annual average inflation
rate in Mexico was approximately 5.55% in 2023 and 7.89% in 2022. Current and future inflationary effects may be driven
by, among other things, supply chain disruptions, governmental stimulus or fiscal policies, and geopolitical instability,
including the ongoing conflicts between Ukraine and Russia and in Gaza. For additional information, please see Item 1A.
Risk Factors—General Risks—The Israel-Palestinian conflict in Gaza, the conflict in Ukraine, and the related price
volatility and geopolitical instability could negatively impact our business. Continuing increases in inflation could increase
our costs of labor and other costs related to our business, which could have an adverse impact on our business, financial
position, results of operations, and cash flows.
At the same time, the peso has been subject to fluctuation, which may not have been proportionate to the inflation
rate and may not be proportional to the inflation rate in the future. The value of the peso increased by 14.6% in 2023 and
increased by 6.3% in 2022. In addition, fluctuations in currency exchange rates may have a significant impact on our
financial results. There can be no assurance that the Mexican government will maintain its current policies with regard to
the peso or that the peso's value will not fluctuate significantly in the future. We cannot assure you that currency
fluctuations, inflation, and exchange control policies will not have an adverse impact on our financial condition, results of
operations, earnings, and cash flows.
Lack of infrastructure could forestall or prevent further exploration and advancement.
Exploration activities, as well as any advancement activities, depend on adequate infrastructure. Reliable roads,
bridges, power sources, and water supply are important factors that affect capital and operating costs and the feasibility
and economic viability of a project. Unanticipated or higher than expected costs and unusual or infrequent weather
phenomena, or government or other interference in the maintenance or provision of such infrastructure, could materially
adversely affect our business, financial condition, and results of operations.
Risks Related to our Common Stock
Our stock price may be volatile, and as a result, shareholders could lose part or all of their investment.
In addition to other risk factors identified in this annual report on Form 10-K, and due to volatility associated with
equity securities in general, the value of a shareholder’s investment could decline due to the impact of numerous factors
upon the market price of our common stock, including:
Changes in the worldwide price for the metals we mine;
Adverse results from our exploration, development, or production efforts;
Changes to the dividend program, including suspensions;
Producing at rates lower than those targeted;
Political and regulatory risks and social unrest, including the conflicts between Ukraine and Russia and in Gaza;
Weather conditions and extreme weather events, including unusually heavy rains;
Failure to meet our revenue or profit goals or operating budget;
Decline in demand for our common stock;
Downward revisions in securities analysts’ estimates or changes in global financial markets, global economies,
and general market conditions;
Investor perception of our industry or our prospects;
Technological innovations by competitors or in competing technologies;
Lawsuits;
Economic impact from the spread of any disease;
Our ability to integrate and operate the companies and the businesses that we acquire;
Actions by government or central banks; and
General economic trends.
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Stock markets in general have experienced extreme price and volume fluctuations, and the market prices of
individual securities have been highly volatile. These fluctuations are often unrelated to operating performance and may
materially adversely affect the market price of our common stock. As a result, shareholders may be unable to sell their
shares at a desired price.
Past payments of dividends on our common stock are not a guaranty of future payments of dividends.
In 2010, we began paying cash dividends to the holders of our common stock. However, our ability to pay dividends
in the future will depend on a number of factors, including free cash flow, expected operational performance, mine
construction requirements and strategies, other acquisition and/or construction projects, spot metal prices, taxation,
government-imposed royalties, and general market conditions. Further, a portion of our cash flow is expected to be retained
to finance our operations, explorations, and development of mineral properties. In February 2023, we announced the
suspension of our quarterly dividends. There is no assurance that the Board will elect to re-institute a dividend payment in
the near-term or at all.
Issuances of our stock in the future could dilute existing shareholders and materially adversely affect the market
price of our common stock.
We have the authority to issue up to 200,000,000 shares of common stock, 5,000,000 shares of preferred stock, and
to issue options and warrants to purchase shares of our common stock, in some cases without shareholder approval. As of
March 20, 2024, there were 88,757,610 shares of common stock outstanding. Future issuances of our securities could be
at prices substantially below the price paid for our common stock by our current shareholders. We can issue significant
blocks of our common stock without further shareholder approval. Because we have issued less common stock than many
of our larger peers, the issuance of a significant amount of our common stock may have a disproportionately large impact
on our share price compared to larger companies.
General Risks
Our operations may be disrupted, and our financial results may be materially adversely affected by any future
pandemic.
Any pandemic may pose a risk to our business and operations. If a significant portion of our workforce becomes
unable to work or travel to our operations due to illness or state or federal government restrictions (including travel
restrictions and “shelter-in-place” and similar orders restricting certain activities that may be issued or extended by
authorities), we may be forced to reduce or suspend exploration activities and/or development projects, which may impact
liquidity and financial results. These restrictions have significantly disrupted economic activity in both the world, national
and local economies and have caused volatility in capital markets.
To the extent any pandemic materially adversely affects our business and financial results, as discussed above, it
may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those
relating to our operation, indebtedness, and financing. We are unable to predict the ultimate adverse impact of any
pandemic on our business, which will depend on numerous evolving factors and future developments, including the
pandemic’s ongoing effect on the demand for silver and gold, as well as the response of the overall economy and the
financial markets after the pandemic and response measures come to an end, the timing of which remains highly
unpredictable.
The Israel-Palestinian conflict in Gaza, the conflict in Ukraine, and the related price volatility and geopolitical
instability could negatively impact our business.
On October 7, 2023, the Palestinian Sunni Islamist group, Hamas, led surprise attacks against Israel from the Gaza
Strip. In response to the attacks, Israel’s cabinet formally declared war on Hamas. Although we do not have operations in
the region, the extent and duration of the military action and resulting market disruptions could be significant and could
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23
potentially have a substantial negative impact on the global economy and/or our business. The magnitude of these risks
cannot be predicted, including the extent to which these conflicts may heighten other risks disclosed herein.
In late February 2022, Russia launched significant military action against Ukraine, and the war remains ongoing.
The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could
potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time.
The ramifications of the hostilities and sanctions may not be limited to Russia, Ukraine, and Russian or Ukrainian
companies, and may spill over to and negatively impact other regional and global economic markets (including in Europe
and in the United States), companies in other countries (particularly those that have done business with Russia
and Ukraine), and various sectors, industries, and markets for securities and commodities globally. Any such volatility and
disruptions may also magnify the impact of other risks described in this “Risk Factors” section.
We may not be able to operate successfully if we are unable to recruit, hire, retain, and develop key personnel
and maintain a qualified and diverse workforce. In addition, we are dependent upon our employees being able to safely
perform their jobs, but there is risk of physical injuries or illness.
We depend upon the services of a number of key executives and management personnel. These individuals include
our executive officers and other key employees. If any of these individuals were to die, become disabled, or leave our
company, we would be forced to identify and retain individuals to replace them. We may be unable to hire a suitable
replacement on favorable terms should that become necessary.
Our success is also dependent on the contributions of our highly skilled and experienced workforce. Our ability to
achieve our operating goals depend upon our ability to recruit, hire, retain, and develop qualified and diverse personnel to
execute on our strategy. There continues to be competition over highly skilled personnel in our industry. If we lose key
personnel or one or more members of our senior management team; or if we fail to develop adequate succession plans; or
if we fail to hire, retain, and develop qualified and diverse employees; our business, financial condition, results of
operations, and cash flows could be harmed.
We are dependent on information technology systems, which are subject to certain risks, including cybersecurity
risks, data leakage risks, and risks associated with implementation and integration.
We are dependent upon information technology systems in the conduct of our business. Any significant breakdown,
invasion, virus, cyberattack, security breach, destruction, or interruption of these systems by employees, others with
authorized access to our systems, or unauthorized persons could negatively impact our business. To the extent any
invasion, cyberattack, or security breach results in disruption to our business; such as loss or disclosure of, or damage to
our data or confidential information; our reputation, business, results of operations, and financial condition could be
materially adversely affected. We have implemented various measures to manage our risks related to information
technology systems and network disruptions. However, given the unpredictability of the timing, nature, and scope of
information technology disruptions, we could potentially be subject to production downtimes, operational delays, the
compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches,
other manipulation or improper use of our systems, and networks or financial losses from remedial actions, any of which
could have a material adverse effect on our cash flows, competitive position, financial condition, or results of operations.
Our systems and insurance coverage for protecting against cyber security risks may not be sufficient. Although to date we
have not experienced any material losses relating to cyberattacks, we may suffer such losses in the future. We may be
required to expend significant additional resources to continue to modify or enhance our protective measures. We also
may be subject to significant litigation, regulatory investigation, and remediation costs associated with any information
security vulnerabilities, cyberattacks, or security breaches.
We may also be materially adversely affected by system or network disruptions if new or upgraded information
technology systems are defective, not installed properly, or not properly integrated into our operations. If we are unable to
successfully implement system upgrades or modifications, we may have to rely on manual reporting processes and controls
over financial reporting that have not been planned, designed, or tested. Various measures have been implemented to
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manage our risks related to the system upgrades and modifications, but system upgrades and modification failures could
have a material adverse effect on our business, financial condition, and results of operations and could, if not successfully
implemented, adversely impact the effectiveness of our internal controls over financial reporting.
Our business is subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, a
breach or violation of which could lead to civil and criminal fines and penalties, loss of licenses or permits, and
reputational harm.
We operate in certain jurisdictions that have experienced some degree of governmental and private sector
corruption, and in certain circumstances, strict compliance with anti-bribery laws may conflict with certain local customs
and practices. The U.S. Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions generally prohibit
companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or
other commercial advantages. Our Code of Ethics and other corporate governance mandate compliance with these anti-
bribery laws, which often carry substantial penalties. However, there can be no assurance that our internal control policies
and procedures will always protect us from recklessness, fraudulent behavior, dishonesty, or other inappropriate acts
committed by our affiliates, employees, contractors, or agents. As such, our corporate policies and processes may not
prevent all potential breaches of law or other governance practices. Violations of these laws, or allegations of such
violations, could lead to civil and criminal fines and penalties, litigation, loss of operating licenses or permits, and may
damage our reputation, which could have a material adverse effect on our business, financial position, and results of
operations, or cause the market value of our common stock to decline.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
Risk Management and Strategy
We have established policies and processes for assessing, identifying, and managing material risk from
cybersecurity threats and have integrated these processes into our overall risk management systems and processes. We
routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted
through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our
information systems or any information residing therein.
We conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a
material change in our business practices that may affect information systems that are vulnerable to such cybersecurity
threats. These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood
and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and
safeguards in place to manage such risks.
Governance
One of the key functions of our Board of Directors is informed oversight of our risk management process, including
risks from cybersecurity threats. Our Board is responsible for monitoring and assessing strategic risk exposure, and
management is responsible for the day-to-day management of any material risks that may arise. The Board receives
periodic updates from management regarding cybersecurity matters and is notified between such updates regarding any
significant new cybersecurity threats or incidents. We do not believe that there are currently any known risks from
cybersecurity threats that are reasonably likely to materially affect us or our business strategy, results of operations, or
financial condition.
Management is responsible for the operational oversight of company-wide cybersecurity strategy, policy, and
standards across relevant departments to assess and help prepare us to address cybersecurity risks. As part of our overall
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risk management system, we monitor and test our safeguards and train our employees on these safeguards. Personnel at
all levels and departments are made aware of our cybersecurity policies through trainings.
Cybersecurity Threats
As of December 31, 2023, we have not identified an indication of a cybersecurity incident that would have a material
impact on our business and consolidated financial statements. For further discussion of cybersecurity risks, please refer to
Item 1A. Risk Factors.
ITEM 2.
PROPERTIES
Glossary
The following terms used in this report shall have the following meanings:
Andesite:
Concentrate:
Doré:
Drift:
Epithermal:
Exploration:
Grade:
Hectare:
An extrusive igneous, volcanic rock, of intermediate composition, with aphanitic to porphyritic
texture characteristic of subduction zones, such as the western margin of South America.
A product from a mineral processing facility, such as gravity separation or flotation, in which
the valuable constituents have been upgraded and unwanted gangue materials rejected as
waste.
Composite gold and silver bullion, usually consisting of approximately 90% precious metals
that will be further refined to separate pure metals.
A horizontal tunnel generally driven within or alongside an ore body and aligned parallel to
the long dimension of the ore.
Used to describe gold deposits found on or just below the surface close to vents or volcanoes,
formed at low temperature and pressure.
Prospecting, sampling, mapping, diamond-drilling, and other work involved in locating the
presence of economic deposits and establishing their nature, shape, and grade.
The concentration of an element of interest expressed as relative mass units (percentage,
ounces per ton, grams per tonne (“g/t”), etc.).
A metric unit of measurement, for surface area. One hectare equals 1/200th of a square
kilometer, 10,000 square meters, or 2.47 acres. A hectare is approximately the size of a soccer
field.
Long-hole Stoping:
Mining method which uses holes drilled by a production drill to a predetermined pattern by a
mining engineer. Long-hole stoping is a highly selective and productive method of mining and
can cater for varying ore thicknesses and dips (0 - 90 degree). Blasted rock is designed to fall
into a supported drawpoint or be removed with remote control LHD (load, haul, dump
machine).
Net Smelter Return
(“NSR”):
The net revenue that the owner of a mining property receives from the sale of the mine's metal
products, less transportation and refining costs. As a royalty, it refers to the fraction of net
smelter return that a mine operator is obligated to pay the owner of the royalty agreement.
Mineral Deposit:
Rocks that contain economic amounts of minerals in them and that are expected to be profitably
mined.
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Tonne:
A metric ton. One tonne equals 1000 kg. It is equal to approximately 2,204.62 pounds.
Volcanogenic:
Of volcanic origin.
Volcanic domes:
These are mounds that form when viscous lava is erupted slowly and piles up over the vent,
rather than moving away as lava flow. The sides of most domes are very steep and typically
are mantled with unstable rock debris formed during or shortly after dome emplacement. Most
domes are composed of silica-rich lava, which may contain enough pressurized gas to cause
explosions during dome extrusion.
Overview
We classify our mineral properties into three categories: “Production Stage Properties,” “Development Stage
Properties,” and “Exploration Stage Properties.” Production Properties are properties for which we operate a producing
mine.
At our Don David Gold Mine, we currently have 100% interest in six properties, including two Production Stage
Properties and four Exploration Stage Properties, located in Oaxaca, Mexico, along the San Jose structural corridor.
Because of their proximity and relatively integrated operations, we collectively refer to the six properties as the Don David
Gold Mine. The two Production Stage Properties are the only two of the six properties that make up the Don David Gold
Mine that we consider to be independently material at this time. Please see Item 2. Properties – Don David Gold Mine for
further discussion of the properties.
The Company also has 100% interest in the Back Forty Project, an advanced Exploration Stage Property, located
in Menominee County, Michigan, USA. We do not consider the Back Forty Project to be independently material to the
Company at this time. Please see Item 2. Properties – Back Forty Project for further discussion of the property.
Mineral Resources
Under S-K 1300, a Mineral Resource is defined as “a concentration or occurrence of material of economic interest
in or on the Earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for economic
extraction.” A Mineral Resource is a “reasonable estimate of mineralization, taking into account relevant factors such as
cut-off grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and
economic conditions, is likely to, in whole or in part, become economically extractable. It is not merely an inventory of
all mineralization drilled or sampled.”
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The following tables summarize the estimated Mineral Resources at DDGM and at Back Forty:
Don David Gold Mine – Summary of Gold, Silver, and Base Metal Mineral Resources
at December 31, 2023(1)(2)(3)(4)
Description
Arista
Measured Mineral Resources
Indicated Mineral Resources
Measured + Indicated
Inferred Mineral Resources
Alta Gracia
Measured Mineral Resources
Indicated Mineral Resources
Measured + Indicated
Inferred Mineral Resources
Notes on Mineral Resources:
KTonnes
Gold
g/t
Silver
g/t
Copper %
Lead %
Zinc % Cut-off grade
68
489
557
1,418
27
141
168
148
1.49
1.10
1.15
1.01
0.81
0.49
0.54
0.62
109.69
131.89
129.16
107.87
370.58
269.96
286.13
259.61
0.42
0.28
0.29
0.21
1.42
1.33
1.34
1.31
4.39
4.25
4.26
3.68
$/Tonne
Metallurgical Recovery
(%)
Au Ag Cu Pb Zn
74 84
77
74 84
77
74 84
77
74 84
77
100 80 91
100 80 91
100 80 91
100 80 91
AuEq/tonne
2.35 85 72
2.35 85 72
2.35 85 72
2.35 85 72
-
-
-
-
-
-
-
-
-
-
-
-
1. Mineral Resources estimated at December 31, 2023 are based on $1,800/oz for Gold, $23.30/oz for Silver, $3.90/pound Copper, $0.95/pound
Lead and $1.25/pound Zinc. The metal prices used are based on the average median consensus prices for years 2024 through 2028 as provided
by the Bank of Montreal in June 2023. The median price was based on the price estimates contributed by 38 participating financial institutions.
These prices are also very similar to the three-year average.
The definitions for Mineral Resources in S-K 1300 were followed which are consistent with CIM (2014) definitions and are exclusive of Mineral
Reserves.
2.
3. Mineral Resources that are not Mineral Reserves are materials of economic interest with reasonable prospects for economic extraction.
4. Rounding of tonnes, average grades, and contained ounces may result in apparent discrepancies with total rounded tonnes, average grades, and
total contained ounces.
For comparison, as at December 31, 2022, DDGM’s estimates of Mineral Resources, exclusive of Mineral Reserves,
are provided in the below table.
Don David Gold Mine – Summary of Gold, Silver, and Base Metal Mineral Resources
at December 31, 2022(1)(2)(3)(4)
Description
Arista
KTonnes
Gold
g/t
Silver
g/t
Copper % Lead % Zinc %
Measured Mineral Resources
Indicated Mineral Resources
Measured + Indicated
Inferred Mineral Resources
259
1,240
1,499
1,916
Alta Gracia
Measured Mineral Resources
Indicated Mineral Resources
Measured + Indicated
Inferred Mineral Resources
24
90
114
148
1.70
1.19
1.27
0.80
0.81
0.61
0.65
0.62
152.58
120.74
126.26
110.98
367.95
327.18
335.82
295.61
0.38
0.29
0.31
0.25
-
-
-
-
Notes on Mineral Resources:
Cut-off
grade
$/Tonne
80
80
80
80
Metallurgical Recovery (%)
Au
82
82
82
82
Ag
91
91
91
91
Cu
71
71
71
71
Pb
70
70
70
70
Zn
84
84
84
84
1.36
1.14
1.18
1.18
3.95
3.17
3.30
3.03
AuEq/tonne
-
-
-
-
-
-
-
-
2.35
2.35
2.35
2.35
85
85
85
85
72
72
72
72
-
-
-
-
-
-
-
-
-
-
-
-
1. Mineral Resources estimated at December 31, 2022 are based on $1,650/oz for Gold, $20.00/oz for Silver, $3.40/pound Copper, $0.90/pound
Lead and $1.35/pound Zinc. As a result of market volatility in 2022, these prices are based on conservative estimates which closely approximate
the 12-month low for Gold ($1,620/oz), Silver ($18/oz), Copper ($3.35/pound), Lead ($0.80/pound), and Zinc ($1.25/pound).
The definitions for Mineral Resources in S-K 1300 were followed which are consistent with CIM (2014) definitions and are exclusive of Mineral
Reserves.
2.
3. Mineral Resources that are not Mineral Reserves are materials of economic interest with reasonable prospects for economic extraction.
4. Rounding of tonnes, average grades, and contained ounces may result in apparent discrepancies with total rounded tonnes, average grades, and
total contained ounces.
During 2023, we performed a comprehensive review of our geological database and interpretation of the
mineralization, the block models derived from them, and ultimately the mine plan to ensure more reliable and accurate
mine planning and forecasting. In addition, metallurgy, mining methods, ground control, and other parameters were
Gold Resource Corporation
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reviewed. As a result of this review, Measured and Indicated Mineral Resources decreased from approximately 1.6 million
tonnes at December 31, 2022 to approximately 0.7 million tonnes at December 31, 2023. The contributing factors to this
decrease was the reclassification of Measured and Indicated Mineral Resource to Proven and Probable Reserves resulting
in a decrease of 0.7 million tonnes, the application of economic constraining parameters (engineering) resulting in a
decrease of 1.4 million tonnes, and change in the NSR cutoff grade from $80/tonne to $100/tonne resulting in a decrease
of 0.6 million tonnes. These reductions were partially offset by the addition of 1.8 million tonnes related to the 2023 infill
and step-out drilling program. The total Inferred Mineral Resources decreased from approximately 2.1 million tonnes at
December 31, 2022 to approximately 1.6 million tonnes at December 31, 2023. The decrease in Inferred Mineral Resources
was mainly due to infill drilling and the reclassification of Inferred Mineral Resources to Measured and Indicated Mineral
Resources along with optimized mine planning.
More information regarding the assumptions, methodologies, and procedures utilized in the estimation of Mineral
Resources at DDGM can be found in the updated Don David Gold Mine Technical Report Summary filed as Exhibit 96.2
to this Form 10-K (the “DDGM Technical Report Summary”).
Back Forty Project – Summary of Gold, Silver, and Base Metal Mineral Resources
at December 31, 2023(1)(2)(3)(4)
Description
Back Forty - Open Pit
Measured Mineral Resources
Indicated Mineral Resources
Measured + Indicated
Inferred Mineral Resources
Back Forty - Underground
Measured Mineral Resources
Indicated Mineral Resources
Measured + Indicated
Inferred Mineral Resources
Notes on Mineral Resources:
KTonnes
Gold
g/t
Silver
g/t
Copper %
Lead %
Zinc %
Cut-off grade
-
9,360
9,360
566
-
5,137
5,137
627
-
2.41
2.41
2.70
-
1.86
1.86
2.00
-
28.06
28.06
48.84
-
24.05
24.05
26.10
-
0.36
0.36
0.35
-
0.41
0.41
0.37
-
-
-
-
-
-
-
-
-
3.74
3.74
1.31
-
2.65
2.65
2.89
$/Tonne
-
33
33
33
AuEq/tonne
-
73
73
73
1. Mineral Resources estimated at December 31, 2023 are based on $1,800/oz for Gold, $23.30/oz for Silver, $3.90/pound Copper, $0.95/pound
Lead and $1.25/pound Zinc. The metal prices used are based on the average median consensus prices for years 2024 through 2028 as provided
by the Bank of Montreal in June 2023. The median price was based on the price estimates contributed by 38 participating financial institutions.
These prices are also very similar to the three-year average.
The definitions for Mineral Resources in S-K 1300 were followed which are consistent with CIM (2014) definitions and are exclusive of Mineral
Reserves.
2.
3. Mineral Resources that are not Mineral Reserves are materials of economic interest with reasonable prospects for economic extraction.
4. Rounding of tonnes, average grades, and contained ounces may result in apparent discrepancies with total rounded tonnes, average grades, and
total contained ounces.
Following the completion of the optimization work for the Back Forty Project, the Company published an update
on Indicated and Inferred Mineral Resources in the Back Forty S-K1300 Technical Report filed on October 26, 2023. A
Measured Mineral Resource estimate or a Mineral Reserve estimate have yet to be established for the Back Forty Project.
More information regarding the assumptions, methodologies, and procedures utilized in the estimation of Mineral
Resources at Back Forty can be found in the Back Forty Technical Report Summary incorporated by reference as Exhibit
96.1 to this Form 10-K.
Mineral Reserves
Under S-K 1300, a Mineral Reserve is defined as “an estimate of tonnage and grade or quality of indicated and
measured Mineral Resources that, in the opinion of the qualified person, can be the basis of an economically viable
project.”
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The following tables summarize the estimated Mineral Reserves at DDGM:
Don David Gold Mine – Summary of Gold, Silver and Base Metal Mineral Reserves
at December 31, 2023 (1) (2) (3) (4)
Description
Tonnes
Don David Gold Mine
Arista Mine (2)
Proven Mineral Reserves
Probable Mineral Reserves
Arista Mine Total
Alta Gracia Mine (3)
-
Proven Mineral Reserves
-
Probable Mineral Reserves
Alta Gracia Mine Total
-
Don David Gold Mine Total 1,063,000
90,000
973,000
1,063,000
Notes on Mineral Reserves:
Gold
g/t
Silver
g/t
Cu
(%)
Pb
(%)
Zn
(%)
Cut-off
Grade
% Au % Ag % Cu % Pb % Zn
Recovery
2.91
1.14
1.29
176
126
131
0.50
0.23
0.26
1.65
0.84
0.91
5.02
2.50
2.71
$/Tonne
120
120
79.5
79.5
91.1 76.6
73.9
91.1 76.6 73.9
83.9
83.9
-
-
-
-
-
-
-
-
AuEq/tonne
-
-
-
-
-
-
-
-
1.29
131
1. Mineral Resources estimated at December 31, 2023 are based on $1,800/oz for Gold, $23.30/oz for Silver, $3.90/pound Copper, $0.95/pound
Lead and $1.25/pound Zinc. The metal prices used are based on the average median consensus prices for years 2024 through 2028 as provided
by the Bank of Montreal in June 2023. The median price was based on the price estimates contributed by 38 participating financial institutions.
These prices are also very similar to the three-year average.
The Arista Mine cut-off grades for Mineral Reserves are $120/tonne NSR.
2.
3. Alta Gracia reserves reported December 31, 2022 have been downgraded to resources for the December 31, 2023 estimate.
4. Rounding of tonnes, average grades, and contained ounces may result in apparent discrepancies with total rounded tonnes, average grades, and
total contained ounces.
For comparison, as at December 31, 2022, DDGM’s estimates of Mineral Reserves are presented in the table below.
Don David Gold Mine – Summary of Gold, Silver and Base Metal Mineral Reserves
at December 31, 2022 (1) (2) (3) (4)
Description
Tonnes
Gold
g/t
Silver
g/t
Cu
(%)
Pb
(%)
Zn
(%)
Cut-off
Grade
% Au % Ag % Cu % Pb % Zn
Recovery
Don David Gold Mine
Arista Mine (2)
Proven Mineral Reserves
Probable Mineral Reserves
Arista Mine Total
Alta Gracia Mine (3)
3,000 0.85 392 0.01
Proven Mineral Reserves
50,800 0.27 169 0.00
Probable Mineral Reserves
Alta Gracia Mine Total
0.00
53,800
Don David Gold Mine Total 1,410,900
236,800 2.34 146 0.37
83 0.24
0.26
94
1,120,300 0.92
1.17
1,357,100
181
97
0.30
1.14
$/Tonne
80
80
81.6
81.6
90.8 71.2
70.4
90.8 71.2 70.4
84.2
84.2
AuEq/tonne
2.35
2.35
85.0
85.0
72.0
72.0
1.60
0.84
0.97
0.12
0.03
0.04
4.12
2.75
2.99
0.25
0.05
0.06
Notes on Mineral Reserves:
1. Mineral Reserves estimated at December 31, 2022 are based on $1,650/oz for Gold, $20.00/oz for Silver, $3.40/pound Copper, $0.90/pound
Lead and $1.35/pound Zinc. As a result of market volatility in 2022, these prices are based on conservative estimates which closely
approximate the 12-month low for Gold ($1,620/oz), Silver ($18/oz), Copper ($3.35/pound), Lead ($0.80/pound), and Zinc ($1.25/pound).
The Arista Mine cut-off grades for Mineral Reserves are $80/tonne NSR.
2.
3. No appreciable amounts of base metals are present in the Alta Gracia veins identified to-date. A breakeven cut-off grade of 2.35 g/t AuEq
was used for Mineral Reserves using gold and silver only to calculate gold equivalencies.
4. Rounding of tonnes, average grades, and contained ounces may result in apparent discrepancies with total rounded tonnes, average grades,
and total contained ounces.
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Proven and Probable Mineral Reserves decreased from 1.4 million tonnes at December 31, 2022 to 1.1 million
tonnes at December 31, 2023. The largest contributing factors for this decrease were the depletion of reserves by 0.5
million tonnes related to 2023 mining activities, the reduction of 0.6 million tonnes due to the increase of the NSR cutoff
grade from $80/tonne to $120/tonne. The deductions were partially offset by the reclassification of 0.7 million tonnes from
Measured and Indicated Mineral Resources to Proven and Probable Mineral Reserves as a result of detailed engineering
for the Arista Mine.
More information regarding the assumptions, methodologies, and procedures utilized in the estimation of Mineral
Reserves can be found in the DDGM Technical Report Summary filed as Exhibit 96.2 to this Form 10-K.
Don David Gold Mine
All of the properties that make up our Don David Gold Mine are located in Oaxaca, Mexico, in what is known as
the San Jose structural corridor, which runs 70 degrees north-west. Our properties comprise 55 continuous kilometers
along this structural corridor, which spans three historic mining districts in Oaxaca. The map below shows the general
location of our properties:
The Company was granted concessions from the Mexican federal government to explore and mine our properties
in Mexico. Please see below Item 2. Properties—Mining Concessions and Regulations in Mexico below for additional
information. We hold certain properties as the concession holder and lease other properties from third-parties. We are
required to pay concession fees to the Mexican government to maintain our interest in these concessions, and we pay
concession fees for all our mineral properties, including those which are subject to the third-party lease.
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The table below details information related to the mining concessions that comprise our properties in Oaxaca,
Mexico:
Total Number of
Concessions
Total Size
(in hectares)
Acquisition Date
Range
18
3
4
2
1
1
29
2002 to 2016
2008
2002 to 2009
2011 to 2013
2002
2013
24,372
5,175
29,547
2,335
19,758
925
2,554
25,572
55,119
2023
Maintenance
Fees Paid
$
$
$
$
556,090
118,289
674,379
53,368
451,601
21,143
58,377
584,489
$
1,258,868
Production Stage Properties:
Arista
Alta Gracia
Total Production Stage Properties:
Exploration Stage Properties:
Rey
Chamizo
Margaritas
Fuego
Total Exploration Stage Properties:
Total:
Production Stage Properties
Arista & Alta Gracia Mines
History: The Arista and Alta Gracia mines are in the regional Tlacolula mining district within Oaxaca State, in
southern Mexico. According to the Mexican Geological Survey, the Servicio Geologico Mexicano (“SGM”) mining
activity was initiated in the early 1880s in the Tlacolula mining district, producing some 300,000 ounces of gold and silver
from an ore shoot in the La Leona mine. However, no separate amounts of production were reported for each metal.
According to the SGM, in 1892 two smelters were built and operated (Magdalena Teitipac and O'Kelly) near the village
of Tlacolula for processing ores from the Alta Gracia La Soledad, San Ignacio y Anexas, La Leona, La Victoria, and San
Rafael silver mines. Subsequently, in 1911, Mr. Sken Sanders investigated the Totolapam mining region with a particular
interest in the Margaritas mine. Most of these historical mines are within DDGM's mining concessions.
While the DDGM Arista Mine and Alta Gracia Mine are in the smaller mining subdistricts of San Jose de Gracia
and Alta Gracia, respectively, only small-scale artisanal mining was historically conducted in these areas’ subdistricts. No
reliable production records exist for the historic production performed in the Arista and Alta Gracia Project areas.
Arista Mine
Background: The Arista Mine currently holds 18 mining concessions aggregating 24,372 hectares.
In 2002, the initial three concessions were leased from a third-party. Two of the concessions are part of the Arista
Mine, and the third concession comprises the Margaritas property. The lease agreement is subject to a 4% net smelter
return royalty where production is sold in the form of gold/silver doré and 5% for production sold in concentrate form.
Subject to meeting minimum exploration requirements, there is no expiration term for the lease. We may terminate it at
any time upon written notice to the lessor, and the lessor may terminate it if we fail to fulfill any of our obligations, which
primarily consist of paying the appropriate royalty to the lessor.
In August 2003, initial drilling and exploration program commenced at the Arista mine. Through the end of 2023,
we have drilled a total of 1,794 core holes (both surface and underground) totaling 482,271 meters and 166 reverse
circulation holes equaling 14,367 meters, for a total of 1,960 holes totaling 496,638 meters.
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DDGM Ore Terminal
In 2010, additional concessions were acquired from a third-party at no additional cost, which are subject to a 2%
royalty. We filed for and received additional concessions from the Mexican government which are also not part of the
concessions leased or acquired from the third-party. Two concessions are considered within the Arista mine.
Location and Access: The Arista mine is located in the Sierra Madre del Sur Mountains of southern Mexico in the
central part of the State of Oaxaca. The property is located along a major paved highway approximately 120 kilometers
southeast of Oaxaca City, the state’s capital city. The property is approximately four kilometers northwest from the village
of San Jose de Gracia. We have constructed gravel and paved roads from the village to the mine and processing facility,
which provide adequate access to the property.
The climate of the Arista mine area is dry and warm to very warm with most rainfall occurring in June through
September, and annual precipitation averaging 423.7 mm. The average yearly temperature is 26.6 degrees centigrade. The
area is very rocky with arid vegetation. Subsistence farming occurs, and the main agricultural crop is agave cactus that is
cultivated for the production of mescal.
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Geology and Mineralization: The Arista mine is located in the San Jose de Gracia Mining District in Oaxaca.
Multiple volcanic domes of various scales, and likely non-vented intrusive domes, dominate the district geology. These
volcanogenic features are imposed on a pre-volcanic basement of sedimentary rocks. Gold and silver mineralization in
this district is related to the manifestations of this classic volcanogenic system and is considered epithermal in character.
Historically, we have produced ore from two locations on the Arista mine, the open pit mine and the underground
mine. The open pit mineralization is considered low sulfidation epithermal-type with consisting primarily of gold with
some silver and no base metals. In 2021, mining activities were completed in the open pit, and it is now being backfilled
and reclaimed by filtered dry stack tailings deposition. The Arista underground mine mineralization is considered
intermediate epithermal-type consisting of gold, silver, copper, lead, and zinc. The host rock in the Arista vein system is
primarily andesite.
Facilities: The processing facility and other infrastructure at the Arista mine was constructed for approximately $35
million in 2009, and the processing facility was expanded in 2012 and 2013 for additional $23 million. The flotation mill
expansion, completed at the end of 2013, increased the number of flotation cells, added a second ball mill to allow for
additional processing capacity, and added a Knelson gravity concentrator. In 2014, a doré processing facility was
completed. In 2019, an increase in pumping capacity to the cyclones in the plant resulted in plant capacity increasing to
nominal 2,000 tonnes per day. The DDGM processing facility is flexible in its ability to process several types of
mineralization. It has a differential flotation section capable of processing polymetallic ore and producing up to three
separate concentrate products. The facility also has an agitated leach circuit capable of producing gold and silver doré.
We obtained water rights from the Mexican government for an amount of water that we believe is sufficient to meet
our operating requirements and pump it approximately five kilometers to the site from a permitted well located near the
Totolapam River.
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Additional improvements at the site include electrical power lines connecting to the Mexican national power grid,
installation of backup diesel generation power plants and switch gear, paving a three-kilometer section of the road from
the mine to the processing facility, construction of a surface maintenance garage and fuel station, construction of haul
roads from the mine site to the processing facility, office space at the processing facility, an assay lab, an exploration
office, tailings impoundment facilities and lift, a paste fill plant, mine camp facilities, the filtration plant, the dry stack
facility, and other infrastructure.
Exploration Activities: In 2023, an extensive underground drilling campaign at the Arista mine was successfully
executed, completing 168 diamond drill holes totaling 36,350 meters. This program included a total of 150 underground
infill drill holes, totaling 26,057 meters, with a specific emphasis on upgrading Mineral Resources to Mineral Reserves
and delineating the multiple sub-parallel veins within the Switchback system. Drilling here identified a number of high-
grade zones up- and down-dip of existing workings, both within and peripheral to existing Mineral Resources. In late
2023, infill drilling also got underway in the Three Sisters vein system to begin converting Inferred Mineral Resources,
identified earlier in the year during expansion drilling, to Mineral Reserves.
Underground expansion drilling activities were also completed at the Arista mine during 2023, encompassing a
total of 18 drill holes totaling 10,293 meters. Expansion drilling focused on the Three Sisters and North Arista vein systems,
as well as on the newly discovered Gloria vein system identified through expansion drilling during the first quarter of
2023. The objective of expansion drilling is to delineate additional Mineral Resources. Both the Arista and Switchback
vein systems extend for over 1.5 kilometers in strike length, and both systems remain open along strike and in the vertical
extent. The Gloria vein system, a new discovery, is located between and north of the Arista and Switchback vein systems,
near existing mine infrastructure. Expansion drilling of the Gloria vein system in 2023 has defined a minimum of three
new veins with true widths locally in excess of six meters. The Three Sisters vein system lies at the northern limit of the
Arista mine underground workings and also between the Switchback and Arista vein systems. The Tree Sisters drilling
during 2023 focused on the Sandy veins, which are open to the northwest and up- and down-dip. Both the Gloria and Three
Sisters vein systems will be a primary focus of continued infill and expansion drilling in 2024.
Surface exploration activity during 2023 focused on the Alta Gracia property with the interpretation of surface
mapping and soil geochemistry results generated in late 2022. This work has identified several targets for future follow-
up exploration activity. Our exploration efforts on the Arista, Alta Gracia, and other properties demonstrate our
commitment to long-term investment and the potential to extend our operations into the future in Oaxaca, Mexico.
Please see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for
additional information concerning our mining operations at the Alta Gracia project.
Alta Gracia Mine
Background: In 2008, we were granted claims adjacent to the Margaritas property in the Alta Gracia Mining District
by filing three mining concessions known as the David Fracción I, the David Fracción II, and La Herradura, totaling 5,175
hectares.
As of December 31, 2016, proven and probable reserves had been established for the Mirador Underground Mine
on our Alta Gracia property. In July 2017, mine development reached the economic ore zone of the Mirador vein, and
mining began.
Location and Access: The Alta Gracia project is approximately 20 kilometers northeast of the village of San Pedro
Totalapam, in the Municipality of San Pedro Totolapam. Access to the project is by a gravel road that departs the paved
highway approximately 13 kilometers east of the village of San Pedro Totalapam. The haulage distance by road from Alta
Gracia to the DDGM processing facility is approximately 32 kilometers.
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Geology and Mineralization: The sedimentary and volcanic units mapped at Alta Gracia are similar to those
observed at the Arista mine. The district is dominated by tertiary-age rhyolite flows and tuffs, which are underlain by
andesite flows and tuffs. Granodiorite and felsic intrusives are observed to crop out to the north and east of the Mirador
mine. Known vein occurrences at Alta Gracia are mainly hosted in andesite and rhyolite. The veins at Alta Gracia are
considered low sulfidation epithermal mineralization with economic values only for gold and silver.
Facilities: During 2016, we received our operating permit for the Mirador Mine. In 2017, two mine portals were
developed to provide access to the Mirador vein. Mine site offices and a mobile equipment maintenance shop were
established. Additionally, a diesel power generation plant, a compressed air system, and a mine water pumping station
were developed and put into service. In 2018, old workings were improved to create a second access to the vein system
called Independencia. The portal for this access is located approximately 500 meters southwest of the Mirador portal.
Development was established to access the mineralization, delineated by drill campaigns completed during 2018 and 2019
on the Mirador’s Independencia vein.
Ore from the Mirador Mine, primarily silver ore, was transported by contracted haul trucks to and processed at our
agitated leach plant at the DDGM processing facility, with the final product being doré.
Exploration Activities: In 2023, surface exploration activity was centered around the Alta Gracia property area. In
late 2022 and continuing into early 2023, a surface mapping and soil geochemical program was carried out in the
Aguacatillo prospect over an area to the south-west, west, and north-west of the Independencia and Mirador mines. The
objective of this work was to test for possible westerly extensions of mineralization extending from the Independencia and
Mirador mines. The program was successful in identifying several anomalous zones, which will be used to target follow-
up detailed mapping to identify additional potential targets for future surface drilling. In addition, analysis and
interpretation was completed in 2023 of the geochemical results generated from a regional soil sampling program
completed in late 2022 in the La Fundicion prospect area located immediately south-southeast of the Independencia and
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36
Mirador mines. This interpretation was successful in identifying three distinct clusters of anomalous gold- and silver-in-
soil anomalies, which will be followed up with detailed geologic mapping and rock chip sampling.
Exploration Properties
Margaritas Property
The Margaritas property is made up of the La Tehuana concession, which is approximately 925 hectares, located
within the 55-kilometer San Jose structural corridor and adjacent to the Arista mine.
In 2023, we continued to review results from previous surface drilling, surveying, detailed geological mapping, and
rock chip channel sampling for the Margaritas property. We completed the work required to maintain the claims during
2023, with work focused on analysis of spectral and geophysical information to identify new targets of interest. We expect
to target a similar amount of work in 2024, along with identifying opportunities to strengthen our relationship in the local
communities.
Chamizo Property
In June 2011, we acquired an exploration concession from the Mexican government of approximately 17,898
hectares referred to as Chamizo. In March 2013, we acquired a property known as Cerro Colorado from Almaden Minerals,
Ltd. (“Almaden”) consisting of approximately 1,860 hectares. The Cerro Colorado property is surrounded by our Chamizo
concession, and we include it as part of the Chamizo property. The Chamizo Property is adjacent to the Alta Gracia
property. Any future production from the Cerro Colorado concession is subject to a 2% net smelter return royalty in favor
of Almaden.
During 2022, surface mapping and geochemical sampling were begun in the Jabali prospect area. Results of this
work were reviewed and analyzed in 2023 in order to plan additional detailed follow up geologic mapping and target
evaluation. Different targets within the Chamizo property will continue to be evaluated in 2024, while also looking to
identify opportunities to strengthen our relationship in the local communities to facilitate future work.
Fuego Property
In March 2013, we acquired the Fuego property from Almaden subject to a 2% net smelter return royalty. The
Fuego property consists of approximately 2,554 hectares and is located south of our Alta Gracia and Chamizo properties.
In 2013, Fuego was included in the property-wide airborne geophysical survey. Geologic mapping and surface sampling
have been conducted on the Fuego property, which allows us to meet the acceptable amount of work required to maintain
the claims. We do not anticipate any significant exploration activities at Fuego in 2024. However, we do plan to conduct
the work required to maintain the claims.
Rey Property
The Rey property consists of concessions on the far north-west end of our 55-kilometer structural corridor in the
State of Oaxaca known as El Rey, El Virrey, La Reyna, and El Marquez, totaling 2,335 hectares. We acquired the El
Virrey concession from a third-party, and it is subject to a 2% net smelter return royalty. We obtained the remaining
concessions by staking claims and filing for concessions with the Mexican government.
The Rey property is located approximately 64 kilometers by road from the Arista mine. There is no plant or
equipment on the Rey property. If exploration is successful, any mining would probably require an underground mine
where ore could be trucked to the DDGM processing facility for processing. To date, we have drilled 48 core holes for a
total of 5,273 meters at the Rey property. Early in 2012, we completed a small amount of work to finish refurbishing and
extending an existing shaft on the property to permit underground exploratory drilling. We ceased work at the Rey property
during 2012, following a request to obtain additional approvals from local community agencies. In 2024, we plan to
continue working with the local agencies to understand and address any concerns the community may have, but we have
Gold Resource Corporation
37
no assurance that we will be able to resume our exploration activities in the near term. Once community support is obtained,
we plan to conduct follow-up drilling and exploration based on the drilling done in 2007 and 2008. While negotiations
continue, we will complete enough work to maintain the claims in good standing.
Mining Concessions and Regulations in Mexico
Mineral rights in Mexico belong to the Mexican federal government and are administered pursuant to Article 27 of
the Mexican Constitution. All of our mining concessions are exploitation concessions, which may be granted or transferred
to Mexican citizens and corporations. Our leases or concessions are held by our Mexican subsidiary DDGM. Exploitation
concessions have a term of 50 years and can be renewed for another 50 years. Concessions grant us the right to explore
and exploit all minerals found in the ground. Maintenance of concessions requires the semi-annual payment of mining
duties (due in January and July) and the performance of assessment work, on a calendar year basis, with assessment work
reports required to be filed in the month of May for the preceding calendar year. The amount of mining duties and annual
assessments are set by regulation, may increase over the life of the concession, and include periodic adjustments for
inflation. Failure to pay the mining duties can lead to the cancelation of the relevant concession.
Mexican mining law does not require payment of finder’s fees to the government, except for a discovery premium
in connection with national Mineral Reserves, concessions and claims, or allotments contracted directly from the Mexican
Geological Survey. None of the claims held by DDGM are under such a discovery premium regime.
Ejido Lands and Surface Right Acquisitions in Mexico
Surface lands within DDGM are Ejido lands (agrarian cooperative lands granted by the federal government to
groups of Campesinos pursuant to Article 27 of the Mexican Constitution of 1917). Prior to January 1, 1994, Ejidos could
not transfer Ejido lands into private ownership. Amendments to Article 27 of the Mexican Constitution in 1994 now allow
individual property ownership within Ejidos and allow Ejidos to enter into commercial ventures with individuals or
entities, including foreign corporations. We have an agreement with the local San Pedro Totolapam Ejido, allowing
exploration and exploitation of mineralization at the Arista mine and some of our surrounding properties.
Mexican law recognizes mining as a land use generally superior to agriculture. However, the law also recognizes
the rights of the Ejidos to compensation in the event mining activity interrupts or discontinues their use of the agricultural
lands. Compensation is typically made in the form of a cash payment to the holder of the agricultural rights. The amount
of such compensation is generally related to the perceived value of the agricultural rights as negotiated in the first instance
between the Ejidos and the owner of the mineral rights. If the parties are unable to reach an agreement on the amount of
the compensation, the decision can be referred to the government.
We have established surface rights agreements with the San Pedro Totolapam Ejido and the individuals impacted
by our proposed operations which allow disturbance of the surface where necessary for our exploration activities and
mining operations.
Office Facilities
We constructed an administrative office building adjacent to the DDGM processing facility and a mine office
adjacent to the Arista Mine portal. We also lease approximately 3,000 square feet of office space in Oaxaca City, Oaxaca.
The lease commenced in 2012 and was renewed in December 2021 through the end of 2024.
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Back Forty Project
The Back Forty Project is an advanced Exploration Stage Property located in Menominee County, Michigan, USA
in the mineral rich Penokean Volcanic Belt. Our property is made up of approximately 1,304 hectares (3,222 acres) of
private and public (State of Michigan) mineral lands. The project is centered at latitude 46 degrees 27 North and longitude
87 degrees 51 West. Because of the exploratory nature of the property, we do not currently consider the Back Forty Project
to be independently material to the Company.
Background: On December 10, 2021, the Company successfully completed the acquisition of all the issued and
outstanding common shares of Aquila Resources Inc. Aquila’s principal asset is its 100% interest in the Back Forty Project
located in Menominee County, Michigan, USA. The Back Forty Project has a polymetallic (gold, silver, copper, lead, and
zinc) Volcanogenic Massive Sulfide deposit. The Back Forty Project controls surface and mineral rights through
ownership, leases with the State of Michigan, and royalties with private parties.
Optimization work related to the metallurgy and the economic model for the Back Forty Project was completed,
and the Company released the Back Forty Project Technical Report Summary, which is incorporated by reference as
Exhibit 96.1 to this Form 10-K. 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 that could lead to the development of the Project. Please see Item 2. Properties for
additional information.
Permitting: The State of Michigan governs and regulates the permitting process as it relates to the Back Forty
Project.
Community: Tribal engagement has been very important to the Project, especially considering the cultural resources
near the site. Outreach to local Tribes, including the Menominee Indian Tribe of Wisconsin, began as early as June of
Gold Resource Corporation
39
2010. Aquila conducted extensive archeological studies throughout the affected and unaffected areas. As agreed with the
authorities, Aquila identified areas for permanent protection and established appropriate buffers.
Office Facilities: In Michigan, we own and operate an administrative office building in Stephenson, MI and another
field office close to the location of the potential future mine facilities.
ITEM 3.
LEGAL PROCEEDINGS
In February 2020, a local Ejido community (who claim to be an indigenous community) filed an injunction against
the Mexican federal government through which they demanded the cancelation of several concession titles, including
concessions currently granted to DDGM. The federal government ordered a suspension to prevent work related to
excavating, drilling, opening tunnels, and exploiting the Mineral Resources on the surface and subsoil of the concessions
named in the injunction in the lands of the indigenous community. Presently, DDGM does not perform such works in the
named concessions in lands of the indigenous community. The lawsuit filed in February 2020 at the First District
Courthouse in the state of Oaxaca remains under review by the courts.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
Gold Resource Corporation
40
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock trades on the New York Stock Exchange American (“NYSE”) under the symbol “GORO”.
On March 20, 2024, there were 88,757,610 shares of Gold Resource Corporation, which were held by approximately
200 holders of record.
Transfer Agent
Computershare Trust Company, N.A. is the transfer agent for our common stock. The principal office of
Computershare is located at 6200 S. Quebec St., Greenwood Village, CO 80111, and its telephone number is (303) 262-
0600. Correspondence should be mailed to P.O. Box 43078, Providence, RI 02940-3078 or couriered to 150 Royall St.,
Suite 101, Canton, MA 0202.
Dividend Policy
Approximately $123 million in dividends have been returned to our shareholders since commercial production
began at DDGM in July 2010. As of February 13, 2023, to protect our balance sheet and to focus our capital resources on
exploration and growth opportunities, thus to maximize shareholder value, the company suspended the quarterly dividend
payments until such time that it may become practicable to reinstate.
ITEM 6.
RESERVED
Gold Resource Corporation
41
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information, the following discussion contains forward-looking statements that are
subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which
speak only as of the date of this report. See “Forward-Looking Statements” above. Our actual future results or actions
may differ materially from these forward-looking statements for many reasons, including but not limited to the risks
described in “Item 1A. Risk Factors” and elsewhere in this annual report and other reports filed by us with the SEC.
This discussion and analysis of our financial condition and results of operations should be read in conjunction with
the audited consolidated financial statements and related notes included in this report and with the understanding that
our actual future results may be materially different from what we currently expect.
Introduction
We are a mining company that pursues gold and silver projects that are expected to achieve both low operating
costs and high returns on capital. DDGM holds six properties and includes mineral production primarily from the Arista
underground mine. We produce gold and silver doré and metal concentrates which contain precious metals of gold and
silver and base metals of copper, lead, and zinc.
The following discussion summarizes our results of operations for the two fiscal years ended December 31, 2023
and 2022 and our financial condition as of December 31, 2023 and 2022, with a particular emphasis on the year ended
December 31, 2023.
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, please see the discussion under Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations below.
In our financial statements, we report the sale of all precious and base metals as revenue, and we periodically review
our revenue streams to ensure that this treatment remains appropriate. We consider precious metals to be the long-term
primary driver of our economic decisions and believe that base metals are secondary products for non-GAAP financial
measures.
Gold equivalent is determined by taking gold ounces produced and sold, plus silver ounces produced and sold,
converted to gold equivalent ounces using the gold to silver average realized price ratio for the period.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
42
Results of Operations
Don David Gold Mine
Production Statistics
Mine activities during 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:
Arista Mine
Milled
Tonnes Milled
Grade
Average Gold Grade (g/t)
Average Silver Grade (g/t)
Average Copper Grade (%)
Average Lead Grade (%)
Average Zinc Grade (%)
Recoveries
Average Gold Recovery (%)
Average Silver Recovery (%)
Average Copper Recovery (%)
Average Lead Recovery (%)
Average Zinc Recovery (%)
Combined
Tonnes Milled (1)
Tonnes Milled per Day (2)
Metal production (3)
Gold (ozs.)
Silver (ozs.)
Copper (tonnes)
Lead (tonnes)
Zinc (tonnes)
Metal produced and sold (3)
Gold (ozs.)
Silver (ozs.)
Copper (tonnes)
Lead (tonnes)
Zinc (tonnes)
Percentage payable metal (3)
Gold (%)
Silver (%)
Copper (%)
Lead (%)
Zinc (%)
For the year ended December 31,
2023
2022
458,111
491,983
1.73
85
0.36
1.52
3.45
79.6
91.6
77.5
73.0
85.4
459,171
1,436
20,328
1,142,138
1,287
5,068
13,513
18,534
1,036,229
1,231
4,501
10,954
91
91
96
89
81
2.56
83
0.39
1.80
4.36
83.9
92.0
75.6
75.4
83.7
493,241
1,466
34,122
1,213,404
1,436
6,665
17,943
30,119
1,057,209
1,348
5,391
14,157
88
87
94
81
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 amount of metals contained in concentrates produced and sold.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
43
Full-year 2023 compared to full-year 2022
Key drivers in the production and financial results for the twelve months ended December 31, 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.
Grades & Recoveries
During the twelve months ended December 31, 2023, we processed ore with an average gold grade of 1.73 g/t, as
compared to 2.56 g/t for the same period in 2022. Full-year average gold grade was approximately 32% lower than the
prior year, in line with our mine sequencing plan. The average silver grade for the year ending 2023 increased 2% to 85
g/t. While silver grade and recovery were similar to prior year, recovery for gold declined 5% in 2023 and is in line as per
mine plan. As shown in the DDGM Technical Report Summary filed as Exhibit 96.2 to this Form 10-K, gold and silver
grades are expected to decline over time, 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; however, there are other factors that may
influence this general assumption.
Our base metal average grades for the twelve months ended December 31, 2023 were 0.36% for copper, 1.52% for
lead, and 3.45% for zinc, compared to 0.39% for copper, 1.80% for lead, and 4.36% for zinc in 2022. Copper, Lead and
zinc grades for the 12 months ending December 31, 2023 declined by 8%, 16% and 21%, respectively, in line with our
mine sequencing plan. As shown in the DDGM Technical Report Summary filed as Exhibit 96.2 to this Form 10-K, future
recoveries and grades are expected to be in line with the life of mine average shown in the Mineral Reserve and Mineral
Resource tables.
Production
For the year ended December 31, 2023, the Oaxaca operations processed 459,171 tonnes of ore, at an average rate
of 1,436 daily tonnes, a decrease of 7% in material processed and a decrease of 2% in tonnes milled per day from prior
year. 20,328 gold ounces and 1,142,138 silver ounces were produced, reflecting a decrease of 40% and 6%, respectively,
from the same period in 2022. The production decrease for gold is directly related to the decrease in gold grade and
recovery in 2023 as compared to the same periods in 2022. Production for copper, lead, and zinc decreased by 10%, 24%,
and 25%, respectively, for the three months ending December 31, 2023, compared the same period in 2022. Production
decreases are mostly related to the decrease in base metal grades in 2023 compared to the same periods in 2022, as well
as a result of lower tonnes processed, as expected and in line with the 2023 mine plan.
Metals produced and sold is less than the amount of metals produced because a portion of the metals present in the
materials shipped is withheld by the purchaser of our doré and concentrates under the terms of the Company’s sales
contracts, as explained above. The percentage payable metal—the amount of metal sold as a percent of the metal
produced—were higher for all metals for the twelve months ended December 31, 2023, compared to same period in 2022,
due to the minerology of the material mined.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
44
Sales Statistics
The following table summarizes certain sales statistics about the Don David Gold Mine operations for the periods
indicated:
Net sales
Gold
Silver
Copper
Lead
Zinc
Less: Treatment and refining charges
Realized and unrealized gain (loss) - embedded derivative, net
Total sales, net
Metal produced and sold
Gold (ozs.)
Silver (ozs.)
Copper (tonnes)
Lead (tonnes)
Zinc (tonnes)
Average metal prices realized (1)
Gold ($ per oz.)
Silver ($ per oz.)
Copper ($ per tonne)
Lead ($ per tonne)
Zinc ($ per tonne)
Gold equivalent ounces sold
Gold Ounces
Gold Equivalent Ounces from Silver
Total AuEq oz
For the year ended December 31,
2023
2022
$
$
$
$
$
$
$
35,944
24,205
10,472
9,540
29,225
(11,630)
(28)
97,728
18,534
1,036,229
1,231
4,501
10,954
1,955
23.68
8,513
2,158
2,621
18,534
12,551
31,085
$
$
$
$
$
$
$
54,319
22,757
11,987
11,626
50,470
(12,072)
(363)
138,724
30,119
1,057,209
1,348
5,391
14,157
1,801
21.53
8,795
2,129
3,539
30,119
12,638
42,757
(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 market average metal prices in most cases.
Full-year 2023 compared to full-year 2022
Metal Sold
During the twelve months ended December 31, 2023, gold sales of 18,534 ounces, silver sales of 1,036,229 ounces,
copper sales of 1,231 tonnes, lead sales of 4,501 tonnes, and zinc sales of 10,954 tonnes decreased by 38%, 2%, 9%, 17%,
and 23%, respectively, as compared to the same period in 2022. These decreases were expected due to mine sequencing.
Average metal prices realized
During the twelve months ended December 31, 2023, the average metal prices were $1,955 per ounce for gold,
$23.68 per ounce for silver, $8,513 per tonne for copper, $2,158 per tonne for lead, and $2,621 per tonne for zinc.
Compared to the same period in 2022, the average metal price for gold, silver, and lead increased by 9%, 10%, and 1%,
respectively, while the average metal price for copper and zinc decreased by 3% and 26%, respectively.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
45
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
46
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
47
Financial Measures
The following table summarizes certain financial data of the Company for the periods indicated:
Doré and concentrate sales
Less: Treatment and refining charges
Realized/unrealized derivatives, net
Sales, net
Total cost of sales
Mine gross (loss) profit
Other costs and expenses, including tax:
Net loss
Other Non-GAAP Financial Measures:
Total cash cost after co-product credits per AuEq oz sold (1)
Total consolidated all-in sustaining cost after co-product credits per AuEq oz sold (1)
Total all-in cost after co-product credits per AuEq oz sold (1)
For the year ended December 31,
2023
2022
(in thousands)
109,386
(11,630)
(28)
97,728
103,043
(5,315)
10,702
(16,017)
1,250
1,864
2,062
$
$
$
$
$
151,159
(12,072)
(363)
138,724
108,976
29,748
36,069
(6,321)
458
1,093
1,442
$
$
$
$
$
(1) For a detailed description of each of the non-GAAP financial measures and a reconciliation to GAAP financial measures, please see the discussion
under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations——Non-GAAP Measures below.
Full-year 2023 compared to full-year 2022
Sales, net
DDGM net sales of $97.7 million for the year ended December 31, 2023 decreased by $41.0 million, or 30%, when
compared to 2022. The decrease in 2023 sales is the result of lower tonnes processed and lower grades for gold and base
metals.
Treatment charges
Treatment charges for the twelve months ended December 31, 2023, were $11.6 million, or $697 per tonne of base
metal produced and sold, as compared to $12.1 million, or $578 per tonne of base metal produced and sold for the same
period in 2022. This 21% cost increase in treatment charge per metal tonne sold due to a 32% increased contractual rate
for copper treatment charges and for a 21% increase in zinc treatment charges which are based on spot and benchmark
rates. These are slightly offset by a 30% decrease in contractual rate for lead treatment charges.
Total cost of sales
Total cost of sales of $103.0 million in 2023 decreased by $5.9 million, or 5%, compared to 2022. The primary
driver is the $4.8 million, or 6% decrease in production costs from $80.9 million in 2022 to $76.1 million in 2023, and a
$1.1 million, or 4% decrease in depreciation expense. The decrease in production costs is related to lower production in
2023.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
48
Mine gross (loss) profit
For the year ended December 31, 2023, mine gross loss and mine gross loss percent totaled $5.3 million and 5%
respectively, as compared to a mine gross profit and mine gross profit percent of $29.7 million and 21% for the same
period in 2022. The decrease in mine gross profit and loss and mine gross profit and loss percent of $35.1 million and
27%, respectively, when compared to the same period in 2022, primarily resulted from the $41.0 million decrease in net
sales year-over-year.
The relationship between sales and operating costs, and therefore mine gross profit or loss, is not perfectly correlated
to the tonnes of ore processed. While both sales and operating costs are impacted by the tonnes of ore processed, other
factors—the grade of ore processed, metal commodity prices, and operating cost unit prices—tend to have a greater impact
on the relationship to mine gross profit. For example, in 2023, the volume of ore processed decreased 7% compared to
2022, with net sales also decreasing by 30% and operating costs decreasing by 40%. The decrease in 2023 net sales when
compared to 2022 is explained by the 32% decrease in gold grade and the base metal grade decreases for copper, lead, and
zinc of 8%, 16%, and 21%, respectively. The decrease in operating costs is explained chiefly by the targeted decreases in
exploration and general and administrative expenses.
We expect grades to vary from period to period based on the annual mine plan. The gold grades are expected to
trend downwards over time, toward the average grade of 1.29 g/t (exclusive of silver, copper, lead, and zinc contained
grades), reflected in our Mineral Reserves estimate. However, as capital intensive mine development progresses and infill
drilling occurs, opportunities to refine mining methods and eliminate dilution may have a favorable impact on future mined
grades.
One component of gross profit or loss is concentrate treatment charges, which are netted against concentrate sales.
These treatment charge agreements are negotiated on an annual basis with the spot rate adjusted quarterly on zinc. The
decrease in treatment charges in 2023 compared to 2022 was the result of lower metals production and therefor decreased
revenue as compared to 2022 due to both reduced tonnes mined and processed, and lower grades realized on the tonnage.
Net loss
For the year ended December 31, 2023, we recorded a net loss from operations of $16.0 million, as compared to
$6.3 million net loss during the same period in 2022. The change was attributable to the factors noted above.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
49
Other Costs and Expenses, Including Taxes
Other costs and expenses:
General and administrative expenses
Mexico exploration expenses
Michigan Back Forty Project expenses
Stock-based compensation
Realized and unrealized loss on zinc zero cost collar
Other (income) expense, net
Total other costs and expenses
(Benefit) provision for income taxes
Total other costs, including taxes
Full-year 2023 compared to full-year 2022
For the year ended December 31,
2023
2022
(in thousands)
$
$
6,583
4,167
1,642
681
-
3,364
16,437
(5,735)
10,702
$
$
8,048
4,244
8,805
1,955
170
4,288
27,510
8,559
36,069
General and administrative expenses: For the year ended December 31, 2023, general and administrative expenses
totaled $6.6 million compared to $8.0 million for the same period of 2022. The $1.4 million decrease in the twelve months
ended December 31, 2023, as compared to the same period in 2022, is due allocating more job duties directly related to
production at DDGM from corporate employees in 2023.
DDGM Exploration expenses: For the years ended December 31, 2023 and 2022 DDGM exploration expenses
remained flat at $4.2 million.
Back Forty Project expenses: For the year ended December 31, 2023, the Back Forty Project expenses totaled $1.6
million as compared to $8.8 million for the year ended December 31, 2022. Costs were lower in 2023, as the optimization
work was completed in October 2023.
Stock-based compensation: For the year ended December 31, 2023, stock-based compensation expense totaled $0.7
million as compared to $2.0 million for the year ended December 31, 2022. This decrease is due to personnel changes and
lower share price in 2023.
Other expense, net: For the year ended December 31, 2023, we recorded other expense of $3.4 million compared
to $4.3 million during the year ended December 31, 2022. The $0.9 million decrease from 2022 was due to $0.7 million
lower realized and unrealized currency gains and losses and lower other expense that includes $0.7 million lower expense
related to the contingent consideration, offset by $0.6 million higher interest on the streaming liabilities and $0.9 million
higher severance payments in 2023 due to planned reduction of work force. Please see Item 8. Financial Statements and
Supplementary Data—Note 17. Other (Income) Expense, Net for additional information.
Provision for income taxes. For the year ended December 31, 2023, income tax benefit increased to $5.7 million
from an $8.6 million income tax expense for the same period in 2022. The 2023 income tax benefit is primarily driven by
the decrease in pre-tax income at DDGM. Please see Item 8. Financial Statements and Supplementary Data—Note 4.
Income Taxes for additional information.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
50
Other Non-GAAP Financial Measures
Certain Non-GAAP financial measures are discussed below. For a detailed description of each of these measures
and a reconciliation to GAAP financial measures, please see the discussion under Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Non-GAAP Measures below.
Full-year 2023 compared to full-year 2022
Total cash cost after co-product credits per AuEq oz sold: For the twelve months ended December 31, 2023, the
total cash cost after co-product credits per AuEq oz sold was $1,250 compared to $458 for the same period in 2022. The
increase is due to the lower amount of co-product credits we received during the twelve months ended December 31, 2023,
the 27% decrease in total number of AuEq ounces sold, and the 4% decrease in treatment and refining charges as a result
of an increase in the zinc treatment charge benchmark and spot price. Although production costs were lower for the twelve
months ended December 31, 2023 compared to the same period last year, the strengthening peso and increased energy
costs negatively impacted production costs and, therefore, the cost per tonne processed and the total cash cost after co-
product credits per AuEq oz sold.
Total consolidated all-in sustaining cost after co-product credits per AuEq oz sold: For the twelve months ended
December 31, 2023, the total consolidated all-in sustaining cost after co-product credits per AuEq oz sold was $1,864
compared to $1,093 for the same period in 2022. The increase is directly related to the higher cash costs per ounce
discussed above, partially offset by lower sustaining capital expenditures.
Total all-in cost after co-product credits per AuEq oz sold: For the twelve months ended December 31, 2023, the
total all-in cost after co-product credits per AuEq oz sold was $2,062 compared to $1,442 for the same period in 2022.
The increase is due to the higher all-in sustaining costs discussed above, offset by lower Back Forty costs due to completion
of the optimization work in October 2023.
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 Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Non-GAAP Measures.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
51
2023 Capital and Exploration Investment Summary
Sustaining Investments:
Underground Development
Infill Drilling
Other Sustaining Capital
Surface and Underground Exploration
Development & Other
Subtotal of Sustaining Investments:
Growth Investments:
DDGM growth:
Surface Exploration / Other
Underground Exploration Drilling
Underground Exploration Development
Back Forty growth:
For the year ended
December 31, 2023
2023 full-year
guidance
(in thousands)
Capital
Capitalized Exploration
Capital
$
Capitalized Exploration
4,386
4,096
1,420
1,139
11,041 $ 9 - 11 million
Exploration
Exploration
Capitalized Exploration
2,240
1,927
357
Back Forty Project Optimization & Permitting
Exploration
Subtotal of Growth Investments:
Total Capital and Exploration:
1,642
6,166 $ 6 - 7 million
17,207 $ 15 - 18 million
$
The Company’s investment in Mexico totaled $15.1 million in 2023. Our investment in Mexico is focused on
favorably impacting our environmental, social, and governance programs while creating operational efficiencies and
longevity. At the Back Forty Project, $1.6 million was spent to wrap up the optimization work and to release the Back
Forty Project Technical Report Summary, which was filed as Exhibit 96.1 to the Form 8-K filed on October 26, 2023.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
52
DDGM Ore Transportation
Underground and Exploration Development: Mine development during the quarter included ramps and accesses to
different areas of the deposit, vertical shafts, and exploration development drifts. A total of 2,420 meters of underground
development and exploration development, at a cost of $5.9 million, was completed during the year, including access to
new exploration drill stations for both infill and expansion programs.
Back Forty Feasibility and Permitting: Work on optimizing the Back Forty Project was completed during the third
quarter of 2023. Mine planning, process plant design, site layout, and infrastructure were largely completed during 2022.
As a result, the Company filed the Back Forty Project Technical Report Summary 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 that
could lead to the development of the Project.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
53
Non-GAAP Measures
Throughout this report, we have provided information prepared or calculated according to U.S. GAAP and have
referenced some non-GAAP performance measures which we believe will assist with understanding the performance of
our business. These measures are based on precious metal gold equivalent ounces sold and include cash cost before co-
product credits per ounce, total cash cost after co-product credits per ounce, and total all-in sustaining cost per ounce
(“AISC”). Because the non-GAAP performance measures do not have any standardized meaning prescribed by U.S.
GAAP, they may not be comparable to similar measures presented by other companies. Accordingly, these measures
should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S.
GAAP. These non-GAAP measures are not necessarily indicative of operating profit or cash flow from operations as
determined under GAAP.
For financial reporting purposes, we report the sale of base metals as part of our revenue. Revenue generated from
the sale of base metals in our concentrates is considered a co-product of our gold and silver production for the purpose of
our total cash cost after co-product credits for our Don David Gold Mine. We periodically review our revenues to ensure
that our reporting of primary products and co-products remains appropriate. Because we consider copper, lead, and zinc
to be co-products of our precious metal production, the value of these metals continues to be applied as a reduction to total
cash costs in our calculation of total cash cost after co-product credits per gold equivalent ounce sold. Gold equivalent is
determined by taking gold ounces produced and sold, plus silver ounces produced and sold, converted to gold equivalent
ounces using the gold to silver average realized price ratio for the period. We believe the identification of copper, lead,
and zinc as co-product credits is appropriate because of their lower individual economic value compared to gold and silver
and due to the fact that gold and silver are the primary products we intend to produce.
Total cash cost, after co-product credits, is a measure developed by the Gold Institute in an effort to provide a
uniform standard for comparison purposes. AISC is calculated based on the current guidance from the World Gold Council.
Total cash cost before co-product credits includes all direct and indirect production costs related to our production
of metals (including mining, milling, and other plant facility costs, royalties, and site general and administrative costs) less
stock-based compensation allocated to production costs plus treatment and refining costs.
Total cash cost after co-product credits includes total cash cost before co-product credits, less co-product credits
(revenues earned from base metals).
AISC includes total cash cost after co-product credits plus other costs related to sustaining production, including
sustaining allocated general and administrative expenses and sustaining capital expenditures. We determined sustaining
capital expenditures as those capital expenditures that are necessary to maintain current production and execute the current
mine plan.
Cash cost before co-product credits per ounce, total cash cost after co-product credits per ounce, and AISC are
calculated by dividing the relevant costs, as determined using the cost elements noted above, by precious metal gold
equivalent ounces sold for the periods presented.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
54
Reconciliations to U.S. GAAP
The table below present reconciliations between the most comparable GAAP measure of Total cost of sales to the
non-GAAP measures of Cash cost after co-product credits , All-in sustaining cost after co-product credits for DDGM and
for the Company, and All-in Cost after co-product credits for the years ended December 31, 2023 and 2022:
Note
For the year ended December 31,
2023
2022
Total cost of sales (1)
Less: Depreciation and amortization (1)
Less: Reclamation and remediation (1)
Refining charges for Doré sales
Treatment and refining charges for Concentrate sales
Co-product credits:
Concentrate sales - Copper
Concentrate sales - Lead
Concentrate sales - Zinc
Realized (loss) gain for embedded derivatives - Copper
Realized (loss) gain for embedded derivatives - Lead
Realized gain for embedded derivatives - Zinc
Total cash cost after co-product credits
Gold equivalent (AuEq) ounces sold (oz)
Total cash cost after co-product credits per AuEq oz sold
Total cash cost after co-product credits from above
Sustaining Investments - Capital:
Underground Development (2)
Other Sustaining Capital (2)
Sustaining Investments - Capitalized Exploration:
Infill Drilling (2)
Surface and Underground Exploration Development & Other (2)
Reclamation and remediation (1)
DDGM all-in sustaining cost after co-product credits
AuEq ounces sold (oz)
DDGM all-in sustaining cost after co-product credits per AuEq oz sold
DDGM all-in sustaining cost after co-product credits from above
Corporate Sustaining Expenses:
General and administrative expenses (1)
Stock-based compensation (1)
Consolidated all-in sustaining cost after co-product credits
AuEq ounces sold (oz)
Total consolidated all-in sustaining cost after co-product credits per AuEq oz sold
Consolidated all-in sustaining cost after co-product credits from above
Growth Investments - Capital:
Gold Regrind (2)
Dry Stack Completion (2)
Growth Investments - Capitalized Exploration:
Underground Exploration Development (2)
Growth Investments - Exploration:
Mexico exploration expenses (1)
Michigan Back Forty Project expenses (1)
Total all-in cost after co-product credits
AuEq ounces sold (oz)
Total all-in cost after co-product credits per AuEq oz sold
$
2
2
2
2
2
19
19
19
$
$
$
$
$
$
$
$
$
$
$
103,043
(26,126)
(774)
52
11,578
(10,472)
(9,540)
(29,225)
(6)
(174)
511
38,867
31,085
1,250
38,867
4,386
1,420
4,096
1,139
774
50,682
31,085
1,630
50,682
6,583
681
57,946
31,085
1,864
57,946
-
-
357
4,167
1,642
64,112
31,085
2,062
$
$
$
$
$
$
$
$
$
$
$
$
108,976
(27,226)
(801)
59
12,013
(11,987)
(11,626)
(50,470)
127
150
364
19,579
42,757
458
19,579
6,619
3,227
3,459
3,034
801
36,719
42,757
859
36,719
8,048
1,955
46,722
42,757
1,093
46,722
745
1,149
-
4,244
8,805
61,665
42,757
1,442
(1) Refer to Item 8—Financial Statements and Supplementary Data: Consolidated Statements of Operations.
(2) Refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—2023 Capital and Exploration
Investment Summary and the 2022 Annual Report Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations—2022 Capital and Exploration Investment Summary.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
55
Trending Highlights
Operating Data
Total tonnes milled
Average Grade
Gold (g/t)
Silver (g/t)
Copper (%)
Lead (%)
Zinc (%)
Metal production (before payable metal deductions)
Gold (ozs.)
Silver (ozs.)
Copper (tonnes)
Lead (tonnes)
Zinc (tonnes)
Metal produced and sold
Gold (ozs.)
Silver (ozs.)
Copper (tonnes)
Lead (tonnes)
Zinc (tonnes)
Average metal prices realized
Gold ($ per oz.)
Silver ($ per oz.)
Copper ($ per tonne)
Lead ($ per tonne)
Zinc ($ per tonne)
Gold equivalent ounces sold
Gold Ounces
Gold Equivalent Ounces from Silver
Total AuEq oz
Financial Data
Total sales, net (in thousands)
Production Costs (in thousands)
Production Costs/Tonnes Milled
Operating Cash Flows (in thousands)
Net income (loss) (in thousands)
Earnings (loss) per share - basic
2022
2023
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
136,844
129,099
110,682
116,616
3.00
81
0.41
1.97
4.89
2.63
64
0.32
1.99
4.00
1.98
80
0.37
1.59
4.21
2.51
109
0.45
1.58
4.27
117,781
-
2.33
94
0.37
1.73
3.88
113,510
116,626
111,255
1.59
86
0.37
1.64
3.72
1.52
73
0.32
1.29
3.24
1.44
85
0.39
1.39
2.95
11,187
332,292
431
2,073
5,562
9,317
249,088
303
2,020
4,282
5,851
261,256
296
1,249
3,901
7,767
370,768
406
1,323
4,198
7,171
322,676
336
1,559
3,837
4,637
289,816
334
1,389
3,569
4,443
247,159
276
1,048
3,223
4,077
282,488
341
1,072
2,884
8,381
265,407
408
1,639
4,359
8,746
231,622
286
1,755
3,590
5,478
225,012
282
1,056
2,943
7,514
335,168
372
941
3,265
6,508
294,815
332
1,417
3,060
4,287
274,257
327
1,317
3,141
3,982
208,905
245
947
2,571
3,757
258,252
327
820
2,182
$ 1,898
$ 23.94
$ 10,144
$ 2,347
$ 3,842
$ 1,874
$ 22.05
$ 9,275
$ 2,168
$ 4,338
$ 1,627
$ 18.54
$ 7,115
$ 1,882
$ 3,186
$ 1,734
$ 21.25
$ 8,221
$ 1,954
$ 2,577
8,381
3,348
11,729
8,746
2,729
11,475
5,478
2,564
8,042
7,514
4,107
11,621
$ 1,915
$ 23.04
$ 9,172
$ 2,158
$ 3,195
6,508
3,547
10,055
$ 2,010
$ 24.93
$ 8,397
$ 2,153
$ 2,485
$ 1,934
$ 23.61
$ 8,185
$ 2,196
$ 2,195
$ 1,985
$ 23.14
$ 8,205
$ 2,122
$ 2,516
4,287
3,402
7,689
3,982
2,550
6,532
3,757
3,011
6,768
$ 45,417 $ 37,064
$ 20,074 $ 21,722
$ 168
$ 7,976
$ 2,673
$ 0.03
$ 147
$ 4,230
$ 4,019
$ 0.05
$ 175
$ 23,869 $ 32,374
$ 19,380 $ 19,773
$ 170
($ 4,292) $ 6,243
($ 9,730) ($ 3,283)
($ 0.04)
($ 0.11)
$ 31,228 $ 24,807 $ 20,552 $ 21,141
$ 19,850 $ 20,302 $ 18,957 $ 17,034
$ 153
$ 163
$ 179
$ 169
$ 1,024
($ 551) ($ 7,475) $ 1,783
($ 1,035) ($ 4,584) ($ 7,341) ($ 3,057)
($ 0.03)
($ 0.05)
($ 0.01)
($ 0.08)
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
56
Liquidity and Capital Resources
As of December 31, 2023, our working capital was $15.2 million, a decrease of $6.2 million from $21.4 million at
December 31, 2022. Our working capital balance at December 31, 2023 reflects a decrease in cash, partially offset by a
decrease in current liabilities related to income tax payable, accounts payable, and the contingent consideration. The
decrease of $17.4 million of cash and cash equivalents from December 31, 2022 is attributable to a cash outflow of $12.5
million for capital investments, as well as a cash outflow of $5.2 million from operating activities for 2023 that includes
$7.8 million of income tax payments for the tax years 2022 and 2023, exploration investment of $4.2 million in DDGM,
and $1.6 million of spending on the Back Forty Project optimization work. The cash outflow from operating activities is
partially the result of higher energy prices due to inflation and the strengthening of the Mexican Peso. Our working capital
balance fluctuates as we use cash to fund our operations, financing, and investing activities, including exploration and
mine development. We believe that as a result of our cash balances, the performance of our current and expected
operations, and current metals prices, we will be able to meet our obligations and other potential cash requirements during
the next 12 months from the date of this report.
The actual amount of cash receipts that we receive during the period from operations may vary significantly from
the planned amounts due to, among other things: (i) unanticipated variations in grade, (ii) unexpected challenges associated
with our proposed mining plan, (iii) decreases in commodity prices below those used in calculating the estimates shown
above, (iv) variations in expected recoveries, or (v) interruptions in mining at DDGM. The actual amount of cash
expenditures that we incur during the twelve-month period ending December 31, 2024 may vary significantly from the
planned amounts and will depend on a number of factors, including, among other things: (i) unexpected challenges in
operations, including exploration and development, (ii) increases in operating costs above those used in calculating the
estimates shown above, (iii) possible strategic transactions, and (iv) continued inflationary pressure. Likewise, if cash
expenditures are greater than anticipated or if cash receipts are less than anticipated, we may need to take certain actions
to adjust our spending over the next twelve months. Although it is not likely, given the current share price, we may also
utilize the At-The-Market Offering Agreement (“ATM”) program, if necessary. Please see Item 8. Financial Statements
and Supplementary Data—Note 12. Shareholders’ Equity in for additional information about the ATM.
Long-term liabilities assumed with the Aquila acquisition, capital requirements to develop the Back Forty Project,
and potential project financing may have an impact on liquidity in the long term. These long-term liabilities are contingent
upon the Back Forty Project securing project financing and achieving commercial production. Project financing
requirements will not be determined until the Company Board of Directors approves a decision to proceed on the Project.
The Board continues to evaluate options that could lead to the development of the Project.
Cash and cash equivalents as of December 31, 2023 decreased to $6.3 million from $23.7 million as of December
31, 2022, a net decrease in cash of $17.4 million. The decrease is primarily due to the $5.2 million cash outflows from
operations and the $12.5 million cash spent on investing activities for capital investments, offset by $0.2 million increase
in value due to the strengthening of the peso.
Net cash used in operating activities for the years ended December 31, 2023 was $5.2 million, compared to net cash
provided by operating activities of $14.2 million in 2022. The decrease is mainly attributable to reduced net sales resulting
from lower mined and processed tonnages, lower grades realized on said tonnages, and lower realized metal prices for
copper and zinc. Other attributable impacts to production costs included higher inflation and a stronger average Mexican
Peso in 2023 as compared to 2022 that resulted in increased costs offset by lower mining and processing related costs
resulting from lower tonnage.
Net cash used in investing activities for the year ended December 31, 2023 was $12.5 million compared to $19.4
million during the same period in 2022. The decrease in investing activities is primarily attributable to non-recurring capital
projects undertaken in 2022 (including efforts to improve stabilization and ventilation of the Don David mine and the
completion of the filtration plant) and in addition, the lower Back Forty expenses related to the optimization work in 2023,
as compared to 2022.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
57
Net cash used in financing activities for the year ended December 31, 2023 was a net outflow of $0.1 million
compared to a net outflow of $3.9 million in 2022. The lower financing costs are attributable to the suspension of the
dividend program in 2023.
Off-Balance Sheet Arrangements
As of December 31, 2023, we have off-balance sheet arrangements related to equipment purchase obligations of
$0.8 million.
Accounting Developments
Recent accounting pronouncements issued have been evaluated and do not presently impact our financial statements
and supplemental data.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amount of assets, liabilities, and contingencies at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the reporting period. As a result, management is required
to routinely make judgments and estimates about the effects of matters that are inherently uncertain. Actual results may
differ from these estimates under different conditions or assumptions. The following discussion pertains to accounting
estimates management believes are most critical to the presentation of our financial position and results of operations that
require management’s most difficult, subjective, or complex judgments.
Future Metals Prices
Metals prices are key components in estimates that determine the valuation of some of our significant assets and
liabilities, including properties, plant and equipment, deferred tax assets, and certain accounts receivable. Metals prices
are also an important component in the estimation of reserves. As shown above in Item 1. – Business, metals prices have
historically been volatile. Gold demand arises primarily from investment and consumer demand. Silver demand arises
from investment demand, particularly in exchange-traded funds, industrial demand, and consumer demand. Investment
demand for gold and silver can be influenced by several factors, including: the value of the U.S. dollar and other currencies,
changing U.S. budget deficits, widening availability of exchange-traded funds, interest rate levels, the health of credit
markets, and inflationary expectations. The investments in the construction industry, rising electrical and electronics
production, and demand for industrial equipment are some of the major factors driving the demand for base metals and
their prices.
Mineral Resources and Mineral Reserves
Critical estimates are inherent in the process of determining our Mineral Resources and Mineral Reserves. Our
Mineral Resources and Mineral Reserves are affected largely by our assessment of future metals prices, as well as by
engineering and geological estimates of ore grade, accessibility, and production costs. Metals prices used in estimating our
Mineral Resources and Mineral Reserves closely approximate the average median consensus prices from analysts as at
June 2023 for each of the five years starting 2024 through 2028. The consensus prices were based on estimates of 38
financial institutions compiled by the Company. These consensus prices were subsequently compared to the actual 2023
closing spot price as at September 29, 2023 and the 36-month average as at August 28, 2023 and as per published
exchanges (Comex for precious metals and London Metal Exchange (“LME”) for base metals) to ensure the prices used
for the Mineral Resources and Mineral Reserves were still considered to be reasonably conservative estimates. Of note,
the metal price estimates are applied to both the Back Forty Mine Project Technical Report Summary and the DDGM
Technical Report Summary. Our assessment of Mineral Resources and Mineral Reserves occurs at least annually. Mineral
Reserves are a key component in the valuation of our property, equipment, mine development, and related depletion and
depreciation rates.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
58
Mineral Reserve estimates are used in determining appropriate rates of units-of-production depreciation, with net
book value of many assets depreciated over remaining estimated reserves. Mineral Resources and Mineral Reserves are
also key components in forecasts of estimated future cash flows, which we compare to current asset values in an effort to
ensure that carrying values are reported appropriately, as well as assessment of the recoverability of deferred tax assets
related to expectations of future taxable income. Mineral Resources and Mineral Reserves are a culmination of many
estimates and are not guarantees that we will recover the indicated quantities of metals or that we will do so at a profitable
level.
Revenue
Concentrate sales are initially recorded based on 100% of the provisional sales prices, net of treatment and refining
charges, at the time of delivery to the customer, at which point the performance obligations are satisfied and control of the
product is transferred to the customer. Adjustments to the provisional sales prices are made to take into account the mark-
to-market changes based on the forward prices of metals until final settlement occurs. The changes in price between the
provisional sales price and final sales price are considered an embedded derivative that is required to be separated from
the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the quoted
metal prices at the time of delivery. The embedded derivative, which does not qualify for hedge accounting, is adjusted to
market through revenue each period prior to final settlement. Market changes in the prices of metals between the delivery
and final settlement dates will result in adjustments to revenues related to previously recorded sales of concentrate. Sales
are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated with the buyer. These
charges are estimated upon delivery of concentrates based on contractual terms and adjusted to reflect actual charges at
final settlement. Historically, actual charges have not varied materially from the Company’s initial estimates.
Doré sales are recognized upon the satisfaction of performance obligations, which occurs when price and quantity
are agreed upon with the customer. Doré sales are recorded using quoted metal prices, net of refining charges.
Depreciation and Amortization
Capitalized costs are depreciated or amortized using the straight-line method or unit-of-production (“UOP”) method
at rates sufficient to depreciate such costs over the shorter of estimated productive lives of such assets or the useful life of
the individual assets. Significant judgment is involved in the determination of the estimated life of the assets. The
Company’s estimates for Mineral Reserves is used in determining our UOP rates. The Company’s estimates of proven and
probable ore reserves may change, possibly in the near term, resulting in changes to depreciation, depletion, and
amortization rates in future reporting periods. Productive lives of the assets range from 1 to 10 years, but do not exceed
the useful life of the individual asset. Please see Item 8. Financial Statements and Supplementary Data—Note 1. Nature
of Operations and Summary of Significant Accounting Policies for depreciation rates of major asset categories.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
59
Carrying Value of Stockpiles
Stockpiles represent ore that has been extracted from the mine and is available for further processing. Mine
sequencing may result in mining material at a faster rate than can be processed. We generally process the highest ore grade
material first to maximize metal production; however, a blend of gold ore stockpiles may be processed to balance hardness
and/or metallurgy in order to maximize throughput and recovery. Processing of lower grade stockpiled ore may continue
after mining operations are completed. Stockpiles are measured by estimating the number of tonnes added and removed
from the stockpile, the number of contained ounces (based on assay data), and the estimated metallurgical recovery rates.
Stockpile ore tonnages are verified by periodic surveys. Costs are added to stockpiles based on current mining costs,
including applicable overhead, depreciation, and amortization relating to mining operations and removed at each
stockpile’s average cost per recoverable unit as material is processed.
We record stockpiles at the lower of average cost or net realizable value, and carrying values are evaluated at least
quarterly. Net realizable value represents the estimated future sales price based on short-term and long-term metals price
assumptions that are applied to expected short-term (12 months or less) and long-term sales from stockpiles, less estimated
costs to complete production and bring the product to sale. The primary factors that influence the need to record write-
downs of stockpiles include declines in short-term or long-term metals prices, increases in costs of production inputs such
as labor, fuel and energy, materials and supplies, as well as realized ore grades and recovery rates.
Other assumptions include future operating and capital costs, metal recoveries, production levels, commodity prices,
Mineral Resource and Mineral Reserve quantities, engineering data, and other factors unique to each operation based on
the life of mine plans. If short-term and long-term commodity prices decrease, estimated future processing costs increase,
or other negative factors occur, it may be necessary to record a write-down of ore on stockpiles. A high degree of judgment
is involved in determining such assumptions and estimates and no assurance can be given that actual results will not differ
significantly from those estimates and assumptions.
Impairment of Long-Lived Assets
We evaluate the carrying value of long-lived assets to be held and used using a fair-value based approach when
events and circumstances indicate that the related carrying amount of our assets may not be recoverable. The economic
environment and commodity prices may be considered as impairment indicators for the purposes of these impairment
assessments. In accordance with U.S. GAAP, the carrying value of a long-lived asset or asset group is considered impaired
when the anticipated undiscounted cash flows from such asset or asset group are less than its carrying value. In that event,
a loss will be recorded in our Consolidated Statements of Operations based on the difference between book value and the
estimated fair value of the asset or asset group computed using discounted estimated future cash flows, or the application
of an expected fair value technique in the absence of an observable market price. Future cash flows include estimates of
recoverable quantities to be produced from estimated Mineral Resources and Mineral Reserves, commodity prices
(considering current and historical prices, price trends, and related factors), production quantities, production costs, and
capital expenditures, all based on life-of-mine plans and projections. In estimating future cash flows, assets are grouped at
the lowest level for which identifiable cash flows exist that are largely independent of cash flows from other asset groups.
It is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of
recoverable minerals, gold and other commodity prices, production levels and costs, and capital are each subject to
significant risks and uncertainties.
Asset Retirement Obligation/Reclamation and Remediation Costs
Our mining and exploration activities are subject to various laws and regulations, including legal and contractual
obligations to reclaim, remediate, or otherwise restore properties at the time the property is removed from service.
Accounting for reclamation and remediation obligations requires management to make estimates of the future costs that
we will incur to complete the work required to comply with existing laws and regulations. Actual costs may differ from
the amounts estimated. Reclamation costs are allocated to expense over the life of the related assets and are periodically
adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
60
of either the timing or amount of the reclamation and remediation costs. Also, future changes to environmental laws and
regulations could increase the extent of reclamation and remediation work required.
Stock-based Compensation
The Company accounts for stock-based employee compensation plans under the fair value recognition and
measurement provisions in accordance with applicable accounting standards, which require all stock-based payments to
employees, including grants of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), and
deferred share units (“DSUs”) to be measured based on the grant date fair value of the awards. The resulting expense is
generally recognized on a straight-line basis over the period during which the employee is required to perform service in
exchange for the award. For stock-based employee compensation that is expected to be settled in cash, a liability is
established, and a quarterly mark-to-market adjustment is applied based on current stock price.
Stock-based compensation expense is recorded net of estimated forfeitures in our Consolidated Statements of
Operations, and it is recorded for only those stock-based awards that we expect to vest. We estimate the forfeiture rate
based on historical forfeitures of equity awards and adjust the rate to reflect changes in facts and circumstances, if any.
We will revise our estimated forfeiture rate if actual forfeitures differ from our initial estimates.
Income Taxes
In preparing our consolidated financial statements, we estimate the actual amount of taxes currently payable or
receivable, as well as deferred tax assets and liabilities attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled. Changes in deferred tax assets and liabilities generally have a direct
impact on earnings in the period of the changes. Mining taxes represent federal and state taxes levied on mining operations.
As the mining taxes are calculated as a percentage of mining profits, we classify them as income taxes. Where applicable
tax laws and regulations are either unclear or subject to varying interpretations, it is possible that changes in these estimates
could occur that materially affect the amounts of deferred income tax assets and liabilities recorded in the consolidated
financial statements.
Each period, we evaluate the likelihood of whether some portion or all of each deferred tax asset will be realized
and provide a valuation allowance for those deferred tax assets for which it is more likely than not that the related benefits
will not be realized. When evaluating our valuation allowance, we consider historical and future expected levels of taxable
income, the pattern and timing of reversals of taxable temporary timing differences that give rise to deferred tax liabilities,
and tax planning initiatives. Levels of future taxable income are affected by, among other things, market gold and silver
prices, production costs, quantities of Mineral Resources and Mineral Reserves, interest rates, federal and local legislation,
and foreign currency exchange rates. If we determine that all or a portion of the deferred tax assets will not be realized, a
valuation allowance will be recorded with a charge to income tax expense. Conversely, if we determine that we will
ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all
or a portion of the related valuation allowance will be reduced with a credit to income tax expense.
In addition, the calculation of income tax expense involves significant management estimation and judgment
involving a number of assumptions. In determining these amounts, management interprets tax legislation in each of the
jurisdictions in which we operate and makes estimates of the expected timing of the reversal of future tax assets and
liabilities. We make assumptions about future earnings, tax planning strategies, and the extent to which potential future
tax benefits will be used. We are also subject to assessments by various taxation authorities, which may interpret tax
legislation differently, which could affect the final amount or the timing of tax payments.
In October 2023, the Company received a notification from the Mexican Tax Administration Services (“SAT”) with
a sanction of 331 million pesos (approximately $19.5 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,
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
61
mining royalty tax, and extraordinary mining tax. Management is in process of disputing this tax notification and sent a
letter of protest to the tax authorities along with providing all requested documentation. Management intends to use all
legal avenues of protest, including filing a lawsuit with the Mexico court system if needed, to see that these adjustments
are removed. Management believes the 2015 tax return was prepared correctly, and that as of December 31, 2023, the
Company has no liability. Please also see Item 8. Financial Statements and Supplementary Data—Note 4. Income Taxes.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risks includes, but is not limited to, the following risks: changes in commodity prices,
foreign currency exchange rates, provisional sales contract risks, changes in interest rates, and equity price risks. We do
not use derivative financial instruments as part of an overall strategy to manage market risk; however, we may consider
such arrangements in the future as we evaluate our business and financial strategy.
Commodity Price Risk
The results of our operations depend in large part upon the market prices of gold, silver, and base metal prices of
copper, lead, and zinc. Gold and silver prices fluctuate widely and are affected by numerous factors beyond our control.
The level of interest rates, the rate of inflation, the state of the global or national economies, the stability of exchange rates,
the world supply of and demand for gold, silver, and other metals, among other factors, can all cause significant
fluctuations in commodity prices. Such external economic factors are in turn influenced by changes in international
investment patterns, monetary systems, and political developments. The price of gold and silver has fluctuated widely in
recent years, and future price declines could cause a mineral project to become uneconomic, thereby having a material
adverse effect on our business and financial condition. We have not entered into derivative contracts to protect the selling
price for gold or silver. We may in the future more actively manage our exposure through derivative contracts or other
commodity price risk management programs.
Effective May 18, 2021, the Company entered into a Trading Agreement with Auramet International LLC that
govern non-exchange traded, over-the-counter, spot, forward, and option transactions on both a deliverable and non-
deliverable basis involving various metals and currencies. Subsequently, the Company entered into zinc zero cost collars.
These derivatives are not designated as hedges. The zero cost collars were used to manage the Company’s near-term
exposure to cash flow variability from zinc price risks; however, the current zinc program concluded on December 21,
2022. We do not currently use financial instruments with respect to any of the other base metal production either.
In addition to materially adversely affecting our reserve estimates, results of operations, and our financial condition,
declining gold and silver prices could require a reassessment of the feasibility of a project. Even if a project is ultimately
determined to be economically viable, the need to conduct such a reassessment may cause delays in the implementation
of a project.
Foreign Currency Risk
Foreign currency exchange rate fluctuations can increase or decrease our costs to the extent that we pay costs in
currencies other than the U.S. dollar. We are primarily impacted by Mexican peso rate changes relative to the U.S. Dollar,
as we incur approximately 55-60% of costs in peso in Mexico. When the value of the peso rises in relation to the U.S.
Dollar, some of our costs in Mexico may increase, thus affecting our operating results. Alternatively, when the value of
the peso drops in relation to the U.S. Dollar, peso-denominated costs in Mexico will decrease in U.S. Dollar terms. These
fluctuations do not impact our revenues since we sell our metals in U.S. dollars. Future fluctuations may give rise to foreign
currency exposure, which may affect our financial results.
As of December 31, 2023, we held 0.9 million Mexican Pesos ($0.1 million) and 0.2 million Canadian Dollars ($0.1
million). We have not utilized market-risk sensitive instruments to manage our exposure to foreign currency exchange
rates but may in the future actively manage our exposure to foreign currency exchange rate risk.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
62
Provisional Sales Contract Risk
We enter into concentrate sales contracts which, in general, provide for a provisional payment to us based upon
provisional assays and prices. The provisionally priced sales contracts contain an embedded derivative that is required to
be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of
concentrates determined at the quoted metal prices at the time of shipment. The embedded derivative, which does not
qualify for hedge accounting, is adjusted to market through revenue each period prior to settlement. Changes in the prices
of metals between the shipment and the final settlement date will result in adjustments to revenues related to the sales of
concentrate previously recorded upon shipment. Please see Item 8. Financial Statements and Supplementary Data—Note
13. Derivatives for additional information.
Interest Rate Risk
None.
Equity Price Risk
We have in the past, and may in the future, seek to acquire additional funding by sale of common stock and other
equity. The price of our common stock has been volatile in the past and may also be volatile in the future. As a result, there
is a risk that we may not be able to sell our common stock at an acceptable price should the need for new equity funding
arise.
Gold Resource Corporation—Management’s Discussion and Analysis of Financial Condition and Results of Operations
63
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements:
Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Spokane, Washington;
PCAOB ID#243)
Consolidated Balance Sheets at December 31, 2023 and 2022
Consolidated Statements of Operations for the years ended December 31, 2023 and 2022
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2023
and 2022
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022
Notes to Consolidated Financial Statements
67
68
69
70
70
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defined.
Gold Resource Corporation—Audited Consolidated Financial Statements and Notes
64
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Gold Resource Corporation
Denver, Colorado
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Gold Resource Corporation (the
“Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations,
changes in shareholders’ equity, and cash flows for each of the years then ended, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing separate opinions on the critical audit matter or on the accounts or disclosures to
which it relates.
Gold Resource Corporation—Audited Consolidated Financial Statements and Notes
65
Evaluation of Going Concern
As described in Note 9 of the Company’s consolidated financial statements, the Company’s liabilities
under its gold and silver stream agreements were approximately $21 million and $24 million,
respectively, as of December 31, 2023. The stream agreements contain certain customary provisions
regarding default and security, including certain operational covenants. In the event that the
Company’s subsidiary defaults under the stream agreements, it may be required to repay the deposit
plus accumulated interest. The Company obtained deferral to 2026 of certain operational covenants
that were previously due in 2024, as more fully described in Note 9. Additionally, the Company’s
revenues declined by $41 million in 2023 as compared to 2022. Should the Company default under the
terms of these operational covenants or otherwise be unable to fund its obligations as they become
due, these conditions could raise substantial doubt regarding its ability to continue as a going concern.
We identified management’s evaluation regarding the Company’s ability to continue as a going concern
as a critical audit matter due to the significant judgments and assumptions used by management in (i)
forecasting compliance with operational covenants in stream agreements, (ii) preparing its forecast of
sources of cash and expenditures, and (iii) expectations of future metals prices. Auditing these
estimates and assumptions involved especially challenging auditor judgment due to the nature and
extent of audit evidence and effort required to address these matters.
The primary procedures we performed to address this critical audit matter included:
Obtaining the amendments to the Company’s stream agreements which deferred the compliance
date of certain operational covenants.
Testing compliance with covenants in the stream agreements for a period of one year after the
date the consolidated financial statements are issued.
Evaluating the appropriateness of management’s forecast of sources of cash and expenditures
by comparing to historical forecasts and actual results, and certain planned operational
activities.
Evaluating the appropriateness of expected future metals prices by comparing to historical
results and published forecasted industry data.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2022.
Spokane, Washington
March 27, 2024
Gold Resource Corporation—Audited Consolidated Financial Statements and Notes
66
GOLD RESOURCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property, plant, and mine development, net
Deferred tax assets, net
Other non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Mining royalty taxes payable, net
Contingent consideration
Accrued expenses and other current liabilities
Total current liabilities
Reclamation and remediation liabilities
Gold and silver stream agreements liability
Deferred tax liabilities, net
Contingent consideration
Other non-current liabilities
Total liabilities
Commitments and contingencies
Shareholders' equity:
Common stock - $0.001 par value, 200,000,000 shares authorized:
88,694,038 and 88,398,109 shares outstanding at December 31, 2023 and
December 31, 2022, respectively
Additional paid-in capital
(Accumulated deficit) retained earnings
Treasury stock at cost, 336,398 shares
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
As of
December 31,
2023
As of
December 31,
2022
Note
3
5
6
4
7
11
8
10
9
4
11
8
11
$
$
$
$
6,254
4,335
9,294
6,612
26,495
138,626
13,301
5,464
183,886
8,378
1,199
-
1,748
11,325
11,795
44,932
14,077
3,548
1,516
87,193
89
111,970
(8,311)
(5,884)
(1,171)
96,693
183,886
$
$
$
$
23,675
5,085
13,500
3,839
46,099
152,563
5,927
5,509
210,098
13,329
3,945
2,211
5,197
24,682
10,366
43,466
15,151
2,179
2,490
98,334
89
111,024
7,706
(5,884)
(1,171)
111,764
210,098
The accompanying notes are an integral part of these consolidated financial statements.
Gold Resource Corporation—Audited Consolidated Financial Statements and Notes
67
GOLD RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 2023 and 2022
(U.S. dollars in thousands, except share and per share amounts)
Sales, net
Cost of sales:
Production costs
Depreciation and amortization
Reclamation and remediation
Total cost of sales
Mine gross (loss) profit
Costs and expenses:
General and administrative expenses
Mexico exploration expenses
Michigan Back Forty Project expenses
Stock-based compensation
Realized and unrealized loss on zinc zero cost collar
Other expense, net
Total costs and expenses
(Loss) income before income taxes
(Benefit) provision for income taxes
Net loss
Net loss per common share:
Basic and diluted net loss per common share
Weighted average shares outstanding:
Basic and diluted
For the year ended
December 31,
2023
2022
$
97,728
$
138,724
76,143
26,126
774
103,043
(5,315)
6,583
4,167
1,642
681
-
3,364
16,437
(21,752)
(5,735)
(16,017)
(0.18)
$
$
80,949
27,226
801
108,976
29,748
8,048
4,244
8,805
1,955
170
4,288
27,510
2,238
8,559
(6,321)
(0.07)
88,514,243
88,368,250
$
$
Note
2
15
16
17
4
18
18
The accompanying notes are an integral part of these consolidated financial statements.
Gold Resource Corporation—Audited Consolidated Financial Statements and Notes
68
GOLD RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 2023 and 2022
(U.S. dollars in thousands, except share and per share amounts)
Balance, December 31, 2021
Stock-based compensation
Net stock options exercised
Common stock issued for vested restricted stock
units
Dividends declared (1)
Unclaimed shares related to the Aquila acquisition
(2)
Surrender of stock for taxes due on vesting
Net loss
Balance, December 31, 2022
Stock-based compensation
Common stock issued for vested restricted stock
units
Issuance of stock, net of issuance costs
Surrender of stock for taxes due on vesting
Net loss
Number of
Common
Shares
88,675,172 $
Par
Value of
Common
Shares
-
-
80,169
-
(16,249)
(4,585)
-
89 $
-
-
-
-
-
-
-
88,734,507 $
89 $
-
130,238
195,872
(30,181)
-
-
-
-
-
-
Additional Paid-
in Capital
Retained
Earnings
(Accumulated
Deficit)
Treasury
Stock
Accumulated
Other
Comprehensi
ve
Loss
Total
Shareholders'
Equity
110,153 $
1,240
(331)
17,563 $
-
-
(5,884) $
-
-
$
(1,171)
-
-
-
-
(29)
(9)
-
111,024 $
879
-
(3,536)
-
-
(6,321)
7,706 $
-
-
85
(18)
-
-
-
-
(16,017)
-
-
-
-
-
(5,884) $
-
-
-
-
-
(5,884) $
-
-
-
-
-
(1,171)
-
-
-
-
-
(1,171)
$
$
120,750
1,240
(331)
-
(3,536)
(29)
(9)
(6,321)
111,764
879
-
85
(18)
(16,017)
96,693
Balance, December 31, 2023
89,030,436 $
89 $
111,970 $
(8,311) $
(1) Cash dividends declared and paid per share was $0.04 for 2022. On February 13, 2023, the Company announced the suspension of future quarterly dividends, thus no cash dividends were declared and
paid in 2023.
(2) Aquila formerly issued shares related to RebGold/BacTech Mining Arrangement Agreement that expired in 2020. As these shares were not redeemed prior to expiration, the shares should have been struck
by Aquila’s transfer agent prior to issuing GRC shares on December 10, 2021 in connection with the acquisition by GRC.
The accompanying notes are an integral part of these consolidated financial statements.
Gold Resource Corporation—Audited Consolidated Financial Statements and Notes
69
GOLD RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2023 and 2022
(U.S. dollars in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
$ (16,017)
$
(6,321)
For the year ended
December 31,
Note
2023
2022
Deferred income tax benefit
Depreciation and amortization
Stock-based compensation
Other operating adjustments
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Other non-current assets
Accounts payable and other accrued liabilities
Mining royalty and income taxes payable, net
Net cash (used in) provided by operating activities
Cash flows from investing activities:
Capital expenditures
Equity investment
Proceeds from the sale of gold and silver rounds
Net cash used in investing activities
Cash flows from financing activities:
Cash settlement of options exercise
Dividends paid
Proceeds from the ATM sales
Other financing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Cash Flow Information
Income and mining taxes paid
Non-cash investing or financing activities
Balance of capital expenditures in accounts payable
Change in estimate for asset retirement costs
Green Light Metals shares received for promissory note
Issuance (cancellation) of shares related to the Aquila acquisition
20
(6,638)
26,217
681
591
750
2,611
1,568
(863)
(7,113)
(7,006)
(5,219)
(12,487)
-
-
(12,487)
-
-
85
(23)
62
223
(17,421)
23,675
6,254
7,751
214
(1,221)
-
-
$
$
$
$
$
$
(3,545)
27,364
1,955
44
3,587
(2,550)
(724)
249
284
(6,186)
14,157
(18,233)
(1,743)
533
(19,443)
(376)
(3,536)
-
-
(3,912)
(839)
(10,037)
33,712
23,675
18,594
1,303
6,384
3,611
(29)
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
Gold Resource Corporation
70
GOLD RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023 and 2022
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Gold Resource Corporation (the “Company”) was organized under the laws of the State of Colorado on August
24, 1998. The Company is a producer of doré containing gold and silver and metal concentrates that contain gold, silver,
copper, lead, and zinc in Oaxaca, Mexico. The Company also has 100% interest in the Back Forty Project, an advanced
Exploration Stage Property, located in Menominee County, Michigan, USA.
Significant Accounting Policies
Basis of Presentation
The consolidated financial statements included herein are expressed in United States dollars and conform to
accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial
statements include the accounts of the Company, its Mexican subsidiary, Don David Gold Mexico S.A. de C.V., and
Aquila Resources Inc (“Aquila) and its subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.
Segment Reporting
The Company has organized its operations into three geographic regions. The geographic regions include 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. The Company’s business activities that are not
considered production stage or advanced exploration stage properties are included in Corporate and Other. Please see
Note 21—Segment Reporting below for additional information.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.
The more significant areas requiring the use of management estimates and assumptions relate to Mineral Resources and
Mineral Reserves that are the basis for future cash flow estimates utilized in impairment calculations and units-of-
production depreciation calculations; future metal prices; environmental remediation, reclamation and closure
obligations; estimates of recoverable gold and other minerals in stockpiles; write-downs of inventory stockpiles to net
realizable value; valuation allowances for deferred tax assets and liabilities; valuation of contingent considerations and
gold and silver stream agreements; provisional amounts related to income tax effects of newly enacted tax laws; and
stock-based compensation. Management routinely makes judgments and estimates about the effects of matters that are
inherently uncertain and bases its estimates and judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances. Actual results could differ from these estimates.
Revisions of Previously Issued Financial Statements for Correction of Immaterial Errors
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
Gold Resource Corporation
71
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, for this immaterial error. The effects of these revisions are as follows.
Revision to the Consolidated Balance Sheet as of December 31, 2022:
ASSETS
Current assets:
Total current assets
Property, plant, and mine development, net
Deferred tax assets, net
Other non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Total current liabilities
Reclamation and remediation liabilities
Gold and silver stream agreements liability
Deferred tax liabilities, net
Contingent consideration
Other non-current liabilities
Total liabilities
Shareholders' equity:
Total shareholders' equity
Total liabilities and shareholders' equity
Cash and Cash Equivalents
As filed as of
December 31,
2022
$
$
$
46,099
152,563
-
5,509
204,171
24,682
10,366
43,466
9,224
2,179
2,490
92,407
Revised as of
Adjustments December 31,
$
$
$
$
$
$
2022
46,099
152,563
5,927
5,509
210,098
24,682
10,366
43,466
15,151
2,179
2,490
98,334
-
-
5,927
-
5,927
-
-
-
5,927
-
-
5,927
111,764
204,171
$
$
-
5,927
111,764
210,098
$
Cash and cash equivalents consist of all cash balances and highly liquid investments with a remaining maturity
of three months or less when purchased. Cash held in Mexican Pesos or Canadian Dollars is converted to U.S. Dollars
at the closing exchange rate at year end.
Accounts Receivable, net
Accounts receivable consists of trade receivables, which are recorded net of allowance for credit losses from the
sale of doré and metals concentrates, as well as net of an embedded derivative based on mark-to-market adjustments for
outstanding provisional invoices based on forward metal prices. Please see Item 8. Financial Statements and
Supplementary Data—Note 13. Derivatives and Item 8. Financial Statements and Supplementary Data—Note 19. Fair
Value Measurement for additional information related to the embedded derivative. As of both December 31, 2023 and
2022, the allowance for credit losses was nil.
Gold Resource Corporation
72
Inventories
The major inventory categories are set forth below:
Stockpile Inventories: Stockpile inventories represent ore that has been mined and is available for further
processing. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, an
estimate of the contained metals (based on assay data), and the estimated metallurgical recovery rates. Costs are allocated
to stockpiles based on relative values of material stockpiled and processed using current mining costs incurred, including
applicable overhead, depreciation, and amortization relating to mining operations. Material is removed at each
stockpile’s average cost per tonne. Stockpiles are carried at the lower of average cost or net realizable value. Net
realizable value represents the estimated future sales price of the product based on current and long-term metals prices,
less the estimated costs to complete production and to bring the product to sale.
Concentrate Inventories: Concentrate inventories include metal concentrates located either at the Company’s
facilities or in transit to its customer’s port. Inventories consist of copper, lead, and zinc metal concentrates, which also
contain gold and silver mineralization. Concentrate inventories are carried at the lower of cost of production or net
realizable value based on current metals prices.
Doré Inventory: Doré includes gold and silver doré bars held at the Company’s facility. Doré inventories are
carried at the lower of cost of production or net realizable value based on current metals prices.
Materials and Supplies Inventories: Materials and supplies inventories consist of chemical reagents, parts, fuels,
and other materials and supplies. Cost includes applicable taxes and freight. Materials and supplies inventory is carried
at the lower of average cost or net realizable value.
Write-downs of inventory, when needed, are charged to production costs on the Consolidated Statements of
Operations.
Property, Plant, and Mine Development
Land and Mineral Interests: The costs of acquiring land, mineral rights, and mineral interests are considered
tangible assets. Administrative and holding costs to maintain an exploration property are expensed as incurred. If a
mineable mineral deposit is discovered, such capitalized costs are amortized when production begins using the units of
production (“UOP”) method. If no mineable mineral deposit is discovered, or such rights are otherwise determined to
have diminished value, costs are expensed in the period in which this determination is made.
Mine Development: This includes the cost of engineering and metallurgical studies; drilling and other related
costs to delineate an ore body; and the cost of building access ways, shafts, lateral access, drifts, ramps, and other
infrastructure. Costs incurred before mineralization is classified as Mineral Resources are expensed and classified as
exploration expenses. Capitalization of mine development project costs that meet the definition of an asset begins once
mineralization is classified as Mineral Resources.
Drilling costs incurred during the production phase for operational ore control are recorded as mine development
and amortized using UOP. All other drilling and related costs are expensed as incurred.
Mine development costs are amortized using the UOP method based on estimated recoverable ounces in Mineral
Reserves.
Property and Equipment: All items of property and equipment are carried at cost. Normal maintenance and repairs
are expensed as incurred, while expenditures for major maintenance and improvements are capitalized. Gains or losses
on disposition are recognized in other expense, net.
Gold Resource Corporation
73
Construction in Progress: Expenditures for new facilities or equipment are capitalized and recorded at cost. Once
completed and ready for its intended use, the asset is transferred to property and equipment to be depreciated or
amortized.
Depreciation and Amortization: Capitalized costs are depreciated or amortized using the straight-line or UOP
method at rates sufficient to depreciate such costs over the shorter of estimated productive lives of such assets or the
useful life of the individual assets. The estimates for Mineral Reserves are a key component in determining the UOP
depreciation rates. The estimates of Mineral Reserves may change, possibly in the near term, resulting in significant
changes to depreciation and amortization rates in future reporting periods. The following are the estimated economic
lives of depreciable assets:
Asset retirement costs
Furniture, computer and office equipment
Light vehicles and other mobile equipment
Machinery and equipment
Mill facilities and related infrastructure
Mine development and mineral interests
Buildings and infrastructure
Impairment of Long-Lived Assets
Range of Lives
UOP
3 to 10 years
4 years
UOP to 8 years
UOP
UOP
UOP to 4 years
The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate
that the related carrying amounts may not be recoverable. Asset impairment is considered to exist if the total estimated
future cash flows on an undiscounted basis are less than the carrying amount of the asset. If an impairment is indicated,
a determination is made whether an impairment has occurred. Impairment losses are measured either 1) as the excess of
carrying value over the total discounted estimated future cash flows, or 2) as the excess of carrying value over the fair
value, using the expected fair value technique in the absence of an observable market price. Losses are charged to
expense on the Company’s Consolidated Statements of Operations. In estimating future cash flows, assets are grouped
at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from
other asset groups.
Existing Mineral Resources and Mineral Reserves are included when estimating the fair value in determining
whether the assets are impaired. The Company’s estimates of future cash flows are based on numerous assumptions,
including expected gold and other commodity prices, production levels and costs, processing recoveries, capital
requirements, and estimated salvage values. It is possible that actual future cash flows will be significantly different
from the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production
levels and costs, and capital requirements are each subject to significant risks and uncertainties.
Fair Value of Financial Instruments
The recorded amounts of cash and cash equivalents, receivables from provisional concentrate sales, and accounts
payable approximate fair value because of the short maturity of those instruments. The recorded amount for the equity
investment in the common shares of Maritime is based on the closing share price of MAE.V on TSX-V. The company
elected the fair value measurement option as the measurement basis for the equity investment in the common shares of
Green Light Metals.
Gold Resource Corporation
74
Treasury Stock
Treasury stock represents shares of the Company’s common stock which have been repurchased on the open
market at the prevailing market price at the time of purchase and have not been canceled. Treasury stock is shown at
cost as a separate component of shareholders’ equity.
Revenue Recognition
The Company recognizes revenue from doré and concentrate sales.
Doré sales: Doré sales are recognized upon the satisfaction of performance obligations, which occurs upon
delivery of doré and when the price and quantity are agreed with the customer. Doré sales are recorded using quoted
metal prices, net of refining charges.
Concentrate sales: Concentrate sales are initially recorded based on 100% of the provisional sales prices, net of
treatment and refining charges, at the time of delivery to the customer, at which point the performance obligations are
satisfied and control of the product is transferred to the customer. Adjustments to the provisional sales prices are made
to take into account the mark-to-market changes based on the forward prices of metals until final settlement occurs. The
changes in price between the provisional sales price and final sales price are considered an embedded derivative that is
required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale
of the concentrates at the quoted metal prices at the time of delivery. The embedded derivative, which does not qualify
for hedge accounting, is adjusted to market through revenue each period prior to final settlement. Market changes in the
prices of metals between the delivery and final settlement dates will result in adjustments to revenues related to
previously recorded sales of concentrate. Sales are recorded net of charges for treatment, refining, smelting losses, and
other charges negotiated with the buyer. These charges are estimated upon delivery of concentrates based on contractual
terms and adjusted to reflect actual charges at final settlement, which normally occurs within three months. Historically,
actual charges have not varied materially from the Company’s initial estimates.
Production Costs
Production costs include labor and benefits, royalties, concentrate and doré shipping costs, mining costs, fuel and
lubricants, legal and professional fees related to mine operations, stock-based compensation attributable to mine
workers, materials and supplies, repairs and maintenance, explosives, site support, housing and food, insurance,
reagents, travel, medical services, security equipment, office rent, tools, and other costs that support mining operations.
Exploration Costs
Exploration costs are charged to expense as incurred. Costs to identify new Mineral Resources and to evaluate
potential Mineral Resources are considered exploration costs. Exploration activities conducted within the defined
Mineral Resources are capitalized.
Stock-Based Compensation
The Company accounts for stock-based compensation under the fair value recognition and measurement
provisions of U.S. GAAP. Those provisions require all stock-based payments, including grants of stock options,
restricted stock units (“RSUs”), performance share units (“PSUs”), and deferred share units (“DSUs”) to be measured
based on the grant date fair value of the awards, with the resulting expense generally recognized on a straight-line basis
in the Consolidated Statements of Operations over the period during which services are performed in exchange for the
award. The majority of the awards are earned over a service period of three years. DSUs are earned immediately at grant
and are expected to be paid out in cash in the future. PSUs and DSUs are considered liability instruments and marked-
to-market each reporting period. The Company's estimates may be impacted by certain variables including, but not
limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, and estimates
of forfeitures.
Gold Resource Corporation
75
Reclamation and Remediation Costs
Reclamation costs are allocated to expense over the life of the related assets and are periodically adjusted to reflect
changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the
timing or amount of the reclamation and remediation costs. Reclamation obligations are based in part on when the
spending for an existing environmental disturbance will occur. The Company reviews the reclamation obligation at least
on an annual basis.
In 2014, the Company became a production stage company and therefore, started capitalizing asset retirement
costs along with the asset retirement obligation. Please see Item 8. Financial Statements and Supplementary Data—Note
10. Reclamation and Remediation in for additional information.
Accounting for reclamation and remediation obligations requires management to make estimates unique to each
mining operation of the future costs expected to be incurred to complete the reclamation and remediation work required
to comply with existing laws and regulations. Actual costs incurred in future periods could differ from the amounts
estimated. Additionally, future changes to environmental laws and regulations could increase the extent of reclamation
and remediation work required. Any such increases in future costs could materially impact the amounts charged to
operations for reclamation and remediation.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is presented in the Consolidated Statements of Changes in Shareholders’
Equity. Accumulated other comprehensive loss is composed of foreign currency translation adjustment effects related
to the historical adjustment when the functional currency was the Mexican peso for our Mexico subsidiary. This loss
will remain on our Consolidated Balance Sheets until the sale or dissolution of our Mexico subsidiary.
Income and Mining Royalty Taxes
Income and Mining Royalty Taxes are computed using the asset and liability method. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
and tax reporting purposes and the effect of net operating loss and foreign tax credit carryforwards using enacted tax
rates in effect in the years in which the differences are expected to reverse. Deferred tax assets and liabilities are
evaluated to determine if it is more likely than not that they will be realized. Deferred tax liabilities and deferred tax
assets attributable to different tax-paying components of the entity or to different tax jurisdictions are not netted against
each other. Please see Item 8. Financial Statements and Supplementary Data—Note 4. Income Taxes for additional
information.
Net Loss Per Share
Basic loss per share is calculated based on the weighted average number of common shares outstanding for the
period. Diluted loss per share reflects the dilution that could occur if potentially dilutive securities, as determined using
the treasury stock method, are converted into common stock. Potentially dilutive securities are excluded from the
calculation when their inclusion would be anti-dilutive, such as periods when a net loss is reported or when the exercise
price of the instrument exceeds the average fair market value of the underlying common stock.
Foreign Currency
The functional currency for all of the Company’s subsidiaries is the United States dollar (“U.S. dollar”).
Gold Resource Corporation
76
Concentration of Credit Risk
The Company has considered and assessed the credit risk resulting from its concentrate sales and doré sales
arrangements with its customers. In the event that the Company’s relationships with its customers are interrupted for
any reason, the Company believes that it would be able to locate another entity to purchase its metals concentrates and
doré bars; however, any interruption could temporarily disrupt the Company’s sale of its products and materially
adversely affect operating results.
Currently 100% of the Company’s total net sales from operations are coming from the Arista and Alta Gracia
mines at DDGM, the Company’s Oaxaca, Mexico business segment. Sales from significant customers as a percentage
of sales for the years ended December 31, 2023 and 2022 were the following:
Customer A
Customer B
Customer C
Customer D
For the year ended
December 31,
2023
2022
48 %
24 %
25 %
- %
38 %
33 %
- %
24 %
The following table shows accounts receivable from significant customers as a percentage of total accounts
receivable as of December 31, 2023 and 2022:
Customer A
Customer B
Customer C
Customer D
As of
December 31,
2023
As of
December 31,
2022
46 %
33 %
21 %
- %
47 %
33 %
- %
20 %
Some of the Company’s operating cash balances are maintained in accounts that currently exceed federally
insured limits. The Company believes that the financial strength of the depositing institutions mitigates the underlying
risk of loss. To date, these concentrations of credit risk have not had a significant impact on the Company’s financial
position or results of operations.
Streaming Liabilities
The Company presents the gold and silver streaming liabilities initially at fair value and subsequently accreted
using a discount rate and risk factor probabilities. The discount rate is the Company’s estimated borrowing rate, and the
probabilities consider the completion of the feasibility study, obtaining necessary permits, and the completion of the
mine facilities. The adjustment in the value is the accretion of interest, which is included in other expense, net.
Gold Resource Corporation
77
New Accounting Pronouncements and Accounting Standards Updates to Become Effective in Future Periods
The FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures in November 2023, amending reportable segment disclosure requirements to include disclosure of
incremental segment information on an annual and interim basis. Among the disclosure enhancements are new
disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and
included within each reported measure of segment profit or loss, as well as other segment items bridging segment
revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for fiscal
years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024,
and are applied retrospectively. Early adoption is permitted. We are currently evaluating the impact of this update on
our consolidated financial statements and disclosures.
The FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures in
December 2023, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes
paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, and are applied
prospectively. Early adoption and retrospective application of the amendments are permitted. We are currently
evaluating the impact of this update on our consolidated financial statements and disclosures.
2. Revenue
The Company derives its revenue from the sale of doré and concentrates. The following table presents the
Company’s net sales disaggregated by source:
Doré sales, net
Gold
Silver
Less: Refining charges
Total doré sales, net
Concentrate sales
Gold
Silver
Copper
Lead
Zinc
Less: Treatment and refining charges
Total concentrate sales, net
Realized gain (loss) - embedded derivative, net (1)
Unrealized (loss) gain - embedded derivative, net
Total sales, net
For the year ended December 31,
2022
2023
(in thousands)
3,079
139
(52)
3,166
32,865
24,066
10,472
9,540
29,225
(11,578)
94,590
298
(326)
97,728
$
$
7,997
230
(59)
8,168
46,322
22,527
11,987
11,626
50,470
(12,013)
130,919
(720)
357
138,724
$
$
(1) Copper, lead, and zinc are co-products. In the realized (loss) gain - embedded derivative, net, there are $0.3 million gain and $0.7 million gain,
respectively, related to these co-products for the years ended December 31, 2023 and 2022.
Gold Resource Corporation
78
3. Inventories
At December 31, 2023 and 2022, inventories consisted of the following:
As of
December 31,
2023
As of
December 31,
2022
Stockpiles - underground mine
Concentrates
Doré, net
Subtotal - product inventories
Materials and supplies (1)
Total
$
$
$
(in thousands)
534
1,768
169
2,471
6,823
9,294
$
597
3,271
653
4,521
8,979
13,500
(1) Net of reserve for obsolescence of $0.5 million and $0.1 million as of December 31, 2023 and 2022, respectively.
4. Income Taxes
The Company accounts for income taxes in accordance with the provisions of ASC 740, "Income Taxes" ("ASC
740") on a tax jurisdictional basis. The Company and its U.S. subsidiaries file U.S. tax returns and the Company’s
foreign subsidiaries file tax returns in Mexico and Canada. For financial reporting purposes, total (loss) income before
income taxes includes the following components.
U.S. Operations
Foreign Operations (1)
Total (loss) income before income taxes
Years Ended December 31,
2022
2023
(in thousands)
(8,958)
(12,794)
(21,752)
$
$
(18,317)
20,555
2,238
$
$
(1) Foreign operations are predominantly in Mexico, as activities in Canada are minimal.
The Company's total income tax (benefit) provision consists of the following:
Current taxes:
State
Foreign
Total current taxes
Deferred taxes:
Federal
State
Foreign
Total deferred tax benefits
Total income tax (benefit) provision
Years ended December 31,
2022
2023
(in thousands)
$
$
$
$
$
(3) $
906
903
$
(691) $
-
(5,947)
(6,638) $
(5,735) $
(254)
12,358
12,104
(895)
25
(2,675)
(3,545)
8,559
Gold Resource Corporation
79
The (benefit) provision for income taxes for the years ended December 31, 2023 and 2022 differs from the amount
of income tax determined by applying the applicable United States statutory federal income tax rate to pre-tax income
from operations as a result of the following differences:
Tax at statutory rates
Foreign rate differential
Changes in valuation allowance
Tax losses subject to limitation
Mexico mining tax
Foreign exchange
Stock option expiration
Mexico withholding tax
Deduction for inflation in Mexico
U.S. state income tax
Foreign tax credit expirations
Other
Tax (benefit) provision
For the year ended December 31,
2023
2022
(in thousands)
(4,568)
(1,006)
(3,521)
2,708
301
(904)
237
102
(1,043)
(288)
2,118
129
(5,735)
$
$
470
1,867
(5,115)
8,306
2,168
311
519
1,328
(1,083)
(786)
-
574
8,559
$
$
In the fourth quarter of 2023, the Company completed a study of the Internal Revenue Code section 382 (“382”)
net operating loss limitations related to ownership changes in connection with the Back Forty Project acquisition. The
study found that approximately $45.1 million of federal net operating losses and $12.3 million of Michigan net operating
losses would be subject to potential limitation under 382. The study also concluded that, of those losses, $30.8 million
of federal losses and $35.9 million of Michigan losses would be unable to offset future taxable income by the Company
due to loss limitations under 382 and loss carryforward expirations. The annual limitation for the Company under 382
is $1.3 million.
The following table sets forth deferred tax assets and liabilities:
Deferred tax assets:
Tax loss carryforward
Property, plant, and mine development
Share-based compensation
Foreign tax credits
Inventory
Foreign Mining Tax
Accrued Expenses
Gold and silver stream agreements liability
Employee profit sharing obligation
Other
Total deferred tax assets
Valuation allowance
Deferred tax assets after valuation allowance
Deferred tax liability – Property, plant and mine development
Deferred tax liability – Other
Total deferred tax liabilities
Net deferred tax liability
As of December 31,
2023
2022
(in thousands)
28,888
5,880
131
1,971
197
264
5,529
3,472
20
300
46,652
(28,297)
18,355
(17,713)
(1,418)
(19,131)
(776)
$
$
$
$
$
25,626
1,429
511
4,089
45
1,106
5,606
2,144
663
1,344
42,563
(31,818)
10,745
(17,724)
(2,245)
(19,969)
(9,224)
$
$
$
$
$
In accordance with ASC 740, the Company presents deferred tax assets net of its deferred tax liabilities on its
Consolidated Balance Sheets on a jurisdictional basis. The net deferred tax liability of $0.8 million as of December 31,
2023 shown in the table above is comprised of a $14.1 million deferred tax liability related to the US entities and a $13.3
Gold Resource Corporation
80
million deferred tax asset related to Don David Gold Mine S.A. de C.V. (“DDGM”) in Mexico. No net deferred tax
balances exist in Canada due to the existence of a full valuation allowance.
The Company evaluates the evidence available to determine whether a valuation allowance is required on deferred
tax assets. As of December 31, 2023, the Company determined that a valuation allowance of $28.3 million was necessary
due to the uncertain utilization of specific deferred tax assets, primarily net operating loss carryforwards, with $18.8
million in U.S. and $9.5 million in Canada; $19.5 million of the total valuation allowance of $28.3 million is related to
Aquila in the U.S. and Canada. As of December 31, 2022, the Company determined that a valuation allowance of $31.8
million was necessary due to the uncertain utilization of specific deferred tax assets, primarily net operating loss
carryforwards, with $21.2 million in U.S. and $10.6 million in Canada; $21.8 million of the valuation allowance is
related to Aquila. The net change in the Company’s valuation allowance was a decrease of $3.5 million for the year
ended December 31, 2023. The decrease in valuation allowance is primarily explained by expiration of foreign tax
credits and the write-off of net operating losses now expected to expire unutilized under 382 on a tax-effected basis as
discussed above.
At December 31, 2023, the Company has available U.S. federal loss carryforwards of $76.8 million, of which
$56.2 million have no expiration date, and $20.6 million that expire at various dates between 2027 and 2037; U.S.
Foreign Tax Credits of $2.0 million that expire at various dates between 2024 and 2026; state of Colorado tax loss
carryforwards of $53.0 million, of which $29.8 million expire at various dates between 2024 and 2037 and $23.1 million
that have no expiration; available state of Michigan tax loss carryforwards of $16.8 million expiring at various dates
between 2024 and 2033; Wisconsin tax loss carryforwards of $4.0 million expiring in 2042; and Canadian tax loss
carryforwards of $23.0 million that expire between 2026 and 2043.
Mexico Mining Taxation
Mining entities in Mexico are subject to two mining duties, in addition to the 30% Mexico corporate income tax:
(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, 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 applicable to earnings
before income tax, depreciation, depletion, amortization, and interest. In calculating the mining royalty tax, there are no
deductions related to depreciable costs from operational fixed assets, but prospecting and exploration expenses are
amortized at 10% rate in a straight line. Both duties are tax deductible for income tax purposes. As a result, our effective
tax rate applicable to the Company’s Mexican operations is substantially higher than Mexico’s statutory rate.
The Company periodically transfers funds from its Mexican wholly-owned subsidiary to the U.S. in the form of
dividends. Mexico requires a 10% withholding tax on dividends on all post-2013 earnings. The Company began
distributing post-2013 earnings from Mexico in 2018. According to the existing U.S. – Mexico tax treaty, the dividend
withholding tax between these countries is reduced to 5% if certain requirements are met. The Company determined that
it had met such requirements and paid a 5% withholding tax on dividends received from Mexico, and as a result, paid
$0.1 million and $1.3 million for years ending December 31, 2023 and 2022, respectively.
Other Tax Disclosures
The Company files U.S. and various state income tax returns, as well as foreign income tax returns in Canada and
Mexico, with varying statutes of limitations. In general, the statute of limitations is three years in the United States and
in Canada. However, the Company has net operating loss and tax credit carryforward balances beginning in the tax year
ended December 31, 2007 for the United States and in the tax year ended December 31, 2006 for Canada. As a result,
all tax years since 2007 remain open to examination in the United States and all tax years since 2006 remain open to
examination in Canada. In Mexico, the statute of limitations is generally five years, which currently is 2018 and forward.
The Company is under audit for the tax year ended December 31, 2015. All other years are closed to inspection outside
of the standard statute of limitations window in Mexico.
Gold Resource Corporation
81
The U.S. Treasury Department issued final regulations in July 2020 concerning global intangible low-taxed
income, commonly referred to as GILTI tax, which was introduced by the Tax Act of 2017. The GILTI provisions
impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The final tax
regulations allow income to be excluded from GILTI tax that are subject to an effective tax rate higher than 90% of the
U.S. tax rate. The Company determined that it is not subject to GILTI tax due to this high tax exception rule.
In October 2023, the Company received a notification from the Mexican Tax Administration Services (“SAT”)
with a sanction of 331 million pesos (approximately $19.5 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 disputing this tax
notification and sent a letter of protest to the tax authorities along with providing all requested documentation.
Management intends to pursue legal avenues of protest, including filing a lawsuit with the Mexico court system if
necessary, to ensure that these adjustments are removed. Management believes the position taken on the 2015 income
tax return meets the more likely than not threshold and that as of the years ended December 31, 2023 and 2022, the
Company has no liability for uncertain tax positions. If the Company were to determine there was an unrecognized tax
benefit, the Company would recognize the liability and related interest and penalties within income tax (benefit)
provision.
5. Prepaid Expenses and Other Current Assets
At December 31, 2023 and 2022, prepaid expenses and other current assets consisted of the following:
As of
December 31,
2023
As of
December 31,
2022
Advances to suppliers
Prepaid insurance
Prepaid income tax
Other current assets
Total
$
$
$
(in thousands)
266
1,103
4,589
654
6,612
$
867
1,298
432
1,242
3,839
IVA taxes receivable, net is a value added (“IVA”) tax in Mexico assessed on purchases of materials and services
and sales of products. Likewise, businesses owe IVA taxes as the business sells a product and collects IVA taxes from
its customers. 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 receivable or payable, since there is a legal right of offset of IVA taxes.
As of December 31, 2023 and 2022, this resulted in an asset balance of $0.4 million and $0.8 million, respectively,
which is included in other current assets above.
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82
6. Property, Plant and Mine Development, net
At December 31, 2023 and 2022, property, plant and mine development consisted of the following:
Asset retirement costs ("ARO asset")
Construction-in-progress
Furniture and office equipment
Land
Mineral interest
Light vehicles and other mobile equipment
Machinery and equipment
Mill facilities and infrastructure
Mine development
Software and licenses
Subtotal
Accumulated depreciation and amortization
Total
As of
December 31,
2023
As of
December 31,
2022
(in thousands)
$
$
6,227
243
1,781
9,033
79,543
2,126
42,887
36,396
115,230
1,554
295,020
(156,394)
138,626
$
$
7,449
351
1,732
9,033
79,543
2,327
41,343
35,917
105,263
1,552
284,510
(131,947)
152,563
Asset retirement credits of $1.2 million were recognized on December 31, 2023 due to changes in estimates in
the reclamation model, also decreasing the asset retirement obligations. Please see Item 8. Financial Statements and
Supplementary Data—Note 10. Reclamation and Remediation for additional information.
Gold Resource Corporation
83
7. Other Non-current Assets
At December 31, 2023 and 2022, other non-current assets consisted of the following:
As of
December 31,
2023
As of
December 31,
2022
Investment in Maritime
Investment in Green Light Metals
Other non-current assets
Total
$
$
(in thousands)
$
1,596
3,698
170
5,464
$
1,559
3,611
339
5,509
On September 22, 2022, the Company invested 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 at the time of purchase. As of both December 31, 2023, and December 31, 2022, the fair value of this
investment was $1.6 million.
On December 28, 2022, Gold Resource Corporation received 12.25 million common shares of Green Light Metals
as a settlement for a promissory note receivable acquired with the Aquila acquisition. This represented approximately
28.5% ownership in Green Light Metals at the time. As of December 31, 2022, the fair value of this equity investment
was $3.6 million. The contract included 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.
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. As of December 31,
2023, and December 31, 2022, the fair value of this equity investment was $3.7 million and $3.6 million, respectively.
8. Accrued Expenses and Other Liabilities
At December 31, 2023 and 2022, accrued expenses and other current and non-current liabilities consisted of the
following:
As of
December 31,
2023
As of
December 31,
2022
Accrued royalty payments
Share-based compensation liability - current
Employee profit sharing obligation
Other payables
Total accrued expenses and other current liabilities
Accrued non-current labor obligation
Share-based compensation liability
Other long-term liabilities
Total other non-current liabilities
$
$
$
$
$
(in thousands)
726
67
67
888
1,748
$
1,167
320
29
1,516
$
$
1,787
-
2,206
1,204
5,197
1,050
884
556
2,490
Under Mexican law, employees are entitled to receive statutory profit sharing (Participacion a los Trabajadores
de las Utilidades or “PTU”) 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.
In 2023, $0.1 million for PTU was recorded in current liabilities and production costs, as well as $1.2 million for
statutory employee severance benefits recorded in other long-term liabilities and other expenses. In 2022, $2.2 million
Gold Resource Corporation
84
for PTU was recorded in current liabilities and production costs, as well as $1.1 million for statutory employee severance
benefits recorded in other long-term liabilities and other expenses.
PSU and DSU awards contain a cash settlement feature and are therefore classified as liability instruments and
are marked to fair value each reporting period. Please see Item 8. Financial Statements and Supplementary Data—Note
15. Stock-Based Compensation for additional information.
9. Gold and Silver Stream Agreements
The following table presents the Company’s liabilities related to the Gold and Silver Stream Agreements as of
December 31, 2023 and 2022:
Liability related to the Gold Stream Agreement
Liability related to the Silver Stream Agreement
Total liability
As of
December 31,
2023
As of
December 31,
2022
$
$
(in thousands)
21,002
23,930
44,932
$
$
20,881
22,585
43,466
Periodic interest expense incurred based on an implied interest rate. The implied interest rate is determined based
on the timing and probability of future production and a 6% discount rate. Interest expense is recorded to the
Consolidated Statements of Operations and the gold and silver stream agreement liability on the Consolidated Balance
Sheet.
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
upon date, it may be required to repay the deposit plus accumulated interest at a rate agreed with Osisko. If the Company
fails to do so, Osisko may elect to enforce its remedies as a secured party and take possession of the assets that comprise
the Back Forty Project.
Gold Streaming Agreement
In November 2017, Aquila entered into a stream agreement with Osisko Bermuda Limited (“OBL”), a wholly-
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 as 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. Remaining deposits from OBL are $5
million upon receipt of permits required for the development and operation of 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. 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 December 31, 2023. Subsequent to year end, the Company secured an amendment to the
stream agreement that deferred the required completion of certain operational milestones related to permitting from 2024
to 2026.
The $20 million received from OBL through December 31, 2023 is shown as a long-term liability on the
Consolidated 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 an estimated gold price
and a discount rate of 6%. As the remaining $30 million deposit is subject to the completion of specific milestones and
the satisfaction of certain other conditions, this amount is not reflected on the Consolidated Balance Sheet.
Gold Resource Corporation
85
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 against the deposit received from Osisko. Please see Item 8. Financial Statements and
Supplementary Data—Note 11. Commitments and Contingencies 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
December 31, 2023. There are no future deposits remaining 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 December 31, 2023. Subsequent to year end, the Company secured
an amendment to the stream agreement that deferred the required completion of certain operational milestones related
to permitting from 2024 to 2026.
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 against the deposit received from Osisko.
The $17.2 million received from OBL through December 31, 2023 is shown as a long-term liability on the
Consolidated Balance Sheet and includes an implied interest rate. 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 an estimated
silver price and a discount rate of 6%. Please see Item 8. Financial Statements and Supplementary Data—Note 11.
Commitments and Contingencies for additional information.
10. Reclamation and Remediation
The following table presents the changes in the Company’s reclamation and remediation obligations for the years
ended December 31, 2023 and 2022:
Reclamation liabilities – balance at beginning of period
Foreign currency exchange loss
Reclamation liabilities – balance at end of period
Asset retirement obligation – balance at beginning of period (1)
Changes in estimate (1)
Liability for Aquila drillhole capping (2)
Accretion
Foreign currency exchange loss
Asset retirement obligation – balance at end of period
Total period end balance
2023
2022
(in thousands)
$
$
1,949
284
2,233
8,417
(1,221)
404
689
1,273
9,562
11,795
$
$
1,833
116
1,949
1,279
6,384
-
668
86
8,417
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 ARO asset. 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. In 2023, the Company updated its closure plan study to include current disturbances, which resulted in a $1.2
million decrease in the estimated liability and ARO asset.
Gold Resource Corporation
86
(2) As of December 31, 2022, the Company reported the liability of $0.4 million 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 of $0.4 million was reclassified to non-current reclamation
and remediation liabilities.
The Company’s undiscounted reclamation liabilities of $2.2 million and $1.9 million as of December 31, 2023
and 2022, respectively, are related to DDGM in Mexico. These represent reclamation liabilities that were expensed
through 2013 before proven and probable Mineral 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 & mine development, post 2013 development stage status, which were discounted using a credit
adjusted risk-free rate of 8%. As of December 31, 2023 and 2022, the Company’s asset retirement obligation related to
the Don David Gold Mine in Mexico was $9.6 million and $8.4 million, respectively.
11. Commitments and Contingencies
As of December 31, 2023 and 2022, the Company had equipment purchase commitments aggregating
approximately $0.8 million and $1.2 million, respectively.
Contingent Consideration
With the Aquila acquisition, the Company assumed a contingent consideration. On December 30, 2013, Aquila’s
shareholders approved the 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 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:
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 Back Forty, up to 50% of the C$3 million can be paid, at the Company’s option in Gold
Resource Corporation shares with the balance payable in cash;
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.
Initially, the company intended to pay the first C$3 million in 2023 to prevent HudBay’s 51% buy-back option
in the Back Forty Project. Management later decided that it was more likely than not that HudBay would not exercise
its buy-back option, and consequently, this amount was not paid. Additionally, since financing of the project is not
expected in 2024, this liability was moved to long-term. As of the end of January 2024, by the contractual deadline,
HudBay did not exercise its buy-back option, and thus, it is forfeited.
The total value of the contingent consideration at December 31, 2023 and 2022 was $3.5 million and $4.4 million,
respectively. The contingent consideration is adjusted for the time value of money and the likelihood of the milestone
payments. Any future changes in the value of the contingent consideration is recognized in other expense, net, in the
Consolidated Statements of Operations.
Gold Resource Corporation
87
The following table shows the change in the balance of the contingent consideration:
Beginning Balance of contingent consideration:
Current contingent consideration
Non-current contingent consideration
Change in value of contingent consideration
Ending Balance of contingent consideration:
Current contingent consideration
Non-current contingent consideration
Other Contingencies
2023
2022
(in thousands)
$
$
$
$
2,211
2,179
4,390
(842)
-
3,548
3,548
$
$
$
$
-
4,603
4,603
(213)
2,211
2,179
4,390
The Company has certain other contingencies resulting from litigation, claims, and other commitments and is
subject to a variety of environmental and safety laws and regulations incident 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 there can be no assurance that their ultimate disposition will not have a material adverse effect on the
Company’s financial position, results of operations or cash flow.
With the 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. 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 failing to achieve commercial production at a future
date, it may be required to repay the deposit plus accumulated interest at a rate agreed with Osisko. If it fails to do so,
Osisko may be entitled to enforce its remedies as a secured party and take possession of the assets that comprise the
Back Forty Project.
12. Shareholders’ Equity
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. Therefore, in the year ended
December 31, 2023, the Company neither declared nor paid dividends. The Company declared and paid dividends of
$3.5 million, or $0.04 per share, for the year ended December 31, 2022.
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. During the year ended December 31, 2023,
an aggregate of 195,872 shares of the Company’s common stock were sold through the ATM Agreement, for net
proceeds to the Company, after deducting the Agent’s commissions and other expenses, of $0.1 million.
Gold Resource Corporation
88
13. Derivatives
Embedded Derivatives
Concentrate Sales
Concentrate sales contracts contain embedded derivatives due to the provisional pricing terms for shipments
pending final settlement. 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 Item 8. Financial Statements and Supplementary Data—Note 19. Fair Value Measurement for
additional information.
The following table summarizes the Company’s unsettled sales contracts at December 31, 2023, with the
quantities of metals under contract subject to final pricing occurring through February 2023:
Gold
(ounces)
2,908
1,983
5,767 $
Silver
(ounces)
252,324
23.45
5,917 $ 1,809 $ 3,609 $ 5,588 $ 22,690
Copper
(tonnes)
217
8,337
Lead
(tonnes)
1,678
2,151
Zinc
(tonnes)
2,236
2,499
Total
$
$
Under contract
Average forward price (per ounce or tonne)
Unsettled sales contracts value (in thousands)
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 impact the Company’s earnings through mark-to-market adjustments until the
physical commodity is delivered or the financial instrument is settled. As of December 31, 2022, the hedge program
concluded, but the Company may utilize similar programs in the future to manage near-term exposure to cash flow
variability from metal prices.
Effective May 18, 2021, GRC 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, and these contracts are not designated as hedging instruments. Due to the
conclusion of the current program, in 2023, the Company had neither realized nor unrealized gains or losses, compared
to a realized loss of $2.0 million and an unrealized gain of $1.8 million in 2022.
The Company manages credit risk by selecting counterparties that it believes to be financially strong, by entering
into netting arrangements with counterparties, and by requiring other credit risk mitigants, as appropriate. The Company
actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits, and monitors credit
exposures against those assigned limits.
14. Employee Benefits
Effective October 2012, the Company adopted a profit-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 provides eligible employees the opportunity to make tax deferred contributions to a
retirement trust account up to 90% of their qualified wages, subject to the IRS annual maximums.
On April 23, 2021, a decree that reforms labor outsourcing in Mexico was published in the Federation’s Official
Gazette. This decree amended the outsourcing provisions, whereby operating companies can no longer source their labor
resources used to carry out the core business functions from service entities or third-party providers. Under Mexican
Gold Resource Corporation
89
law, employees are entitled to receive statutory profit sharing (Participacion a los Trabajadores de las Utilidades or
“PTU”) 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 Item 8. Financial Statements and
Supplementary Data—Note 8. Accrued Expenses and Other Liabilities for additional information.
15. 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 stock
options, restricted stock units (“RSUs”), performance stock units (“PSUs”), and deferred stock units (“DSUs”).
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, PSUs, and performance cash. Effective January 1, 2021, the
Company’s Board of Directors, on the recommendation of the Compensation Committee, implemented a program to
issue DSUs, which are qualifying instruments under the terms of the Company’s Incentive Plan, to eligible directors.
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.
The Company’s STIP provides for an annual cash bonus payable upon achievement of specified performance
metrics for its management team. As of December 31, 2023, we accrued $0.8 million payable in cash related to the STIP
program. As of December 31, 2022, we accrued $1.0 million related to the program.
Stock-Based Compensation Expense
Stock-based compensation expense for stock options, RSUs, PSUs, and DSUs is as follows:
For the year ended December 31,
2023
2022
Stock options
Restricted stock units
Performance stock units
Deferred stock units
Total
$
$
$
(in thousands)
342
537
(168)
(30)
681
$
646
631
332
346
1,955
The estimated unrecognized stock-based compensation expense from unvested options and RSUs, as of
December 31, 2023, was nil and $0.7 million, respectively, and is expected to be recognized over the weighted average
remaining periods of nil and 1.93 year, respectively. As DSUs are vested immediately at grant, the full amount of fair
value is recognized as expense at the time of grant. In addition, a mark-to-market adjustment due to fluctuation of share
price is recognized at the end of each period related to the DSUs. The fair value of the PSUs is recognized over their
vesting period of three years, and similarly to the DSUs, a mark-to-market adjustment due to fluctuation of the share
price, as well as due to changes in the performance, is recognized at the end of each period related to the proportionate
number of units based on passage of time.
Gold Resource Corporation
90
Stock Options
A summary of stock option activity under the Incentive Plan for the years ended December 31, 2023 and 2022 is
presented below:
Outstanding as of December 31, 2021
Granted
Exercised
Expired or Forfeited
Outstanding as of December 31, 2022
Expired or Forfeited
Outstanding as of December 31, 2023
Stock
Options
2,454,700
320,816
(355,000)
(945,200)
1,475,316
(634,704)
840,612
Vested and exercisable as of December 31, 2023
593,740
Weighted
Average Exercis
e
Price (per share)
$
$
$
$
4.62
2.41
1.31
7.78
2.90
2.79
2.99
2.98
Weighted Averag
e
Remaining
Contractual Ter
m
(in years)
Aggregate
Intrinsic
Value
(in
thousands)
4.58
$
109
7.38
7.38
7.36
$
$
$
18
-
-
During the years ended December 31, 2023 and 2022 stock options of nil and 320,816, respectively, were granted.
The weighted-average fair value of options per share granted during the years ended December 31, 2023 and 2022 was
nil and $1.06, respectively. The total intrinsic value of options exercised during the years ended December 31, 2023 and
2022, was nil and $0.1 million, respectively. The total fair value of options vested during the years ended December 31,
2023 and 2022 was nil and $1.0 million, respectively.
Stock options of nil and 355,000 were exercised during the years ended December 31, 2023 and December 31,
2022, respectively. The 2022 exercises were settled in cash.
The following table summarizes information about stock options outstanding at December 31, 2023:
Range of Exercise Prices
$0.00 - $2.50
$2.51 -$5.00
Outstanding
Weighted Average
Remaining
Contractual Term
(in years)
Weighted
Average Exercise
Price (per share)
2.41
$
8.22
3.22
7.04
$
2.99
7.38 $
Exercisable
Number of
Options
160,407 $
433,333 $
593,740 $
Weighted
Average Exercise
Price (per share)
2.41
3.19
2.98
Number of
Options
240,612
600,000
840,612
The assumptions used to determine the value of stock-based awards granted in 2022 under the Black-Scholes
method are summarized below:
Risk-free interest rate
Dividend yield
Expected volatility
Expected life in years
2022
2.13 %
1.66 %
56.39 %
5
Gold Resource Corporation
91
Restricted Stock Units
A summary of RSU activity under the Incentive Plan for the years ended December 31, 2023 and 2022 is
presented below:
Nonvested as of December 31, 2021
Granted
Vested but not redeemed (deferred)
Vested and redeemed
Forfeited
Nonvested as of December 31, 2022
Granted
Vested but not redeemed (deferred)
Vested and redeemed
Vested and forfeited for net settlement
Forfeited
Nonvested as of December 31, 2023
Restricted
Stock
Units
105,799
611,681
(39,298)
(80,169)
(22,465)
575,548
779,192
(106,955)
(100,057)
(30,181)
(270,292)
847,255
$
$
$
Aggregate
Intrinsic
Value
(in thousands)
Weighted Average
Remaining
Contractual Term
(in years)
165
1.07
881
1.04
319
1.93
RSUs of 779,192 and 611,681 respectively, were granted during the years ended December 31, 2023 and 2022.
The weighted-average fair value per share of RSUs granted during the years ended December 31, 2023 and 2022 was
$0.92 and $1.97, respectively. The grant date fair value of RSUs is determined by the 20-day volume weighted average
price of the Company’s common shares at grant date. The total intrinsic value of RSUs vested during the years ended
December 31, 2023 and 2022 was $0.6 million and $0.3 million, respectively. During the years ended December 31,
2023 and 2022, 0.1 million and 39 thousand RSUs were deferred, respectively.
Performance Stock Units
A summary of PSU activity under the Incentive Plan for the years ended December 31, 2023 presented below:
Outstanding as of December 31, 2021
Granted
Outstanding as of December 31, 2022
Granted
Forfeited
Outstanding as of December 31, 2023
Performance
Share
Units
Liability Balance
(in thousands)
-
695,041
695,041
534,890
(349,005)
880,926
-
332
164
Starting in 2022, the Company’s Board of Directors approved granting performance share units to the Company’s
management team. PSUs cliff vest in three years based on the relative total shareholder return of a predetermined peer
group and are expected to be settled in cash. These awards contain a cash settlement feature and are therefore classified
as liability and are marked to fair value each reporting period based on the relative total shareholder return of a
predetermined peer group and the Company’s stock price. As of December 31, 2023 and 2022, the Company has liability
of $0.2 million and $0.3 million, respectively, related to PSUs. As of December 31, 2023, of the $0.2 million liability,
$0.1 million is short-term and expected to be paid out in 2024 according to the terms of the grant agreements.
PSUs of 534,890 and 695,041, respectively, were granted during the years ended December 31, 2023 and 2022,
with weighted-average fair value of $0.90 and $1.99 per unit, respectively. The grant date fair value of PSUs is
Gold Resource Corporation
92
determined by the 20-day volume weighted average price of the Company’s common shares at grant date. No PSUs
were vested nor redeemed during the years ended December 31, 2023 and 2022. and PSUs of 349,005 and nil,
respectively, were forfeited during the years ended December 31, 2023 and 2022.
Deferred Stock Units
A summary of DSU activity under the Incentive Plan for the years ended December 31, 2023 is presented below:
Outstanding as of December 31, 2021
Granted
Granted in lieu of board fees
Outstanding as of December 31, 2022
Granted
Granted in lieu of board fees
Granted in lieu of executive bonus
Redeemed
Outstanding as of December 31, 2023
Deferred
Stock
Units
Liability Balance
(in thousands)
131,960
214,357
14,382
360,699
278,663
108,011
212,407
(373,489)
586,291
206
552
223
Effective January 1, 2021, the Company’s Board of Directors, on the recommendation of the Compensation
Committee, implemented a program to issue deferred stock units to members of the Company’s Board of Directors.
Additionally, members of the Board may elect, at the beginning of each year, that a portion of their board fees be paid
in DSUs rather than in cash. DSUs are qualifying instruments under the terms of the Company’s Incentive Plan, 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.
DSUs are vested immediately at grant and are redeemable in cash or shares—at the discretion of the Company—
at the earlier of 10 years or upon the eligible directors’ termination and expected to be paid in cash. Termination is
deemed to occur on the earliest of (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 value each reporting period. As of December 31, 2023 and 2022, the Company has $0.2
million and $0.6 million, respectively, of other non-current liability related to the DSUs, based on the fair value of the
Company’s stock price.
DSUs of 278,663 and 214,357 were granted to the Board of Directors during the years ended December 31, 2023
and 2022, respectively. Additionally, DSUs of 108,011 and 14,382 were granted to the Board of Directors in lieu of
board fees at their request during the years ended December 31, 2023 and 2022, respectively. DSUs of 212,407 and nil,
respectively, were granted in lieu of executive bonuses during the years ended December 31, 2023 and 2022. The
weighted-average grant date fair value per share of DSUs granted during the years ended December 31, 2023 and 2022
was $0.83 and $2.93, respectively. The grant date fair value of DSUs is determined by the 20-day volume weighted
average price of the Company’s common shares at grant date. During the year ended December 31, 2022, no DSUs were
redeemed or forfeited, and 373,489 and nil DSUs, respectively, were redeemed and forfeited during the year ended
December 31, 2023.
Gold Resource Corporation
93
16. Zinc Zero Cost Collar
During the years ended December 31, 2023 and 2022, the realized and unrealized losses related to the Company’s
Zinc Zero Cost Collar are the following:
Realized (gain) loss on zinc zero cost collar
Unrealized gain on zinc zero cost collar (1)
Total
For the year ended December 31,
2023
2022
(in thousands)
$
$
-
-
-
$
$
2,014
(1,844)
170
(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.
Effective May 18, 2021, GRC entered into Trading Agreement with Auramet International LLC that govern
nonexchange traded, over-the-counter, spot, forward and option transactions on both a deliverable and non-deliverable
basis involving various metals and currencies. In 2022, the Company had a realized loss of $2.0 million and an unrealized
gain of $1.8 million related to the program. As of December 31, 2022, the current program concluded; therefore, in
2023, the Company had neither realized nor unrealized gains or losses related to the program. However, the Company
may enter into similar zinc zero cost collar call and put options in the future. Please see Item 8. Financial Statements
and Supplementary Data—Note 13. Derivatives in for additional information.
17. Other Expense, Net
During the years ended December 31, 2023 and 2022, other expense, net consisted of the following:
Unrealized currency exchange (gain) loss (1)
Realized currency exchange loss
Realized and unrealized loss (gain) from gold and silver rounds, net
Loss on disposal of fixed assets
Interest on streaming liabilities
Severance
Other expense (income)
Total
For the year ended December 31,
2023
2022
$
$
(in thousands)
(174)
$
860
(12)
13
1,466
1,619
(408)
3,364
$
1,286
121
(28)
330
906
688
985
4,288
(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.
18. Net Loss per Common Share
Basic loss per common share is calculated based on the weighted average number of shares of common stock
outstanding for the period. Diluted Loss per common share is calculated based on the assumption that stock options
outstanding, which have an exercise price less than the average market price of the Company’s common stock 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 restricted stock units are considered to be dilutive.
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
0.8 million shares of common stock at weighted average exercise prices of $2.99 were outstanding as of December 31,
2023 but had no dilutive effect due to the net loss. Options to purchase 1.5 million shares of common stock at weighted
average exercise prices of $2.90 were outstanding as of December 31, 2022 but had no dilutive effect due to the net loss.
Gold Resource Corporation
94
Basic and diluted net loss per common share is calculated as follows:
Numerator:
Net loss (in thousands)
Denominator:
Basic and diluted weighted average common shares outstanding
Basic and diluted net loss per common share
19. Fair Value Measurement
For the year ended
December 31,
2023
2022
(16,017)
$
(6,321)
88,514,243
88,368,250
(0.18)
$
(0.07)
$
$
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 tables set forth certain of the Company’s assets and liabilities measured at fair value by level
within the fair value hierarchy as of December 31, 2023 and 2022:
As of
December 31,
2023
As of
December 31,
2022
Input Hierarchy Level
Cash and cash equivalents
Accounts receivable, net
Investment in equity securities-Maritime
Investment in equity securities-Green Light Metals
$
$
$
$
(in thousands)
6,254
4,335
1,596
3,698
$
$
$
$
23,675
5,085
1,559
3,611
Level 1
Level 2
Level 1
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 approximates fair value.
Accounts receivable, net: Accounts receivable, net include amounts due to the Company for deliveries of
concentrates and doré sold to 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 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
Gold Resource Corporation
95
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 date. At December 31, 2023 and 2022, the Company
had an unrealized gain of $0.3 million and $0.6 million, respectively, included in its accounts receivable on the
accompanying Consolidated Balance Sheets related to mark-to-market adjustments. Please see Item 8. Financial
Statements and Supplementary Data—Note 13. Derivatives for additional information.
Investment in equity securities—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., 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 both December 31, 2023 and 2022, the share price of Maritime was C$0.045.
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 shares received represented approximately 28.5% ownership. Management chose to account for this
investment using the fair value option; therefore, these securities are carried at fair value. As of December 31, 2023, the
value of this equity investment was C$4.9 million (or $3.7 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 recent Green Light Metals equity
transactions. Through December 31, 2023, there have been no gains or losses on the value of the shares the Company
received, other than some foreign exchange gain.
Gains and losses related to changes in the fair value of these financial instruments were included in the Company’s
Consolidated Statements of Operations as shown in the following:
For the year ended
December 31,
2023
2022
Statements of
Operations Classification
Realized and unrealized derivative gain (loss), net
Note
13
$
(28) $
(363)
Realized gain (loss) on zinc zero cost collar
16
$
- $
(2,014)
Unrealized gain on zinc zero cost collar
16
$
- $
1,844
Sales, net
Realized and unrealized
loss on zinc zero cost
collar
Realized and unrealized
loss on zinc zero cost
collar
Realized/Unrealized Derivatives, net
The following tables summarize the Company’s realized/unrealized derivatives, net (in thousands):
For the year ended December 31, 2023
Realized gain (loss)
Unrealized (loss) gain
$
Total realized/unrealized derivatives, net
$
295 $
(40)
255 $
334
(241)
93
$
$
6 $
4
10 $
174
(186)
(12)
$
$
(511) $
137
(374) $
298
(326)
(28)
Gold
Silver
Copper
Lead
Zinc
Total
For the year ended December 31, 2022
Realized loss
Unrealized gain (loss)
$
Total realized/unrealized derivatives, net
$
(79) $
136 $
57 $
-
433
433
$
$
$
(127) $
7 $
(120) $
(150)
153
3
$
$
$
(364) $
(372)
(736) $
(720)
357
(363)
Gold
Silver
Copper
Lead
Zinc
Total
Gold Resource Corporation
96
20. Supplementary Cash Flow Information
During the years ended December 31, 2023 and 2022, other operating adjustments and write-downs within the
net cash provided by operations on the Consolidated Statements of Cash Flows consisted of the following:
For the year ended
December 31,
2023
2022
Unrealized gain on gold and silver rounds
Unrealized foreign currency exchange (gain) loss
Loss on disposition of fixed assets
Increase (decrease) in reserve for inventory
Unrealized gain on zinc zero cost collar
Other
Total other operating adjustments
21. Segment Reporting
$
$
$
(in thousands)
(14)
(174)
13
382
-
384
591
$
(63)
1,286
408
(264)
(1,844)
521
44
As of December 31, 2023, the Company has organized its operations into three geographic regions. The
geographic regions include 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 Consolidated Balance Sheets relating to the Company’s
segments (in thousands):
As of December 31, 2023
Total current assets
Total non-current assets (1)
Total assets
Total current liabilities
Total non-current liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
As of December 31, 2022
Total current assets
Total non-current assets (1)
Total assets
Total current liabilities
Total non-current liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
Oaxaca,
Mexico
Michigan,
USA
Corporate
and Other Consolidated
$ 25,155
62,368
$ 87,523
$ 10,029
12,559
64,935
$ 87,523
$
116
93,287
$ 93,403
59
62,792
30,552
$ 93,403
$ 38,032
69,269
$ 107,301
$ 20,035
11,460
75,806
$ 107,301
$
272
92,927
$ 93,199
3,352
$
60,648
29,199
$ 93,199
$
$
$
$
$
$
$
1,224
1,736
2,960
1,237
517
1,206
2,960
7,795
1,803
9,598
1,295
1,544
6,759
9,598
$
26,495
157,391
$ 183,886
11,325
$
75,868
96,693
$ 183,886
$
46,099
163,999
$ 210,098
24,682
$
73,652
111,764
$ 210,098
(1)
In 2023, the total non-current assets included capital investments of $11.0 million in Oaxaca, Mexico, $0.4 million in Michigan, USA, and nil
in Corporate and Other. In 2022, the total non-current assets included capital investments of $18.1 million in Oaxaca, Mexico, $0.1 million in
Michigan, USA, and nil in Corporate and Other.
Gold Resource Corporation
97
The following table shows selected information from the Consolidated Statements of Operations relating to the
Company’s segments (in thousands):
For the year ended December 31, 2023
Sales, net
Total mine cost of sales, including depreciation
Exploration expense
Total other costs and expenses, including G&A
Income tax benefit
Net loss
For the year ended December 31, 2022
Sales, net
Total mine cost of sales, including depreciation
Exploration expense
Total other costs and expenses, including G&A
Income tax provision (benefit)
Net income (loss)
Oaxaca,
Mexico
Michigan,
USA
Corporate
and Other
Consolidate
d
$ 97,728
102,913
4,167
2,693
(4,767)
$ (7,278)
-
92
1,642
529
(695)
$ (1,568)
38
-
7,406
(273)
$ (7,171)
$
$
97,728
103,043
5,809
10,628
(5,735)
(16,017)
$ 138,724
108,863
4,244
2,741
8,061
$ 14,815
$
-
75
8,805
1,415
(1,123)
$ (9,172)
$
-
38
-
10,305
1,621
$ (11,964)
$ 138,724
108,976
13,049
14,461
8,559
(6,321)
$
Gold Resource Corporation
98
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the
reports that we file under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed,
summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange
Commission, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
The Chief Executive Officer and the Chief Financial Officer, with assistance from management, have evaluated the
effectiveness of disclosure controls and procedures as of December 31, 2023. Based on that evaluation, the Chief
Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were
effective as of December 31, 2023.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting
and for the assessment of the effectiveness of internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Because of its inherent limitations, any system of internal control over financial
reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can
be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because
of changes in conditions, internal control effectiveness may vary over time. Management assessed the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2023 based on the framework set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated
Framework (2013) and concluded that the Company has maintained effective internal control over financial reporting
as of December 31, 2023 based on the COSO criteria.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act) which occurred during the fourth quarter of our year ended December 31, 2023 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
Gold Resource Corporation
99
Item 10.
Directors, Executive Officers, and Corporate Governance
PART III
The information required by this item is incorporated by reference from the information to be contained in our
Proxy Statement for the 2024 Annual Meeting of Shareholders (“2024 Proxy Statement”), which we will file within 120
days after the end of our fiscal year ended December 31, 2023.
We have adopted a code of ethics that applies to all of our employees, including the principal executive officer,
principal financial officer, principal accounting officer, and those of our officers performing similar functions. The full
text of our code of ethics can be found on the Corporate Governance page on our website. In the event our Board of
Directors approves an amendment to or waiver from any provision of our code of ethics, we will disclose the required
information pertaining to such amendment or waiver on our website.
Item 11.
Executive Compensation
The information required by this item is incorporated by reference from the information to be contained in our
2024 Proxy Statement.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item is incorporated by reference from the information to be contained in our
2024 Proxy Statement.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from the information to be contained in our
2024 Proxy Statement.
Item 14.
Principal Accounting Fees and Services
The information required by this item is incorporated by reference from the information to be contained in our
2024 Proxy Statement.
Gold Resource Corporation
100
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
The following exhibits are filed with or incorporated by referenced in this report:
Item No.
Description
3.1
3.1.1
3.1.2
3.1.3
3.2
3.2.1
3.2.2
4.1
10.1
10.2
10.3
10.4
Articles of Incorporation of the Company as filed with the Colorado Secretary of State on August 24,
1998 (incorporated by reference from Exhibit 3.1 to the Company’s Registration Statement on Form
SB-2 filed with the SEC on October 28, 2005).
Articles of Amendment to the Articles of Incorporation as filed with the Colorado Secretary of State
on September 16, 2005 (incorporated by reference from Exhibit 3.1.1 to the Company’s Registration
Statement on Form SB-2 filed with the SEC on October 28, 2005).
Articles of Amendment to the Articles of Incorporation as filed with the Colorado Secretary of State
on November 8, 2010 (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report
on Form 10-Q filed with the SEC on November 10, 2010).
Articles of Amendment to the Articles of Incorporation as filed with the Colorado Secretary of State
on June 4, 2021 (incorporated by reference from Exhibit 3.1.3 to the Company’s Annual Report on
Form 10-K filed with the SEC on March 13, 2023).
Amended and Restated Bylaws of the Company dated August 9, 2010 (incorporated by reference from
Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2010).
Amendment dated March 25, 2013 to Amended and Restated Bylaws of the Company dated August 9,
2010 (incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed
with the SEC on March 27, 2013).
Amendment dated April 3, 2018 to the Amended and Restated Bylaws of the Company dated August
9, 2010 (incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K
filed with the SEC on April 3, 2018).
Description of Capital Stock (incorporated by reference from Exhibit 4.1 to the Company’s Form 10-
K filed with the SEC on March 10, 2022).
Exploitation and Exploration Agreement between the Company and Jose Perez Reynoso dated October
14, 2002 (incorporated by reference from Exhibit 10.1 to the Company’s Registration Statement on
Form SB-2 filed with the SEC on October 28, 2005).
Mining Exploration and Exploitation Agreement between Don David Gold, S.A. de C.V. and Jose
Perez Reynoso effective November 21, 2002 (incorporated by reference from Exhibit 10.15 to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2012).
Amendment to Mining Exploration and Exploitation Agreement between Don David Gold Mexico,
S.A. de C.V. and Jose Perez Reynoso effective August 3, 2012 (incorporated by reference Exhibit
10.17 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2012).
Gold Resource Corporation 2016 Equity Incentive Plan (incorporated by reference from Exhibit 4.1 to
the Company’s Registration Statement on Form S-8 filed with the SEC on December 7, 2016).
Gold Resource Corporation
101
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12*
10.13
10.14
10.15
21*
23.1*
23.2*
23.3*
23.4*
23.5*
23.6*
31.1*
Form of Stock Option Agreement (incorporated by reference from Exhibit 10.5 to the Company’s
Annual Report on Form 10-K filed with the SEC on March 2, 2020).
Form of RSU Agreement (incorporated by reference from Exhibit 10.6 to the Company’s Annual
Report on Form 10-K filed with the SEC on March 2, 2020).
Form of RSU Agreement (incorporated by reference from Exhibit 10.7 to the Company’s Annual
Report on Form 10-K filed with the SEC on March 2, 2020).
Form of Indemnification Agreement between the Company and its directors and officers (incorporated
by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on
December 18, 2013).
At-The-Market Offering Agreement dated November 29, 2019 between the Company and H.C.
Wainwright & Co., LLC (incorporated by reference from Exhibit 1.1 to the Company’s Registration
Statement on Form S-3 filed with the SEC on November 29, 2019).
Employment Agreement dated December 31, 2020 between Gold Resource Canada Corporation and
Allen Palmiere (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form
8-K filed with the SEC on December 31, 2020).
Employment Agreement dated May 12, 2021 between Gold Resource Canada Corporation and Alberto
Reyes (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with the SEC on May 18, 2021).
Employment Agreement dated August 2, 2023 between Gold Resource Canada Corporation and Chet
Holyoak.
Arrangement Agreement by and among Gold Resource Corporation, Gold Resource Acquisition Sub,
Inc. and Aquila Resources Inc. dated October 5, 2021 (incorporated by reference from Exhibit 2.1 to
the Company’s Current Report on Form 8-K filed with the SEC on October 12, 2021).
Aquila and Osisko - Amended and Restated Gold Purchase Agreement (incorporated by reference from
Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed with the SEC on March 10, 2022).
Aquila and Osisko - Amended and Restated Silver Purchase Agreement (incorporated by reference
from Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed with the SEC on March 10,
2022).
Subsidiaries of the Company.
Consent of BDO USA, P.C., Independent Registered Public Accounting Firm.
Consent of Qualified Person.
Consent of Qualified Person.
Consent of Qualified Person.
Consent of Qualified Person.
Consent of Qualified Person.
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer.
Gold Resource Corporation
102
31.2*
32*
96.1
96.2*
97.1*
101*
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer.
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer
and Chief Financial Officer.
Technical Report Summary for the Back Forty Mine Project dated September 30, 2023 (incorporated
by reference from Exhibit 96 to the Company’s Current Report on Form 8-K filed with the SEC on
October 17, 2023).
Technical Report Summary for the Don David Gold Mine dated December 31, 2023.
Policy for Recoupment of Executive Compensation effective July 26, 2023.
The following financial statements from the Annual Report on Form 10-K for the year ended December
31, 2023 are furnished herewith, formatted in inline XBRL: (i) the Consolidated Balance Sheets, (ii)
the Consolidated Statements of Operations, (iii) the Consolidated Statements of Changes in
Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the
Consolidated Financial Statements.
104
Cover Page Interactive Data File (embedded within the XBRL document).
*
filed herewith
ITEM 16.
FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 27, 2024
GOLD RESOURCE CORPORATION
/s/ Allen Palmiere
By: Allen Palmiere, Chief Executive Officer,
President and Director
Gold Resource Corporation
103
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Allen Palmiere
Allen Palmiere
/s/ Chet Holyoak
Chet Holyoak
/s/ Ron Little
Ron Little
/s/ Lila Murphy
Lila Murphy
Chief Executive Officer, President and Director
March 27, 2024
(Principal Executive Officer)
Chief Financial Officer
March 27, 2024
(Principal Financial and Accounting Officer)
Director
Director
March 27, 2024
March 27, 2024
Gold Resource Corporation
104