Q1 2022 Gold Resource Corp Earnings Call

Good morning, and welcome to the Gold Resource Corporation first quarter, 2022 financial and operating results Conference call.

At this time all participants are in a listen only mode.

Following managements presentation, there will be a question and answer session open to financial analysts only.

Instructions will be provided at that time for you to queue up for questions.

If anyone has any difficulties hearing the conference. Please press star followed by zero for operator assistance at any time.

I would like to remind everyone that this conference call is being recorded today may 10 two.

And 'twenty two.

11 o'clock eastern time.

I will now turn the conference over to Kim Perry Gold Resource Corporation, Chief Financial Officer, Mr. Barry You May proceed.

Okay.

Thank you, Chris and good morning to everyone on behalf of the gold resource team I would like to welcome you to our conference call covering our Q1 2022 result.

Before we begin the call there are a couple of housekeeping matters I'd like to address please.

Please note that certain statements to be made today are forward looking in nature and as such are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, and other SEC filings.

Joining me on the call today is Alan Telomere, our president and CEO , and Alberta, Rich, our Chief operating officer.

Following Alan Alberto in my prepared remarks will be available to answer your question.

This conference call is being webcast for those of you joining us on the webcast you can download a PDF copy of the conference call slides.

The event will also be available for replay on our website later today.

Yesterday's news release issued following the close of the market and the accompanying financial statements and MD&A contained in our Form 10-Q have been filed with the SEC on Edgar and are also available on our website at Www Dot Gold resource Corp Dot com.

Please note that all amounts mentioned in this call are U S dollars unless otherwise stated I will now turn the call over to Alex.

Okay.

Thank you, Tim and good morning, everyone.

I'd like to thank all of the listeners for taking the time to join us on this call.

Yeah.

This year is off to a good start in Mexico maintained momentum they created in the fourth quarter of 2021.

Order over quarter, John was through the mill and gold equivalent ounces produced continue to increase.

I'd like to point out a few achievements relating to ESG before handing the call over to Alberto to provide an update on our dawn David Gold operations.

Excuse me.

I will then proceed with March from Kim on our Q1 financial results.

Lee will provide a few closing remarks and definitely we'll take questions from participants.

Most important asset that'd be hard because our people we have.

Very good team in Mexico, who are responding well to the new culture and operational methodologies that are being introduced.

Our corporate team is first class I'm very happy with the quality and the ability of the team and shows the results achieved and bodes very well for the future.

We've continued to invest heavily in Mexico, which will benefit us going forward from an operational financial and in many cases, an environmental standpoint.

With the completion of the filtration plant to dry stack facility in 2021 we're processing the tailings through the new plant.

The tailing facilities, not only conserve water they reduce the traditional risks associated with the tailings storage facility and accelerate the reclamation of the Earth.

Original open pit.

We also processed over 1000 tonnes of artisanal tailings from our local community.

In addition to financially giving back to the community, we're able to ensure that they were properly handled and stored.

In Michigan, we continue to progress the Black 40 feasibility study.

Internal commitment we made when we acquired the project.

It was to ensure that the optimized design deployed incorporated environmentally friendly designs and advances in the mining industry.

So far we are on track to achieve this objective.

The optimized feasibility study should be released in the second half of this year with permit applications. Following shortly thereafter.

I'll now pass the presentation 12 burden to discuss the dawn.

Don David Gold's first quarter operational results.

Thank you Ellen and also good morning to all.

We experienced a positive quarter for them, David Goldmine, turning to our results of operations I am pleased to report that we processed nearly 137000 tonnes of ore and sold approximately 8000 ounces of gold 265000 ounces of silver equating to a combined 11 seven.

One ounces of gold equivalent.

We further sold over 400 tons of copper 600 tons of lead and 4300 tons of zinc.

As to our investment in infrastructure.

Earlier I wanted to point out progress on the construction of the zinc tails Goldberg and circuit.

You may recall, we expect the circuit to provide for a 6% to 10% increase in gold recovery.

We are pleased to inform you that the finding yourselves have been installed.

<unk> has been commission and it is fully operational.

All the infrastructure.

Maybe this include a new business improvement project that it's on its way.

The underground installation circuit is currently being enhanced the new circuit will improve installation throughout the mine a new 350 horsepower fendt already installed replaces the 400 horsepower fendt, thus, reducing energy consumption will providing the system the flexibility to extend that.

Circuit will be fully operational by the end of Q2.

Continuing with the underground exploration development program in level three is progressing slowly as development rates adopted the ground conditions. The delay in development will not impact the total drill meters in the year higher priority is being placed on other areas in the underground delivering interesting results regarding the potential.

Down dip extension of switchback and lateral extension of Arista.

Now switching our focus to our back 40 project feasibility study is progressing according to plan.

Three undergoing final reviews, the block models for the open pit and the underground mine defined processing plant and surface infrastructure. It is worth noticing that we have bolstered the team driving the feasibility study and can expect to reach completion during the second half of 2022.

I'll now pass over the presentation to Kim to discuss Q1 financial results.

Yes.

Thank you Alberto.

We closed the quarter with a strong balance sheet, consisting of just over 31 million cash and working capital increased more than 3 million at March 31st.

For the first quarter, we reported net income of $4 million net.

Net sales of over $45 million, we're 67% higher than the same period in 2021 due to higher gold sales and higher average base metal prices.

Total production cost of $20 1 million for the quarter is 32% higher than the production cost for the same period in 2021.

The increase was primarily due to higher royalties as a result of higher metal cells and price increases in rate reagents consumed and the process plant.

While we have experienced approximately 14% inflationary pressure on many consumables over the last year, we've been able to maintain the processing cost per ton quarter over quarter.

Another contributing factor on production cost was the impact of the Mexican labor reform related to profit sharing which was effective in the second half of 2021.

John David Goldmine total cash cost after co product credits with a negative $121 per gold equivalent ounce sold and.

In total all in sustaining cost per gold equivalent ounce sold were $499 per ounce.

These costs are significantly lower in 2021 cost per ounce sold.

Directly related to the higher base metal prices realized Alan back to you.

Thank you Kevin.

As you have heard me say before we are focused on creating value through disciplined growth and capital allocation.

As I noted in my opening comments, we've made tremendous strides to demonstrate our commitment to advance initiatives your own health safety community development and really our overall ESG programs.

And to continually expand our efforts in this area.

With our healthy balance sheet and strong management team, we look forward to advancing the back 40 project and continuing to focus on improvements at the dawn, David Goldmine, while maintaining our status as a low cost producer with a focus on disciplined growth.

With that I'll turn the call over to the operator for questions.

Thank you.

Like to ask a question. Please press Star then one on your telephone keypad.

Our first question is from Heiko Ihle with H C. Wainwright Your line is open.

Hey, there thanks for taking my questions.

So nice to see the breakdown of your capital and exploration investments somewhere in the release.

Building on that you spend $1 1 million at that 40 in Q1, and you're guiding to a total spend of $89 million for the year.

Would you be so kind just break that down a bit those eight to 9 million how much of that is drilling how many meters you're shooting for.

The feasibility study is expected to come out with the second half of 2022 anyway, you can maybe just define a quote or like.

A little more color when you think we'll see given the Q3 starts in three weeks.

Alright.

Three stores in three weeks.

Heiko I'll I will answer that a couple of ways most of the <unk> expenditure back 40. This year relates to completion of the feasibility study.

Operations for preparation islands. The permit applications. There is a small amount of drilling in the budget directionally about a $1 million and that is aimed.

Condemnation drilling a little bit of additional geotechnical drilling and a little bit.

Exploration drilling.

Say, a little bit we're looking at the southwest extension holds the deposit just to see what potentially is we believe it's significant.

Havent tested it.

Yeah.

Okay.

I think I've covered most of it in terms of timing.

I would like to give you a hard date. The reality is we're working with our consultants and trying to pin it down our target is to have the feasibility complete.

September however.

However, some of our consultants are squirming, a little bit with that so.

Target is certainly.

This year, our internal target is the end of September hopefully no later than October .

After that probably two months after we have with feasibility complete.

We'll be submitting our applications.

Got it.

Okay.

And building on the last question a little bit.

With wage inflation, both in Michigan and Mexico.

Michigan, we're not seeing a great deal just because they have a very small a very remote staffing levels. However, in Mexico, we've been able to negotiate.

Increases.

The union of just under 5%.

Which is a.

A major accomplishment.

We are seeing further inflationary pressure.

Pressures, primarily in the area of reagents.

Super Bowls.

But so far through increased productivity that hasnt adversely impacted our operating cost per tonne.

Can we maintain that I don't know I would love to say, we can but it's really going to be a function of both.

No.

How high the inflation rates are and how persistent payout ultimately.

We will opt to.

Recognized some increased cost potentially but at this point, we're managing quite well.

Perfect.

And then finally with the dry stack tailings project means your total investments have been 14 1 million thinking.

Thinking out loud a bit.

Would you be willing to guesstimate and quantify the actual cash savings.

<unk> seen from this so far since you just used so much less water.

Yeah.

Cash savings HEICO zero.

Just a quick answer.

Dry stock tailings is operationally a little bit more expensive.

<unk>.

What are the real benefit comes from is as you've identified powder production water consume.

But.

That really isn't a cost that's more of an environmental.

Benefit.

We're re circulating directionally about 80% of our process 100, now, whereas before majority of that intelligence to the tailings pond.

While we did recycle some of US we continually had to top up with freshman freshwater.

That amount of top up is diminished significantly worse dry stack.

Stock is preferable from an environmental point of view because you don't have the.

You don't have a down number one you don't have.

Ill, let material exposed.

And you don't have a long term reclamation problem. So that's a real benefit arising from dry stacking.

We had.

<unk> open pit at the site and what we're doing is using that as our first area of deposition for the dry stack. So ultimately we will surely die stacking complete the remediation of the open pit, but just made major step forward.

But it's not a cost savings dry stack is more expensive.

Yes.

There, Okay simple enough I appreciate your time.

Thanks, Tycho appreciate the question.

Again, Please press star one if you would like to ask a question.

And it appears that we have no further questions at this time I'll turn it over to Mr. Paul Miller for any closing remarks.

Okay.

Thanks, Chris I do appreciate it I do appreciate everyones time.

It was a good quarter.

Hopefully youll be able to see that sustained through the second quarter and I look forward to speaking to you at our next quarterly conference call. Thank.

Thank you all and have a great partner.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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The House has ended this call goodbye.

Hi, My question well.

It was less.