Q2 2022 Gold Resource Corp Earnings Call
tailing storage facility and accelerate the reclamation of the open pit.
We also processed over 200 tons of our additional tailings from a local community.
In addition to financially giving back to the community, we were able to ensure they were properly handled and stored.
We are encouraged by the results of our investment in the infill drilling program, which is producing positive results.
In Michigan, we continue to work on the feasibility study. The inflationary environment and capital cost pressures combined with lower commodity prices are creating challenges.
We continue to work on alternatives and are working to optimize the value in the parents in this world-class deposit.
I'll now pass the presentation to Alberto to discuss Don David Gold's operational results.
Thank you, Alvin, and also good morning to all. We experienced a positive quarter for David Goldbine turning to the results of operations. I am pleased to report that we processed nearly 120, 29,000 tons of ore and sold approximately 9,000 ounces of gold, 230,000 ounces of silver equating to a combined 11.5 thousand gold equivalent ounces.
We farther sold over 285 tons of copper, 1800 tons of lead in 3.6 thousand tons of zinc.
Tr ???? flight 5.
As for an update on investment, Alan mentioned earlier, I want to highlight that the Zane Tills Regranbridge Circuit has reached the target recovery which reflected towards the end of the Q2. Also, in the underground, we have successfully completed phase one of the ventilation circuit. The new circuit includes ventilation shafts, 273 meters in length, and three meters in diameter, that connect level three, all the way down to level 22.
The system allows for 450,000 CFM to be delivered to the lower levels while reducing resistance to airflow. Phase 2 is underway and it will be completed in Q3. The secondary race will connect level 22 to level 27.
Our underground exploration program has for some of the ventilation has improved. The amount of drilling will achieve 35,000 to 40,000 in the year. Drilling in the underground continues to deliver positive results, supporting potential extension to the current working areas.
I will now pass over the presentation to Kim to discuss the data goals financial results. Thank you, Alberto. We close the quarter with a strong balance sheet consisting of just over 33 million in cash and working capital increase on the five million during the quarter. We reported net income of 2.7 million and operating cash flows of eight million for the three months ended June 30.
Net cells of over 37 million were 20% higher than the same period in 2021 due to higher gold cells and higher base metal prices. Net cells of over 70 million were 20% higher than the same period in 2021
Thus, productive.
Total production costs of 21.7 million for the quarter is 11% higher than the production costs for the same period in 2021. The increase is largely related to half a million increase in consumable products driven by price increases, half a million increase in royalty expense due to higher sales, and almost a million dollars in spare parts for heavy equipment repairs. And finally, there was a half a million increase in transportation costs due to an agreed 9% rate increase.
Don David Goldmines Total Cash Costs with $247 per ounce.
and total all in sustaining costs for Goldie Guglin ounce for 799 per ounce.
These costs are significantly lower than 2021 and directly related to the higher base metal prices realized. Allen, back to you. RIGHT BUT potentially THAT'S something we can officer more towards $
Thanks, Kim.
The economic climate has changed dramatically in the past few months.
While we are comfortable with the guidance for the year, it is making new projects challenging.
Across the industry, we are seeing projects suffer from cost escalation, as well as increased cost of capital at a time when commodity prices are declining.
It is unfortunately a perfect storm, the duration of which is unknown.
However, as you've heard me say before, we remain focused on creating values to discipline growth and capital allocation. Alert task part could be approaching successfully and to discipline growth and capital allocation.
As I noted in my opening comments, we've made tremendous strides to demonstrate our commitment to advance initiatives around health, safety, community development, and really our overall ESG programs. And really our overall ESG programs. And really our overall ESG programs.
We plan to continually expand our efforts in this area. With our healthy balance sheet, strong management team, we look forward to advancing the Back 40 project and to continue to focus on improvements at the Don David Gold Mine while maintaining our status as a low cost producer with a focus on discipline growth.
With that, I'll turn the call over to the operator for questions.
Thank you, ladies and gentlemen. If you would like to ask a question, please press star followed by one on your telephone keypad. One moment, please fear first question.
Your first question comes from the line of Jake Sikelski of Alliance Global Partners. Please go ahead.
Pay out and in team, thanks for taking my questions.
Lauren and Jake. So obviously, you know, we've seen industry-wide cost inflation that you just touched on a bit. But it seems like you've been somewhat insulated with on-standing cost coming in below $800 an ounce. Any color on the steps that you're taking, and are you concerned at all with any of them?
surfacing in a larger way in the second half of the year.
I'm not anticipating significant changes in the second half, Jake.
We had anticipated cost escalation when we did the budget last year, and as it's turned out, we've been unfortunately fairly accurate.
So a lot of the cost increases that we've seen had already been anticipated. On a go-forward basis, we're beginning to see correction albeit slight in the cost of grinding media and some of the other.
inputs seem to be stabilizing a little bit.
We were fortunate in that we are able to negotiate a 6% increase in labor.
early in the year and again that was budgeted for.
Thank you.
We are, of course.
benefiting from the high base metal prices that we experienced in the first half of the year.
that has corrected somewhat, obviously. That being said,
The current rates are still significant. We do have some hedging in place for our zinc production, which is going to ensure solid revenue for the balance of this year. What that will do is enable us to maintain our
cash costs and ASIC at least for the balance of this year.
Do you think even with obviously Zinc prices have come down a bit off the highs, but we're still sitting at $1.50 or so count, which historically is a strong level? Are you comfortable with putting in longer-term hedges with Zinc at current levels?
It's something that we consider actively on an ongoing basis, Jake. I will tell you that my personal view, and this is not one that we've...
necessarily adopted corporately yet is that I would take dollar fifty zinc all day long forever.
I've been involved in the Zinc for...
Unfortunately, a few decades now, and I've never seen zinc prices at this level for an extended period of time.
I think there is a strong possibility that zinc may in fact increase in the short term because of smelter curtailments in Europe and who knows what's happening in China right now.
COVID and the resultant reductions in capacity.
Europe is being driven by the energy crisis over there and the zinc smelters are not going to be operating at full capacity. That may result in a supply squeeze in the short term and I don't know what short term is.
I think we're going to see a period of time.
of strong zinc prices persisting, but historically you're right. The dollar $45.50 zinc is very, very good and it is something that we will consider to lock in prices on and go forward basis.
Okay, that's fair. And then just lastly on backboard, I mean, we're coming up to the feasibility study over the next couple quarters and then kicking off the permitting process after that. Can you just touch a bit on what that permitting process might look like going forward? It's my understanding that the process rests solely with the state with no federal permitting. You need to just get that right.
That is correct. Michigan is one of two states in the union that has complete control over the permitting process. That has complete control over the permitting process.
They do have.
A little bit of input from the EPA from a technical perspective, but only that. The state has total authority over granting permits.
All of the permits that we deal with are under the control of a department called Energy Great Lakes and Environment Eagle.
For short
It's a part of the Department of Natural Resources and we deal with
by sub-departments of that group.
What it does is enable us to have a relatively focused approach to permitting.
Processes we will submit.
applications for the various permits to the appropriate departments.
There will be a back and forth public hearings.
commentary from the departments, we will respond. We're forecasting at this time that that process will take
10 to 12 months.
After that period, we would anticipate that we would receive the permits from Eagle.
Permits in the state of Michigan are subject to a contested case process whereby
components of the project can challenge the permits in an administrative court.
It's a normal process. We fully anticipate that we will be going through that process.
and it will take again.
6 to 12 months and I'm
The guidelines are really fuzzy here because it's totally out of our control. We do know, or we've been led to believe that the court would like to have a combined contested case process for all permits concurrently.
That would shorten the timeline to conclusion. Once the court rules that we have valid permits.
assuming they do so.
Then wheel belt begin construction.
Is that a dress of Jake?
Yeah, no, that was very helpful.
That's all I'm Ion. Thanks again and congrats on a strong quarter.
Thanks Jake, good hearing from you. Thanks Jake.
There are no further questions at this time. I will turn the call to Mr. Allen Paul-Mier for closing remarks.
While that was short and sweet, I would suggest that I would love to...
suggest our disclosure was so all-encompassing that there was no questions generated.
Probably it's the economic times in which we live that is creating a lot of attention to be placed on other issues.
That being said, I would very much like to thank everyone for joining us. I look forward to speaking to you all in Q3. Have a very good afternoon and thank you again.
This concludes today's conference call. You may now disconnect your lines.
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