Full Year 2023 Gold Resource Corp Earnings Call

Operator: Good morning, and welcome to the Gold Resource Corporation fourth quarter 2023 Financial and Operating Results Conference call. At this time, all participants are in listen-only mode.

Good morning, and welcome to the Gold Resource Corporation fourth quarter, 2023 financial and operating results conference call. At this time all participants are in listen only mode. Following management's presentation. There will be a question and answer session and instructions will be provided at that time for you to queue up.

Operator: Following management's presentation, there will be a question and answer session. 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, March 14, 2024, at 10 a.m. Eastern Time. I will now turn the conference over to Chet. Corporation's Chief Financial Officer. Mr. Holyoak, you may begin.

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.

This conference call is being recorded today March 14, 2024 at 10 am Eastern time.

I will now turn the conference over to Chuck <unk>.

<unk> Gold Resource Corporation, Chief Financial Officer, Mr. Julio You May proceed.

Chet Holyoak: Thank you, Joelle, and good morning to everyone. On behalf of the Gold Resource team, I would like to welcome you to our conference call covering our fourth quarter 2023 results. Before we begin the call, there are a couple of housekeeping matters I would like to address. 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. All financial measures are unaudited.

Thank you Joelle and good morning to everyone on behalf of the gold resource team I would like to welcome you to our conference call covering our fourth quarter 2023 results.

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

All financial measures are unaudited.

Chet Holyoak: Audited financial statements will be presented in our 2023 Form 10-K, which will be filed at a future date no later than April 1, 2024, once our external audit firm, BDO USA LLP, completes its audit procedures. Please note all amounts referenced during this presentation are in U.S. dollars unless otherwise stated. Joining me on the call today is Allen Palmiere, our President and CEO, and Alberto Reyes, our Chief Operating Officer. Following Allen, Alberto, and my prepared remarks, we will be available to answer questions. 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.

<unk> financial statements will be presented in our 2023 Form 10-K, which will be filed at a future date. No later than April one 2024, once our external audit firm BDO USA LLP compete complete their audit procedures. Please note all amounts referenced during this presentation are in U S dollars.

Unless otherwise stated.

Joining me on the call today is Alan Palmer, our president and CEO and Alberto <unk>, our Chief operating officer.

Following Allen Alberto and my prepared remarks, we will be available to answer your questions. 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 that was issued following the close of the market has been filed with the SEC on Edgar and is available on our website at Www Dot Gold resource Corp Dot com.

Chet Holyoak: Yesterday's news release that was issued following the close of the market has been filed with the SEC on EDGAR and is available on our website at www.goldresourcecourt.com. I will now turn the call over to Allen. Thank you, Chet. Good morning, everyone.

I will now turn the call over to Alan.

Yes.

Thank you Chuck and good morning, everyone.

Allen Joseph Palmiere: I'd like to thank you for joining our Q4 conference. I'd like to address a few points first, and then Alberto will address operations, followed by Chet with financials. Following their remarks, I will then make a few closing comments, and we will take questions. The fourth quarter was another challenging one.

I'd like to thank you for joining our Q4 conference call.

Like to address a few points first and then Alberto will address operations, followed by charged with the financial results.

Following their remarks I will then make a few closing comments.

We'll take questions.

The fourth quarter was another challenging one for us as previously guided mine sequencing result sequencing resulted in lower ore grades.

Allen Joseph Palmiere: As previously guided, mind sequencing resulted in lower OR grades. While this was always in the plan for the latter part of the year, the unexpected strengthening of the peso and the lower than forecast zinc price adversely affected our byproduct revenue. While commodity prices and foreign exchange rates are beyond our control, we are very focused on those factors that we can control, including costs and product. In 2023, we performed an assessment of our workforce in Mexico that ultimately resulted in a reduction of approximately 10%.

This was always in the plan for the latter part of the year unexpected.

Unexpected strengthening of the peso.

The lower than forecast zinc price of zinc.

Zinc adversely affected our byproduct revenues.

While commodity prices and foreign exchange rates are beyond our control.

We're very focused on those factors that we can control, including cost and productivity.

During 2023, we performed an assessment of our workforce in Mexico.

Ultimately resulted in a reduction of approximately 10%.

Allen Joseph Palmiere: And we will continue to evaluate for further reduction. Additionally, we renegotiated certain supply and service contracts that resulted in cost reduction. We've gained certain practices underground to reduce mining costs, reduce dilution, and increase productivity. Concerning our processing plant, we are doing test work to attempt to improve recovery while maintaining and concentrate quality. Cash continues to be tight and remains our primary vote.

And we will continue to evaluate further reductions.

Additionally, we renegotiated certain supply and service contracts resulted in cost reductions.

Certain practices underground to reduce mining costs reduce dilution and increase productivity.

Concerning our processing plants, we're doing test work to attempt to improve recovery, while maintaining and concentrate quality.

<unk> continues to be tight and remains our primary focus.

Allen Joseph Palmiere: We published a preliminary economic analysis for the BAC40 project last year, which demonstrated the robust nature of the project and confirmed our assumptions when we first acquired it. The project carries a life of mine NPV at a 6% discount rate of approximately $215 million with an initial capital requirement of $325 million. This study demonstrated the economic viability of the Black Party project.

We published a preliminary economic analysis from the back 40 project last year, which demonstrated the robust nature of the project and confirmed.

<unk> was when we first acquired.

The project.

Life of mine NPV of a 6% discount rate of approximately $215 million with an initial capital requirements.

$325 million.

This study demonstrated the economic viability of the back part of the project.

Allen Joseph Palmiere: Now, please turn to slide four, and I'll provide a brief update on our Q4 exploration report. Our exploration program continues to produce good results, which will result in higher-grade material in our reserves and resources and will increase the mine life. In the past year and a half, we have discovered areas of mineralization known as the Three Sisters, Gloria, Marina, and a continuation of Splay 31, which had been previously identified, all of which contain bi-grade intercepts and will be part of Don Deaver's future.

Now please turn to slide four and I'll provide a brief update on our Q4 exploration results.

Our exploration program continues to produce good results, which will result in higher grade material in our reserves and resources and will increase the mine life.

In the past year and a half we have discovered errors mineralization known as <unk>.

<unk>, Florida Marina and the continuation of Splay 31, which had been previously identified.

All of which contained by grade intercepts.

We'll be part of the future of dawn to anybody.

Allen Joseph Palmiere: As you know, exploration has been the major use of cash over the past two plus years, but the results are more than sufficient to justify the expense and point to the need and desirability of additional drilling in the future. I will now turn the call over to Alberto for an update on the operation. Thank you, Allen, and good morning to everyone.

As you know exploration has been the major use of cash over the past two plus years, but the results are more than sufficient to justify the expense and point to the need and desirability of additional drilling in the future.

I will now turn the call over to Alberto for an update on the operations.

Thank you Alan and good morning to everyone.

Alberto Reyes: I'm pleased to share our latest achievements, indicative of our strong commitment to cultivating a mature health and safety culture. We're proud to announce that our leading indicators continue to surpass expectations, a testament to the dedication and outstanding participation from our museum. I'm pleased to report that our collective efforts have resulted in our lowest LP IFR yet, spending at a rate of 0.2, surpassing our yearly target of 0.25. This milestone underscores a relentless pursuit of safety excellence and the profound impact of our team's diligence and collaboration. The challenges persisted in the fourth quarter, with inflationary pressure, fluctuating exchange rates, and modifications to the operation procedure. 14 on going off.

Bruce will share our latest achievements indicative of our strong commitment to cultivating a mature health and safety culture.

We're proud to announce that our elite.

Indicators continue to surpass expectations.

Testament to the dedication and outstanding participation from our leadership team.

I am pleased to report that our collective efforts have resulted in our lowest LTI AFR yet.

Spending on our radar to surplus in our yearly target 0.5.

This milestone under sports, our relentless pursuit of safety excellence and the profound impact our team's diligence and collaboration.

The challenges persisted in the fourth quarter with inflationary pressure fluctuating exchange rates and modifications to the operational procedures hosting ongoing obstacles. However, our proactive approach to cost savings initiatives, we made pivotal and ensuring the continued success of our operations.

Alberto Reyes: However, our proactive approach to cost-saving initiatives remains pivotal in ensuring the continued success of our operation. Despite these challenges, we bolstered our resilience to endure inflationary pressures and exchange rate fluctuations more effectively this time around in response to the prevailing conditions and with full support from the communities and suppliers. We've successfully negotiated additional cost-saving measures. These measures have helped alleviate financial strain and position us for greater stability in the face of economic uncertainty. Production for Q4 reached 111,000 tons, but this figure is lower than Q3's achievement. Although mining generated 118,000 tons of coal, the processing plant faced a major change to the way we collect the water for the process. As of December, the PSS has been prepared for reclamation, and no longer serves as a vast water storage reservoir where reagents can dilute quickly. As such, the optimization of the different rotation circuits was temporarily destabilized, and a lower throughput was necessary to help keep consistency.

Despite the challenges with bolstered our resilience to inflationary pressures and exchange rate fluctuations more effectively this time around in response to the <unk>.

<unk> conditions and with full support from the communities and suppliers.

We successfully negotiated additional cost saving measures these measures.

How help alleviate financial strength and position us for greater stability in the face of economic uncertainties.

Production for Q4 reached operating 11000 pumps. This figure is lower than Q3's achievements, although mining generated 118000 tons. The processing plant based on major change to the way we collect the water for the process.

As of December the TSS is being prepared for reclamation.

And no longer serves as a boss water storage reservoir reagents can dilute quickly.

The optimization of the different floatation circuits was temporarily the stable Lux and our lower throughput what's necessary to help keep consistency.

Alberto Reyes: Processing operator on average of 1,380 pounds per day, and our 2024 targets have been adjusted to reflect the, I am pleased to report that we processed nearly 111,000 tons of ore, sold approximately 3,760 ounces of gold and 259,000 ounces of silver, equating to over 6,770 equivalent ounces. In addition, we sold 327 pounds of copper, approximately 820 pounds of lead, and more than 2,180 pounds of lead for the year. For the year today through December 31st, we processed nearly 460,000 tons of ore, sold approximately 18,500 ounces of gold and over 1 million ounces of silver, equating to over 31,000 gold equivalent ounces. We further sold over 1,230 tons of copper, currently 4,500 tons of lead, and close to 11,000 tons. Did GM's capital costs face difficult obstacles in 2023, including but not limited to maintaining cash cash flow Project HIRE NSR Scopes Beyond 2023. This adjustment was iterated numerous times to ensure optimal returns on investment.

Processing operated an average of <unk>.

1200, <unk> tons per day or two.

2024 targets have been adjusted to reflect the change.

I am pleased to report that we processed nearly 11000 tonnes of ore.

Sold approximately 3760 ounces of gold and 259000 ounces of silver.

Getting to over 6770 equivalent ounces.

In addition, we sold 327 tonnes of copper.

820 tons of lead and more than 2180 tonnes of zinc.

For the year.

For the year to date through December 31st.

We processed nearly 460000 tonnes of ore.

Sold approximately 18500 ounces of gold and over 1 million ounces of silver equating to over 91000 gold equivalent ounces with farmers sold over 1230 parcel of copper four.

<unk> 4500 console led and close to 11000 tons of zinc.

Turning to slide six.

Did the Gms capital cost faced difficult obstacles to in 2023, including but not limited to maintaining the cash.

Cash flow, well and producing more development.

Higher NSF scopes beyond 2023.

This adjustment was iterate it numerous times to ensure optimal returns on investment.

Alberto Reyes: The total underground development. Corps was approximately $860,000. $5.8 million for the year.

The total underground development for the quarter was approximately $860000 and $5 $8 million for the year.

Alberto Reyes: For the total sustaining capital amount, the company spent $1.6 million and approximately $11 million for the quarter and year. Promising near mine exploration results also influence capital growth expenditure. The team quickly shifted focus and prioritized the models to impact, the impact of the new results, and the science required in 2024 to align exploration and development efforts to the right targets. Despite modifications, Q4's total capital exploration investment came to $2.2 million and a total of $17.2 million for the entire year.

For the total sustaining capital amount the company spent $1 $6 million and approximately $11 million for the quarter and year respectively.

Promising near mine exploration results also influence capital growth expenditure the team quickly shifted focus and prioritize the models to impact.

The impact of the new results and science, requiring 'twenty 'twenty four to align exploration and development efforts to the right targets.

Despite modifications Q4 total capital exploration investment gains of $2 $2 million and a total of $17 $2 million for the entire year. This figure is within the range that was provided in guidance between 15 and $18 million.

Alberto Reyes: This figure is within the range that was provided in guidance between $15 and $18 million. In posting my update on operations, I'd like to acknowledge the resilience and determination of our team as we reflect on the challenges facing Q4 2023. Despite the obstacles, we remained firm and emerged stronger, demonstrating our ability to adapt and persevere in the face of adversity.

In closing my update on operations I would like to acknowledge.

Their resilience and determination of our team as we reflect on the challenges faced in Q4 2023.

By the obstacles, we remain firm in a much stronger demonstrating our ability to adapt and persevere in the face of a person looking ahead to 2024 and beyond.

Alberto Reyes: Looking ahead to 2024 and beyond, we have carefully accounted for the challenges that lie ahead in our strategic planning. We are confident that the measures we've implemented and the lessons we've learned will position us for success in the coming years. I'll now pass the presentation over to Chet to discuss financial resources. Thank you, Alberto.

Carefully accounted for the challenges that lie ahead of it.

In our strategic planning, we are confident that the measures we've implemented and the lessons we've learned will position us for success in the coming years.

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

Thank you Alberto.

Turning to slide seven during the fourth quarter, we realized a small decrease in our cash balance and we ended the quarter was $6 3 million.

Chet Holyoak: Turning to slide seven, during the fourth quarter, we realized a small decrease in our cash balance, and we ended the quarter with $6.3 million. The decline in cash is primarily due to increased cash costs at DDGM, which we will discuss in just a moment, and to our exploration program, as mentioned earlier by Allen. Cash used in operating activities was $5.2 million for the year and included over $4.5 million spent on exploration in Mexico and over $1.5 million spent in Michigan related to the BAC 40 studies. For the fourth quarter of 2023, we reported net losses of $3.1 million, or $0.03 per share, and for the full year, we reported net losses of $16 million, or $0.18 per share. For the quarter, net sales of $21 million were 35% lower than the same period in 2022, due mainly to lower volumes of all metals sold.

The decline in cash is primarily due to increased cash costs at <unk>, which we will discuss in just a moment to our exploration program as was mentioned earlier by Alan.

Cash used in operating activities was $5 $2 million for the year and includes over $4 $5 million spend on exploration in Mexico and over $1 5 million spent in Michigan related to the back 40 studies.

In the fourth quarter 2023, we reported net losses of $3 1 million or <unk> <unk> per share and for the full year, we reported net losses of $16 million or <unk> 18 per share.

For the quarter net sales of $21 million were 35% lower than the same period in 2022, due mainly to lower volumes of all metal sold.

Year to date net sales of $97 7 million were 30% lower than the same period. In 2022 also due to lower volumes of all metal sold and significantly lower zinc prices.

The lower zinc prices are also impacting cash cost per ounce, which we discussed on the next page.

While production costs for the quarter and year of approximately $17 million and $76 million, respectively are slightly lower than the prior year the significantly lower tonnes processed along with gold equivalent ounces sold resulted in an unfavorable impact on unit costs, such as cost per tonne processed and cost per gold equivalent ounce sold.

Chet Holyoak: Year to date net sales of $97.7 million were 30% lower than the same period in 2022, also due to lower volumes of all metals sold and significantly lower zinc prices. The lower zinc prices are also impacting cash costs per ounce, which we discuss on the next page. While production costs for the quarter and year of approximately $17 million and $76 million, respectively, are slightly lower than the prior year, the significantly lower tons processed along with gold equivalent ounces sold resulted in an unfavorable impact on unit costs, such as cost per ton processed and cost per gold equivalent ounce sold. We will discuss this a bit more on the next page. Depreciation for the period is largely in line with the depreciation for the same period in 2022.

We will discuss this in a bit more on the next page.

Depreciation for the period is largely in line with the depreciation for the same period in 2022.

Finally mining gross profit is lower in 2023, primarily due to the lower sales not being proportionally offset by lower production costs.

Turning to slide eight we will discuss cash costs for the quarter and year.

For the quarter, Don David Gold mines total cash cost after co product credits was $1397 per gold equivalent ounce and total all in sustaining cost per gold equivalent ounce sold was $1664 per ounce for.

For the year, Dan Davids Gold mines total cash cost after co product credits was $1250 per gold equivalent ounce sold and total all in sustaining cost per gold equivalent ounces sold was $1630 an ounce.

Chet Holyoak: Finally, mining gross profit is lower in 2023 primarily due to lower sales not being proportionally offset by lower production costs. Turning to slide eight, we will discuss cash costs for the quarter and year. For the quarter, Don David Gold Mines' total cash cost after coproduct credit was $1,397 per gold equivalent ounce, and total all-in sustaining costs per gold equivalent ounce sold was $1,664 per ounce. For the year, Don David Gold Mines' total cash costs after coproduct credits were $1,250 per gold equivalent ounce sold. And the total all-in sustaining costs per gold equivalent ounce sold was $1,630 an ounce.

There are five key drivers related to the increase in cash cost per gold equivalent ounce sold.

First the reduction in gold equivalent ounces sold second a reduction in co product credits.

The strengthening of the Mexican peso.

Fourth treatment charges and test other production cost increases such as power and transportation.

The gold equivalent ounces are lower due to the lower grade ore and lower recoveries realized both during the quarter and year to date.

The lower co product credits were the result of lower copper lead and zinc tons being sold as compared to the respective 2022 periods and the significantly lower realized metal price of zinc during the year.

The Mexican peso has strengthened against the U S. Dollar in 2023 with approximately 60% of our production and capital cost originating in the peso. This has resulted in a larger than planned unfavorable impact on our costs.

Chet Holyoak: There are five key drivers related to the increase in cash costs for gold equivalent ounces sold. The first is a reduction in gold equivalent ounces sold. Second, a reduction in co-product credit. Third, the strengthening of the Mexican peso. Fourth, treatment charges. And fifth, other production costs, such as power and transportation. The gold equivalent ounces are lower due to the lower grade ore and lower recoveries realized both during the quarter and year

All the above mentioned drivers have resulted in a negative impact we have made positive strides in managing the costs that we can control, resulting in a decrease in total cash cost after co product credits and total all in sustaining cost per gold equivalent ounce sold from quarter three to quarter for.

While the drivers above also resulted in the company missing guidance on several key performance measures, we were able to stay within or exceed guidance on other measures such as safety production mine development and exploration.

Chet Holyoak: The lower coproduct credits were the result of lower copper, lead, and zinc tons being sold as compared to the respective 2022 periods and the significantly lower realized metal price of zinc during the year. The Mexican peso strengthened against the US dollar in 2023. With approximately 60% of our production and capital costs originating in the peso, this has resulted in a larger-than-planned, unfavorable impact on our costs. While the above-mentioned drivers have resulted in a negative impact, we have made positive strides in managing the costs that we can control, resulting in a decrease in total cash costs after co-product credits and total all-in sustaining costs per gold While the drivers above also resulted in the company missing guidance on several key performance measures, we were able to stay within or exceed guidance on other measures, such as safety, production, mine development, and exploration. Allen, back to you. Thank you, Chuck.

Alan back to you.

Thank you Chuck.

<unk> share price along with most of our peer group continues to languish.

A producing mine in Mexico, and a project, having a $200 million NPV in Michigan.

Trading at prices that do not reflect the underlying value.

We are not getting any recognition for the intrinsic value of our assets.

Relatively strong balance sheet and excellent technical and operating teams.

The current environment.

Will persist for an indeterminate period of time and as previously announced the board of directors and management have engaged the services of core Mark Securities Inc.

Financial adviser to explore and evaluate strategic alternatives to unlock value for our shareholders.

There is no certainty around the outcome, but we are confident that the process is necessary to ensure that we are acting in the best interest of all stakeholders.

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

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.

You will hear three Tom prop acknowledging your request and your questions will be pulled in the order. They are risk team should you wish to the confidence pulling process. Please press star followed by the Q.

Allen Joseph Palmiere: Our share price, along with most of our peer group, continues to languish. A producing mine in Mexico and a project having a $200 million NPV in Michigan are trading at prices that do not reflect the underlying value. We are not getting any recognition for the intrinsic value of our assets, and relatively strong balance.

If you are using a speakerphone please lift the handset before pressing any keith.

Your first question comes from Heiko Ihle with H C. Wainwright. Please go ahead.

Hello, there thanks for taking my questions sorry, if there was some background noise on the road as you can probably hear.

Allen Joseph Palmiere: Excellent technical and operating skills. The current environment has and will persist for an indeterminate period of time, and as previously announced, the Board of Directors and Management have engaged the services of Coremark Securities, as a financial advisor, to explore and evaluate strategic alternatives to unlock value for our shareholders. There is no certainty around the outcome, but we are confident the process is necessary to ensure that we are acting in the best interests of all stakeholders.

During the year your exploration program actually went quite well looking ahead a little bit.

<unk> focus on Switchback list under three sisters.

Can you walk us through priorities by target for 2024, and maybe same question across your asset base.

Thank you Heiko.

I'm glad you could take the time to call in while you're on the road.

As you alluded to our exploration program last year.

Was very successful.

We have begun to develop an area of mineralization known as glory and the three sisters and to put it in context historically, we've mined two separate.

Operator: With that, I'll turn the call over to the operator for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the letter 'D'. If you are using a speakerphone, please lift the handset before pressing any key.

No.

Bidding swarms are reached.

Switchback they are separated by distance of about 500 meters.

The glory.

Three sisters mineralization is midway between the two so it's very close to existing infrastructure.

We were not able to incorporate <unk>.

Heiko Felix Ihle: Your first question comes from Heiko Ihle with HC Wainwright. Please go ahead. Hello, there.

Should that material into our SK <unk> hundreds.

Will it be filed in the next couple of weeks the update as of 12, 31, 2023, but since our cutoff for data on that S. K 1300 rehab of an additional six months of drilling.

Allen Joseph Palmiere: Thanks for taking my question. Sorry if there is some background noise on the road, as you can probably hear. During the year, your exploration program actually went quite well. Looking ahead a little bit, I mean, you focused on, you know, Switchback and the Three Sisters. Can you walk us through priorities by target for 2024 and maybe the same question across your asset base? Happy to hear from you, and I'm glad you could take the time to call in while you're on the road?

Yeah.

So that material the results of that drilling are leading us in a direction.

Whereby we will continue to focus on those.

Those targets being three sisters and Gloria.

The trend is to the northwest so we will be pushing out our drill stations as far as we can to extend the resource along strike.

Allen Joseph Palmiere: As you alluded to, our exploration program last year was very successful. We have begun to develop an area of mineralization known as Glory and the Three Sisters. And to put it in context, historically, we've mined two separate resources: Bane Swarms, Arista, and Switchback.

We continue to get.

Good results.

In both Florida, and the three sisters and more importantly, or equally as importantly, the thicknesses are such that it will allow for highly productive mining.

Allen Joseph Palmiere: They are separated by a distance of about 500 metres. The Gloria and Three Sisters mineralization is midway between the two, so it's very close to existing infrastructure. We were not able to incorporate much of that material into our SK-1300 that will be filed in the next couple of weeks as an update as of 12-31-2023. But since our cutoff for data on that SK-1300, we have an additional six months of drilling. That material, and the results of that drilling, are leading us in a direction whereby we will continue to focus on those targets, those targets being Three Sisters and Gloria. And the trend is to the northwest, so we will be pushing out our drill stations as far as we can to extend the resource along strike.

It does not.

These areas of mineralization are not currently included in the life of mine plan incorporated in SK 1300, because we just.

We're unable to.

Got sufficient information to enable us to included in the resource. However, I can say unequivocally that we will be in those zones within the next two years notwithstanding what the current life of mine plan States.

They're relatively high up.

They are very close to existing infrastructure.

Grades are good at as soon as we can develop sufficient.

Data to support detailed mining plans, we will be incorporating bosons ensure a revised life of mine plan and hopefully by the end of this year.

It is the future of the well.

David.

We're very optimistic that the drill results are going to continue to be encouraging.

Allen Joseph Palmiere: We continue to get good results in both Gloria and the three sisters, and more importantly, or equally as importantly, the thicknesses are such that they will allow for highly productive mining. These areas of mineralization are not currently included in the life of mine plan incorporated in the SK 1300 because we just were unable to get sufficient information to enable us to include it in the resource. However, I can say unequivocally that we will be in those zones within the next two years, notwithstanding what the current life of mine plan states. They're close; they're relatively high up.

So Don David is not all may blessed with a longer life, but higher grades going forward.

Let address with Tyco.

It does and you actually want us Horace to.

Sort of hinting at my next question here.

Building on that last question speaking of exploration your expectations right now or two to $3 5 million, that's on David and additional nine 700 to $900.

Thousands.

Michigan and microphone like a bit of an in house geologist right now, but I mean, assuming results continue to impress the way. They have is there room in the budget to raise those numbers a little bit.

Allen Joseph Palmiere: They are very close to existing infrastructure, the grades are good, and as soon as we can develop sufficient data to support detailed mining plans, we will be incorporating those zones into a revised life of mine plan, hopefully by the end of this year. It is the future of Don David, and we're very optimistic that the drill results are going to continue to be encouraging, so that Don David is not only blessed with a longer life but higher grades going forward. I'll address it, Heiko, and you actually went as far as to start hinting at my next question. Building on that last question, I mean, speaking of exploration, your expectations right now are $2 to $3.5 million for David, an additional $700,000 to $900,000. Michigan.

We're constrained right now by available cash.

Let me address it in a different way.

Michigan, we're not going to be doing any drilling.

The numbers for Michigan really our property maintenance.

And a little bit of technical work.

Every spare dollar we can.

To vote to exploration in Mexico, we will.

We are actually looking at potentially arranging a bit of a debt facility for a couple of reasons, one we'd like to update our mechanical our mining fleet with.

Two we'd like to spend a little bit more money on exploration in the first successful in arranging that debt facility.

Partial use of proceeds will be to increase our exploration budget.

Very much for the reasons that you just alluded to it is the future of the mine.

Allen Joseph Palmiere: I might sound like a bit of an in-house geologist right now, but I mean, assuming results continue to impress the way they have, is there room in the budget to raise those numbers a little bit? We're constrained right now by available cash. Let me address it in a different way. In Michigan, we're not going to be doing any drilling.

Fair enough all goals of $21 60, right now hopefully a couple of extra dollars can be sounds and with that I'll get back in queue. Thank you very much.

Thanks, Tycho appreciate that gold at 21 six years.

By any measure a wonderful price thats, obviously going to help our cash flow above and beyond what we budgeted. So if we get a corresponding break on liquidity. So we will be generating sufficient funds internally to expand that exploration program.

Allen Joseph Palmiere: The budgeted numbers for Michigan really are property maintenance, and a little bit of text: every spare dollar we can devote to exploration in Mexico, we will. We are actually looking at potentially arranging a bit of a debt facility for a couple of reasons. One, we'd like to update our mining fleet, but two, we'd like to spend a little bit more money on exploration. And if we're successful in arranging that debt facility, a partial use of the proceeds will be to increase our exploration budget, very much for the reasons that you just alluded to.

Operator.

Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the one.

Your next question comes from Jake to lap the Koski with Allied Globe Global Partners. Please go ahead.

Hey, Alan and team thanks for taking my questions.

Good morning, Jay how are you doing.

Good. Thank you so just starting with costs.

I mentioned, obviously the strength of the peso had an impact last year.

Allen Joseph Palmiere: Fair enough. Well, gold's at $21.60 right now. Hopefully, a couple of extra dollars can be found, and with that, I'll get back to you.

And just looking at your cost guide for this year.

Can you remind us what FX rate are you assuming in that guide and I guess, how exposed are you to both further strength or.

Heiko Felix Ihle: Thank you very much. Thank you, I appreciate it. Gold at 2160 is, by any measure, a wonderful price, and it's obviously going to help our cash flow above and beyond what we had budgeted. So if we get a corresponding break on the pace, we will be generating sufficient funds internally to expand that exploration program. Operator.

Or even weakness in the peso going forward.

Chuck do you want to take this one.

Yeah.

Currently in the budget that we're using we're using exchange.

Exchange rate of 17.1.

We are closely monitoring.

The movement in the peso as I mentioned, we are 60% of our production capital costs in Mexico.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star followed by 1. Your next question comes from Jake Sekelsky with Allied Global Partners. Please go ahead. Hey, Allen and team, thanks for taking my question. Morning, Jake. How are you doing?

Art and the Mexican peso, so there is quite a bit of exposure there.

Yes.

What's the impact.

Yeah.

100 basis point move in the peso on our cash flow.

I will get you that number just one second.

I just wanted to elaborate a little bit Jake.

The peso right now it's at about $16 <unk>.

As Chuck indicated we bunch of $17 one.

Jacob G. Sekelsky: Good, thank you. So just starting with costs, I mean, I think you just mentioned that obviously, the strength of the peso had an impact last year. And just looking at your cost guide for this year, can you remind us what FX rate you are assuming in that guide? And I guess how exposed are you to both further strength or even weakness in the peso going forward? Chet, do you want to take this one?

Okay.

The peso was being held up primarily by the carry trade.

Crime rates in Mexico was north of 11% the U S. It's 5%.

Dollars slow the higher interest rate environments, there is an expectation in Mexico.

The Central Bank will start easing the interest rate potentially as soon as this month.

<unk>.

People, who.

Our first smarter than I am.

Chet Holyoak: Yeah. Currently, in the budget that we're using, we're using an exchange rate of 17.1. We are closely monitoring, you know, the movement in the peso. As I mentioned, 60% of our production capital costs in Mexico are in the Mexican peso, so there is quite a bit of exposure there. What's the impact of a 100 basis point move on the peso on our cash flow? I will get you that number in just one second. I just want to elaborate a little bit, Jake. The peso right now is at about 16.8.

Kind of lead us to believe that once the <unk>.

The Mexican Central Bank starts easing off on.

The interest rate the carry trade will start to unwind and the peso will.

Brand towards a more real.

The trend towards a value based on economic fundamentals as opposed to rates.

The expectation is that it'll be 18 to.

In 19 to one by the end of the year.

Okay.

And Alan I can just add that if the peso were to go from our budget of $17 five up to $18 five that has about a $2 million.

Impact.

So there's a high degree of sensitivity Jacob.

Chet Holyoak: As Chet indicated, we budgeted $17.1. The peso is being held up primarily by the carry trade. Prime Ridge in Mexico is north of 11%, and the U.S. at 5%. Dollars flow to higher interest rate environments. There is an expectation in Mexico that the central bank will start easing the interest rate potentially as soon as this month, and the people who are far smarter than I am have led us to believe that once the Mexican Central Bank starts easing off on the interest rate, the carry trade will start to unwind, and the peso will..., trend towards a value that's based on economic fundamentals as opposed to bank rates.

Okay. That's helpful. That's helpful.

And then just switching to exploration.

Obviously, you announced some pretty strong results in December last year, it sounds like that drilling didnt make it into the updated resource so.

I guess do you feel you need to bring Gloria and the three sisters into a particular resource category before.

Bringing them into the mine plan going forward or.

Do you think internally you can you can get to a level of comfort.

To start accessing that material over the next year or two as you mentioned.

I'd like to ask question, because what it doesn't reflect the operational reality as opposed to trying to work within the constraints of the necessary <unk> hundreds.

Chet Holyoak: The expectation is that it'll be 18 and a half to 19 to one by the end of the year. Allen, I can just add that if the peso were to go from our budget of $17.5 up to $18.5, it would have about a $2 million impact. So there's a higher degree of sensitivity.

We are we already have developed some.

The term as DSO does look stope optimizer. So we're already looking at developing mine plans for some of that material.

Chet Holyoak: Yeah, that's helpful. And then just switching to exploration, you know, obviously, you announced some pretty strong results in December last year. But it sounds like that drilling didn't make it into the updated resource.

We drill it off hopefully by the end of the year, we will be able to incorporate.

Some of that material into the mine plan for.

2025, we won't get there this year, we need more information, but 1% to 25, I think letters to very good chance that we will be incorporating some of that material into.

Jacob G. Sekelsky: So, I guess, do you feel you need to bring Gloria and the Three Sisters into a particular resource category before bringing them into the mine plan going forward? Or, you know, do you think internally you can get to a level of comfort to start accessing that material over the next year or two, as you mentioned? I like that question, Jake, because it does reflect the operational reality as opposed to trying to work within the constraints of an SKA 1300. We are, we already have developed some. The term is DSO, it's a Desert Stope Optimizer, so we're already looking at developing mine plans for some of that material. As we drill it off, hopefully by the end of the year, we will be able to incorporate some of that material into the master plan for 2025. We won't get there this year.

The 2025 mine plan as well as the life of mine plan.

Got it okay perfect. That's all from me Thanks again.

Thanks Jake.

Your next question comes from Ron Gold with Heart Ethnie Hardt. Please go ahead.

Hi, how are you I was just wondering last time, you mentioned that you would not reverse split as we know whats the kiss of death from any stock however at the price of 38.

How do you propose to <unk>.

The extension in order to maintain.

Being on the NYSE.

While we're on the right.

Yes.

<unk> America.

To date, we've had no communication from the exchange of Boe.

The.

Problem with our pricing.

Allen Joseph Palmiere: We need more information, but in 2025, I think there's a very good chance that we will be incorporating some of that material into the 2025 Mine Plan, as well as the LIFO Mine Plan. Got it. Okay, perfect. That's all for me. Thanks again.

I will point out that were up 25% in the last five days and that is largely thanks to gold price.

And the other factor to keep in mind.

We do have.

A strategic process underway.

Scott.

Yes.

While I don't want to prejudge the outcome.

Jacob G. Sekelsky: Thanks, Jake. Your next question comes from Ron Gold with Heart of New York. Please go ahead. Hi, how are you?

Could involve a.

Merger of some sort that could involve a outright sale of the company. It could result in almost any type.

Ron Gold: I was just wondering last time you mentioned that you would not do a reverse split, as we know, it's a kiss of death on any stock. However, at the price of $38,000, Cents. How do you propose? to get the extension in order to maintain being on the NYSC. Well, we're on... MISC American.

Business combination.

And the option itself, we would hope woods.

Good.

Fair amount of support to our stock price and address the issues raised strong currently we don't have any plans and we haven't had any correspondence with the exchange.

Allen Joseph Palmiere: And to date, we've had no communication from the exchange about any problems with our price. I will point out that we're up 25% in the last five days, and that is largely thanks to the gold price. And the other fact to keep in mind is we do have a strategic process underway, that process, while I don't want to prejudge the outcome, could involve a merger of some sort. It could involve an outright sale of the company, or it could result in almost any type of business combination.

Alright understood the exchange would not notify a while until the year expires. So I would assume by about next month or so they will notify you of a delisting unless you.

You might be able to go through an extension I'm not sure how that works.

Would you what would you do at that point.

If you did not.

Achieve and incorporating what you just stated what would you do with that point could you go for an extension.

Would you continue.

Allen Joseph Palmiere: And that, in itself, we would hope, would... give a fair amount of support to our stock price and address the issue that you've raised Ron. Currently, we don't have any plans, and we haven't had any correspondence with the exchange. Right, understood. The exchange will not notify you until the year expires. So I would assume by about the next month or so, they'll notify you of the listing unless you, you might be able to go for an extension.

Just to delist the stock to a different outcome.

First alternative that's available to us would obviously, obviously beach who.

And an extension.

And you.

Can you get an extension.

Can't answer off the top of my head.

Not.

Typically explored with legal counsel.

I'm sorry, but.

I will attempt to find out and revert to you revert back to.

Great Okay, what's the second.

Sorry, first what you.

He said Thats the first what's the second.

Ron Gold: I'm not sure how that works. What would you do at that point? If you did not, achieve in incorporating what you just stated?

That's assuming we are not involved in a transaction.

We don't have any other alternatives. So it's status quo in the exchange.

Allen Joseph Palmiere: What would you do at that point? Could you go for an extension, or would you continue just to delist the stock for a different outcome? The first alternative that's available to us would obviously, obviously be to obtain an extension. Can you get an extension?

<unk> said they wanted to GE list, we would look at an alternative.

Creating platform at a different exchange.

Alright, So you would not do a reverse split which was destroyed.

Everything that you have so you wouldn't even consider it.

Okay.

No I am very uncomfortable.

But certainly I'm very uncomfortable with the reverse split.

Ron Gold: I can't answer that off the top of my head. I have not specifically explored that with legal counsel, so I'm sorry, but I will attempt to find out and revert back to you. Great. Okay, what's the second? That's the first. He said that was the first. What's the second?

They.

Yet to see one that does anything other than destroy value.

Exactly.

Okay. Thank you very much.

That would not be.

I'm speaking here without having board approval, but I.

I'm quite confident that the board would agree with me and it's not a solution that we would want to pursue.

Allen Joseph Palmiere: Oh, that's that. That's assuming we are not involved in a transaction, and we don't have any other alternatives. So it's status quo, and the exchange came to us and said they wanted to delist. We would look at an alternative, creating Platform, a different exchange. Right, so you would not do a reverse split, which would destroy everything that you have. No, I am very uncomfortable, and I mentioned this earlier. I'm very uncomfortable with the reverb, because I've yet to see one that does anything other than destroy value.

Great. Okay wishing you good luck hope things turn out the right way nice talking thank you. Thank you I appreciate it.

My pleasure.

There are no further questions at this time I will now turn the call over to Alan Palmer. Please go ahead.

Thank you operator, and thank you all for participating in our ended the year in Q4 conference call.

The world can change very quickly in the mining industry as evidenced by the fact that we are now seeing gold prices.

Our setting all time.

Our stock is beginning to respond to the higher price of gold, we do have the strategic initiative underway too.

Allen Joseph Palmiere: Exact. Okay, thank you very much. That would not be...

Ron Gold: I'm speaking here without having board approval of it, but I am quite confident that the board would agree with me and that it's not a solution that we would want to pursue. Great. Okay. Wishing you good luck. Hope things turn out the right way.

Identify a mechanism by which we can improve or increase shareholder value.

We're very aware of the problem of a single mine asset.

Okay.

In order to.

Create value, we would like to see a merger or a transaction whereby.

Ron Gold: It's nice talking to you. Thank you. Thank you. I appreciate it. Project

There were.

Two or three operating entities within the corporate umbrella.

Operator: There are no further questions at this time. I will now turn the call over to Allen Palmiere. Please go ahead.

While that might not be the final stage it would certainly get us well north of 100000 ounces.

Allen Joseph Palmiere: Thank you, operator. And thank you all for participating in our end of year Q4 conference call. You know, the world can change very quickly in the mining industry, as evidenced by the fact that we are now seeing gold prices that are setting new records. Our stock is beginning to respond to the higher price of gold. We do have a strategic initiative underway to identify a mechanism by which we can improve or increase shareholder value. We're very aware of the problem of a single mine asset, and in order to create value, we would like to see a merger or a transaction whereby there were two or three operating entities within the corporate umbrella. While that might not be the final stage, it would certainly get us well north of 100,000 ounces.

It would be a big step along the way to achieving the size necessary to enable us to start gaining some attention in the marketplace.

Again I. Thank you all for participating.

We'll be talking relatively soon when we have our.

First quarter of 2024 conference call.

Thank you very much and back to you operator.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating.

Thank you. Please disconnect your line.

[music].

Sure.

[music].

Operator: And it would be a big step along the way to achieving the size necessary to enable us to start gaining some attention in the marketplace. Again, I thank you all for participating, and we will be talking relatively soon when we have our first quarter of 2024 conference. Thank you very much, and back to you, operator. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.

Sure.