Full Year 2024 Gold Resource Corp Earnings Call

John Bair, Heiko Ihle, Jacob Sekelsky,

Speaker Change: Good afternoon ladies and gentlemen and welcome to the Gold Resource Year and 2024 earnings call.

At this time, online Journalism Only Mode.

Speaker Change: Following the presentation, we welcome back a question and answer session.

Speaker Change: If at any time during this call you require immediate assistance, please press the store 0 for the operator. This call is being recorded on Wednesday, April 9, 2025. I would now like to turn the conference over to Chet Holyoak, please go ahead.

Chet Holyoak: Thank you, Ludi, and good morning to everyone. On behalf of the Gold Resource Team, I would like to welcome you to our conference call covering our year in 2024 results. Before we begin the call, there are a couple housekeeping matters I would like to address.

Chet Holyoak: 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 10K and other SEC filings.

Speaker Change: Joining me in the call today is Allen Palmiere, our President and CEO and Alberto Reyes, our Chief Operating Officer.

Chet Holyoak: Following our prepared remarks, we will be available to answer questions.

Chet Holyoak: This conference call is being webcast and will be available for replay on our website later today.

Alan Palmiere: Yesterday's news release that was issued following the close of the market and the accompanying form 10K have been filed with the SEC on Edgar and are also available on our website at www.goldresourcecork.com. I will now turn the call over to Allen.

Alan Palmiere: Thank you, Chet, and good morning, everyone. I'd like to thank you all for joining our year-end conference call. I would like to address a few points first, and then Alberto will address operations followed by Chet addressing the financials.

Alan Palmiere: Following their remarks, I will then make a few closing comments and we will take questions.

2024, unfortunately, was a perfect storm for us.

Alan Palmiere: Back-to-back hurricanes, political road blockades, low-grade ore, extremely low equipment availability and limited working-paces, all contributed to the core performance.

Alan Palmiere: While difficult, it wasn't expected, and we managed our cash position diligently.

How did we get here?

Alan Palmiere: Three years ago, we realized that we were facing two significant challenges.

Alan Palmiere: Our equipment fleet was wearing out and productivity was suffering accordingly, and our reserves and resources are declined to the point where we couldn't justify the capital to upgrade the fleet.

Alan Palmiere: We decided to focus all available capital and direct exploration to increase the quality and quantity of the reserves.

Alan Palmiere: Fortunately, we were successful and discovered a new system that we now call the three sisters.

Alan Palmiere: This new system is relatively close to surface and close to the mine entrance, which should result in lower mining cost. The higher grade and good widths that are projected will permit efficient mining and produce good value.

Going forward, how do we resolve the existing problems?

The solution has a number of components.

Alan Palmiere: Low grade isn't something we can change, but the current results we are seeing from the tree sister system.

Alan Palmiere: that's significantly higher grade than the other areas of the mind.

Alan Palmiere: and since it has located higher in the geological column contains higher levels of gold and in particular silver which is projected to improve the great issue that we have dealt with and continue to deal with.

Alan Palmiere: We are currently negotiating with a contractor to develop and produce from the three sisters.

This will do two things.

Alan Palmiere: To ensure the productivity we need in terms of development and production in the three sisters and pre-op our team and equipment to do the necessary development and maintain the necessary production from the other two areas of the mind.

Alan Palmiere: Effectively, we would be accepting somewhat higher variable costs, which we expect will be offset by higher volume, to mitigate risk and ensure we achieve our plans.

Alan Palmiere: We have identified and are currently negotiating the purchase of a mining fleet that while used was only operated for a couple of years in a very good condition.

Alan Palmiere: This is projected to address our mechanical availability and allow us to improve our productivity.

Alan Palmiere: We are looking to secure a third filter for a tailing filter plant and thereby eliminate the constraint on male throughput.

Alan Palmiere: The additional filters projected to, once again, are increased their daily production initially to 1,300 tons a day and thereafter to 1,500 tons a day.

Alan Palmiere: As close to 50% of our costs are fixed, increased volume will have a significant impact on crop of the quality.

Alan Palmiere: to help us with these improvements. We are currently evaluating several sources of funding to enable the implementation and execution of our plan.

Alan Palmiere: This is what we plan to do to turn around performance.

Alan Palmiere: All of it is planned, all of it is controllable and we are confident in our ability to execute.

It will take time.

We are planning on mobilize the contractor in Q2.

Alan Palmiere: The new equipment is projected to be on-site and working in Q3, and our objective is to be cash positive again by the end of Q3.

Alan Palmiere: I will now turn the call over to Alberto for an update on the operation. Alberto?

Thank you, Allen. Hello and good morning to everyone.

Alan Palmiere: A company celebrated a significant milestone of one year without a lost time injury. This accomplishment reflects the collective commitment to maintaining a safe and secure workplace.

Alan Palmiere: As mentioned by Allen, the operations experience, a challenging year, has it that was lower minus flexibility, equipment constraints, and lower great towards the extremities of quarries to enswitch back.

Alan Palmiere: To help mitigate or personal challenges in mining, the team made significant improvements to

Alan Palmiere: The efforts have resulted in narrow-winged long-haul mining, maintaining a dilution rate less than 10 percent.

Alan Palmiere: This improvement reduces mining costs and helps maintain better quality material to pass into the process and clamped.

Alan Palmiere: In addition, the processing plant improvements include reducing filter-perfecting times, minimizing grinding immediate consumption, and increasing the solid percentage to tails.

Alan Palmiere: With the pre-cister zone, now formally incorporated into the mind line,

Alan Palmiere: The team implemented key improvements that will allow commercial production to be reached months earlier than originally projected.

Alan Palmiere: This high grade deposit is a game changer for DDGN, offering improved productivity because of high built and wider mineralized zones.

Alan Palmiere: Reduce development cost and time, thanks to its proximity to surface and existing infrastructure, enhance operational flexibility, offer an alternative to the overall mining sequence.

Alan Palmiere: Multiple acts of development to the three sisters began in Q4. The ORBODY was successful and intersected in Q1 2025, confirming thickness and grades.

Alan Palmiere: The project is advancing well, and the development rates are expected to increase the arrival of the contractor.

Alan Palmiere: As Risk Mitigation, the use of a contractor offers a balance production set strategy, minimizing potential bottlenecks.

Chet Holyoak: I'll now pass the presentation over to Chet to discuss financial results [inaudible]

Chet Holyoak: Thank you Alberto. As has been discussed already and as you can see when reading our current Forum 10K 2024 was a difficult year with many challenges. I do not want to rehash all the information in the filed report but there are a couple of points that I'd like to make.

Chet Holyoak: The largest issue that needs to be addressed is the restatement of the back-40 project that gold and silver stream liabilities.

Chet Holyoak: It was discovered that the model that was carried over from the Akila acquisition and that had been used to date had an error in the application of US generally accepted accounting principles relating to the streaming liabilities and in the calculation of interest and repayments.

Chet Holyoak: The error resulted in the company understating the streaming liability in that loss.

Chet Holyoak: affects the forms 10Q4 2023 and 2024 and the form 10K for 2023. The error has been corrected and the company is in the process of implementing remediation plans to address the material weakness and controls.

Chet Holyoak: While the error was considered material, it did not apply to the company's mining operations in Mexico, nor did it affect the company's cash position.

Chet Holyoak: For cash management for the year, the company did a better job of managing cash than the shone in the statement of operations. During the year, our cash balance decreased by 4.7 million dollars.

Chet Holyoak: Included in this decrease was $2 million spent on exploration at the dawn of it, David Goldmine.

Chet Holyoak: A half million dollar spent on maintaining the back 40 project and $4.3 million spent on overhead general and administration costs. The main reason for pointing this out is that even with the much lower production from the mine, the mine was still able to cover the cost of operations.

Allen, that's you.

Alan Palmiere: Thank you, Chuck. I would like to thank you all again for joining the call and for your continued support through the difficult times that we've experienced. The good news is we have a path forward all of this plan.

Alan Palmiere: All of it is controllable, and we are confident in our ability to execute. They will take time, but with the development of the three sisters area, new equipment and continued exploration success, the Don David Mine will once again be a significant cash generator.

Speaker Change: With that, I can go to turn the call over to the Operator for questions.

Speaker Change: Thank you. We will now begin the question and answer session. If you do wish to ask an audio question, please press the star 1 on your telephone keypad. If you would like to withdraw your question, you may do so by pressing star 2 to cancel. Once again, please press the star 1 to register for a question. One moment please for your first question.

Jake Zichalski: And our first question comes from the line of Jake Sekelsky with Alliance Global Partners. Please go ahead.

Thai Allen team, thanks for taking my questions.

Morning, Jake.

Jake Zichalski: So, just looking at the three sisters system in the contractor that's arriving on site this quarter, can you provide any color on sort of the cadence of development there and when you expect to reach first or in a best case scenario?

Jake Zichalski: The First Bane Structure, about a month ago now, and we're currently drifting along strike and getting limited amounts, but we're getting some ore out of the three sisters as we speak.

Jake Zichalski: It's going to be sporadic at first because we have to develop the ramp up and down to develop additional levels, but we are in fact going to be getting some or release.

by the end of the year.

Jake Zichalski: The three sisters is generating a significant percentage of the ore and feed to the male and our objective would be by January or February of next year to be back up to 1500 tons a day.

Jake Zichalski: Over half of which will be out of the three sisters.

Jake Zichalski: I'm just going to elaborate a little bit more, Jake, because I think it's to remain. We, when we first intersected the vein.

Jake Zichalski: We actually did a channel sample. Now I don't like channel samples particularly, but the channel sample was one well done, it was cut.

Jake Zichalski: full way across the vein. And what it disclosed was higher grade than we were anticipating.

Jake Zichalski: The thickness was greater and the grades were significantly higher than put it in context. The NSR value of the channel jumped over slightly in excess of a thousand dollars a ton.

Jake Zichalski: I am not going to tell you that's represented of the three sisters.

Jake Zichalski: But what it does do is lead credence to our interpretation whereby we believe tree sisters will be well in excess of $200 NSR on a sustained basis, so we're very encouraged with our result.

Okay, that's helpful and a good surprise in that sense.

Speaker Change: In staying with the development work, you have to break down the 8 million in development capital that you mentioned just from a timing perspective over the next, I guess, call it two to three quarters.

It's going to be heavily weighted towards Q2 and Q3.

Speaker Change: Development is going to be well in excess of $20 million for the year, but...

Speaker Change: The impact is going to be felt most in Q2 and Q3. The reason for that is the contractor will be mobilized and will be focusing on development without getting much in the way of order release initially.

Jake Zichalski: Later on in the year or release of the three sisters picks up and while the development continues apace, the cash flow will be more than sufficient to compensate for that. Does that address your question, Jake?

Jake Zichalski: It does. I appreciate it. It's all from my class again.

Thanks, Jake.

Speaker Change: And here, next question comes from the line of Heiko Ihle, which H. C. Wing right piece

Heiko Ile: Hello, Allen team. Thanks for taking my questions and apologies for the background noise on that the airport as you can probably hear. Yeah, great. Welcome to Real Life. I'm excited about all the progress you have with the I-Great-3 sisters vein system. You mentioned some active ways to reduce costs and improve timing on this call earlier in the prepared remarks. Just in general, can you just provide a little bit of added color on what we should expect to see do.

Bair over the next six, nine months, so that may be even some water term ideas.

Absolutely up.

Speaker Change: What I alluded to was the fact that we are bringing in a contractor to focus on the tree

Speaker Change: Intuitively, they're going to be higher than we would be able to achieve ourselves. However,

About 50% of our coughs are fixed.

So the cure for fixed cost is higher volume.

Speaker Change: The contractor, we are very confident, will be able to increase our volume and by the end of the year or by the end of Q1 of next year we'll be back up to 1500 tons a day.

A significant reduction in our unit cost.

Speaker Change: for tongue, mind and processed, and it's strictly a function of fixed cost absorption.

Speaker Change: That's where we're going to see a big component, the other components.

Speaker Change: I indicated that we were in the process of acquiring a new mining fleet.

Speaker Change: One of our biggest variable costs has been an attempt to maintain mechanical availability on our existing fleet, and that has proven to be extremely expensive.

by having a fleet with minimal hours on it.

Speaker Change: We anticipate that the repair and maintenance costs will go down. Mechanical availability will increase and our productivity will increase, all of which will result in lower unit cost per tonne mined and milled.

Speaker Change: I'll give you a bit of a feel for Heiko.

Michael: Yeah, that's a very comprehensive answer. Thank you very much. Two things just to clarify that sleep you're looking to buy. Is that already in Mexico given you know daily changes and tariffs and just general things that are going on here politically right now and just maybe. Thank you.

Please go ahead.

Michael: And then maybe just an idea of what exactly is included in that fleet in the price.

Michael: Absolutely. No, the equipment is actually located in Canada, which provides

Michael: in a normal world that's easy to transport from Canada to Mexico.

But, givenly, [inaudible]

Michael: Volatility around tariffs and with the best of intentions we have concerns about.

U.S. Customs and Mexican Customs.

Not knowing how to respond to tariffs and transchipping me

Speaker Change: May create problems. We're evaluating alternatives up to and including putting on vote and shipping it from...

Michael: Canada to Mexico and thus avoiding boats at both borders. And it's really in response to uncertainty.

Michael: We want to minimize the risk of this equipment being held up or whatever reason, and that's why we're looking at potentially ocean prey.

They're included in there are-

Three rock bolters, a re-bolter. There are three jumbos.

There are five scoops.

Three low-profile trucks.

Michael: and I think that's most of the fleet, but in effect it's a complete mining fleet for a mine of a boat.

Michael: It was originally scopes for 1,800-ton per day mine, so it really is one stop.

Michael: I'll give you, you know, because it is used we're getting a significant reduction from new price.

Michael: Minimizes our impact on cash flow and with the equipment purchased we're also getting

Unqualified, but significant.

Spare Parks

Michael: for all of the equipment. And I say it's unquodified because it's been purchased from a distraught situation.

Michael: and basically we've got a couple of containers of parts and we're not 100% sure what we've got but we know it's significant value potentially as much as a million dollars and most containers.

Heiko Ile: Has that addressed the question, Heiko? Given the uncertainty around, you know, the tariff situation and the volatility.

We would like to try and avoid.

Heiko Ile: Any potential exposure? It may not be possible, but to the extent possible we just want to avoid it.

Heiko Ile: You know, a long-term, it'll settle out, but it's just, I feel sorry for the customs people.

Heiko Ile: on every border in every country right now, because I'm not sure if they know what's hit them.

Heiko Ile: That's a fair answer. Thank you very much. I'll get back in cute.

Thanks, Michael.

Speaker Change: And once again, if you would like to add some questions, you can press the Storm 1 on your telephone keypad.

Speaker Change: Your next question comes from the line of Heinrich Hebefischmann with Dankor Dutch V-Squad.

Hi, good morning, Allen. Hope you're doing well today, sir.

Good morning and good to hear from you.

Speaker Change: Quick question for you, sir. In the 10K, I saw you're depended upon three buyers of the product. Are any of those buyers located in Asia?

No.

Okay, they are not, are by, just, you know, provide clarity.

We sell concentrates and typically we sell concentrates either to...

Speaker Change: Historically, we sold it to a Mexican company that had their own smelter. Currently, we are selling to international trading houses and none of them are located in Asia. They're all

Speaker Change: Okay, another quick question. I see there's been basically no insider buying from executives for quite a while. I was just wondering if you guys are buying personally and you don't have confidence in buying the stock, what would you say to us as shareholders to encourage us to buy the stock?

Speaker Change: Watch the performance. We are in a position, the stock is lost 95% of its value.

Speaker Change: And I've articulated the reasons for that. I'm not saying it's I'm happy about it. I will tell you personally that I'm underwater in excessive $2 million in that time frame. So your pain is shared. The reality is...

Speaker Change: The situation, unfortunately, is something we inherited and we've been working very hard to remedy.

Speaker Change: I believe that we now have a path forward with the discovery of its resistors to return the mind to the proper ability that we've enjoyed in the past and I hope.

Speaker Change: Hopefully can reward those shareholders that have suffered along with us.

Ciao!

Speaker Change: In terms of insider buying, we have effectively been blackouts for...

about six months.

You'll recall, or you may recall, that...

Speaker Change: We had to issue a press release in November of last year citing potential liquidity challenges and the implications if we weren't able to remedy them.

Speaker Change: We have been in blackout ever since that because we're looking at

Speaker Change: A number of funding opportunities and while we're in that process, it's just not approach, you know, me jumping into the market and buying at $0.12, knowing where I'm trying to take the company is insider trading, can't do it.

Ascending Stabilize

Keep watching the trading. That's all I can tell you.

Speaker Change: Okay, sounds good. I was also wondering if the compensation packages for executives is based upon performance. Is that something that Board of Directors overseas?

Speaker Change: There are two elements of executive compensation that is high to performance, short-term and long-term incentives.

Speaker Change: I will tell you, the last year and this 2023 and 2024, there have been no awards. There were a modest LTI awards in 2023.

2024-0, both short-term and long-term.

Speaker Change: Well, I'm sure you appreciate your time, Allen, and I wish you guys the best today, and thank you for asking me my questions. I hope you have a wonderful afternoon, sir.

Speaker Change: I appreciate your questions and please come back when we do Q1 and hopefully we'll be able to provide you with additional color.

Sounds good.

Thank you.

Speaker Change: and I'm showing no further questions at this time. I would like to turn the call back to Mr. Allen Palmiere for closing remarks.

Alan Palmiere: Thank you, operator. I would like to thank everybody for participating. This has been...

Alan Palmiere: A very unpleasant period of time for the entire operating team, and I would like to amend the operating team for the effort put in to...

Alan Palmiere: Keep the mind afloat, and now to be in a position to turn the mind around and restore it to where it has been historically.

They've gone above and beyond.

Alan Palmiere: Shareholders, I appreciate your forbearance. I know that everybody is underwater. I've shared that pain, but I am very comfortable with what we have in place.

Alan Palmiere: to execute on a go-forward basis and restore value for their holders. And I assure you that is our entire focus.

Operator

Alan Palmiere: That concludes my remarks. Thank you once again for everyone and we will talk soon for the Q1 conference call.

Speaker Change: Thank you, presenters and ladies and gentlemen, this now concludes our presentation. Thank you all for attending. You may now, disconnect.