Gold Resource (GORO) - 2019 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, highlighting a significant Q1 2019 decrease in net income and a shift to net cash used in operating activities Condensed Consolidated Balance Sheets | Metric | March 31, 2019 (Unaudited, in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :------------------------------- | :-------------------- | | Total Assets | $181,163 | $150,331 | $30,832 | | Total Liabilities | $41,989 | $23,069 | $18,920 | | Total Shareholders' Equity | $139,174 | $127,262 | $11,912 | | Cash and cash equivalents | $8,527 | $7,762 | $765 | | Inventories, net | $20,464 | $14,342 | $6,122 | | Property, plant and mine development, net | $119,617 | $111,242 | $8,375 | | Operating lease assets, net | $12,681 | $- | $12,681 | | Operating lease liabilities, current | $7,868 | $- | $7,868 | | Operating lease liabilities, long-term | $4,816 | $- | $4,816 | Condensed Consolidated Statements of Operations | Metric | Three months ended March 31, 2019 (Unaudited, in thousands) | Three months ended March 31, 2018 (Unaudited, in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | :------- | | Sales, net | $26,578 | $32,151 | $(5,573) | -17.3% | | Mine gross profit | $5,439 | $12,920 | $(7,481) | -57.9% | | Income before income taxes | $1,953 | $9,103 | $(7,150) | -78.5% | | Net income | $882 | $5,457 | $(4,575) | -83.8% | | Basic Net income per common share | $0.01 | $0.10 | $(0.09) | -90.0% | | Diluted Net income per common share | $0.01 | $0.09 | $(0.08) | -88.9% | Condensed Consolidated Statements of Changes in Shareholders' Equity | Metric | March 31, 2019 (Unaudited, in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :------------------------------- | :-------------------- | | Total Shareholders' Equity | $139,174 | $127,262 | $11,912 | | Common Stock (shares outstanding) | 61,833,211 | 59,186,829 | 2,646,382 | | Additional Paid-in Capital | $132,903 | $121,592 | $11,311 | | Retained Earnings | $13,231 | $12,656 | $575 | - Issuance of stock, net of issuance costs, contributed $10.9 million to shareholders' equity in Q1 2019[12] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change (in thousands) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Net cash (used in) provided by operating activities | $(648) | $13,958 | $(14,606) | | Net cash used in investing activities | $(8,785) | $(7,330) | $(1,455) | | Net cash provided by (used in) financing activities | $10,313 | $(274) | $10,587 | | Net increase in cash and cash equivalents | $765 | $6,227 | $(5,462) | | Cash and cash equivalents at end of period | $8,527 | $28,617 | $(20,090) | - Proceeds from at-the-market sales contributed $10.8 million in Q1 2019, significantly boosting financing cash flows[15] Notes to Condensed Consolidated Financial Statements 1. Basis of Preparation of Financial Statements - Interim financial statements are unaudited and prepared per SEC rules, with condensed U.S. GAAP disclosures[17] - Results reported are not necessarily indicative of the full year[17] 2. Recent Accounting Pronouncements - Adopted ASU 2016-02 (Leases Topic 842) effective January 1, 2019, recognizing $14.2 million in ROU assets and operating lease liabilities[18][19][40] - The new lease standard had a material impact on consolidated balance sheets but not on consolidated statements of operations or cash flows[20][132] - ASU 2018-07 (Stock Compensation) and ASU 2018-09 (Codification Improvements) are not expected to have a material impact[22][23] 3. Revenue | Revenue Source | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Total doré sales, net | $2,045 | $2,181 | $(136) | -6.2% | | Total concentrate sales, net | $22,696 | $29,399 | $(6,703) | -22.8% | | Realized/unrealized embedded derivative, net | $1,837 | $571 | $1,266 | 221.7% | | Total sales, net | $26,578 | $32,151 | $(5,573) | -17.3% | - Base metal prices decreased YoY: copper by 12% to $6,291/tonne, lead by 20% to $2,063/tonne, and zinc by 25% to $2,856/tonne[93] 4. Gold and Silver Rounds/Bullion - Gold and silver bullion are held for investment and a dividend exchange program[25] | Metal | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :---- | :------------------------------ | :------------------------------- | | Gold | $2,445 | $2,415 | | Silver | $1,205 | $1,222 | | Total | $3,650 | $3,637 | 5. Inventories, net | Inventory Type | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------ | :------------------------------- | :-------------------- | :------- | | Stockpiles - underground mine | $2,705 | $2,365 | $340 | 14.4% | | Stockpiles - open pit mine | $1,516 | $414 | $1,102 | 266.2% | | Leach pad | $4,065 | $376 | $3,689 | 981.1% | | Concentrates | $1,485 | $1,231 | $254 | 20.6% | | Doré | $1,510 | $1,289 | $221 | 17.2% | | Subtotal - product inventory | $11,281 | $5,675 | $5,606 | 98.8% | | Materials and supplies | $9,183 | $8,667 | $516 | 5.9% | | Total | $20,464 | $14,342 | $6,122 | 42.7% | 6. Income Taxes | Metric | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Income tax expense | $1,071 | $3,646 | $(2,575) | -70.6% | - Consolidated effective tax rate is above statutory rates due to U.S. losses (21%) netted against Mexican income (37.5%)[27] - Expects to pay a 5% withholding tax on dividends from Mexico in 2019, benefiting from the U.S.-Mexico tax treaty[28] 7. Prepaid Expenses and Other Current Assets | Asset Type | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------ | :------------------------------- | :-------------------- | :------- | | IVA taxes receivable, net | $1,065 | $538 | $527 | 98.0% | | Prepaid insurance | $729 | $1,179 | $(450) | -38.2% | | Total | $2,607 | $2,450 | $157 | 6.4% | 8. Property, Plant and Mine Development, net | Asset Type | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | :------- | | Construction-in-progress | $34,897 | $34,335 | $562 | 1.6% | | Machinery and equipment | $30,712 | $27,485 | $3,227 | 11.7% | | Mill facilities and infrastructure | $17,236 | $11,712 | $5,524 | 47.2% | | Mine development | $71,426 | $69,487 | $1,939 | 2.8% | | Total | $119,617 | $111,242 | $8,375 | 7.5% | - Nevada construction-in-progress increased by $3.5 million to $25.1 million, while Mexico construction-in-progress decreased by $2.9 million to $9.8 million[31] - Depreciation and amortization expense was $3.6 million in Q1 2019, slightly down from $3.7 million in Q1 2018[33] 9. Accrued Expenses and Other Current Liabilities | Liability Type | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------ | :------------------------------- | :-------------------- | :------- | | Accrued insurance | $187 | $364 | $(177) | -48.6% | | Accrued royalty payments | $1,467 | $1,432 | $35 | 2.4% | | Total | $1,889 | $2,030 | $(141) | -6.9% | 10. Reclamation and Remediation | Liability Type | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | :------- | | Reclamation liabilities – balance at end of period | $2,039 | $2,009 | $30 | 1.5% | | Asset retirement obligation – balance at end of period | $1,772 | $1,289 | $483 | 37.5% | | Total period end balance | $3,811 | $3,298 | $513 | 15.6% | - Asset retirement obligation for Isabella Pearl project increased from $0.8 million to $1.2 million[36] 11. Loans Payable - Outstanding loans payable balance was $2.3 million at March 31, 2019[37] - Loans bear annual interest rates from 3% to 4.48% and are collateralized by equipment[37] | Year | Scheduled Minimum Repayments (in thousands) | | :--- | :------------------------------------------ | | 2019 | $600 | | 2020 | $900 | | 2021 | $700 | | 2022 | $100 | 12. Commitments and Contingencies - Contract Mining Agreement for Isabella Pearl project includes an embedded lease for mining equipment[38] | Commitment Type | Year Ended December 31, 2019 (in millions) | Year Ended December 31, 2020 (in millions) | | :-------------------------- | :----------------------------------------- | :----------------------------------------- | | Contract Mining Agreement (operational costs) | $6.8 | $8.7 | - Equipment purchase commitments aggregate approximately $2.5 million as of March 31, 2019[39] 13. Leases - Recognized $14.2 million in ROU assets and operating lease liabilities upon adoption of ASC 842[40] - Weighted average remaining lease term for operating leases is 1.62 years, with a weighted average discount rate of 4.48%[42][43] - Weighted average remaining lease term for finance leases is 2.63 years, with a weighted average discount rate of 5.87%[49][53] | Lease Type | 2019 (in thousands) | 2020 (in thousands) | 2021 (in thousands) | 2022 (in thousands) | Total Lease Payments (in thousands) | Present Value (in thousands) | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :---------------------------------- | :----------------------------- | | Operating Lease Liabilities | $6,205 | $6,813 | $151 | $13 | $13,182 | $12,684 | | Finance Lease Obligations | $353 | $470 | $406 | $- | $1,229 | $1,142 | 14. Embedded Derivatives - Concentrate sales contracts contain embedded derivatives due to provisional pricing, adjusted to market through revenue[54][69] - Unrealized gain from embedded derivatives was $0.9 million at March 31, 2019, compared to an unrealized loss of $0.1 million at December 31, 2018[69] | Metal | Under Contract (ounces/tonnes) | Average Forward Price (per ounce/tonne) | | :----- | :----------------------------- | :-------------------------------------- | | Gold | 5,075 ounces | $1,281 | | Silver | 270,768 ounces | $15.21 | | Copper | 378 tonnes | $6,299 | | Lead | 1,880 tonnes | $2,033 | | Zinc | 4,857 tonnes | $2,707 | 15. Stock-Based Compensation | Compensation Type | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Stock options | $211 | $174 | $37 | 21.3% | | Restricted stock units | $125 | $62 | $63 | 101.6% | | Total | $336 | $236 | $100 | 42.4% | - 274,750 stock options were exercised in Q1 2019, compared to 1,000,000 in Q1 2018[58][59] - 14,804 RSUs vested in Q1 2019, compared to 14,964 in Q1 2018[57] 16. Shareholders' Equity - Sold 2,537,130 common shares via ATM Agreement for $10.8 million net proceeds in Q1 2019[61] - Declared and paid dividends of $0.005 per common share in Q1 2019 and Q1 2018[62] 17. Other Expense, net | Expense Type | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Unrealized currency exchange gain | $(127) | $(1,026) | $899 | -87.6% | | Realized currency exchange loss | $151 | $1,324 | $(1,173) | -88.6% | | Total | $25 | $278 | $(253) | -91.0% | 18. Net Income per Common Share | Metric | Three months ended March 31, 2019 | Three months ended March 31, 2018 | Change | % Change | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Basic net income per common share | $0.01 | $0.10 | $(0.09) | -90.0% | | Diluted net income per common share | $0.01 | $0.09 | $(0.08) | -88.9% | | Basic weighted average shares outstanding | 60,672,133 | 57,120,077 | 3,552,056 | 6.2% | | Diluted weighted average shares outstanding | 61,142,088 | 57,911,299 | 3,230,789 | 5.6% | - Options to purchase 3.6 million shares (2019) and 3.1 million shares (2018) were anti-dilutive and excluded from diluted EPS calculation[65] 19. Fair Value Measurement - Fair value hierarchy categorizes assets into Level 1 (active market prices) and Level 2 (observable inputs)[66][72] | Asset | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Input Hierarchy | | :-------------------------------- | :------------------------------ | :------------------------------- | :-------------- | | Bank deposits | $8,527 | $7,762 | Level 1 | | Gold and silver rounds/bullion | $3,650 | $3,637 | Level 1 | | Receivables from provisional concentrate sales | $4,515 | $1,744 | Level 2 | | Total | $16,692 | $13,143 | | - Unrealized gain from provisional concentrate sales was $0.9 million at March 31, 2019, compared to an unrealized loss of $0.1 million at December 31, 2018[69] 20. Supplementary Cash Flow Information | Adjustment Type | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Unrealized gain on gold and silver rounds/bullion | $(17) | $(18) | $1 | -5.6% | | Unrealized foreign currency exchange gain | $(127) | $(1,026) | $899 | -87.6% | | Total other operating adjustments | $(128) | $(906) | $778 | -85.9% | 21. Segment Reporting - Company operates in Oaxaca, Mexico, and Nevada, U.S.A. segments[75] | Segment | Revenue (Q1 2019, in thousands) | Net Income (Loss) (Q1 2019, in thousands) | Capital Expenditures (Q1 2019, in thousands) | Total Assets (March 31, 2019, in thousands) | | :------------------ | :------------------------------ | :---------------------------------------- | :------------------------------------------- | :------------------------------------------ | | Mexico | $26,578 | $3,396 | $4,682 | $97,754 | | Nevada | $- | $(419) | $7,199 | $71,011 | | Corporate and Other | $- | $(2,095) | $- | $12,398 | | Consolidated | $26,578 | $882 | $11,881 | $181,163 | - Nevada segment's capital expenditures increased significantly from $1.3 million in Q1 2018 to $7.2 million in Q1 2019, reflecting Isabella Pearl project development[77] 22. Subsequent Events - Sold 1,129,787 shares under ATM agreement for $4.1 million net proceeds after March 31, 2019[79] - Proceeds are intended to fund inventory build-up and completion of Isabella Pearl project[127] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2019 financial performance, highlighting decreased net income and mine gross profit due to lower sales and higher costs Highlights | Metric | Q1 2019 Value | | :---------------------------------------------------------- | :------------ | | Sales | $26.6 million | | Cash balance (March 31, 2019) | $8.5 million | | Dividend distributions | $0.3 million | | Dividends per share | $0.005 | | Total cash cost after by-product credits per precious metal gold equivalent ounce sold | $340 | - Began initial stages of gold processing at Isabella Pearl with solution application on the leach pad[87] Overview - Company focuses on gold and silver projects with low operating costs and high returns on capital[83] - Currently producing from Aguila and Alta Gracia projects (Mexico) and developing Isabella Pearl project (Nevada)[83] - Precious metal gold equivalent ounces are calculated using actual metal prices realized from gold and silver sales[84] Exploration and Development Activities - Exploration activities are conducted in Oaxaca, Mexico (San Jose structural corridor) and Nevada, U.S.A. (Walker Lane Mineral Belt)[85] Oaxaca Mining Unit, Mexico - Aguila project focused on development and ore extraction from Arista and Switchback vein systems[86] - 4,069 meters of underground diamond drilling completed at Aguila project in Q1 2019 for Switchback vein system expansion[86] - Alta Gracia project continued Mirador Mine development, accessing high-grade ore from the Independencia vein, and initiated geochemical soil sampling[87][88] Nevada Mining Unit, U.S.A. - Isabella Pearl project construction substantially completed in Q1 2019, with initial gold processing (leach solution application) commenced[89] - First gold from Isabella Pearl project shipped and sold subsequent to March 31, 2019, beating the 12-month production goal[89] - Exploration at Isabella Pearl included 32 drill holes (1,507 meters) for open pit expansion[90] - East Camp Douglas property saw surface mapping, rock chip sampling, and analysis for future drill targeting[91] Results of Operations | Metric | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Sales, net | $26,578 | $32,151 | $(5,573) | -17.3% | | Mine gross profit | $5,439 | $12,920 | $(7,481) | -57.9% | | Net income | $882 | $5,457 | $(4,575) | -83.8% | Oaxaca Mining Unit Sales and Production - Net sales decreased by $5.6 million (17%) to $26.6 million in Q1 2019, primarily due to higher concentrate treatment charges, lower precious metal sales volumes, and lower average realized base metal prices[93] | Metric | Three months ended March 31, 2019 | Three months ended March 31, 2018 | Change | % Change | | :---------------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Gold production (ozs.) | 6,538 | 6,647 | (109) | -1.6% | | Silver production (ozs.) | 364,653 | 425,884 | (61,231) | -14.4% | | Precious metal gold equivalent ounces produced | 10,825 | 11,909 | (1,084) | -9.1% | | Tonnes Milled per Day | 1,917 | 1,636 | 281 | 17.2% | | Gold sold (ozs.) | 4,758 | 5,563 | (805) | -14.5% | | Silver sold (ozs.) | 268,189 | 381,366 | (113,177) | -29.7% | | Total cash cost after by-product credits per precious metal gold equivalent ounce sold | $340 | $(316) | $656 | -207.6% | - The increase in total cash cost after by-product credits was a result of lower by-product credits from base metal sales and lower gold equivalent ounces from silver[98] Consolidated Other Financial Results - Mine gross profit decreased by $7.5 million (58%) to $5.4 million in Q1 2019[105] - General and administrative expenses decreased by $0.3 million to $2.0 million due to lower legal and accounting fees[106] - Exploration expenses increased by $0.3 million to $1.5 million due to increased drilling in Oaxaca[107] - Other expense, net, decreased from $0.3 million to $0.03 million due to less currency exchange losses[108] - Provision for income taxes decreased from $3.6 million to $1.1 million, commensurate with lower income before taxes[109] Non-GAAP Measures - Non-GAAP measures include cash cost before/after by-product credits per ounce and total all-in sustaining cost (AISC) per ounce[111] - Base metals (copper, lead, zinc) are considered by-products, and their revenue reduces total cash costs[112] | Metric | Three months ended March 31, 2019 | Three months ended March 31, 2018 | Change | % Change | | :---------------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Total cash cost after by-product credits per precious metal gold equivalent ounce sold | $340 | $(316) | $656 | -207.6% | | Total all-in sustaining cost per precious metal gold equivalent ounce sold | $834 | $347 | $487 | 140.3% | | By-product Credits (in thousands) | Three months ended March 31, 2019 | Three months ended March 31, 2018 | Change | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Copper sales | $2,128 | $2,433 | $(305) | -12.5% | | Lead sales | $3,410 | $3,842 | $(432) | -11.2% | | Zinc sales | $12,869 | $14,375 | $(1,506) | -10.5% | | Total sales from by-products | $18,407 | $20,650 | $(2,243) | -10.9% | Liquidity and Capital Resources | Metric | March 31, 2019 (in millions) | December 31, 2018 (in millions) | Change (in millions) | | :-------------------------- | :----------------------------- | :------------------------------ | :------------------- | | Working Capital | $10.5 | $13.5 | $(3.0) | | Cash and cash equivalents | $8.5 | $7.7 | $0.8 | - Net cash used in operating activities was $0.6 million in Q1 2019, a $14.6 million decrease from Q1 2018, mainly due to lower net income and increased inventories[124] - Net cash provided by financing activities was $10.3 million in Q1 2019, driven by $10.8 million from ATM stock sales[126] - Subsequent to Q1 2019, an additional $4.1 million was raised from ATM sales to fund Isabella Pearl project[127] Accounting Developments - Refer to Note 2 for details on recently adopted and issued accounting pronouncements, including ASC Topic 842, Leases[128] Off-Balance Sheet Arrangements - No material changes in off-balance sheet arrangements since December 31, 2018[130] Contractual Obligations | Obligation Type | Total (in thousands) | 2019 (in thousands) | 2020 (in thousands) | 2021 (in thousands) | 2022 (in thousands) | 2023 and Thereafter (in thousands) | | :-------------------------- | :------------------- | :------------------ | :------------------ | :------------------ | :------------------ | :--------------------------------- | | Loan payable | $2,284 | $623 | $879 | $665 | $87 | $30 | | Finance lease obligation | $1,142 | $312 | $436 | $394 | $- | $- | | Interest on loan payable | $123 | $58 | $49 | $14 | $2 | $- | | Interest on finance lease obligation | $87 | $41 | $35 | $9 | $2 | $- | | Operating lease obligations | $13,182 | $6,205 | $6,813 | $151 | $13 | $- | | Contract Mining Agreement | $15,530 | $6,843 | $8,687 | $- | $- | $- | | Equipment purchase commitments | $2,467 | $2,467 | $- | $- | $- | $- | | Total | $34,815 | $16,549 | $16,899 | $1,233 | $104 | $30 | Critical Accounting Estimates - Adoption of ASC Topic 842, Leases, on January 1, 2019, led to recognition of $14.2 million in operating lease liabilities and right-of-use assets[132] - The new lease standard did not materially impact results of operations or cash flows[132] - No other changes in critical accounting estimates since December 31, 2018[133] Forward-Looking Statements - Report contains forward-looking statements about future exploration, production, development, and business expectations[134][138] - Statements are subject to numerous assumptions, risks, and uncertainties, and actual results may differ materially[137] - Company cautions against undue reliance and does not undertake to update these statements publicly[137][138] Risk Factors Impacting Forward-Looking Statements - Key risks include changes in gold/silver prices, market volatility, adverse exploration/production results, and political/regulatory risks[139] - Other risks include weather conditions, earthquakes, failure to meet financial goals, decline in stock demand, technological innovations, investor perception, lawsuits, central bank actions, and general economic trends[139] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks from commodity prices, foreign currency, provisional sales, interest rates, and equity prices - Exposed to market risks from commodity prices (gold, silver, copper, lead, zinc), foreign currency exchange rates (Mexican peso), provisional sales contracts, interest rates, and equity prices[140] - Does not currently use derivative financial instruments to manage market risk but may consider them in the future[140][141][144] - Interest rate risk is insignificant due to fixed-rate debt[146] - Provisional sales contracts contain embedded derivatives, adjusted to market through revenue, creating price risk between shipment and final settlement[145] Commodity Price Risk - Operations are highly dependent on fluctuating market prices of gold, silver, copper, lead, and zinc[141] - Gold and silver prices are affected by interest rates, inflation, exchange rates, and world supply/demand[141] - Future price declines could make mineral projects uneconomic or cause delays[141][142] Foreign Currency Risk - Primarily impacted by Mexican peso rate changes relative to the U.S. Dollar, affecting costs in Mexico[143] - Stronger peso increases U.S. Dollar equivalent costs; weaker peso decreases them[143] - Revenues are not impacted as metals are sold in U.S. dollars[143] Provisional Sales Contract Risk - Concentrate sales contracts have provisional pricing terms with embedded derivatives[145] - Embedded derivatives are adjusted to market through revenue, causing adjustments based on metal price changes between shipment and final settlement[145] Interest Rate Risk - Outstanding debt (equipment loans and finance leases) is at fixed rates[146] - Interest rate risk exposure is considered insignificant[146] Equity Price Risk - Risk of not being able to sell common stock at an acceptable price for future funding due to past and potential future volatility[147] ITEM 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2019, with lease accounting changes not materially impacting internal controls - Disclosure controls and procedures were effective as of March 31, 2019[148] - Implemented changes to internal controls for ASC Topic 842 (Leases) adoption, including comprehensive lease scoping analysis[149] - Changes in internal controls related to lease accounting did not materially affect internal control over financial reporting[149] Evaluation of Disclosure Controls and Procedures - Management concluded that disclosure controls and procedures were effective as of March 31, 2019[148] - Controls ensure information is recorded, processed, summarized, and reported within required time periods[148] Changes in Internal Control Over Financial Reporting - Implemented changes to internal controls for ASC Topic 842 (Leases) adoption, including comprehensive lease scoping analysis[149] - No changes materially affected internal control over financial reporting during Q1 2019[149] PART II - OTHER INFORMATION ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2019, Gold Resource Corporation issued 25,000 unregistered common shares as payment for an investor relations service agreement with a third-party - Issued 25,000 unregistered common shares in Q1 2019 as payment for an investor relations service agreement[151] ITEM 4. Mine Safety Disclosures Information concerning mine safety violations and other regulatory matters, as mandated by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, is provided in Exhibit 95 of this Quarterly Report - Mine safety disclosures are provided in Exhibit 95 of the Quarterly Report, as required by Dodd-Frank Act and Regulation S-K[152] ITEM 6. Exhibits This section lists all exhibits filed or furnished with the Form 10-Q, including corporate governance documents (articles of incorporation, bylaws), amendments, Sarbanes-Oxley Act certifications, mine safety information, and XBRL formatted financial statements - Lists exhibits filed with the Form 10-Q, including corporate documents, certifications, mine safety information, and XBRL financial statements[153][154] Signatures The Form 10-Q report is officially signed by Jason D. Reid, Chief Executive Officer and President, and John A. Labate, Chief Financial Officer, on behalf of Gold Resource Corporation, dated May 7, 2019 - Report signed by Jason D. Reid (CEO and President) and John A. Labate (CFO) on May 7, 2019[158]