Gold Resource (GORO) - 2025 Q2 - Quarterly Report

Second Quarter 2025 Summary Operational challenges at Don David Gold Mine led to lower production, a $11.5 million net loss, and going concern doubt Q2 2025 Key Metrics | Metric | Value | | :--- | :--- | | Gold Equivalent (AuEq) Ounces Sold | 2,420 oz | | Net Loss | $11.5 million | | Net Loss per Share | $0.09 | | Cash Position (as of June 30, 2025) | $12.7 million | | Working Capital (as of June 30, 2025) | $10.4 million | | Total Cash Cost per AuEq ounce | $4,017 | | All-in Sustaining Cost (AISC) per AuEq ounce | $5,458 | - Production was significantly impacted by the reduced availability of critical mining equipment due to an aging fleet and a shortage of alternative ore production headings[9][10] - The company executed a loan agreement for $6.28 million for working capital and issued a warrant for the purchase of 1,500,000 shares at an exercise price of $0.65 per share[10][16] - The company's inability to achieve production estimates and continued operating losses have created substantial doubt about its ability to continue as a going concern[14] Part I - FINANCIAL INFORMATION This section presents unaudited interim financial statements, MD&A, market risk disclosures, and internal control assessments Item 1. Condensed Consolidated Interim Financial Statements and Notes This section presents unaudited interim financial statements and notes, detailing restatements and going concern uncertainty Condensed Consolidated Interim Balance Sheets Total assets were $155.1 million, liabilities $136.0 million, with cash increasing to $12.7 million from financing activities Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $26,278 | $16,580 | | Cash and cash equivalents | $12,673 | $1,628 | | Total Assets | $155,142 | $145,874 | | Total Current Liabilities | $15,916 | $14,484 | | Total Liabilities | $135,984 | $118,591 | | Total Shareholders' Equity | $19,158 | $27,283 | Condensed Consolidated Interim Statements of Operations Q2 2025 net loss was $11.5 million on $11.2 million sales, an improvement from restated Q2 2024 due to a tax provision Statements of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 (Restated) | H1 2025 | H1 2024 (Restated) | | :--- | :--- | :--- | :--- | :--- | | Sales, net | $11,228 | $20,782 | $23,582 | $39,484 | | Mine gross loss | $(4,420) | $(3,592) | $(5,872) | $(5,761) | | Net loss | $(11,486) | $(27,005) | $(19,805) | $(32,682) | | Net loss per share | $(0.09) | $(0.30) | $(0.16) | $(0.36) | Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Shareholders' equity decreased to $19.2 million due to a $19.8 million net loss, partially offset by capital raises - For the six months ended June 30, 2025, the company raised approximately $8.6 million from its ATM Program, $2.5 million from a registered direct offering, and recorded $0.4 million related to warrants issued[32][34][35] Condensed Consolidated Interim Statements of Cash Flows Net cash provided by financing activities was $17.1 million, leading to an $11.0 million net cash increase for the period Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 (Restated) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,135) | $1,419 | | Net cash used in investing activities | $(3,865) | $(4,008) | | Net cash provided by financing activities | $17,116 | $1,802 | | Net increase (decrease) in cash | $11,045 | $(912) | Notes to the Condensed Consolidated Interim Financial Statements Notes detail restated 2024 financials, going concern uncertainty, a new $6.28 million loan, and segment reporting - Financial statements for the three and six months ended June 30, 2024 were restated due to errors in the application of U.S. GAAP related to interest accretion on liabilities associated with the Osisko Stream Agreements[43][44] - The company's low production, net loss of $19.8 million, and net cash used in operations of $2.1 million for the first six months of 2025 raise substantial doubt about its ability to continue as a going concern[54] - On June 26, 2025, the company executed a loan agreement for $6.28 million, bearing interest at SOFR + 5.0%, with principal and interest due in December 2026[90] - For the six months ended June 30, 2025, the Oaxaca, Mexico operating segment generated all $23.6 million of the company's net sales but recorded a loss before income taxes of $7.9 million[137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MD&A details Q2 2025 operational and financial challenges, including production declines, increased costs, and liquidity concerns Overview & Exploration Update DDGM faced production challenges due to aging equipment, leading to contract miner engagement, while exploration remains suspended - DDGM continued to experience production challenges due to limited equipment availability, stemming from aging machinery and a lack of spare parts[147] - A third-party contract miner was engaged during the second quarter to advance production development in the Three Sisters system[148] - The exploration drill program remained suspended during Q2 2025 due to cash flow shortages[155] Results of Operations Q2 2025 saw significant declines in tonnes milled and gold production, resulting in a 46% drop in net sales and higher AISC Production Comparison - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Tonnes Milled | 63,479 | 93,687 | -32% | | Gold Production (oz) | 758 | 2,947 | -74% | | Silver Production (oz) | 196,435 | 263,023 | -25% | Financial Comparison - Q2 2025 vs Q2 2024 (in thousands) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $11,228 | $20,782 | -46% | | Total Cost of Sales | $15,648 | $24,374 | -36% | | Mine Gross Loss | $(4,420) | $(3,592) | +22% | Non-GAAP Cost Comparison per AuEq oz Sold - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total cash cost after co-product credits | $4,017 | $1,950 | | Total consolidated all-in sustaining cost (AISC) | $5,458 | $2,652 | Liquidity and Capital Resources Working capital improved to $10.4 million due to $21.3 million in H1 2025 capital raises, but going concern doubt persists - Working capital increased to $10.4 million as of June 30, 2025, a 395% increase from $2.1 million at December 31, 2024, mainly due to an $11.0 million increase in cash from financing activities[237] - The company raised a total of $21.3 million in the first six months of 2025 through its ATM program, a direct offering, a tax refund, and a loan[249] - Management estimates it will require approximately $7.0 million for mining equipment and mill upgrades, plus an additional $8.0 million in working capital over the next 12 months[247] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from commodity price fluctuations, foreign currency exchange rates, and provisional sales - The company's primary market risks are changes in commodity prices for gold, silver, copper, lead, and zinc, as well as foreign currency exchange rates, particularly the Mexican peso[261][262][267] - The company does not currently use derivative financial instruments to manage market risk but may consider them in the future[261] Item 4. Controls and Procedures Disclosure controls were ineffective as of June 30, 2025, due to a material weakness in accounting for complex transactions - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025[274] - The ineffectiveness is due to a material weakness in internal control over financial reporting related to the accounting for complex transactions[275] - A remediation plan is being implemented, which includes consulting with outside third-party accounting experts for non-routine or complex transactions[276][281] Part II - OTHER INFORMATION This section details legal proceedings, new risk factors, unregistered equity sales, and other required disclosures Item 1. Legal Proceedings A local community filed an injunction in 2020 seeking cancellation of DDGM concession titles, with no final ruling yet - In February 2020, a local Ejido community filed an injunction against the Mexican federal government seeking the cancellation of several DDGM concession titles, but the lawsuit has not progressed to a final ruling[279] Item 1A. Risk Factors A new risk factor highlights potential dilution from 1,500,000 warrants issued in June 2025, affecting stock price - A new risk factor was disclosed concerning the 1,500,000 warrants issued in June 2025, which could result in dilution to existing stockholders and may adversely affect the stock's market price[284] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In June 2025, the company issued a warrant for 1,500,000 shares at $0.65 per share as part of a $6.28 million loan - On June 26, 2025, the company issued a common stock purchase warrant for up to 1,500,000 shares at an exercise price of $0.65 per share in connection with a loan agreement, constituting an unregistered sale of equity securities[285] Item 3. Defaults upon Senior Securities None reported - None[286] Item 4. Mine Safety Disclosures Not applicable as the Michigan exploration project is not yet subject to MSHA jurisdiction - Not applicable[287] Item 5. Other Information No director or Section 16 officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or Section 16 officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[288] Item 6. Exhibits This section lists all exhibits filed with the report, including the new loan agreement and required certifications - Lists all exhibits filed with the report, including the Loan Agreement dated June 26, 2025, and certifications by the CEO and CFO[292]