Gold Resource (GORO) - 2023 Q3 - Quarterly Report

Third Quarter 2023 Highlights Don David Gold Mine Highlights DDGM achieved zero lost time incidents in Q3 2023, producing 6,532 gold equivalent ounces and advancing resource drilling - The Don David Gold Mine (DDGM) reported zero lost time incidents for Q3 2023, with a year-to-date LTIFR of 0.11, substantially lower than the Mexican average of 0.89[11] Q3 2023 Don David Gold Mine Production and Sales | Metric | Value | | :-------------------------------- | :------ | | Gold Equivalent Ounces Produced | 6,532 | | Gold Ounces Produced | 3,982 | | Silver Ounces Produced | 208,905 | | Average Gold Sales Price per Ounce | $1,934 | | Average Silver Sales Price per Ounce | $24 | - DDGM's diamond drilling program continued as planned, utilizing five drill rigs for infill drilling (upgrading Inferred to Indicated resources) and expansion drilling (identifying additional Inferred resources)[11] Back Forty Project Highlights Back Forty Project optimization completed in Q3 2023, showing a robust economic model and no wetland impacts - Optimization work on metallurgy and the economic model for the Back Forty Project was completed in Q3 2023[9] - The Company released the Technical Report Summary for the Back Forty Project on October 26, 2023, indicating a more robust economic project[9] - The project design now includes no planned impacts to wetlands, aiming for a more environmentally protective approach to facilitate successful mine permitting[9] Financial Highlights The Company held $6.7 million cash, zero debt, $13.8 million working capital, and reported a $7.3 million net loss Q3 2023 Key Financial Metrics | Metric | Value (in millions) | | :-------------------------------- | :------------------ | | Cash as of Sep 30, 2023 | $6.7 | | Debt as of Sep 30, 2023 | $0 | | Working Capital as of Sep 30, 2023 | $13.8 | | Net Loss for the Quarter | $(7.3) | | Net Loss per Share | $(0.08) | Q3 2023 Cost Metrics per AuEq Ounce | Metric | Value (per AuEq ounce) | | :-------------------------------------- | :--------------------- | | Total Cash Cost after Co-product Credits | $1,839 | | Total AISC after Co-product Credits | $2,669 | - The net loss for the quarter was primarily due to significant investments in exploration development and underground drilling[12] Part I - FINANCIAL INFORMATION ITEM 1. Condensed Consolidated Interim Financial Statements and Notes Unaudited condensed interim financial statements and notes detail the Company's financial position and performance Condensed Consolidated Interim Balance Sheets The balance sheets show a decrease in total assets and shareholders' equity, alongside a reduction in total liabilities Condensed Consolidated Interim Balance Sheets (in thousands USD) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | ASSETS | | | | Cash and cash equivalents | $6,706 | $23,675 | | Total current assets | $28,900 | $46,099 | | Property, plant, and mine development, net | $144,194 | $152,563 | | Deferred tax assets, net | $11,589 | $5,927 | | Total assets | $189,692 | $210,098 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $15,101 | $24,682 | | Total liabilities | $90,178 | $98,334 | | Total shareholders' equity | $99,514 | $111,764 | Condensed Consolidated Interim Statements of Operations The statements of operations show a net loss for both the three and nine months ended September 30, 2023, with decreased sales Condensed Consolidated Interim Statements of Operations (in thousands USD) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Sales, net | $20,552 | $23,869 | $76,587 | $106,350 | | Total cost of sales | $24,963 | $26,047 | $79,238 | $81,186 | | Mine gross (loss) profit | $(4,411) | $(2,178) | $(2,651) | $25,164 | | Total costs and expenses | $5,589 | $7,769 | $14,975 | $19,287 | | (Loss) income before income taxes | $(10,000) | $(9,947) | $(17,626) | $5,877 | | Net loss | $(7,341) | $(9,730) | $(12,960) | $(3,038) | | Basic and diluted net loss per common share | $(0.08) | $(0.11) | $(0.15) | $(0.03) | Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Shareholders' equity decreased due to net losses, with dividends suspended to preserve capital for exploration and growth Changes in Shareholders' Equity (in thousands USD) | Metric | Balance, Sep 30, 2022 | Balance, Sep 30, 2023 | | :-------------------------------- | :-------------------- | :-------------------- | | Total Shareholders' Equity | $115,644 | $99,514 | | Net Loss (3 months ended Sep 30) | $(9,730) | $(7,341) | | Net Loss (9 months ended Sep 30) | $(3,038) | $(12,960) | | Stock-based compensation (3 months ended Sep 30) | $285 | $105 | | Stock-based compensation (9 months ended Sep 30) | $952 | $672 | - The Company suspended future quarterly dividends on February 13, 2023, to protect its balance sheet and focus capital on exploration and growth opportunities[19][23] - An aggregate of 130,199 shares of common stock were sold through the At The Market Agreement (ATM) during the three and nine months ended September 30, 2023, generating net proceeds of $0.1 million[20][24] Condensed Consolidated Interim Statements of Cash Flows Cash and cash equivalents decreased due to operating and investing activities, partially offset by financing activity shifts Condensed Consolidated Interim Statements of Cash Flows (in thousands USD) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(12,960) | $(3,038) | | Net cash (used in) provided by operating activities | $(7,002) | $7,914 | | Net cash used in investing activities | $(9,751) | $(15,333) | | Net cash provided by (used in) financing activities | $33 | $(3,027) | | Net decrease in cash and cash equivalents | $(16,969) | $(11,181) | | Cash and cash equivalents at end of period | $6,706 | $22,531 | - Operating activities shifted from providing $7.9 million in cash in 2022 to using $7.0 million in 2023, primarily due to lower net sales and higher production costs relative to sales[28] - Investing activities used less cash in 2023 ($9.8 million) compared to 2022 ($15.3 million), mainly due to reduced capital expenditures related to the completion of the filtration plant, dry stack facility, and gold regrind circuit in 2022[28] Notes to the Condensed Consolidated Interim Financial Statements These notes provide additional detail on accounting policies, revenue, inventory, income taxes, and other significant financial items Note 1. Basis of Preparation of Financial Statements Interim financial statements are unaudited and prepared under SEC rules, with an immaterial error correction in prior period deferred taxes - The interim financial statements are unaudited and prepared under SEC rules, with condensed GAAP disclosures[30] - An immaterial error in prior period financial statements, involving incorrect offsetting of deferred tax liabilities and assets, was identified and corrected[31] Revision to Consolidated Balance Sheet as of December 31, 2022 (in thousands USD) | Metric | As filed | Adjustments | Revised | | :-------------------------- | :------- | :---------- | :------ | | Deferred tax assets, net | $0 | $5,927 | $5,927 | | Total assets | $204,171 | $5,927 | $210,098 | | Deferred tax liabilities, net | $9,224 | $5,927 | $15,151 | | Total liabilities | $92,407 | $5,927 | $98,334 | Note 2. Recently Adopted Accounting Standards Recent accounting pronouncements have been evaluated and do not currently have a material impact on the Company's financial statements - Recent accounting pronouncements have been evaluated and do not presently impact the Company's financial statements[34] Note 3. Revenue Revenue from doré and concentrate sales decreased in Q3 2023, with significant contributions from various metals - The Company generates revenue from the sale of doré and concentrates[35] Net Sales Disaggregated by Source (in thousands USD) | Source | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total doré sales, net | $433 | $1,545 | $2,760 | $5,333 | | Total concentrate sales, net | $19,780 | $23,258 | $74,032 | $102,081 | | Realized (loss) gain - embedded derivative, net | $(633) | $(1,212) | $249 | $814 | | Unrealized gain (loss) - embedded derivative, net | $972 | $278 | $(454) | $(1,878) | | Total sales, net | $20,552 | $23,869 | $76,587 | $106,350 | - Copper, lead, and zinc are considered co-products, with realized losses related to these co-products for the three and nine months ended September 30, 2023[35][36] Note 4. Inventories, net Inventories, net, primarily consist of product inventories (stockpiles, concentrates, doré) and materials and supplies Inventories, net (in thousands USD) | Inventory Type | Sep 30, 2023 | Dec 31, 2022 | | :----------------------- | :----------- | :----------- | | Stockpiles - underground mine | $69 | $597 | | Concentrates | $2,301 | $3,271 | | Doré, net | $366 | $653 | | Subtotal - product inventories | $2,736 | $4,521 | | Materials and supplies | $7,706 | $8,979 | | Total | $10,442 | $13,500 | Note 5. Income Taxes The Company recorded income tax benefits in 2023, but faces a significant tax sanction from the Mexican Tax Administration Services Income Tax (Benefit) Provision (in thousands USD) | Period | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | (Benefit) provision for income taxes | $(2,659) | $(217) | $(4,666) | $8,915 | - Mexico's mining entities are subject to a 30% corporate income tax, a 7.5% 'special' mining duty, and a 0.5% 'extraordinary' mining duty, resulting in a higher effective tax rate[39] - In October 2023, the Company received a notification from the Mexican Tax Administration Services (SAT) for a 2015 tax audit, imposing a sanction of 331 million pesos (approximately $18 million), which management believes is incorrect[43] Note 6. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets increased, primarily due to a significant rise in prepaid income tax with an expected refund Prepaid Expenses and Other Current Assets (in thousands USD) | Asset Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Advances to suppliers | $492 | $867 | | Prepaid insurance | $1,764 | $1,298 | | Prepaid income tax | $3,693 | $432 | | Other current assets | $1,089 | $1,242 | | Total | $7,038 | $3,839 | - The increase in prepaid income tax is due to Mexican tax statutes requiring prepayments based on prior year earnings; however, DDGM expects a tax refund of approximately $3 million next year due to current year losses[45] Note 7. Property, Plant, and Mine Development, net Property, Plant, and Mine Development, net, decreased from December 31, 2022, to September 30, 2023, with associated depreciation and amortization expenses Property, Plant, and Mine Development, net (in thousands USD) | Asset Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Asset retirement costs | $7,449 | $7,449 | | Mineral interest | $79,543 | $79,543 | | Mine Development | $113,519 | $105,263 | | Subtotal (before accumulated depreciation) | $294,610 | $284,510 | | Accumulated depreciation and amortization | $(150,416) | $(131,947) | | Total | $144,194 | $152,563 | Depreciation and Amortization Expense (in thousands USD) | Period | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Depreciation and amortization expense | $5,800 | $6,600 | $19,500 | $19,800 | Note 8. Other Non-current Assets Other non-current assets primarily include investments in Maritime Resources Corp. and Green Light Metals, with varying fair values Other Non-current Assets (in thousands USD) | Asset Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Investment in Maritime | $1,211 | $1,559 | | Investment in Green Light Metals | $3,608 | $3,611 | | Other non-current assets | $190 | $339 | | Total | $5,009 | $5,509 | - The investment in Maritime Resources Corp. decreased in fair value from $1.6 million to $1.2 million, resulting in an unrealized loss of $0.4 million[51][109] - The investment in Green Light Metals, representing approximately 28.0% ownership, maintained a stable fair value of $3.6 million after settling a promissory note for 12,250,000 private shares[53][54] Note 9. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities decreased, particularly in current obligations like employee profit sharing and other payables Accrued Expenses and Other Liabilities (in thousands USD) | Liability Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Current Liabilities: | | | | Accrued royalty payments | $771 | $1,787 | | Employee profit sharing obligation | $64 | $2,206 | | Total accrued expenses and other current liabilities | $1,637 | $5,197 | | Non-Current Liabilities: | | | | Accrued non-current labor obligation | $1,221 | $1,050 | | Share-based compensation liability | $336 | $884 | | Total other non-current liabilities | $1,618 | $2,490 | Note 10. Gold and Silver Stream Agreements Liabilities from Gold and Silver Stream Agreements with OBL for the Back Forty Project increased, with future deposits contingent on milestones Gold and Silver Stream Agreements Liability (in thousands USD) | Liability Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Liability related to the Gold Stream Agreement | $20,951 | $20,881 | | Liability related to the Silver Stream Agreement | $23,752 | $22,585 | | Total liability | $44,703 | $43,466 | - Under the Gold Stream Agreement, OBL committed $50 million, with $20 million received to date, and remaining deposits contingent on permits and project debt financing[58][59] - OBL will purchase 18.5% of refined gold until 105,000 ounces are delivered (then 9.25%) at 30% of the spot price (max $600/ounce), and 85% of silver at a fixed price of $4 per ounce, with $17.2 million advanced to date[60][61][62] Note 11. Reclamation and Remediation Reclamation and remediation obligations increased, driven by an updated closure plan and reclassification of certain liabilities Reclamation and Remediation Obligations (in thousands USD) | Metric | 9 Months Ended Sep 30, 2023 | Year Ended Dec 31, 2022 | | :-------------------------------- | :-------------------------- | :---------------------- | | Reclamation liabilities – balance at beginning of period | $1,949 | $1,833 | | Asset retirement obligation – balance at beginning of period | $8,417 | $1,279 | | Total period end balance | $12,349 | $10,366 | - In 2022, an updated closure plan study increased the estimated liability and asset retirement costs by $6.4 million, due to formalizing a tailings storage facility closure plan, adding a dry stack facility and filtration plant, and increased inflation in Mexico[64] - The liability for remediating exploration drill holes at the Back Forty Project was reclassified to non-current reclamation and remediation liabilities in Q1 2023; 26 drillholes were capped in Q3 2023[65][68] Note 12. Commitments and Contingencies The Company has equipment purchase commitments and contingent consideration related to the Aquila acquisition, tied to Back Forty Project milestones - As of September 30, 2023, the Company had equipment purchase commitments of approximately $1.7 million[69] - The contingent consideration from the Aquila acquisition, valued at $4.3 million as of September 30, 2023, includes C$9 million in future milestone payments for the Back Forty Project's development[72] - The contingent consideration includes a C$3 million payment upon financing completion for Back Forty construction, with a risk of HudBay repurchasing 51% ownership if not achieved by the tenth anniversary of the HMI acquisition[72][76] Note 13. Shareholders' Equity Shareholders' equity changes include the renewal of the ATM Offering Agreement and the suspension of quarterly dividends in 2023 - The At The Market (ATM) Offering Agreement, allowing the sale of up to $75.0 million in common stock, was renewed in June 2023[75] - 130,199 shares of common stock were sold through the ATM Agreement during the three and nine months ended September 30, 2023, generating $0.1 million in net proceeds[75] - No dividends were declared or paid in 2023, following the suspension of future quarterly dividends announced on February 13, 2023[78] Note 14. Derivatives Concentrate sales contracts contain embedded derivatives due to provisional pricing, requiring mark-to-market adjustments, while the zinc hedge program concluded - Concentrate sales contracts contain embedded derivatives due to provisional pricing, requiring mark-to-market adjustments to accounts receivable and revenue based on forward metal prices[79] Unsettled Sales Contracts Value as of September 30, 2023 (in thousands USD) | Metal | Under Contract (ounces/tonnes) | Average Forward Price ($/ounce or tonne) | Unsettled Sales Contracts Value | | :------ | :----------------------------- | :--------------------------------------- | :------------------------------ | | Gold | 3,361 ounces | $1,934 | $6,500 | | Silver | 274,538 ounces | $23.63 | $6,487 | | Copper | 165 tonnes | $8,256 | $1,362 | | Lead | 2,278 tonnes | $2,138 | $4,870 | | Zinc | 2,106 tonnes | $2,445 | $5,149 | | Total | | | $24,368 | - The Company's zinc zero cost collar hedge program concluded on December 31, 2022, though similar programs may be used in the future to manage metal price exposure[81] Note 15. Employee Benefits The Company offers a 401(k) profit-sharing plan for U.S. employees and is subject to statutory profit-sharing payments under Mexican law - The Company operates a 401(k) profit-sharing plan for all U.S. employees, allowing tax-deferred contributions[83] - Under Mexican law, employees are entitled to statutory profit-sharing (PTU) payments, equal to 10% of their employer's profit subject to PTU[84] Note 16. Stock-Based Compensation The equity incentive plan includes DSUs, RSUs, stock options, and PSUs, with associated compensation expenses and vesting details - The Gold Resource Corporation 2016 Equity Incentive Plan allows for the issuance of up to 5 million shares in various equity-based forms[86] - DSUs, granted to the Board of Directors and executives, are immediately vested and classified as a liability, marked to market each reporting period[87][88] Stock-Based Compensation Expense (in thousands USD) | Award Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Deferred stock units | $(89) | $13 | $(20) | $383 | | Restricted stock units | $95 | $161 | $422 | $465 | | Stock options | $10 | $124 | $250 | $523 | | Performance stock units | $(118) | $152 | $(150) | $246 | | Total | $(102) | $450 | $502 | $1,617 | Note 17. Zinc Zero Cost Collar The zinc zero cost collar hedge program concluded on December 31, 2022, resulting in no recorded gains or losses in 2023 Realized and Unrealized (Gains) Losses on Zinc Zero Cost Collar (in thousands USD) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Realized (gain) loss on zinc zero cost collar | $0 | $(61) | $0 | $2,396 | | Unrealized gain on zinc zero cost collar | $0 | $(157) | $0 | $(2,276) | | Total | $0 | $(218) | $0 | $120 | - The Company's zinc zero cost collar hedge program concluded on December 31, 2022, leading to no recorded gains or losses in 2023[97][98] Note 18. Other Expense, net Other expenses, net, increased due to currency exchange, streaming interest, and severance costs from workforce reductions Other Expense, net (in thousands USD) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Unrealized currency exchange (gain) loss | $260 | $678 | $599 | $1,200 | | Interest on streaming liabilities | $688 | $257 | $1,237 | $567 | | Severance | $664 | $0 | $1,541 | $0 | | Total | $1,967 | $765 | $4,147 | $1,817 | - Interest expense increased in Q3 2023 due to updated streaming models based on the Technical Report Summary for the Back Forty Project[100] - Severance expenses of $664 thousand for the three months and $1.5 million for the nine months ended September 30, 2023, were incurred due to a reduction in workforce and leadership changes at DDGM in Mexico[100] Note 19. Net Loss per Common Share Basic and diluted net loss per common share are identical due to net losses, rendering dilutive securities non-impactful Net Loss per Common Share Calculation | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss (in thousands) | $(7,341) | $(9,730) | $(12,960) | $(3,038) | | Basic weighted average shares of common stock outstanding | 88,499,327 | 88,391,220 | 88,458,276 | 88,358,188 | | Basic and diluted net loss per common share | $(0.08) | $(0.11) | $(0.15) | $(0.03) | - Options to purchase 1.1 million shares (2023) and 2.1 million shares (2022) had no dilutive effect due to the net loss for the periods[102] Note 20. Fair Value Measurement This note classifies assets and liabilities measured at fair value, detailing valuation methods and derivative gains/losses - Fair value hierarchy prioritizes inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[105][110] Assets Measured at Fair Value (in thousands USD) | Asset | Sep 30, 2023 | Dec 31, 2022 | Input Hierarchy Level | | :-------------------------------- | :----------- | :----------- | :-------------------- | | Cash and cash equivalents | $6,706 | $23,675 | Level 1 | | Accounts receivable, net | $4,714 | $5,085 | Level 2 | | Investment in equity securities-Maritime | $1,211 | $1,559 | Level 1 | | Investment in equity securities-Green Light Metals | $3,608 | $3,611 | Level 3 | Realized/Unrealized Derivatives, net (in thousands USD) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total realized/unrealized derivatives, net | $339 | $(934) | $(205) | $(1,064) | Note 21. Supplementary Cash Flow Information This note breaks down other operating adjustments and write-downs impacting net cash from operations Other Operating Adjustments (in thousands USD) | Adjustment Type | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Unrealized gain on gold and silver rounds | $(3) | $(54) | | Unrealized foreign currency exchange loss | $599 | $1,200 | | Unrealized gain on zinc zero cost collar | $0 | $(2,276) | | Other | $614 | $(164) | | Total other operating adjustments | $1,210 | $(1,294) | Note 22. Segment Reporting Financial information is disaggregated by three geographic segments: Oaxaca, Michigan, and Corporate and Other - The Company operates in three segments: Oaxaca, Mexico (production), Michigan, U.S.A. (advanced exploration), and Corporate and Other[117] Total Assets by Segment (in thousands USD) | Segment | Sep 30, 2023 | Dec 31, 2022 | | :---------------- | :----------- | :----------- | | Oaxaca, Mexico | $92,746 | $107,301 | | Michigan, USA | $93,354 | $93,199 | | Corporate and Other | $3,592 | $9,598 | | Consolidated | $189,692 | $210,098 | Net Loss by Segment (in thousands USD) | Segment | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------- | :-------------------------- | :-------------------------- | | Oaxaca, Mexico | $(1,740) | $13,402 | | Michigan, USA | $(1,832) | $(7,766) | | Corporate and Other | $(9,388) | $(8,674) | | Consolidated | $(12,960) | $(3,038) | Note 23. Subsequent Events The Company received a significant tax sanction notification from the Mexican Tax Administration Services in October 2023 - In October 2023, the Company received a notification from the Mexican Tax Administration Services (SAT) with a sanction of 331 million pesos (approximately $18 million) resulting from a 2015 tax audit[120] - Management is currently assessing the tax notification but believes the 2015 tax return was prepared correctly[120] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial condition and operational results, including production, sales, and liquidity Overview Gold Resource Corporation focuses on low-cost, high-return gold, silver, and other metal projects, with DDGM as its cornerstone asset - Gold Resource Corporation focuses on gold, silver, and other metal projects with objectives of low operating costs and high returns on capital[123] - The Don David Gold Mine (DDGM) in Mexico is the cornerstone asset, producing gold and silver doré, and copper, lead, and zinc concentrates[123] - The Back Forty Project in Michigan completed optimization work in Q3 2023, with a Technical Report Summary filed, indicating a more robust economic project with no planned wetland impacts[124] Review of Strategic Alternatives The Board of Directors initiated a formal review of strategic alternatives, including a potential sale, to maximize shareholder value - The Company's Board of Directors has initiated a formal review process to evaluate strategic alternatives, including a potential sale of the Company, to maximize shareholder value[125] - There is no deadline or definitive timetable for the completion of this strategic review, and no assurance regarding its results or outcome[126] DDGM Operational Update DDGM focused on safety, efficiency, and cost-saving initiatives in Q3 2023, achieving zero lost time injuries despite lower Net Smelter Return - DDGM achieved zero lost time injuries for Q3 2023, with a year-to-date LTIFR of 0.11, significantly lower than the Mexican average of 0.89[128] - Production maintained tonnage levels similar to Q1, but a significant portion of material came from lower levels with a decreased Net Smelter Return, necessary for integrating transverse long-hole stoping in Q4[129] - Cost-saving measures implemented include a 10% reduction in headcount, minimizing crusher usage during peak hours, and improving mining cycle efficiencies[130] 2023 DDGM Exploration Update DDGM's Q3 2023 exploration focused on underground expansion and infill drilling, with positive results expected to increase tonnage and grades - Underground exploration and infill drilling continued in Q3 2023 using five diamond-drill rigs within the Arista mine[133] - Preliminary calculations from recent drill results indicate a positive increase in tonnage with higher grades in the Arista and Switchback vein deposits, and an increase in inferred resources for the Gloria and Three Sisters vein systems[134] - Regional exploration focused on evaluating and prioritizing advanced stage projects along the San Jose structural corridor, aiming to define additional priority drill targets[140] Results of Operations - Don David Gold Mine This section compares DDGM's production, grades, recoveries, and sales statistics for Q3 and year-to-date 2023 against 2022 Production Total tonnes milled increased in Q3 2023, but metal production decreased due to lower grades, while year-to-date saw overall reductions Don David Gold Mine Production Statistics | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Tonnes Milled | 116,626 | 110,682 | 346,857 | 375,367 | | Gold (ozs.) | 4,443 | 5,851 | 16,251 | 26,355 | | Silver (ozs.) | 247,159 | 261,256 | 859,651 | 842,636 | | Copper (tonnes) | 276 | 296 | 946 | 1,030 | | Lead (tonnes) | 1,048 | 1,249 | 3,996 | 5,342 | | Zinc (tonnes) | 3,223 | 3,901 | 10,629 | 13,745 | - Q3 2023 metal production for gold, silver, copper, lead, and zinc decreased by 24%, 5%, 7%, 16%, and 17% respectively, compared to Q3 2022, primarily due to lower metal grades[145] - Year-to-date 2023 metal production for gold, copper, lead, and zinc decreased by 38%, 8%, 25%, and 23% respectively, while silver production increased by 2% due to higher silver grades[148] Grades & Recoveries Average gold and silver grades and recoveries decreased in Q3 2023 due to lower metal grades and challenging mineralization Don David Gold Mine Average Grades | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Average Gold Grade (g/t) | 1.52 | 1.98 | 1.82 | 2.57 | | Average Silver Grade (g/t) | 73 | 80 | 85 | 75 | | Average Copper Grade (%) | 0.32 | 0.37 | 0.35 | 0.37 | | Average Lead Grade (%) | 1.29 | 1.59 | 1.56 | 1.86 | | Average Zinc Grade (%) | 3.24 | 4.21 | 3.61 | 4.38 | Don David Gold Mine Average Recoveries | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Average Gold Recovery (%) | 77.9 | 82.9 | 79.7 | 84.3 | | Average Silver Recovery (%) | 89.7 | 91.3 | 91.0 | 92.7 | | Average Copper Recovery (%) | 74.5 | 72.8 | 77.0 | 75.0 | | Average Lead Recovery (%) | 69.5 | 71.0 | 74.1 | 76.3 | | Average Zinc Recovery (%) | 85.2 | 83.7 | 84.8 | 83.5 | - Gold and silver recoveries decreased in Q3 2023 (6% for gold, 2% for silver) and year-to-date (5% for gold, 2% for silver) due to different mineralization containing high quartz, which negatively impacts flotation and gold recovery[147][151] Sales Statistics Net sales decreased for both Q3 and year-to-date 2023, driven by lower sales volumes and zinc prices Don David Gold Mine Sales Statistics (in thousands USD, except prices) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total sales, net | $20,552 | $23,869 | $76,587 | $106,350 | | Gold (ozs.) sold | 3,982 | 5,478 | 14,777 | 22,605 | | Silver (ozs.) sold | 208,905 | 225,012 | 777,977 | 722,041 | | Average Gold ($ per oz.) | $1,934 | $1,627 | $1,948 | $1,823 | | Average Silver ($ per oz.) | $23.61 | $18.54 | $23.86 | $21.65 | | Average Zinc ($ per tonne) | $2,195 | $3,186 | $2,648 | $3,828 | - Net sales decreased by 14% in Q3 2023 and 28% year-to-date, primarily due to decreased sales volumes and lower realized metal prices for zinc[154][174] - Average realized prices for gold, silver, copper, and lead increased in Q3 2023 compared to Q3 2022, while zinc's average price decreased by 31%[156] Third quarter 2023 compared to third quarter 2022 Metal sales volumes decreased across all metals in Q3 2023, while average realized prices varied, with zinc significantly declining - Gold sales decreased by 27%, silver by 7%, copper by 13%, lead by 10%, and zinc by 13% in Q3 2023 compared to Q3 2022[155] - Average realized metal prices for gold, silver, copper, and lead increased by 19%, 27%, 15%, and 17% respectively in Q3 2023, while zinc's average price decreased by 31%[156] - Financial results were unfavorably impacted by the strengthening Mexican peso and lower zinc prices[154] Year-to-date 2023 compared to year-to-date 2022 Year-to-date 2023 saw decreased sales volumes for most metals, mixed average price changes, and unfavorable impacts from the Mexican peso and zinc prices - Year-to-date 2023, gold sales decreased by 35%, copper by 7%, lead by 17%, and zinc by 19%, while silver sales increased by 8%[158] - Average realized metal prices for gold and silver increased by 7% and 10% respectively year-to-date 2023, while copper and zinc prices decreased by 4% and 31%, with lead's average price remaining unchanged[159] - Financial results were unfavorably impacted by the strengthening Mexican peso and lower zinc prices realized in 2023[157] Financial Measures This section analyzes net sales, total cost of sales, mine gross profit, and net loss, comparing Q3 and year-to-date 2023 against the prior year Summary of Financial Data (in thousands USD) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Sales, net | $20,552 | $23,869 | $76,587 | $106,350 | | Total cost of sales | $24,963 | $26,047 | $79,238 | $81,186 | | Mine gross (loss) profit | $(4,411) | $(2,178) | $(2,651) | $25,164 | | Net loss | $(7,341) | $(9,730) | $(12,960) | $(3,038) | Third quarter 2023 compared to third quarter 2022 Net sales decreased by 14% in Q3 2023, leading to a 103% increase in mine gross loss, despite a $2.4 million improvement in net loss due to tax benefits - Net sales decreased by $3.3 million (14%) in Q3 2023 compared to Q3 2022, driven by decreased sales volumes and lower realized zinc prices[166] - Total cost of sales decreased by 4% to $25.0 million, primarily due to a $0.4 million decrease in production costs and a $0.8 million decrease in depreciation expense[167] - Mine gross loss increased by $2.2 million (103%) to $4.4 million, mainly due to the larger decrease in net sales compared to the reduction in costs[168] - Net loss for Q3 2023 was $7.3 million, an improvement of $2.4 million compared to Q3 2022, primarily attributable to a higher tax benefit[173] Year-to-date 2023 compared to year-to-date 2022 Year-to-date net sales decreased by 28%, shifting mine gross profit to a loss, and increasing net loss by $10.0 million - Year-to-date net sales decreased by $29.8 million (28%) to $76.6 million, primarily due to decreased sales volumes[174] - Total cost of sales decreased by 2% to $79.2 million, mainly due to a $2.1 million decrease in production costs, despite higher reclamation and remediation expenses[175] - Mine gross profit decreased by $27.8 million (111%), shifting from a $25.2 million profit in 2022 to a $2.7 million loss in 2023[176] - Net loss for the nine months ended September 30, 2023, increased by $10.0 million to $13.0 million, primarily attributable to the mine gross loss[180] Other Costs and Expenses, Including Taxes This section details changes in general and administrative, exploration, stock-based compensation, other expenses, and income tax provisions Other Costs and Expenses, Including Taxes (in thousands USD) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | General and administrative expenses | $1,764 | $1,799 | $5,087 | $5,618 | | Mexico exploration expenses | $1,540 | $1,143 | $3,974 | $3,190 | | Michigan Back Forty Project expenses | $420 | $3,830 | $1,265 | $6,925 | | Stock-based compensation | $(102) | $450 | $502 | $1,617 | | Other expense, net | $1,967 | $765 | $4,147 | $1,817 | | (Benefit) provision for income taxes | $(2,659) | $(217) | $(4,666) | $8,915 | - Back Forty Project expenses decreased significantly by 89% in Q3 and 82% year-to-date due to the completion of optimization work[184][192] - Income tax benefit increased in Q3 2023 due to the loss primarily occurring in Mexico, and year-to-date due to a decrease in net income before income taxes[189][196] Other Non-GAAP Financial Measures This section discusses non-GAAP financial measures, including total cash cost and all-in sustaining cost (AISC) per gold equivalent ounce sold Non-GAAP Financial Measures (per AuEq oz sold) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total cash cost after co-product credits | $1,839 | $1,103 | $1,210 | $314 | | Total consolidated all-in sustaining cost after co-product credits | $2,669 | $1,838 | $1,852 | $944 | | Total all-in cost after co-product credits | $3,001 | $2,457 | $2,082 | $1,329 | Third quarter 2023 compared to third quarter 2022 Total cash cost, AISC, and total all-in cost per AuEq oz sold increased in Q3 2023 due to lower co-product credits, decreased AuEq ounces, and a strengthening Mexican peso - Total cash cost after co-product credits per AuEq oz sold increased to $1,839 in Q3 2023 from $1,103 in Q3 2022, due to lower co-product credits and a 19% decrease in AuEq ounces sold[198] - Total consolidated AISC after co-product credits per AuEq oz sold increased to $2,669 in Q3 2023 from $1,838 in Q3 2022, directly related to higher cash costs[199] - Total all-in cost after co-product credits per AuEq oz sold increased to $3,001 in Q3 2023 from $2,457 in Q3 2022, due to higher AISC and lower exploration expense for Back Forty optimization[200] Year-to-date 2023 compared to year-to-date 2022 Year-to-date 2023 saw increases in total cash cost, AISC, and total all-in cost per AuEq oz sold, driven by lower co-product credits and decreased AuEq ounces - Year-to-date 2023, total cash cost after co-product credits per AuEq oz sold increased to $1,210 from $368 in 2022, driven by lower co-product credits, a 22% decrease in AuEq ounces sold, and a 6% increase in treatment and refining charges[201] - Total consolidated AISC after co-product credits per AuEq oz sold increased to $1,852 from $998, directly related to higher cash costs, partially offset by lower sustaining capital expenditures[204] - Total all-in cost after co-product credits per AuEq oz sold increased to $2,082 from $1,383, due to higher AISC, partially offset by lower Back Forty costs as optimization work neared completion[205] 2023 Capital and Exploration Investment Summary Total capital and exploration investment for the nine months ended September 30, 2023, was $14.99 million, within full-year guidance 2023 Capital and Exploration Investment Summary (in thousands USD) | Investment Category | 9 Months Ended Sep 30, 2023 | 2023 Full Year Guidance | | :-------------------------------- | :-------------------------- | :---------------------- | | Subtotal of Sustaining Investments | $9,395 | $9 - 11 million | | Subtotal of Growth Investments | $5,595 | $6 - 7 million | | Total Capital and Exploration | $14,990 | $15 - 18 million | - The Company invested $13.3 million in Mexico through Q3 2023, focusing on environmental, social, and governance programs, operational efficiencies, and sustainability[207] - Year-to-date, $1.3 million was invested in optimization work and permitting initiatives at the Back Forty Project[207] Underground and Exploration Development Mine development in Q3 2023 included 87 meters at a cost of $0.3 million, with year-to-date investments in exploration and safety initiatives - 87 meters of mine development, costing $0.3 million, was completed in Q3 2023, including ramps, access, ventilation shafts, and exploration development drifts[209] - Year-to-date, $1.5 million has been invested in 520 meters of development for exploration purposes[209] - Investments were also made in additional ground support and improved ventilation as part of ongoing safety initiatives[209] Back Forty Feasibility and Permitting Back Forty Project optimization completed in Q3 2023, yielding a robust economic project with no wetland impacts to aid permitting - Optimization work on the Back Forty Project was completed in Q3 2023, with the Technical Report Summary (S-K 1300) filed on October 26, 2023[210] - The optimization results indicate a more robust economic project with no planned impacts to wetlands, aiming to facilitate a successful mine permitting process[210] - The Board of Directors continues to evaluate potential alternative options for developing the Back Forty Project[210] Non-GAAP Measures This section defines non-GAAP financial measures used for internal evaluation and industry comparison, with base metals considered co-products - Non-GAAP measures include total cash cost after co-product credits per ounce and total all-in sustaining cost (AISC) after co-product credits per ounce[212] - These measures are used by management for evaluating operating results, comparing performance with peer groups, and decision-making[122] - Copper, lead, and zinc are considered co-products, and their revenue is applied as a reduction to total cash costs in the calculation of total cash cost after co-product credits[213] Reconciliations to U.S. GAAP This section reconciles non-GAAP financial measures to their most directly comparable U.S. GAAP measures for the periods presented Reconciliation of Non-GAAP Measures to U.S. GAAP (in thousands USD, except per oz) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Gold equivalent ounces sold (oz) | 6,532 | 8,042 | 24,306 | 31,180 | | Total production costs | $18,957 | $19,380 | $59,109 | $61,176 | | Total cash cost after co-product credits | $12,012 | $8,871 | $29,411 | $9,793 | | Total cash cost after co-product credits per AuEq oz sold | $1,839 | $1,103 | $1,210 | $314 | | Consolidated all-in sustaining cost after co-product credits | $17,431 | $14,783 | $45,006 | $29,438 | | Total consolidated all-in sustaining cost after co-product credits per AuEq oz sold | $2,669 | $1,838 | $1,852 | $944 | | Total all-in cost after co-product credits | $19,600 | $19,756 | $50,601 | $41,447 | | Total all-in cost after co-product credits per AuEq oz sold | $3,001 | $2,457 | $2,082 | $1,329 | - Co-product credits for prior year (2022) comparable numbers were adjusted to include only realized embedded derivatives for co-products, excluding unrealized gains or losses, to better represent cash cost[219] - Prior year (2022) comparable numbers for reclamation and remediation were adjusted to be included in all-in sustaining cost, as it is part of normal operating activities[221] Trending Highlights This section presents quarterly trending data for operating and financial metrics from Q1 2022 to Q3 2023 Quarterly Operating Data Trends | Metric | 2022 Q1 | 2022 Q2 | 2022 Q3 | 2022 Q4 | 2023 Q1 | 2023 Q2 | 2023 Q3 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Total tonnes milled | 136,844 | 129,099 | 110,682 | 116,616 | 117,781 | 113,510 | 116,626 | | Average Gold Grade (g/t) | 3.00 | 2.63 | 1.98 | 2.51 | 2.33 | 1.59 | 1.52 | | Average Silver Grade (g/t) | 81 | 64 | 80 | 109 | 94 | 86 | 73 | | Gold (ozs.) production | 11,187 | 9,317 | 5,851 | 7,767 | 7,171 | 4,637 | 4,443 | | Silver (ozs.) production | 332,292 | 249,088 | 261,256 | 370,768 | 322,676 | 289,816 | 247,159 | | Total sales, net (in thousands) | $45,417 | $37,064 | $23,869 | $32,374 | $31,228 | $24,807 | $20,552 | | Net income (loss) (in thousands) | $4,019 | $2,673 | $(9,730) | $(3,283) | $(1,035) | $(4,584) | $(7,341) | Trending Highlights of Non-GAAP Measures This section provides quarterly trending data for non-GAAP measures, including gold equivalent ounces sold and various cost metrics Quarterly Non-GAAP Measures Trends (per AuEq oz sold) | Metric | 2022 Q1 | 2022 Q2 | 2022 Q3 | 2022 Q4 | 2023 Q1 | 2023 Q2 | 2023 Q3 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Gold equivalent ounces sold (oz) | 11,729 | 11,475 | 8,042 | 11,621 | 10,055 | 7,689 | 6,532 | | Total cash cost after co-product credits per AuEq oz sold | $(163) | $247 | $1,103 | $842 | $711 | $1,333 | $1,839 | | Total consolidated all-in sustaining cost after co-product credits per AuEq oz sold | $462 | $805 | $1,838 | $1,487 | $1,221 | $1,990 | $2,669 | | Total all-in cost after co-product credits per AuEq oz sold | $774 | $1,099 | $2,457 | $1,740 | $1,404 | $2,196 | $3,001 | Liquidity and Capital Resources Working capital and cash decreased significantly, primarily due to operating and investing activities, though liquidity is deemed sufficient for the near term - Working capital decreased by $7.6 million (36%) to $13.8 million as of September 30, 2023, from $21.4 million at December 31, 2022[228] - Cash and cash equivalents decreased by $17.0 million to $6.7 million as of September 30, 2023, primarily due to capital and exploration expenditures and mining royalty tax payments[230] - Net cash used in operating activities for the nine months ended September 30, 2023, was $7.0 million, a shift from a $7.9 million inflow in the prior year, due to lower net sales and higher production costs[232] - The Company believes it has sufficient liquidity and capital resources to fund operations and corporate activities for the foreseeable future, despite current macro risk factors[235] Accounting Developments Refer to Note 2 of the financial statements for a discussion of recently adopted and issued accounting pronouncements - For information on recently adopted and issued accounting pronouncements, refer to Note 2 – Recently Adopted Accounting Standards in Item 1[238] Forward-Looking Statements Forward-looking statements are subject to inherent uncertainties and risks, with actual results potentially differing materially from expectations - Forward-looking statements are identified by words like 'anticipate,' 'continue,' 'estimate,' 'expect,' 'may,' 'could,' 'will,' 'project,' 'should,' 'believe,' and similar expressions[239] - These statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of the Company's control[240] - Important factors that could cause actual results to differ include commodity price fluctuations, mine protests, geological challenges, economic conditions, interest and exchange rate changes, and the inherent uncertainty of Mineral Resource and Mineral Reserve estimates[242][246] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to commodity price, foreign currency, provisional sales contract, interest rate, and equity price risks Commodity Price Risk The Company's financial condition is highly dependent on fluctuating metal prices, and it may consider derivatives in the future - The Company's results are largely dependent on the market prices of gold, silver, copper, lead, and zinc, which fluctuate widely due to numerous factors beyond its control[248] - Declining metal prices could render a mineral project uneconomic or delay its implementation, materially affecting the business[249] - The zinc zero cost collar hedge program concluded on December 31, 2022; the Company has no current derivative contracts for other metals but may consider them in the future[248] Foreign Currency Risk Revenue is not materially impacted by foreign currency, but 50% to 60% of expenses are in non-U.S. dollar currencies, primarily the Mexican peso - Foreign currency exchange rate fluctuations do not materially impact revenue, as gold, silver, copper, lead, and zinc are sold worldwide in U.S. dollars[250] - Approximately 50% to 60% of expenses are paid in currencies other than the U.S. dollar, primarily the Mexican peso[251] - A rising Mexican peso relative to the U.S. dollar can increase costs and adversely affect operating results[251] Provisional Sales Contract Risk Concentrate sales contracts include provisional pricing terms, creating embedded derivatives that are marked to market through revenue - Concentrate sales contracts feature provisional pricing, which includes an embedded derivative that is separated from the host contract for accounting purposes[254] - The embedded derivative is adjusted to market through revenue each period prior to settlement, meaning changes in metal prices can impact previously recorded revenues[254] Interest Rate Risk The Company considers its exposure to interest rate risk to be insignificant, related to immaterial office lease payments - The Company's interest rate risk exposure is considered insignificant, primarily related to immaterial payments for office leases[255] Equity Price Risk The Company may seek future equity funding, but its volatile common stock price poses a risk to obtaining acceptable prices - The Company may seek additional funding through the sale of common stock and other equity in the future[256] - The price of the Company's common stock has been volatile and may continue to be, posing a risk to obtaining new equity funding at acceptable prices[256] ITEM 4. Controls and Procedures This section details management's evaluation of disclosure controls and procedures and reports on changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management concluded that the Company's disclosure controls and procedures were effective as of September 30, 2023 - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2023[257] - It was concluded that the disclosure controls and procedures were effective in ensuring timely and accurate reporting of required information[257] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the three months ended September 30, 2023 - No changes occurred during the three months ended September 30, 2023, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting[258] Part II - OTHER INFORMATION ITEM 1. Legal Proceedings An injunction filed by a local Ejido community against the Mexican federal government regarding concession titles remains ongoing - A local Ejido community filed an injunction in February 2020 against the Mexican federal government, seeking cancellation of several concession titles[260] - The federal government ordered a suspension of excavation, drilling, tunneling, and mineral exploitation work on the named concessions[260] - The lawsuit has not progressed to a final ruling, and the Don David Gold Mine does not currently perform such works in the affected concessions[260] ITEM 1A. Risk Factors There have been no material changes to the risk factors previously described in the Company's 2022 Annual Report on Form 10-K - There have been no material changes from the risk factors described in the 2022 Annual Report[262] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[263] ITEM 3. Defaults upon Senior Securities No defaults upon senior securities to report for the period - No defaults upon senior securities to report[264] ITEM 4. Mine Safety Disclosures Mine safety disclosure requirements are not applicable to the Company's Michigan advanced exploration project - Mine safety disclosure requirements are not applicable to the Michigan, USA, advanced exploration project as it is not yet subject to the Mine Safety and Health Administration jurisdiction[265] ITEM 5. Other Information No other information to report for the period - No other information to report[266] ITEM 6. Exhibits This section lists the exhibits filed or furnished with the Form 10-Q, including certifications and financial statements in inline XBRL - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[267] - Financial statements from the Quarterly Report on Form 10-Q are formatted in inline XBRL, including the Condensed Consolidated Interim Balance Sheets, Statements of Operations, Changes in Shareholders' Equity, Cash Flows, and Notes[267] Signatures This section contains the required signatures for the Form 10-Q, certifying its submission by the CEO and CFO - The report was signed on November 6, 2023, by Allen Palmiere, Chief Executive Officer, President and Director, and Chet Holyoak, Chief Financial Officer[271]