Gold Resource (US:GORO)2022-05-09 21:07First Quarter 2022 Highlights Gold Resource Corporation achieved strong Q1 2022 financial and operational results, including $4.0 million net income, $31.2 million cash, and 11,729 gold equivalent ounces produced at a negative cash cost, while advancing the Back Forty Project First Quarter 2022 Highlights Gold Resource Corporation achieved strong Q1 2022 financial and operational results, including $4.0 million net income, $31.2 million cash, and 11,729 gold equivalent ounces produced at a negative cash cost, while advancing the Back Forty Project Q1 2022 Financial Highlights | Metric | Value | | :--- | :--- | | Net Income | $4.0 million | | Earnings Per Share (EPS) | $0.05 | | Cash and Cash Equivalents (as of March 31, 2022) | $31.2 million | | Cash Flow from Operating Activities | $4.2 million | | Working Capital (as of March 31, 2022) | $32.4 million | | Shareholder Dividends Distributed | $0.9 million | Q1 2022 Operational & Cost Highlights | Metric | Value | | :--- | :--- | | Gold Equivalent Ounces Produced & Sold | 11,729 oz | | Gold Ounces Sold | 8,381 oz | | Silver Ounces Sold | 265,407 oz | | Total Cash Cost (after co-product credits) | ($121) per AuEq oz | | Total All-in Sustaining Cost (AISC) (after co-product credits) | $499 per AuEq oz | - Strategic initiatives in Q1 2022 included advancing the Back Forty Project's feasibility study, which is expected in H2 2022, and making key personnel appointments to de-risk the project. The company also demonstrated its environmental commitment by processing tailings material from a local community12 Part I - Financial Information This section presents the company's unaudited condensed consolidated interim financial statements and management's discussion and analysis for Q1 2022 Item 1. Financial Statements Unaudited Q1 2022 financial statements show net sales increased to $45.4 million, net income to $4.0 million, and a strong balance sheet with $216.6 million in total assets Condensed Consolidated Interim Balance Sheets The balance sheet as of March 31, 2022, shows total assets at $216.6 million, cash at $31.2 million, and shareholders' equity at $123.7 million Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Current Assets | $60,683 | $58,915 | | Cash and cash equivalents | $31,175 | $33,712 | | Total Assets | $216,583 | $215,762 | | Current Liabilities | $28,319 | $29,659 | | Total Liabilities | $92,868 | $95,012 | | Total Shareholders' Equity | $123,715 | $120,750 | Condensed Consolidated Interim Statements of Operations Q1 2022 net sales surged 67% to $45.4 million, driving mine gross profit up 125% to $19.3 million and net income to $4.0 million ($0.05 EPS) Statement of Operations Summary (in thousands, except per share data) | Account | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Sales, net | $45,417 | $27,268 | | Total cost of sales | $26,094 | $18,693 | | Mine gross profit | $19,323 | $8,575 | | Income before income taxes | $9,370 | $5,121 | | Net income | $4,019 | $2,527 | | Basic and diluted EPS | $0.05 | $0.03 | Condensed Consolidated Interim Statements of Cash Flows Q1 2022 saw $4.2 million cash from operations, offset by $5.4 million in investing and $1.1 million in financing activities, leading to a $2.5 million net cash decrease Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,230 | $6,831 | | Net cash used in investing activities | ($5,416) | ($4,317) | | Net cash used in financing activities | ($1,129) | ($579) | | Net (decrease) increase in cash | ($2,537) | $1,825 | Notes to the Condensed Consolidated Interim Financial Statements Notes detail revenue composition, including $42.1 million from concentrate sales, a $4.1 million zinc collar loss, $42.8 million in stream liabilities, and segment performance Net Sales by Source (Q1 2022, in thousands) | Source | Amount | | :--- | :--- | | Total doré sales, net | $1,257 | | Total concentrate sales, net | $42,126 | | Realized/Unrealized gain on embedded derivative | $2,034 | | Total sales, net | $45,417 | - The company has a zinc zero cost collar derivative to manage price risk. For Q1 2022, this resulted in a realized loss of $1.6 million and an unrealized loss of $2.5 million, recorded as a current liability666779 - Liabilities related to Gold and Silver Stream Agreements for the Back Forty Project totaled $42.8 million as of March 31, 2022. These agreements are with Osisko Bermuda Limited and are tied to future production4458 Segment Net Income (Loss) (Q1 2022, in thousands) | Segment | Net Income (Loss) | | :--- | :--- | | Oaxaca, Mexico | $8,043 | | Michigan, USA | ($1,385) | | Corporate and Other | ($2,639) | | Consolidated | $4,019 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 2022 performance to higher grades and metal prices, with net sales up 67% to $45.4 million, a negative cash cost of ($121) per AuEq ounce, and $31.2 million in cash Results of Operations Q1 2022 results show 83% higher gold production to 11,187 ounces due to improved grades, driving net sales up 67% to $45.4 million and net income up 59% to $4.0 million Production Statistics Comparison | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Tonnes Milled (Arista Mine) | 135,801 | 127,403 | | Average Gold Grade (g/t) | 3.00 | 1.68 | | Gold Production (oz) | 11,187 | 6,097 | | Silver Production (oz) | 332,292 | 307,610 | Sales & Financial Performance (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Sales, net | $45,417 | $27,268 | | Total cost of sales | $26,094 | $18,693 | | Mine gross profit | $19,323 | $8,575 | | Net income | $4,019 | $2,527 | - The increase in cost of sales was primarily due to a $2.6 million increase in depreciation and a $4.8 million increase in production costs, which were impacted by higher consumable prices, royalties, and costs related to the Mexico Labor Reform124 Non-GAAP Measures Non-GAAP measures show Q1 2022 cost improvements, with total cash cost at ($121) per AuEq ounce and AISC at $499 per AuEq oz, driven by strong base metal prices Non-GAAP Cost Reconciliation (per AuEq oz sold) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total cash cost after co-product credits | $(121) | $413 | | Total consolidated all-in sustaining cost (AISC) | $499 | $943 | | Total all-in cost | $811 | $1,275 | - The negative cash cost in Q1 2022 is attributed to the higher amount of co-product credits received from strong base metal prices and a 33% increase in total gold equivalent ounces sold135 Liquidity and Capital Resources As of March 31, 2022, the company has $31.2 million in cash and $32.4 million in working capital, with a $2.5 million net cash decrease due to investing and financing activities - Working capital increased by $3.0 million to $32.4 million at March 31, 2022, from $29.3 million at year-end 2021161 - Cash and cash equivalents decreased by $2.5 million during Q1 2022, from $33.7 million to $31.2 million165 - Long-term liquidity may be impacted by capital requirements to develop the Back Forty Project, with project financing expected in 2023 or 2024164 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from commodity price fluctuations, foreign currency exposure (50-60% of expenses in non-USD), provisional sales contracts, and equity price risk - The company's primary market risk is the fluctuation in prices of gold, silver, copper, lead, and zinc182 - A zinc zero cost collar is used to manage zinc price risk, but no other derivative contracts are in place for other metals182183 - The company is exposed to foreign currency risk, as 50% to 60% of its expenses are paid in currencies other than the U.S. dollar, primarily the Mexican peso186 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to a material weakness in internal control over financial reporting related to the Aquila acquisition - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of March 31, 2022191 - A material weakness exists related to review controls over the accounting and valuation of assets and liabilities from the Aquila acquisition, which involved complex valuations and a compressed timeframe193195196 - Notwithstanding the material weakness, management has concluded that the financial statements in this quarterly report are fairly presented in conformity with U.S. GAAP191 Part II - Other Information This section provides other relevant information, including legal proceedings and updates on risk factors Item 1. Legal Proceedings The company reports no material legal proceedings against it, noting an ongoing injunction against the Mexican government regarding concession titles not impacting current operations - The company is not aware of any material legal proceedings against it199 - An injunction was filed by a local community in February 2020 against the Mexican government regarding certain concession titles. The Don David Gold Mine does not currently operate in the specific concessions mentioned200 Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Form 10-K for the year ended December 31, 2021 - No material changes have occurred from the risk factors described in the company's annual report on Form 10-K for the year ended December 31, 2021201