Gold Resource (US:GORO)2023-11-07 23:48Financial Data and Key Metrics Changes - The company ended the third quarter with a cash balance of $6.7 million, a decrease attributed to increased cash costs and exploration programs [10][12][43] - For Q3, net sales were $21 million, a 14% decrease compared to the same period in 2022, while year-to-date net sales were $76.6 million, down 20% from the previous year [44][43] - The company reported net losses of $7.3 million for Q3, or $0.08 per share, and total net losses of $13 million, or $0.15 per share, for the first nine months of the year [43][44] Business Line Data and Key Metrics Changes - The Don David Gold Mine's total cash cost after product credits was $1,839 per gold equivalent ounce for Q3, with all-in sustaining costs at $2,669 per ounce [11] - Year-to-date, the total cash cost was $1,210 per gold equivalent ounce, and all-in sustaining costs were $1,852 per ounce [11] - The company processed nearly 347,000 tonnes of ore year-to-date, selling approximately 14,800 ounces of gold and 778,000 ounces of silver [7][43] Market Data and Key Metrics Changes - The strengthening of the Mexican peso has significantly impacted operating costs, with approximately 60% of production costs denominated in pesos [12][52] - Zinc prices have decreased from $1.45 a year ago to around $1.17, affecting byproduct revenues [22][31] Company Strategy and Development Direction - The company is focusing on enhancing the profitability of the Don David Mine while exploring strategic alternatives to unlock shareholder value, including potential mergers or acquisitions [12][19][100] - A financial adviser has been engaged to evaluate strategic alternatives, indicating a proactive approach to address market challenges [49][100] - The company plans to scale back exploration efforts and focus on sustaining capital expenditures to manage cash flow effectively [8][39] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in Q3, including lower ore grades and unfavorable market conditions, but expressed optimism for improvements in Q4 [31][122] - The company expects to see increased grades in production starting in Q4 and continuing into 2024, contingent on commodity prices and exchange rates [122][111] - Management emphasized the importance of generating free cash flow to rebuild cash balances and maintain operational productivity [142][110] Other Important Information - The company has identified new areas of mineralization that may enhance future production and resource growth [5][40] - A 10% reduction in the workforce was implemented to decrease operating costs, with potential for further reductions [15][54] Q&A Session Summary Question: What are the impacts of the strengthening peso and lower byproduct credits? - Management noted that about 60% of operating costs are in pesos, and the recent strengthening has increased costs significantly [52][54] Question: Are there plans for hedging against currency fluctuations? - Currently, there are no plans for hedging, but management is open to considering it if the peso strengthens further [69][54] Question: Will the company be profitable in the near future? - Management indicated that profitability is uncertain and heavily dependent on commodity prices and operational efficiency [142][110] Question: What is the focus for the next year? - The primary focus will be on the Don David Mine to ensure it generates sufficient cash flow while exploring other properties cautiously [159][110] Question: Is there any news on the Back Forty Project? - The company is considering further engineering studies for the Back Forty Project, but significant investment will depend on cash availability [99][110]