Gold Resource Corp (GORO) 2023 Q4 法說會逐字稿

Good morning, and welcome to the Gold Resource Corporation Fourth Quarter 2023 financial and operating results conference call. At this time, all participants are in listen only mode following management's presentation, there will be a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star, followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, March 14, 2024, at 10 AM. Eastern time. I will now turn the conference over to Chip holy Oak Gold Resource Corporation, Chief Financial Officer, Mr. Chet Holyoak, you may proceed.

Thank you, Joel, and good morning, to everyone on behalf of the gold resource team, I would like to welcome you to our conference call covering our fourth quarter 2023 results. Before we begin the call there are a couple of housekeeping matters I would like to address, please note that certain statements to be made today are forward-looking in nature and as such are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings. All financial measures are unaudited audited financial statements will be presented in our 2023 form 10-K, which will be filed at a future date, no later than April first, 2024. Once our external audit firm, BDO USA LLP compete completes their audit procedures. Please note, all amounts referenced during this presentation are in U.S. dollars and unless otherwise stated.

Joining me on the call today is Allen Palmiere, our President and CEO, and Alberto Arias, our Chief Operating Officer. Following Allan, Alberto and my prepared remarks, we will be available to answer questions.

This conference call is being webcast. For those of you joining us on the webcast, you can download a PDF copy of the conference call slides. The event will also be available for replay on our website later today.

Yesterday's news release that was issued following the close of the market has been filed with the SEC on EDGAR and is available on our website at w. w. w. dot Gold Resource Corp.com. I will now turn the call over to Alan.

Thank you, Chuck, and good morning, everyone. I'd like to thank you for joining our Q4 conference call. I'd like to address a few points first, and then Alberto will address operations followed by chat with the financial results. Following their remarks, I will then make a few closing comments. We will take questions.

The fourth quarter was another challenging one for us. As previously guided mine sequencing results sequencing resulted in lower ore grades. While this was always in the plan for the latter part of the year, the unexpected strengthening of the peso and the lower than forecast zinc price of zinc adversely affected our byproduct revenues. While commodity prices and foreign exchange rates are beyond our control, we are very focused on those factors that we can control, including costs and productivity.

During 2023, we performed an assessment of our workforce in Mexico that ultimately resulted in a reduction of approximately 10%, and we will continue to evaluate for further reductions. Additionally, we renegotiated certain supply and service contracts that resulted in cost reductions. We obtained certain practices underground to reduce mining cost, reduce dilution and increase productivity.

Concerning our processing plant, we are doing test work to attempt to improve recovery while maintaining concentrate quality. Cash continues to be tight and remains our primary focus. We published a preliminary economic analysis in the Back 40 project last year, which demonstrated the robust nature of the project and confirmed by our assumptions when we first acquired it. The project carry some life of mine NPV at a 6% discount rate of approximately $215 million with an initial capital requirement of $325 million. This study demonstrated the economic viability of the back part of the project.

Now please turn to slide 4, and I'll provide a brief update on our Q4 exploration results. Our exploration program continues to produce good results, which will require result in higher grade material in our reserves and resources and will increase the mine life in the past year and a half we had discovered there's mineralization the line of three sisters, Gloria Marina and the continuation of Splay 31, which had been previously identified, all of which contain high-grade intercepts and will be part of the future of Dan Davis.

As you know, exploration has been the major use of cash over the past two plus years, but the results are more than sufficient to justify the expense and point to the need and desirability of additional drilling in the future.

I will now turn the call over to Alberto for an update on the operations.

Thank you, Alan, and good morning to everyone. I'm thrilled to share our latest achievements indicative of our strong commitment to cultivating a mature health and safety culture. We're proud to announce that our leading indicators continued to surpass expectations, a testament to the dedication and outstanding participation from our leadership team. I'm pleased to report that our collective efforts have resulted in our lowest LPIFR. year, extending our run rate of 0.2, surpassing our yearly target of 0.25. This milestone underscores our relentless pursuit of safety excellence and the profound impact of our team's diligence and collaboration. The challenges persisted in the fourth quarter with inflationary pressure, fluctuating exchange rates and modifications to the operation procedures posing ongoing obstacles. However, our proactive approach to cost saving initiatives remain pivotal in ensuring the continued success of our operations. Despite these challenges, we've bolstered our resilience to endure inflationary pressures and exchange rates fluctuations more effectively this time around in response to the prevailing conditions and with full support from the communities and suppliers with successfully negotiated additional cost saving measures. Those measures have helped alleviate financial strain and position us for greater stability in the face of economic uncertainties.

Production for Q4 reached 111,000 tonnes. This figure is lower than Q3's achievements. Although mine generated 118,000 tonnes, the processing plant faced a major change to the way we collect the water for the process as of December, the PFS has been prepared for reclamation and no longer serves as robust water storage reservoir re-agents. Can they move quickly as such, the optimization of the different flotation circuits was temporarily stabilized and a lower throughput was necessary to help keep consistency processing operator on an average of 1,200 tonnes per day and our two 2024 targets have been adjusted to reflect the change. I am pleased to report that we processed nearly 111,000 tonnes of ore sold approximately 3,760 ounces of gold and 259,000 ounces of silver, equating to over 6,770 equivalent ounces. In addition, we sold 327 tons of copper, approximately 800,000 tons of lead in more than 2,180 tonnes of zinc for the year for the year to date, through December 31, we processed nearly 460,000 tonnes of ore sold, approximately 18,500 ounces of gold and over 1 million ounces of silver equating to over 31,000 gold equivalent ounces. We further sold over 1,230 tonnes of copper to the 4,500 tonnes of lead and close to 11,000 tonnes of zinc.

Turning to slide 6, the GM's capital cost faced difficult obstacles during 2023, including but not limited to maintaining flush cash flow while introducing more development project higher initial stopes beyond 2023. This adjustment was reiterated numerous times to ensure optimal returns on investment. But total underground development for the quarter was approximately $860,000 and $5.8 million for the year. As for the total sustaining capital amount, the company spent $1.6 million and approximately $11 million for the quarter and year, respectively. Promising near-mine exploration results also influenced capital growth expenditure. The team quickly shifted focus and prioritize the models to impact the impact of the new results and the science required in 2024 to align exploration and development efforts to the right targets.

Despite modifications.

Q4's total capital exploration investment came to $2.2 million and a total of $17.2 million for the entire year. This figure is within the range that was provided in guidance between $15 million and $18 million in closing my update on operations, I'd like to acknowledge the resilience and determination of our team as we reflect on the challenges faced in Q4 2023. Despite the obstacles we remain firm in a much stronger, demonstrating our ability to adapt and persevere in the face of adversity.

Looking ahead to 2024 and beyond, we have carefully accounted for the challenges that lie ahead of ahead in our strategic planning, we are confident that the measures we've implemented and the lessons we've learned will position us for success in the coming years.

I'll now pass the presentation over to Chuck to discuss the financial results.

Thank you, Alberto. Turning to Slide 7. During the fourth quarter, we realized a small decrease in our cash balance and we ended the quarter with $6.3 million. Decline in cash is primarily due to increased cash costs at DDGM., which we will discuss in just a moment and to our exploration program. As was mentioned earlier by Alan, cash used in operating activities was $5.2 million for the year and includes over $4.5 million spent on exploration in Mexico and over $1.5 million spent in Michigan related to the Back 40 studies for the fourth quarter 2023 we reported net losses of $3.1 million or $0.03 per share. And for the full year, we reported net losses of $16 million or $0.18 per share for the quarter. Net sales of $21 million were 35% lower than the same period in 2022, due mainly to lower volumes of all metals sold year to date, net sales of $97.7 million were 30% lower than the same period in 2022, also due to lower volumes of all metals sold and significantly lower zinc prices. The lower zinc prices are also impacting cash cost per ounce, which we discuss on the next page. While production costs for the quarter and year of approximately $17 million and $76 million respectively, are slightly lower than the prior year due to significantly lower tonnes processed, along with gold equivalent ounces sold resulted in an unfavorable impact on unit costs such as cost per tonne processed and cost per gold equivalent ounce sold. We will discuss this in a bit more in the next page.

Depreciation for the period is largely in line with the depreciation for the same period in 2022.

Finally, mining gross profit is lower in 2023, primarily due to the lower sales, not being proportionately offset by lower production costs.

Turning to slide 8, we will discuss cash costs for the quarter and year for the quarter. Don, David Gold Mines.

Total cash cost after co-product credits was $1,397 per gold equivalent ounce. And total all-in sustaining costs per gold equivalent ounce sold was $1,664 per ounce for the year, Don, David Gold Mines. Total cash cost after co-product credits was $1,250 per gold equivalent ounce sold and total all-in sustaining costs for gold equivalent ounces sold was $1,630 an ounce. There are five key drivers related to the increase in cash cost per gold equivalent ounce sold, the first reduction in gold equivalent ounces sold, second, a reduction on co-product credits. Third, the strengthening of the Mexican peso, fourth treatment charges and 50 other production cost increases such as power and transportation. The gold equivalent ounces are lower due to the lower grade ore and lower recoveries realized both during the quarter and year to date, the lower co-product credits were the result of lower copper lead and zinc tons being sold as compared to the respective 2022 periods and the significantly lower realized metal price of zinc during the year. The Mexican peso has strengthened against the USD in 2023 with approximately 60% of our production and capital costs originating in the peso. This has resulted in a larger than planned unfavorable impact on our costs. While the above-mentioned drivers have resulted in a negative impact, we have made positive strides in managing the costs that we can control, resulting in a decrease in total cash cost after co-product credits and total all-in sustaining cost per gold equivalent ounce sold from quarter three to quarter four. While the drivers above also resulted in the Company missing guidance on several key performance measures.

We were able to stay within or exceed guidance on other measures such as safety, production, mine development and exploration Alan, back to you.

Thanking Chuck, our share price, along with most of our peer group, continues to languish producing mine in Mexico on a project having a $200 million NPV in Michigan are trading at prices that do not reflect the underlying value. We are not getting any recognition for the intrinsic value of our assets, relatively strong balance sheet and excellent technical and operating teams. Currently, Embraer has and will persist for an indeterminate period of time. And as previously announced, the Board of Directors and management have engaged the services of Cormark Securities, Inc. as a financial advisor to explore and evaluate strategic alternatives to unlock value for our shareholders. There is no certainty around the outcome, but we are confident that the processes necessary to ensure that we are acting in the best interest of all stakeholders.

With that, I'll turn the call over to the operator for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear three-tone prompt acknowledging your request and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys.

Your first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Hello there.

Thanks for taking my question.

Sorry, there's some background noise on the road, as you can probably hear me on during the year, your exploration program actually went quite well on looking ahead a little bit.

I mean, you focus on the U.S., which best risks and the three sisters, some key walk us through priorities by target for 2024.

And maybe same question across your asset base.

operating cycle, and I'm glad you could take the time to call in water on the road, as you alluded to, our exploration program and last year was very successful. We have begun to develop an area of mineralization known as Gloria and the three sisters, and I put it in context. Historically, we've mined two separate regions between swarms, Arista and Switchback. They are separated by distance of about 500 meters. The Gloria and three sisters mineralization is midway between the two. So it's very close to existing infrastructure. We were not able to incorporate much of that material into our SK. 1,300 that was will be filed in the next couple of weeks.

The update as of 12/31/2023 but since our cutoff for data on that SK. 1,300, we have a an additional six months of drilling that material. The results of that drilling are leading us in a direction whereby we will continue to focus on those. Those targets being three, sisters and Gloria and the trend is to the northwest. So we will be pushing out our drill stations as far as we can to extend the resource along strike, we continue to get good results in both Gloria and of the sisters and more importantly or equally importantly, the thicknesses are such that it will allow for highly productive mining. It is not that these the areas of mineralization are not currently included in the life of mine plan incorporated in the S-K 1,300 because we just were unable to get sufficient information to enable us to include it in the resource. However, I can say unequivocally that we will be in those zones within the next two years, notwithstanding what the current life of mine plan state quotas are relatively high up, they are very close to existing infrastructure. The grades are good and as soon as we can develop sufficient data to support detailed mining plans, we will be incorporating those zones into a revised life of mine plan, hopefully by the end of this year. It is the future of John David, and we're very optimistic that the drill results are going to continue to be encouraging and filled that Dan David is not only blessed with a longer life, but higher grades going forward that address that, Michael.

It does, and you actually want us for us to start hinting at my next question here from building on that last question is speaking of exploration.

Your expectations right now are $2 million to $3.5 million, Dan, David and additional Mine $700,000 to $900,000 thousand in Michigan. It might sound like a bit of an in-house geologist right now, but I mean, assuming results continue to impress the way they have, is there room in the budget to raise those numbers a little bit.

We're constrained right now by available cash. Let me address it in a different way. In Michigan. We're not going to be doing any drilling would be the budgeted numbers for Michigan, really our property maintenance and a little bit of technical work, every spare dollar we can devote to exploration in Mexico. We will come we are actually looking at potentially arranging a bit of a debt facility for a couple of reasons. One, we'd like to update our mechanical or mining fleet. But two, we'd like to spend a little bit more money on exploration. And the first successful in arranging that debt facility up partial use of proceeds will be to increase our exploration budget very much for the reasons that you just alluded to, that is the future of the mine.

There are four goals at 21, 60 right now.

Hopefully a couple of extra dollars can be found.

And with that, I'll get back in queue.

Thank you very much.

Thanks, Michael. Appreciate that. Our goals are 2160-ish by any measure, a wonderful price and it's obviously going to help our cash flow above and beyond what we had budgeted. So if we get a corresponding break on the page, so we will be generating sufficient funds internally to expand our exploration program.

Operator?

Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. Your next question comes from Jake Sokalsky with Alliance Global partner. Please go ahead.

Hey, Alan and team. Thanks for taking my questions.

Morning, Terry Carter, doing good.

Thank you. So just starting with costs, I mean I think you just mentioned, obviously the strength of the peso had an impact last year on just looking at your cost guide for this year, can you remind us what FX rate are you assuming in that guide? And I guess how exposed are you to both further strength or even weakness in the peso going forward?

Chuck, do you want to take this one?

Yes.

Currently in the budget that we're using, we're using an exchange rate of 17.1. We are closely monitoring the movement in the peso. As I mentioned, we are 60% of our production capital costs in Mexico are in the Mexican peso.

So there is quite a bit of exposure there.

What's some of the impacts of a 100 basis point move in the peso on our cash flow.

And I will give you that number in just second.

If I just want to elaborate a little bit Jake, the peso right now is at about 16.8. As Chuck indicated, we budgeted at 17.1. The peso was being held up primarily by the carry or carry trade primaries in Mexico was north of 11%, the US at 5% dollars flow. The higher interest rate environments. There is an expectation in Mexico. The Central Bank will start easing the interest rate potentially as soon as this month and the people who are far smarter than I am and have led us to believe that once the central Mexican central bank starts easing off on the interest rate, the carry trade will start to unwind and the peso will by brand towards a more real trend towards a value that's based on economic fundamentals as opposed to Bankrate. The expectation is that it will be 18 and-a-half to 19 to one by the end of the year.

And Alan, I can just add that if the pace of where to go from our budget of 17.5 up to 18.5, it has about a $2 million impact.

So there's a higher degree of sensitivity, Jake.

Yes, again, that's okay. So that's helpful. And then just switching to exploration on, obviously, you announced some pretty strong results in December last year. It sounds like that drilling didn't make it into the updated resource. So I guess, do you feel you need to bring Gloria and the three sisters into a particular resource category before bringing them into the mine plan going forward? Or do you think internally you can you can get to a level of comfort to start accessing that material over the next year or two?

As you mentioned.

I'd like to ask question, Jay, because it doesn't reflect the operational reality as opposed to trying to work within the constraints of an extra 1,300. We are we already have developed some it is the term as DSL does if it does what stope optimizer. So whereby we're already looking at developing mine plans for some of that material as we drill it off. Hopefully, by the end of the year, we will be able to incorporate some of that material into the mine plan for 2025. We won't get there this year, we need more information. But 2025, I think there's a very good chance that we will be incorporating some of that material into the 2025 mine plan as well as the life of mine plan.

Got it.

Okay, perfect. That's all for me. Thanks again.

Thanks.

Should Your next question comes from [Ryan Gold with Heart of New York]. Please go ahead.

Hi, how are you?

I was just wondering, last time you mentioned that you would not do a reverse split. As we know, it's the kiss of death from any stock. However, at the price of 38, then how do you propose to get the extension in order to maintain?

I'm being on the NYSE.

While we're on the NYSE American.

And to date, we have had no communication from the exchange of boats problem with our pricing. I will point out that we're up 25% in the last five days. And that is largely thanks to gold price and the other fact that keep in mind it is we do have a strategic process underway for that process. While I don't want to prejudge the outcome. Covid involve a merger of some sort. It could involve a outright sale of a company. It could result in almost any type our business combination and the option itself, we would hope would give a fair amount of support to our stock price and address the issues you've raised wrong currently, we don't have any plans and we haven't had any correspondence with the exchange.

If I understood, the exchange would not notify you until the year expires. So I would assume by about next month or so, they'll notify you of delisting unless you might be able to go for an extension. I'm not sure how that works.

And would you what would you do at that point if you did not achieve and incorporating what you just stated and what would you do at that point? Could you go for an extension or would you continue and just to delist the stock to a different outcome.

First alternative, it's available to us, obviously, obviously Beach to obtain an extension.

Can you get an extension.

I can't answer the top of my head. I have not specifically explored that with legal counsel. So like I'm sorry, but I will attempt to find out and revert to you revert back to you.

Great, Okay, what's the second.

I'm sorry.

You said, that's the first, what's the second --

That's assuming we are not involved in a transaction and we don't have any other alternatives. So it's status quo and exchanged came to us and said they wanted to de-list. We would look at an alternative trading platform and a different exchange.

Right. So you would not do a reverse split, which was destroyed in everything that you have. So you wouldn't even consider.

I know I I'm very uncomfortable, and I mentioned that certainly I'm very uncomfortable with the reverse split because they I've yet to see one that does anything other than destroy value.

Exactly.

Okay.

Thank you very much.

I would that would not be I'm speaking here without having Board approval of it, but I am quite confident that the Board would agree with me in that it's not a solution that we would want to pursue.

Great.

Okay. Wishing you good luck of things turn out the right way by stopping criteria.

Thank you. I appreciate it.

My pleasure.

There are no further questions at this time. I will now turn the call over to Allen Palmiere. Please go ahead.

Thank you, operator, and thank you all for participating in our end-of-year and Q4 conference call. The world can change very quickly in the mining industry, as evidenced by the fact that we are now seeing gold prices that are setting all time findings. Our stock is beginning to respond to the higher price of gold. We do have the strategic initiative underway to identify a mechanism by which we can improve or increase shareholder value. We're very aware of the problem of a single mine asset. And in order to create value, we would likely to see a merger or a transaction whereby there were two or three operating entities within the corporate umbrella. While that might not be the final stage, it would certainly get us well north of 100,000 ounces and it would be a big step along the way to achieving the size necessary to enable us to start gaining some attention in the marketplace.

Again, I thank you all for participating, and we will be talking relatively soon when we have our first quarter of 2024 conference call. Thank you very much and back to you, operator.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.