Gold Resource Corporation Reports Third Quarter Net Income of $5.0 Million, or $0.07 Per Share

Rhea-AI Summary

Gold Resource Corporation (GORO) reported strong Q3 2020 results, producing 12,575 gold ounces and 333,761 silver ounces, contributing to consolidated net revenue of $42.3 million. The company highlighted record production from its Nevada Mining Unit, with a 51% increase over Q2. GORO has returned $115 million to shareholders since 2010 and is set to spin off its Nevada unit, Fortitude Gold Corporation, to enhance shareholder value. The company reported a net income of $5 million or $0.07 per share.

Positive

• Record third quarter production of 12,575 gold ounces and 333,761 silver ounces.
• Consolidated revenue of $42.3 million, a significant recovery post-Q2 shutdown.
• 51% increase in gold production from Nevada Mining Unit compared to Q2 2020.
• Spin-off of Nevada Mining Unit expected to unlock additional shareholder value.
• $31.3 million cash balance at quarter-end, an increase from $11.1 million at the beginning of the year.

Negative

• Oaxaca Mining Unit production down from prior year (4,728 gold ounces vs. 7,462 ounces).
• Net income decreased significantly in the nine months ended September 30, 2020 ($68,000) compared to $5.7 million in the same period in 2019.

COLORADO SPRINGS, CO, Nov. 02, 2020 (GLOBE NEWSWIRE) -- via NewMediaWire -- Gold Resource Corporation (NYSE American: GORO) (the “Company”, “We”, “Our” or “GRC”) reported consolidated production results for the third quarter ended September 30, 2020 of 12,575 gold ounces and 333,761 silver ounces.  In addition to precious metals, the Company produced base metals resulting in consolidated net revenue of $42.3 million for the quarter.  Gold Resource Corporation is a gold and silver producer, developer and explorer with operations in Oaxaca, Mexico and Nevada, USA.  The Company has returned $115 million to its shareholders in consecutive monthly dividends since July 2010 and offers its shareholders the option to convert their cash dividends into physical gold and silver and take delivery.

“Our successful third quarter demonstrates our strength and determination,” stated Gold Resource Corporation’s CEO and President, Mr. Jason Reid.  “Despite the mandatory two-month shutdown in Mexico during the second quarter, our Oaxaca Mining unit is back to generating free cashflow while putting employee and community health and safety first.  Nevada also delivered on generating free cash flow with its record quarterly gold production, a 51% increase over the prior quarter, while continuing rigorous COVID protocols.  Additionally, we made a deliberate strategic move to unlock and increase shareholder value from both mining units by initiating the spin-off of the Nevada Mining Unit to shareholders as Fortitude Gold Corporation.”

Q3 2020 HIGHLIGHTS

• On July 1, 2020, we celebrated 10 years of production, over $1 billion in revenue and $114 million in shareholder dividends;
• Record gold production from Isabella Pearl of 7,847 gold ounces;
• Consolidated production of 12,575 gold ounces and 333,761 silver ounces;
• $42.3 million consolidated net sales bringing year-to-date September 30, 2020 sales to $91.4 million;
• Net income of $5.0 million or $0.07 per share;
• Total Oaxaca Mining Unit cash cost after by-product credits of $589 per ounce;
• Total Nevada Mining Unit cash cost after by-product credits of $935 per ounce;
• $31.3 million cash balance at September 30, 2020, an increase of $20.2 million from the December 31, 2019 balance of $11.1 million;
• Cash from operating activities of $17.7 million for the nine months ended September 30, 2020, an increase of 127% from same period in 2019;
• Working capital at September 30, 2020 of $50.0 million, an increase of 120% from December 31, 2019;
• $0.7 million dividend distributions, or $0.01 per share for the quarter;
• On August 6, 2020, we announced Ms. Kim Perry would transition from the Board of Directors to fill the Chief Financial Officer role for retiring Mr. John Labate. The Board of Directors’ nominating committee is actively recruiting for the vacant Board of Director’s seat;
• Subsequent to the quarter close, we announced on October 5, 2020, the intent to spin-off the Nevada Mining Unit to its shareholders as a separate publicly traded company, Fortitude Gold Corporation, to further create shareholder value.

Overview of Q3 2020 Results

Record third quarter production from the Company’s Nevada Mining Unit (NMU) totaled 7,847 gold ounces, an increase of 51% over Q2 2020.  Through the first three quarters of 2020, NMU gold production totaled 16,747 gold ounces.  The third quarter was the first full quarter that the Company was able to regularly access portions of the deposit’s high-grade “Pearl” zone, while also mining the deposit’s lower grade “Isabella” zone.  Gold Resource Corporation remains on track to achieve its annual production target of 40,000 gold ounces in 2021.

Third quarter Oaxaca Mining Unit (OMU) production totaled 4,728 gold ounces, 324,592 silver ounces, 428 copper tonnes, 2,157 lead tonnes and 5,538 zinc tonnes.  Through the first three quarters of 2020, OMU production numbers total 13,619 gold ounces, 912,464 silver ounces, 1,162 copper tonnes, 5,811 lead tonnes and 14,386 zinc tonnes. 

Third quarter NMU sales from the Isabella Pearl mine totaled 8,396 gold ounces at a total cash cost of $935 per ounce (after by-product credits) at an average realized price of $1,901 per ounce.  Third quarter OMU sales totaled 7,898 precious metal gold equivalent ounces at a total cash cost of $589 per ounce (after by-product credits).  OMU average realized metal prices during the quarter included $1,887 per ounce and $25.47 per ounce*.  The Company recorded net income of $5.0 million, or $0.07 per share, and paid $0.7 million to its shareholders in dividends, or $0.01 per share during the quarter. Cash and cash equivalents at quarter end totaled $31.3 million.

*Average realized metal prices include final settlement adjustments for previously unsettled provisional sales.  Some provisional sales may remain unsettled from one period into the next.  Realized prices will therefore vary from average spot metal market prices upon final settlement.

COVID-19

The Company previously withdrew its 2020 production outlook for both its Oaxaca and Nevada Mining Units following the impacts and uncertainties of the global pandemic, the two-month mandatory governmental suspension of Mexican operations in April 2020, and uncertainty of potential future outbreaks or governmental responses to the pandemic.  Both mining units operated continuously during the third quarter along with continued health screening protocols for COVID-19 prevention and mitigation.  During the third quarter, Nevada identified one positive case of COVID-19 while Mexico identified 29 positive cases. Due to the rigorous protocols in place, these cases were promptly identified and mitigated to ensure the health and safety of our employees and the communities in which we operate.

Nevada Mining Unit Spin-Off

Subsequent to the quarter, on October 5, 2020, the Company announced its intention to spin-off its Nevada Mining Unit to shareholders as a separate publicly traded company, Fortitude Gold Corporation.  100% of the Nevada Mining Unit will be distributed on a pro rata basis to shareholders of record on the transaction execution date.  Following completion of the spin-off, the Gold Resource Corporation will hold all of the assets and related liabilities of the Oaxaca Mining Unit and Fortitude Gold Corporation will hold all of the Nevada assets and related liabilities.  The spin-off does not require shareholder approval and is expected to be tax-free to the shareholders.

The transaction is subject to certain conditions, including the final approval by the Company’s Board of Directors and the receipt of an effective date for the Form S-1 registration statement filed by Fortitude Gold Corporation on October 19, 2020 with the Securities and Exchange Commission.  The transaction is targeted to be completed by year-end 2020 or the first quarter of 2021.

The following Production Statistics tables summarize certain information about our Oaxaca and Nevada Mining Unit operations for the three and nine months ended September 30, 2020 and 2019:

Oaxaca Mining Unit

		Three months ended September 30,						Nine months ended September 30,
		2020			2019			2020			2019
Arista Mine
Milled
Tonnes Milled			136,618			163,259			373,394			469,167
Grade
Average Gold Grade (g/t)			1.25			1.76			1.35			1.72
Average Silver Grade (g/t)			76			85			78			84
Average Copper Grade (%)			0.40			0.39			0.39			0.38
Average Lead Grade (%)			1.93			1.92			1.95			1.91
Average Zinc Grade (%)			5.02			4.70			4.85			4.71
Aguila Open Pit Mine
Milled
Tonnes Milled			16,913			3,640			34,740			23,976
Grade
Average Gold Grade (g/t)			1.35			1.49			1.32			1.76
Average Silver Grade (g/t)			32			58			36			45
Mirador Mine
Milled
Tonnes Milled			-			11,690			7,450			22,540
Grade
Average Gold Grade (g/t)			-			0.76			0.91			0.95
Average Silver Grade (g/t)			-			197			130			203
Combined
Tonnes milled			153,531			178,589			415,584			515,683
Tonnes Milled per Day (1)			1,745			2,007			1,880			1,967
Metal production (before payable metal deductions) (2)
Gold (ozs.)			4,728			7,462			13,619			21,881
Silver (ozs.)			324,592			473,810			912,464			1,304,975
Copper (tonnes)			428			492			1,162			1,407
Lead (tonnes)			2,157			2,459			5,811			6,916
Zinc (tonnes)			5,538			6,057			14,386			17,949

---

1. Based on actual days the mill operated during the period.
2. The difference between what we report as "Metal Production" and "Metal Sold" is attributable to the difference between the quantities of metals contained in the concentrates we produce versus the portion of those metals actually paid for according to the terms of our sales contracts. Differences can also arise from inventory changes related to shipping schedules, or variances in ore grades and recoveries which impact the amount of metals contained in concentrates produced and sold.

Nevada Mining Unit

	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Ore mined
Ore (tonnes) (1)		188,048			82,169			490,620			770,446
Gold grade (g/t)		2.02			0.75			1.60			0.70
Low-grade stockpile (tonnes)
Ore (tonnes)		51,977			83,394			70,467			472,120
Gold grade (g/t)		0.50			0.47			0.52			0.52
Pre-strip waste (tonnes)		-			1,111,259			1,346,316			2,514,809
Waste (tonnes)		1,437,428			136,632			3,597,770			432,530
Metal production (before payable metal deductions) (2)
Gold (ozs.)		7,847			3,703			16,747			5,381
Silver (ozs.)		9,169			3,487			20,154			4,459

1. Nine months ended September 30, 2019 amount includes run-of-mine ore and initial over liner of the heap leach pad.
2. The difference between what we report as "Metal Production" and "Metal Sold" is attributable to the difference between the quantities of metals contained in the doré we produce versus the portion of those metals actually paid for according to the terms of our sales contracts. Differences can also arise from inventory changes related to shipping schedules, or variances in ore grades and recoveries which impact the amount of metals contained in doré produced and sold.

The following Sales Statistics tables summarize certain information about our Oaxaca and Nevada Mining Unit operations for the three and nine months ended September 30, 2020 and 2019:

Oaxaca Mining Unit

		Three months ended September 30,						Nine months ended September 30,
		2020			2019			2020			2019
Metal sold
Gold (ozs.)			3,619			6,175			11,153			17,201
Silver (ozs.)			316,993			411,088			862,087			1,096,131
Copper (tonnes)			447			451			1,090			1,220
Lead (tonnes)			1,849			2,188			4,827			5,961
Zinc (tonnes)			4,586			6,016			11,534			14,389
Average metal prices realized (1)
Gold ($ per oz.)			1,887			1,490			1,766			1,391
Silver ($ per oz.)			25.47			17.08			20.09			15.94
Copper ($ per tonne)			6,711			5,659			5,954			6,027
Lead ($ per tonne)			1,902			2,018			1,779			1,976
Zinc ($ per tonne)			2,392			2,261			2,114			2,642
Precious metal gold equivalent ounces sold
Gold Ounces			3,619			6,175			11,153			17,201
Gold Equivalent Ounces from Silver			4,279			4,712			9,807			12,561
Total Precious Metal Gold Equivalent Ounces			7,898			10,887			20,960			29,762
Total cash cost before by-product credits per precious metal gold equivalent ounce sold		$	2,803		$	2,187		$	2,767		$	2,247
Total cash cost after by-product credits per precious metal gold equivalent ounce sold (2)		$	589		$	299		$	884		$	327
Total all-in sustaining cost per precious metal gold equivalent ounce sold		$	897		$	622		$	1,174		$	723

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1. Average metal prices realized vary from the market metal prices due to final settlement adjustments from our provisional invoices when they are settled. Our average metal prices realized will therefore differ from the market average metal prices in most cases.
2. Total cash cost after by-product credits are significantly affected by base metals sales during the periods presented.

Nevada Mining Unit

		Three months ended September 30,						Nine months ended September 30,
		2020			2019			2020			2019
Metal sold
Gold (ozs.)			8,396			4,044			17,205			5,175
Silver (ozs.)			9,616			3,534			21,046			4,146
Average metal prices realized (1)
Gold ($ per oz.)			1,901			1,481			1,773			1,455
Silver ($ per oz.)			24.02			17.56			19.86			17.19
Total cash cost before by-product credits per gold ounce sold		$	963		$	1,130		$	1,182		$	999
Total cash cost after by-product credits per gold ounce sold		$	935		$	1,115		$	1,158		$	985
Total all-in sustaining cost per gold ounce sold		$	945		$	1,137		$	1,191		$	1,002

1. Average metal prices realized vary from the market metal prices due to final settlement adjustments from our provisional invoices when they are settled. Our average metal prices realized will therefore differ from the market average metal prices in most cases.

See Accompanying Tables

The following information summarizes the results of operations for Gold Resource Corporation for the three and nine months ended September 30, 2020 and 2019, its financial condition at September 30, 2020 and December 31, 2019, and its cash flows for the nine months ended September 30, 2020 and 2019. The summary data as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 is unaudited; the summary data as of December 31, 2019 is derived from our audited financial statements contained in our annual report on Form 10-K for the year ended December 31, 2019, but do not include the footnotes and other information that is included in the complete financial statements. Readers are urged to review the Company’s Form 10-K in its entirety, which can be found on the SEC's website at www.sec.gov.

The calculation of our cash cost per precious metal gold equivalent ounce, total all-in sustaining cost per precious metal gold equivalent ounce and total all-in cost per precious metal gold equivalent ounce contained in this press release are non-GAAP financial measures. Please see "Management's Discussion and Analysis and Results of Operations" contained in the Company’s most recent Form 10-K for a complete discussion and reconciliation of the non-GAAP measures.

GOLD RESOURCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share amounts)

		September 30,			December 31,
		2020			2019
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	31,313		$	11,076
Gold and silver rounds/bullion			5,241			4,265
Accounts receivable, net			4,777			8,362
Inventories, net			26,977			24,131
Prepaid taxes			-			786
Prepaid expenses and other current assets			2,168			2,032
Total current assets			70,476			50,652
Property, plant and mine development, net			117,409			125,259
Operating lease assets, net			1,411			7,436
Deferred tax assets, net			8,617			4,635
Other non-current assets			5,550			5,030
Total assets		$	203,463		$	193,012
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	11,991		$	14,456
Loans payable, current			840			879
Finance lease liabilities, current			465			446
Operating lease liabilities, current			1,371			7,287
Income taxes payable, net			876			-
Mining royalty taxes payable, net			1,162			1,538
Accrued expenses and other current liabilities			3,754			3,366
Total current liabilities			20,459			27,972
Reclamation and remediation liabilities			6,710			5,605
Loans payable, long-term			165			782
Finance lease liabilities, long-term			84			435
Operating lease liabilities, long-term			51			160
Total liabilities			27,469			34,954
Shareholders' equity:
Common stock - $0.001 par value, 100,000,000 shares authorized:
71,850,665 and 65,691,527 shares outstanding at September 30, 2020 and December 31, 2019, respectively			72			66
Additional paid-in capital			168,114			148,171
Retained earnings			14,863			16,876
Treasury stock at cost, 336,398 shares			(5,884)			(5,884)
Accumulated other comprehensive loss			(1,171)			(1,171)
Total shareholders' equity			175,994			158,058
Total liabilities and shareholders' equity		$	203,463		$	193,012

GOLD RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 (U.S. dollars in thousands, except share and per share amounts)
Unaudited

		Three months ended September 30,						Nine months ended September 30,
		2020			2019			2020			2019
Sales, net		$	42,286		$	40,066		$	91,389		$	96,018
Mine cost of sales:
Production costs			24,027			24,611			62,554			61,169
Depreciation and amortization			7,289			6,117			19,694			13,524
Reclamation and remediation			68			20			136			77
Total mine cost of sales			31,384			30,748			82,384			74,770
Mine gross profit			10,902			9,318			9,005			21,248
Costs and expenses:
General and administrative expenses			2,665			2,194			7,136			6,913
Exploration expenses			1,799			1,129			3,505			3,210
Other (income) expense, net			(537)			600			(871)			518
Total costs and expenses			3,927			3,923			9,770			10,641
Income (loss) before income taxes			6,975			5,395			(765)			10,607
Provision (benefit) for income taxes			1,974			2,417			(833)			4,949
Net income		$	5,001		$	2,978		$	68		$	5,658
Net income per common share:
Basic		$	0.07		$	0.05		$	-		$	0.09
Diluted		$	0.07		$	0.05		$	-		$	0.09
Weighted average shares outstanding:
Basic			70,641,938			65,495,958			68,896,059			63,001,178
Diluted			71,044,528			65,796,899			69,289,349			63,336,131

GOLD RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (U.S. dollars in thousands, except share and per share amounts)
Unaudited

		Nine Months Ended September 30,
		2020			2019
Cash flows from operating activities:
Net income		$	68		$	5,658
Adjustments to reconcile net income to net cash from operating activities:
Deferred income taxes			(4,617)			1,091
Depreciation and amortization			19,953			13,881
Stock-based compensation			1,175			1,581
Other operating adjustments			(815)			314
Changes in operating assets and liabilities:
Accounts receivable			3,585			(6,056)
Inventories			(1,823)			(5,727)
Prepaid expenses and other current assets			(196)			1,505
Other non-current assets			(1,304)			(2,882)
Accounts payable and other accrued liabilities			60			349
Mining royalty and income taxes payable, net			1,610			(1,944)
Net cash provided by operating activities			17,696			7,770
Cash flows from investing activities:
Capital expenditures			(12,915)			(29,166)
Other investing activities			133			2
Net cash used in investing activities			(12,782)			(29,164)
Cash flows from financing activities:
Proceeds from the exercise of stock options			-			98
Proceeds from issuance of stock			18,674			24,449
Dividends paid			(2,062)			(944)
Repayment of loans payable			(656)			(597)
Repayment of finance leases			(332)			(311)
Net cash provided by financing activities			15,624			22,695
Effect of exchange rate changes on cash and cash equivalents			(301)			(306)
Net increase in cash and cash equivalents			20,237			995
Cash and cash equivalents at beginning of period			11,076			7,762
Cash and cash equivalents at end of period		$	31,313		$	8,757
Supplemental Cash Flow Information
Interest expense paid		$	84		$	121
Income and mining taxes paid		$	1,915		$	3,743
Non-cash investing activities:
Change in capital expenditures in accounts payable		$	(2,207)		$	158
Change in estimate for asset retirement costs		$	1,404		$	1,476
Equipment purchased through loan payable		$	-		$	330
Equipment purchased under finance leases		$	-		$	56
Common stock issued for the acquisition of mineral property		$	100		$

FAQ

What were Gold Resource Corporation's production results for Q3 2020?

In Q3 2020, Gold Resource Corporation produced 12,575 gold ounces and 333,761 silver ounces.

What is the significance of Gold Resource Corporation's spin-off announcement?

The spin-off of the Nevada Mining Unit, Fortitude Gold Corporation, aims to enhance shareholder value by separating the assets into a publicly traded entity.

What was the net income reported by Gold Resource Corporation for Q3 2020?

Gold Resource Corporation reported a net income of $5 million, or $0.07 per share, for Q3 2020.

How much cash does Gold Resource Corporation have as of September 30, 2020?

As of September 30, 2020, Gold Resource Corporation had a cash balance of $31.3 million.

What were the consolidated revenues for Gold Resource Corporation in Q3 2020?

Gold Resource Corporation reported consolidated revenues of $42.3 million for Q3 2020.