P1Y0001160791--12-312020Q2falseGOLD RESOURCE CORP0.010.0050.020.010001160791us-gaap:CommonStockMember2020-04-012020-06-300001160791goro:AtMarketOfferingAgreementMember2020-04-012020-06-300001160791us-gaap:CommonStockMember2020-01-012020-06-300001160791us-gaap:CommonStockMember2019-04-012019-06-300001160791goro:AtMarketOfferingAgreementMember2019-04-012019-06-300001160791us-gaap:CommonStockMember2019-01-012019-06-300001160791goro:AtMarketOfferingAgreementMember2019-01-012019-06-300001160791us-gaap:TreasuryStockMember2020-06-300001160791us-gaap:RetainedEarningsMember2020-06-300001160791us-gaap:AdditionalPaidInCapitalMember2020-06-300001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001160791us-gaap:TreasuryStockMember2020-03-310001160791us-gaap:RetainedEarningsMember2020-03-310001160791us-gaap:AdditionalPaidInCapitalMember2020-03-310001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100011607912020-03-310001160791us-gaap:TreasuryStockMember2019-12-310001160791us-gaap:RetainedEarningsMember2019-12-310001160791us-gaap:AdditionalPaidInCapitalMember2019-12-310001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001160791us-gaap:TreasuryStockMember2019-06-300001160791us-gaap:RetainedEarningsMember2019-06-300001160791us-gaap:AdditionalPaidInCapitalMember2019-06-300001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300001160791us-gaap:TreasuryStockMember2019-03-310001160791us-gaap:RetainedEarningsMember2019-03-310001160791us-gaap:AdditionalPaidInCapitalMember2019-03-310001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-3100011607912019-03-310001160791us-gaap:TreasuryStockMember2018-12-310001160791us-gaap:RetainedEarningsMember2018-12-310001160791us-gaap:AdditionalPaidInCapitalMember2018-12-310001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001160791us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300001160791us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-06-300001160791goro:ZincConcentrateMember2020-04-012020-06-300001160791goro:SilverDoreMember2020-04-012020-06-300001160791goro:SilverConcentrateMember2020-04-012020-06-300001160791goro:LeadConcentrateMember2020-04-012020-06-300001160791goro:GoldDoreMember2020-04-012020-06-300001160791goro:GoldConcentrateMember2020-04-012020-06-300001160791goro:CopperConcentrateMember2020-04-012020-06-300001160791goro:ZincConcentrateMember2020-01-012020-06-300001160791goro:SilverDoreMember2020-01-012020-06-300001160791goro:SilverConcentrateMember2020-01-012020-06-300001160791goro:LeadConcentrateMember2020-01-012020-06-300001160791goro:GoldDoreMember2020-01-012020-06-300001160791goro:GoldConcentrateMember2020-01-012020-06-300001160791goro:CopperConcentrateMember2020-01-012020-06-300001160791goro:ZincConcentrateMember2019-04-012019-06-300001160791goro:SilverDoreMember2019-04-012019-06-300001160791goro:SilverConcentrateMember2019-04-012019-06-300001160791goro:LeadConcentrateMember2019-04-012019-06-300001160791goro:GoldDoreMember2019-04-012019-06-300001160791goro:GoldConcentrateMember2019-04-012019-06-300001160791goro:CopperConcentrateMember2019-04-012019-06-300001160791goro:ZincConcentrateMember2019-01-012019-06-300001160791goro:SilverDoreMember2019-01-012019-06-300001160791goro:SilverConcentrateMember2019-01-012019-06-300001160791goro:LeadConcentrateMember2019-01-012019-06-300001160791goro:GoldDoreMember2019-01-012019-06-300001160791goro:GoldConcentrateMember2019-01-012019-06-300001160791goro:CopperConcentrateMember2019-01-012019-06-300001160791us-gaap:VehiclesMember2020-06-300001160791us-gaap:MineDevelopmentMember2020-06-300001160791us-gaap:MachineryAndEquipmentMember2020-06-300001160791us-gaap:LandMember2020-06-300001160791us-gaap:ConstructionInProgressMember2020-06-300001160791us-gaap:ComputerSoftwareIntangibleAssetMember2020-06-300001160791us-gaap:AssetRetirementObligationCostsMember2020-06-300001160791goro:MineralInterestsAndMineralRightsMember2020-06-300001160791goro:MillFacilitiesAndInfrastructureMember2020-06-300001160791goro:LeachPadAndPondsMember2020-06-300001160791goro:FurnitureAndOfficeEquipmentMember2020-06-300001160791goro:AssetValueFinanceLeaseMember2020-06-300001160791us-gaap:MineDevelopmentMember2020-04-010001160791us-gaap:VehiclesMember2019-12-310001160791us-gaap:MineDevelopmentMember2019-12-310001160791us-gaap:MachineryAndEquipmentMember2019-12-310001160791us-gaap:LandMember2019-12-310001160791us-gaap:ConstructionInProgressMember2019-12-310001160791us-gaap:ComputerSoftwareIntangibleAssetMember2019-12-310001160791us-gaap:AssetRetirementObligationCostsMember2019-12-310001160791goro:MineralInterestsAndMineralRightsMember2019-12-310001160791goro:MillFacilitiesAndInfrastructureMember2019-12-310001160791goro:LeachPadAndPondsMember2019-12-310001160791goro:FurnitureAndOfficeEquipmentMember2019-12-310001160791goro:AssetValueFinanceLeaseMember2019-12-310001160791goro:MineralExtractionProcessingAndMarketingCostsMember2020-04-012020-06-300001160791goro:MineralExtractionProcessingAndMarketingCostsMember2020-01-012020-06-300001160791goro:MineralExtractionProcessingAndMarketingCostsMember2019-04-012019-06-300001160791goro:MineralExtractionProcessingAndMarketingCostsMember2019-01-012019-06-300001160791us-gaap:CorporateAndOtherMember2019-04-012019-06-300001160791us-gaap:CorporateAndOtherMember2019-01-012019-06-300001160791goro:IsabellaPearlProjectMember2020-04-012020-06-300001160791goro:IsabellaPearlProjectMember2020-01-012020-06-300001160791goro:IsabellaPearlProjectMember2019-04-012019-06-300001160791goro:IsabellaPearlProjectMember2019-01-012019-06-300001160791goro:MaterialsAndSuppliesMember2020-06-300001160791goro:DoreMember2020-06-300001160791goro:MaterialsAndSuppliesMember2019-12-310001160791goro:DoreMember2019-12-310001160791us-gaap:OtherOperatingIncomeExpenseMember2020-04-012020-06-300001160791us-gaap:OtherOperatingIncomeExpenseMember2020-01-012020-06-300001160791us-gaap:OtherOperatingIncomeExpenseMember2019-04-012019-06-300001160791us-gaap:OtherOperatingIncomeExpenseMember2019-01-012019-06-300001160791us-gaap:GoldMember2019-01-012019-06-300001160791goro:ZincMember2019-01-012019-06-300001160791goro:SilverMember2019-01-012019-06-300001160791goro:LeadMember2019-01-012019-06-300001160791goro:CopperMember2019-01-012019-06-300001160791us-gaap:GoldMember2020-04-012020-06-300001160791goro:ZincMember2020-04-012020-06-300001160791goro:SilverMember2020-04-012020-06-300001160791goro:LeadMember2020-04-012020-06-300001160791goro:CopperMember2020-04-012020-06-300001160791us-gaap:GoldMember2019-04-012019-06-300001160791goro:ZincMember2019-04-012019-06-300001160791goro:SilverMember2019-04-012019-06-300001160791goro:LeadMember2019-04-012019-06-300001160791goro:CopperMember2019-04-012019-06-300001160791us-gaap:RetainedEarningsMember2020-04-012020-06-300001160791us-gaap:RetainedEarningsMember2020-01-012020-06-300001160791us-gaap:RetainedEarningsMember2019-04-012019-06-300001160791us-gaap:RetainedEarningsMember2019-01-012019-06-300001160791us-gaap:SalesMember2020-04-012020-06-300001160791us-gaap:SalesMember2020-01-012020-06-300001160791us-gaap:SalesMember2019-04-012019-06-300001160791us-gaap:SalesMember2019-01-012019-06-300001160791srt:MaximumMember2020-06-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2020-04-012020-06-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2020-04-012020-06-300001160791us-gaap:MineralExplorationMembercountry:MX2020-04-012020-06-300001160791us-gaap:MineralExplorationMember2020-04-012020-06-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2020-01-012020-06-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2020-01-012020-06-300001160791us-gaap:MineralExplorationMembercountry:MX2020-01-012020-06-300001160791us-gaap:MineralExplorationMember2020-01-012020-06-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2019-04-012019-06-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2019-04-012019-06-300001160791us-gaap:MineralExplorationMembercountry:MX2019-04-012019-06-300001160791us-gaap:MineralExplorationMember2019-04-012019-06-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2019-01-012019-06-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2019-01-012019-06-300001160791us-gaap:MineralExplorationMembercountry:MX2019-01-012019-06-300001160791us-gaap:MineralExplorationMember2019-01-012019-06-300001160791goro:DoreMember2020-04-012020-06-300001160791goro:ConcentrateMember2020-04-012020-06-300001160791goro:DoreMember2020-01-012020-06-300001160791goro:ConcentrateMember2020-01-012020-06-300001160791goro:DoreMember2019-04-012019-06-300001160791goro:ConcentrateMember2019-04-012019-06-300001160791goro:DoreMember2019-01-012019-06-300001160791goro:ConcentrateMember2019-01-012019-06-300001160791us-gaap:MineralMember2020-04-012020-06-300001160791us-gaap:MineralMember2020-01-012020-06-300001160791us-gaap:MineralMember2019-04-012019-06-300001160791us-gaap:MineralMember2019-01-012019-06-300001160791us-gaap:CommonStockMember2020-06-300001160791us-gaap:CommonStockMember2020-03-310001160791us-gaap:CommonStockMember2019-12-310001160791us-gaap:CommonStockMember2019-06-300001160791us-gaap:CommonStockMember2019-03-310001160791us-gaap:CommonStockMember2018-12-310001160791us-gaap:FairValueInputsLevel1Member2020-06-300001160791us-gaap:FairValueInputsLevel1Member2019-12-3100011607912019-06-300001160791us-gaap:CorporateAndOtherMember2020-04-012020-06-300001160791goro:NevadaMember2020-04-012020-06-300001160791country:MX2020-04-012020-06-300001160791us-gaap:CorporateAndOtherMember2020-01-012020-06-300001160791goro:NevadaMember2020-01-012020-06-300001160791country:MX2020-01-012020-06-300001160791goro:NevadaMember2019-04-012019-06-300001160791country:MX2019-04-012019-06-300001160791goro:NevadaMember2019-01-012019-06-300001160791country:MX2019-01-012019-06-300001160791us-gaap:CorporateAndOtherMember2020-06-300001160791us-gaap:CorporateAndOtherMember2019-12-310001160791goro:AguilaProjectMember2020-06-300001160791goro:IsabellaPearlProjectMember2019-12-310001160791goro:AguilaProjectMember2019-12-310001160791us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001160791us-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-300001160791us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300001160791us-gaap:AdditionalPaidInCapitalMember2019-01-012019-06-300001160791goro:ShortTermIncentivePlanMember2020-06-300001160791goro:ShortTermIncentivePlanMember2019-12-310001160791us-gaap:FairValueInputsLevel2Member2020-06-300001160791us-gaap:FairValueInputsLevel2Member2019-12-310001160791goro:OperatingLeaseArrangementForPropertyPlantAndMineDevelopmentMember2020-04-012020-06-300001160791goro:OperatingLeaseArrangementForInventoryMember2020-04-012020-06-300001160791goro:OperatingLeaseArrangementForPropertyPlantAndMineDevelopmentMember2020-01-012020-06-300001160791goro:OperatingLeaseArrangementForInventoryMember2020-01-012020-06-300001160791goro:OperatingLeaseArrangementForPropertyPlantAndMineDevelopmentMember2019-04-012019-06-300001160791goro:OperatingLeaseArrangementForInventoryMember2019-04-012019-06-300001160791goro:OperatingLeaseArrangementForPropertyPlantAndMineDevelopmentMember2019-01-012019-06-300001160791goro:OperatingLeaseArrangementForInventoryMember2019-01-012019-06-300001160791srt:MinimumMember2020-06-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-06-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-06-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2019-04-012019-06-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-06-3000011607912018-12-3100011607912020-04-012020-06-3000011607912019-04-012019-06-300001160791goro:NevadaMember2020-06-300001160791country:MX2020-06-300001160791goro:NevadaMember2019-12-310001160791country:MX2019-12-310001160791goro:AtMarketOfferingAgreementMember2020-01-012020-06-3000011607912019-01-012019-12-310001160791goro:SilverBullionMember2020-06-300001160791goro:IsabellaPearlProjectMember2020-06-300001160791goro:GoldBullionMember2020-06-300001160791goro:SilverBullionMember2019-12-310001160791goro:GoldBullionMember2019-12-310001160791us-gaap:GoldMember2020-01-012020-06-300001160791goro:ZincMember2020-01-012020-06-300001160791goro:SilverMember2020-01-012020-06-300001160791goro:LeadMember2020-01-012020-06-300001160791goro:CopperMember2020-01-012020-06-3000011607912019-01-012019-06-300001160791srt:MaximumMembergoro:AtMarketOfferingAgreementMember2018-04-0300011607912020-06-3000011607912019-12-3100011607912020-08-0300011607912020-01-012020-06-30xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxbrli:pureutr:tutr:oziso4217:USDutr:tiso4217:USDutr:ozgoro:segment

Table of Contents

   

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-34857

Gold Resource Corporation

(Exact Name of Registrant as Specified in its charter)

Colorado

84-1473173

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2886 Carriage Manor Point, Colorado Springs, Colorado 80906

(Address of Principal Executive Offices) (Zip Code)

(303) 320-7708

(Registrant’s telephone number including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange where registered

Common Stock

GORO

NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act       

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 70,076,753 shares of common stock outstanding as of August 3, 2020.

 

Table of Contents

GOLD RESOURCE CORPORATION

FORM 10-Q

Index

Page

Part I - FINANCIAL INFORMATION

Item 1.

    

Financial Statements

Condensed Consolidated Balance Sheets at June 30, 2020 (unaudited) and December 31, 2019

1

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (unaudited)

2

Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

3

Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2020 and 2019 (unaudited)

5

Notes to Condensed Consolidated Financial Statements (unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

Part II - OTHER INFORMATION

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 4.

Mine Safety Disclosures

33

Item 6.

Exhibits

34

Signatures

35

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share amounts)

June 30, 

December 31, 

    

2020

    

2019

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

13,328

$

11,076

Gold and silver rounds/bullion

4,717

4,265

Accounts receivable, net

3,363

8,362

Inventories, net

27,034

24,131

Prepaid taxes

-

786

Prepaid expenses and other current assets

2,514

2,032

Total current assets

50,956

50,652

Property, plant and mine development, net

121,758

125,259

Operating lease assets, net

3,227

7,436

Deferred tax assets, net

8,491

4,635

Other non-current assets

4,344

5,030

Total assets

$

188,776

$

193,012

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

8,513

$

14,456

Loans payable, current

886

879

Finance lease liabilities, current

459

446

Operating lease liabilities, current

3,150

7,287

Mining royalty taxes payable, net

832

1,538

Accrued expenses and other current liabilities

3,507

3,366

Total current liabilities

17,347

27,972

Reclamation and remediation liabilities

6,276

5,605

Loans payable, long-term

340

782

Finance lease liabilities, long-term

203

435

Operating lease liabilities, long-term

88

160

Total liabilities

24,254

34,954

Shareholders' equity:

Common stock - $0.001 par value, 100,000,000 shares authorized:

70,061,099 and 65,691,527 shares outstanding at June 30, 2020 and December 31, 2019, respectively

70

66

Additional paid-in capital

160,937

148,171

Retained earnings

10,570

16,876

Treasury stock at cost, 336,398 shares

(5,884)

(5,884)

Accumulated other comprehensive loss

(1,171)

(1,171)

Total shareholders' equity

164,522

158,058

Total liabilities and shareholders' equity

$

188,776

$

193,012

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share amounts)

(Unaudited)

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

    

2020

    

2019

Sales, net

$

21,098

$

29,374

$

49,103

$

55,952

Mine cost of sales:

Production costs

17,642

18,677

38,527

36,558

Depreciation and amortization

5,007

4,165

12,405

7,407

Reclamation and remediation

30

41

68

57

Total mine cost of sales

22,679

22,883

51,000

44,022

Mine gross (loss) profit

(1,581)

6,491

(1,897)

11,930

Costs and expenses:

General and administrative expenses

2,197

2,708

4,471

4,719

Exploration expenses

551

631

1,706

2,081

Other income, net

(1,847)

(107)

(334)

(82)

Total costs and expenses

901

3,232

5,843

6,718

(Loss) income before income taxes

(2,482)

3,259

(7,740)

5,212

(Benefit) provision for income taxes

(670)

1,461

(2,807)

2,532

Net (loss) income

$

(1,812)

$

1,798

$

(4,933)

$

2,680

Net (loss) income per common share:

Basic and diluted

$

(0.03)

$

0.03

$

(0.07)

$

0.04

Weighted average shares outstanding:

Basic

69,985,499

62,778,445

68,011,860

61,729,871

Diluted

69,985,499

63,066,616

68,011,860

62,079,859

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(U.S. dollars in thousands, except share amounts)

Three Months Ended June 30, 2020 and 2019

  

Number of
Common
Shares

  

Par Value of
Common
Shares

  

Additional Paid-
in Capital

  

Retained
Earnings

  

Treasury
Stock

  

Accumulated
Other
Comprehensive
Loss

  

Total
Shareholders'
Equity

Balance, March 31, 2019

61,833,211

$

63

132,935

$

13,231

$

(5,884)

$

(1,171)

$

139,174

Stock-based compensation

-

-

878

-

-

-

878

Dividends declared

-

-

-

(319)

-

-

(319)

Issuance of stock, net of issuance costs

3,314,742

3

10,999

-

-

-

11,002

Net income

-

-

-

1,798

-

-

1,798

Balance, June 30, 2019 (unaudited)

65,147,953

$

66

$

144,812

$

14,710

$

(5,884)

$

(1,171)

$

152,533

Balance, March 31, 2020

69,877,925

$

70

$

158,987

$

13,090

$

(5,884)

$

(1,171)

$

165,092

Stock-based compensation

-

-

400

-

-

-

400

Dividends declared

-

-

-

(708)

-

-

(708)

Common stock issued for vested restricted stock units

35,072

-

-

-

-

-

-

Issuance of stock, net of issuance costs

484,500

-

1,550

-

-

-

1,550

Net loss

-

-

-

(1,812)

-

-

(1,812)

Balance, June 30, 2020 (unaudited)

70,397,497

$

70

$

160,937

$

10,570

$

(5,884)

$

(1,171)

$

164,522

3

Table of Contents

Six Months Ended June 30, 2020 and 2019

  

Number of
Common
Shares

  

Par Value of
Common
Shares

  

Additional Paid-
in Capital

  

Retained
Earnings

  

Treasury
Stock

  

Accumulated
Other
Comprehensive
Loss

  

Total
Shareholders'
Equity

Balance, December 31, 2018

59,186,829

$

59

$

121,602

$

12,656

$

(5,884)

$

(1,171)

$

127,262

Stock-based compensation

-

-

1,214

-

-

-

1,214

Net stock options exercised

69,448

1

97

-

-

-

98

Common stock issued for vested restricted stock units

14,804

-

-

-

-

-

-

Dividends declared

-

-

-

(626)

-

-

(626)

Issuance of stock, net of issuance costs

5,876,872

6

21,899

-

-

-

21,905

Net income

-

-

-

2,680

-

-

2,680

Balance, June 30, 2019 (unaudited)

65,147,953

$

66

$

144,812

$

14,710

$

(5,884)

$

(1,171)

$

152,533

Balance, December 31, 2019

66,027,925

$

66

$

148,171

$

16,876

$

(5,884)

$

(1,171)

$

158,058

Stock-based compensation

-

-

870

-

-

-

870

Common stock issued for vested restricted stock units

35,072

-

-

-

-

-

-

Dividends declared

-

-

-

(1,373)

-

-

(1,373)

Issuance of stock, net of issuance costs

4,334,500

4

11,896

-

-

-

11,900

Net loss

-

-

-

(4,933)

-

-

(4,933)

Balance, June 30, 2020 (unaudited)

70,397,497

$

70

$

160,937

$

10,570

$

(5,884)

$

(1,171)

$

164,522

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)

Six Months Ended June 30,

    

2020

    

2019

Cash flows from operating activities:

Net (loss) income

$

(4,933)

$

2,680

Adjustments to reconcile net (loss) income to net cash from operating activities:

Deferred income taxes

(4,598)

1,275

Depreciation and amortization

12,598

7,641

Stock-based compensation

870

1,214

Other operating adjustments

(368)

(293)

Changes in operating assets and liabilities:

Accounts receivable

4,999

(3,886)

Inventories

(2,274)

(8,464)

Prepaid expenses and other current assets

(437)

97

Other non-current assets

(256)

(2,012)

Accounts payable and other accrued liabilities

(2,644)

6,183

Mining royalty and income taxes payable, net

159

(3,328)

Net cash provided by operating activities

3,116

1,107

Cash flows from investing activities:

Capital expenditures

(10,600)

(21,438)

Other investing activities

4

1

Net cash used in investing activities

(10,596)

(21,437)

Cash flows from financing activities:

Proceeds from the exercise of stock options

-

98

Proceeds from issuance of stock

11,900

21,807

Dividends paid

(1,357)

(617)

Repayment of loans payable

(435)

(385)

Repayment of finance leases

(219)

(204)

Net cash provided by financing activities

9,889

20,699

Effect of exchange rate changes on cash and cash equivalents

(157)

(192)

Net increase in cash and cash equivalents

2,252

177

Cash and cash equivalents at beginning of period

11,076

7,762

Cash and cash equivalents at end of period

$

13,328

$

7,939

Supplemental Cash Flow Information

Interest expense paid

$

56

$

79

Income and mining taxes paid

$

1,066

$

2,897

Non-cash investing activities:

Change in capital expenditures in accounts payable

$

(3,120)

$

(1,214)

Change in estimate for asset retirement costs

$

1,097

$

638

Equipment purchased through loan payable

$

-

$

330

Equipment purchased under finance leases

$

-

$

56

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

GOLD RESOURCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020
(Unaudited)

1. Basis of Preparation of Financial Statements

The interim Condensed Consolidated Financial Statements (“interim financial statements”) of Gold Resource Corporation and its subsidiaries (collectively, the “Company”) are unaudited and have been prepared in accordance with the rules of the Securities and Exchange Commission for interim statements. Certain information and footnote disclosures required by United States Generally Accepted Accounting Principles (“U.S. GAAP”) have been condensed or omitted as permitted by such rules, although the Company believes that the disclosures included are adequate to make the information presented not misleading. In the opinion of management, all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim financial statements have been included. The results reported in these interim financial statements are not necessarily indicative of the results that may be reported for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s annual report on Form 10-K. The year-end balance sheet data was derived from the audited financial statements. Unless otherwise noted, there have been no material changes to the footnotes from those accompanying the audited consolidated financial statements contained in the Company’s annual report on Form 10-K.

Certain items in the prior period’s Condensed Consolidated Financial Statements have been reclassified to conform to the current presentation.

2. Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”. The standard modifies the measurement approach for credit losses on financial instruments, including trade receivables, from an incurred loss method to a current expected credit loss method. The standard requires the measurement of expected credit losses to be based on relevant information, including historical experiences, current conditions and a forecast that is supportable. The Company adopted the new standard on January 1, 2020. The adoption of the standard did not have any effect on the Company’s Condensed Consolidated Financial Statements.

6

Table of Contents

3. Revenue

The Company derives its revenue from the sale of doré and concentrates. The following table presents the Company’s net sales for each period presented, disaggregated by source:

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

(in thousands)

Doré sales, net

Gold

$

10,531

$

3,110

$

18,214

$

4,793

Silver

678

651

1,354

1,051

Less: Refining charges

(174)

(61)

(266)

(99)

Total doré sales, net

11,035

3,700

19,302

5,745

Concentrate sales

Gold

2,467

6,738

8,683

11,303

Silver

2,566

5,542

7,781

9,303

Copper

1,198

2,621

3,559

4,735

Lead

1,750

3,999

5,229

7,394

Zinc

5,176

10,852

14,216

23,123

Less: Treatment and refining charges

(3,300)

(3,606)

(9,135)

(7,016)

Total concentrate sales, net

9,857

26,146

30,333

48,842

Realized/unrealized embedded derivative, net

206

(472)

(532)

1,365

Total sales, net

$

21,098

$

29,374

$

49,103

$

55,952

4. Gold and Silver Rounds/Bullion

The Company periodically purchases gold and silver bullion on the open market for investment purposes and to use in its dividend exchange program under which shareholders may exchange their cash dividends for minted gold and silver rounds.

At June 30, 2020 and December 31, 2019, the Company’s holdings of rounds/bullion, using quoted market prices, consisted of the following:

2020

2019

    

Ounces

    

Per Ounce

    

Amount

    

Ounces

    

Per Ounce

    

Amount

(in thousands)

(in thousands)

Gold

1,865

$

1,768

$

3,297

1,866

$

1,515

$

2,827

Silver

79,535

$

17.85

1,420

79,662

$

18.05

1,438

Total holdings

$

4,717

$

4,265

7

Table of Contents

5. Inventories, net

At June 30, 2020 and December 31, 2019, inventories, net consisted of the following:

    

2020

    

2019

(in thousands)

Stockpiles - underground mine

$

520

$

3,968

Stockpiles - open pit mine

321

833

Leach pad

15,227

9,103

Concentrates

1,937

1,340

Doré (1)

1,879

1,581

Subtotal - product inventories

19,884

16,825

Materials and supplies (2)

7,150

7,306

Total

$

27,034

$

24,131

(1)Net of reserve of $378 and $478 at June 30, 2020 and December 31, 2019, respectively.
(2)Net of reserve for obsolescence of $1,264 as of June 30, 2020 and December 31, 2019.

In addition to the inventory above, as of June 30, 2020 and December 31, 2019, the Company has $4.0 million and $4.7 million, respectively, of low-grade ore stockpile inventory included in other non-current assets on the accompanying Condensed Consolidated Balance Sheets.

During the three months ended June 30, 2020, using a gold price of $1,768 per ounce, the Company recorded a net realizable value (“NRV”) inventory adjustment of $2.0 million for inventories at its Isabella Pearl Mine. For the six months ended June 30, 2020 the Company recognized a total of $3.6 million NRV inventory adjustments. No NRV adjustments were made during the three and six months ended June 30, 2019.

6. Income Taxes

The Company recorded income tax benefit of $0.7 million and $2.8 million for the three and six months ended June 30, 2020. For the three and six months ended June 30, 2019, the Company recorded income tax expense of $1.5 million and $2.5 million, respectively. In accordance with applicable accounting rules, the interim provision for taxes was calculated by using the consolidated effective tax rate. The consolidated effective tax rate is a function of the combined effective tax rates for the jurisdictions in which the Company operates. Variations in the relative proportions of jurisdictional income could result in fluctuations to the Company’s consolidated effective tax rate. At the federal level, the Company’s income in the U.S. is taxed at 21%, while a 5% net proceeds of minerals tax applies to the Company’s operations in Nevada, and a 5% withholding tax applies to dividends received from Mexico. The U.S. tax results are combined with the Company’s losses in Mexico which are taxed at 37.5% (30% income tax and 7.5% mining tax), which has resulted in a consolidated effective tax rate above statutory Federal rates.

Enacted in response to the novel coronavirus (“COVID-19”) pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provides roughly $2 trillion in economic relief to eligible businesses and individuals impacted by the novel coronavirus outbreak. The CARES Act is significant legislation that will affect nearly every aspect of the economy. The CARES Act affected corporate taxpayers, including corporations seeking sources of liquidity through net operating loss (“NOL”) carryback claims and income tax refunds. The Company has not applied for aid or relief funds under the CARES Act and in most cases will not qualify for such aid as our operations in the U.S. have continued uninterrupted and our suspended operation in Mexico is considered to be foreign business, thus not qualifying for benefits under the Act. However, as a result of changes under the CARES Act, corporate taxpayers with eligible NOLs may now carryback those losses to prior years to receive a refund of up to five years of prior taxes paid. As the CARES Act did not modify IRC Section 172(b)(3), a taxpayer, where advantageous, can still waive the carryback and elect to carry NOLs forward to subsequent tax years. Further, for years 2018 thru 2020, the CARES Act removed the 80% NOL utilization limitation on corporate taxpayers, thus the Company may use NOLs to fully offset taxable income in those years. The CARES Act has no immediate impact on the Company’s income taxes, however removal of the NOL utilization limitation will expedite its future realization of US losses generated post Tax Cuts and Jobs Act of 2017.

8

Table of Contents

The Company periodically transfers funds from its Mexican wholly-owned subsidiary to the U.S. in the form of dividends. Mexico requires a 10% withholding tax on dividends to foreign parent companies on all post-2013 earnings. Dividends from earnings generated prior to 2014 were exempted from the new dividend withholding tax. The Company commenced distribution of post-2013 earnings from Mexico in 2018. According to the existing U.S. – Mexico tax treaty, the dividend withholding tax between these countries is limited to 5% if certain requirements are met. Based on the Company’s review of these requirements, it estimates it will pay a 5% withholding tax on dividends received from Mexico in 2020. The impact of the planned annual dividends for 2020 is reflected in the estimated annual effective tax rate.

As of June 30, 2020, the Company believes that it has no liability for uncertain tax positions.

The U.S. Treasury Department issued final regulations in July 2020 concerning global intangible low-taxed income, commonly referred to as GILTI tax and introduced by the Tax Act of 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The final tax regulations permit a taxpayer to elect to exclude from its GILTI inclusion items of income subject to a high effective rate of foreign taxes. The Company is in the process of reviewing the regulations and assessing the impact of the new legislation on its consolidated financial statements.

7. Prepaid Expenses and Other Current Assets

At June 30, 2020 and December 31, 2019, prepaid expenses and other current assets consisted of the following:

    

2020

    

2019

(in thousands)

Advances to suppliers

$

361

$

109

Prepaid insurance

1,198

1,333

IVA taxes receivable, net

446

245

Prepaid royalties

39

127

Other current assets

470

218

Total

$

2,514

$

2,032

8. Property, Plant and Mine Development, net

At June 30, 2020 and December 31, 2019, property, plant and mine development, net consisted of the following:

    

2020

    

2019

(in thousands)

Asset retirement costs

$

4,509

$

3,412

Construction-in-progress (1)

2,302

11,965

Furniture and office equipment

2,109

2,087

Leach pad and ponds

5,649

5,649

Land

242

242

Light vehicles and other mobile equipment

2,555

2,553

Machinery and equipment

44,207

43,364

Mill facilities and infrastructure

32,004

31,408

Mineral interests and mineral rights

18,878

18,228

Mine development (2)

105,221

90,089

Software and licenses

1,659

1,659

Subtotal (3) (4)

219,335

210,656

Accumulated depreciation and amortization

(97,577)

(85,397)

Total

$

121,758

$

125,259

(1)Includes Nevada construction-in-progress and pre-production stripping costs of $0.1 million and $9.6 million at June 30, 2020 and December 31, 2019, respectively. Mexico construction-in-progress was $2.2 million and $2.4 million at June 30, 2020 and December 31, 2019, respectively.
(2)Pearl Mine development of $13.3 million was put into service on April 1, 2020.
(3)Includes $1.8 million of assets recorded under finance leases. Please see Note 13 for additional information.
(4)Includes accrued capital expenditures of $0.7 million and $3.8 million at June 30, 2020 and December 31, 2019, respectively.

9

Table of Contents

The Company recorded depreciation and amortization expense of $5.1 million and $12.6 million for the three and six months ended June 30, 2020. For the three and six months ended June 30, 2019, the Company recorded $4.2 million and $7.6 million, respectively.

9. Accrued Expenses and Other Current Liabilities

At June 30, 2020 and December 31, 2019, accrued expenses and other current liabilities consisted of the following:

    

2020

    

2019

(in thousands)

Accrued insurance

$

574

$

452

Accrued royalty payments

2,393

2,212

Dividends payable

235

219

Other payables

305

483

Total

$

3,507

$

3,366

10. Reclamation and Remediation

The following table presents the changes in reclamation and remediation obligations for the six months ended June 30, 2020 and year ended December 31, 2019:

    

2020

    

2019

(in thousands)

Reclamation liabilities – balance at beginning of period

$

2,014

$

2,009

Changes in estimate

-

(82)

Foreign currency exchange (gain) loss

(363)

87

Reclamation liabilities – balance at end of period

1,651

2,014

Asset retirement obligation – balance at beginning of period

3,591

1,289

Changes in estimate

1,097

2,172

Accretion

139

102

Foreign currency exchange (gain) loss

(202)

28

Asset retirement obligation – balance at end of period

4,625

3,591

Total period end balance

$

6,276

$

5,605

The Company’s reclamation liabilities are related to the Aguila project in Mexico.

The Company’s asset retirement obligations were discounted using a credit adjusted risk-free rate of 8%. As of June 30, 2020 and December 31, 2019, the Company recorded an asset retirement obligation of $3.7 million and $2.5 million, respectively, related to the Isabella Pearl project. As of June 30, 2020 and December 31, 2019, the Company’s asset retirement obligation related to the Aguila project in Mexico was $0.9 million and $1.1 million, respectively.

11. Loans Payable

The Company has financed certain equipment purchases on a long-term basis. The loans bear annual interest at rates ranging from 3% to 4.48%, are collateralized by the equipment, and require monthly principal and interest payments of $0.08 million. As of June 30, 2020, and December 31, 2019, there was an outstanding balance of $1.2 million and $1.7 million, respectively. Scheduled minimum repayments are $0.4 million in 2020, $0.7 million in 2021, and $0.1 million in 2022. One of the loan agreements is subject to a prepayment penalty of 1% of the outstanding loan balance at time of repayment. The fair value of the loans payable, based on Level 2 inputs, approximated the outstanding balance at both June 30, 2020 and December 31, 2019. See Note 19 for the definition of a Level 2 input.

10

Table of Contents

12. Commitments and Contingencies

The Company has a Contract Mining Agreement with a mining contractor relating to mining activities at its Isabella Pearl project. Included in this Agreement is an embedded lease for the mining equipment for which the Company has recognized a right-of-use asset and corresponding operating lease liability. Please see Note 13 for more information. In addition to the embedded lease payments, the Company pays the contract miner operational costs in the normal course of business. These costs represent the remaining future contractual payments for the Contract Mining Agreement over its term. The contractual payments are determined by rates within the Contract Mining Agreement, estimated tonnes moved and bank cubic yards for drilling and blasting. As of June 30, 2020, total estimated contractual payments remaining, excluding embedded lease payments, are $2.9 million for the year ended December 31, 2020.

As of June 30, 2020, the Company has equipment purchase commitments aggregating approximately $0.6 million.

13. Leases

Operating Leases

The Company leases office equipment and administrative offices from third parties as well as an administrative office from a related party. In addition, the Company has an embedded lease in its Contract Mining Agreement. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases as incurred over the lease term. For leases beginning in 2019 and later, the Company accounts for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs).

Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to two years. The exercise of lease renewal options is at the Company’s sole discretion. The depreciable life of assets are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The weighted average remaining lease term for the Company’s operating leases as of June 30, 2020 is 0.42 years.

The discount rate implicit within the Company’s leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for the Company’s leases is determined based on the lease term adjusted for impacts of collateral. The weighted average discount rate used to measure the Company’s operating lease liabilities as of June 30, 2020 was 4.48%.

There are no material residual value guarantees and no restrictions or covenants imposed by the Company’s leases.

Most of the Company’s leases have a standard payment schedule; however, the payments for its mining equipment embedded lease are determined by tonnage hauled. This embedded lease is within a Contract Mining Agreement entered into for the mining activities at the Company’s Isabella Pearl project. The payments, amortization of the right-of-use asset, and interest vary immaterially from forecasted amounts due to variable conditions at the mine. During the three months ended June 30, 2020, the Company capitalized variable lease costs of $2.0 million to Inventory and nil to Property, plant, and mine development, respectively. During the six months ended June 30, 2020, the Company capitalized variable lease costs of $2.7 million to Inventory and $1.5 million to Property, plant, and mine development, respectively. During the three months ended June 30, 2019, the Company capitalized variable lease costs of $0.8 million to Inventory and $0.9 million to Property, plant, and mine development, respectively.  During the six months ended June 30, 2019, the Company capitalized variable lease costs of $1.5 million to Inventory and $1.8 million to Property, plant, and mine development, respectively.

11

Table of Contents

The components of all other lease costs recognized within the Company’s Condensed Consolidated Statements of Operations are as follows: