P1Y0001160791--12-312020Q3false0.01Accelerated Filer0.0050.03GOLD RESOURCE CORP0001160791us-gaap:CommonStockMember2020-07-012020-09-300001160791goro:AtMarketOfferingAgreementMember2020-07-012020-09-300001160791us-gaap:CommonStockMember2020-01-012020-09-300001160791goro:AtMarketOfferingAgreementMember2020-01-012020-09-300001160791us-gaap:CommonStockMember2019-07-012019-09-300001160791goro:AtMarketOfferingAgreementMember2019-07-012019-09-300001160791us-gaap:CommonStockMember2019-01-012019-09-300001160791goro:AtMarketOfferingAgreementMember2019-01-012019-09-300001160791goro:GoldenMileProjectMember2020-07-012020-09-300001160791us-gaap:TreasuryStockMember2020-09-300001160791us-gaap:RetainedEarningsMember2020-09-300001160791us-gaap:AdditionalPaidInCapitalMember2020-09-300001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001160791us-gaap:TreasuryStockMember2020-06-300001160791us-gaap:RetainedEarningsMember2020-06-300001160791us-gaap:AdditionalPaidInCapitalMember2020-06-300001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-3000011607912020-06-300001160791us-gaap:TreasuryStockMember2019-12-310001160791us-gaap:RetainedEarningsMember2019-12-310001160791us-gaap:AdditionalPaidInCapitalMember2019-12-310001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001160791us-gaap:TreasuryStockMember2019-09-300001160791us-gaap:RetainedEarningsMember2019-09-300001160791us-gaap:AdditionalPaidInCapitalMember2019-09-300001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001160791us-gaap:TreasuryStockMember2019-06-300001160791us-gaap:RetainedEarningsMember2019-06-300001160791us-gaap:AdditionalPaidInCapitalMember2019-06-300001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-3000011607912019-06-300001160791us-gaap:TreasuryStockMember2018-12-310001160791us-gaap:RetainedEarningsMember2018-12-310001160791us-gaap:AdditionalPaidInCapitalMember2018-12-310001160791us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001160791us-gaap:RestrictedStockUnitsRSUMember2020-07-012020-09-300001160791us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001160791us-gaap:RestrictedStockUnitsRSUMember2019-07-012019-09-300001160791us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-09-300001160791goro:ZincConcentrateMember2020-07-012020-09-300001160791goro:SilverDoreMember2020-07-012020-09-300001160791goro:SilverConcentrateMember2020-07-012020-09-300001160791goro:LeadConcentrateMember2020-07-012020-09-300001160791goro:GoldDoreMember2020-07-012020-09-300001160791goro:GoldConcentrateMember2020-07-012020-09-300001160791goro:CopperConcentrateMember2020-07-012020-09-300001160791goro:ZincConcentrateMember2020-01-012020-09-300001160791goro:SilverDoreMember2020-01-012020-09-300001160791goro:SilverConcentrateMember2020-01-012020-09-300001160791goro:LeadConcentrateMember2020-01-012020-09-300001160791goro:GoldDoreMember2020-01-012020-09-300001160791goro:GoldConcentrateMember2020-01-012020-09-300001160791goro:CopperConcentrateMember2020-01-012020-09-300001160791goro:ZincConcentrateMember2019-07-012019-09-300001160791goro:SilverDoreMember2019-07-012019-09-300001160791goro:SilverConcentrateMember2019-07-012019-09-300001160791goro:LeadConcentrateMember2019-07-012019-09-300001160791goro:GoldDoreMember2019-07-012019-09-300001160791goro:GoldConcentrateMember2019-07-012019-09-300001160791goro:CopperConcentrateMember2019-07-012019-09-300001160791goro:ZincConcentrateMember2019-01-012019-09-300001160791goro:SilverDoreMember2019-01-012019-09-300001160791goro:SilverConcentrateMember2019-01-012019-09-300001160791goro:LeadConcentrateMember2019-01-012019-09-300001160791goro:GoldDoreMember2019-01-012019-09-300001160791goro:GoldConcentrateMember2019-01-012019-09-300001160791goro:CopperConcentrateMember2019-01-012019-09-300001160791us-gaap:VehiclesMember2020-09-300001160791us-gaap:MineDevelopmentMember2020-09-300001160791us-gaap:MachineryAndEquipmentMember2020-09-300001160791us-gaap:LandMember2020-09-300001160791us-gaap:ConstructionInProgressMember2020-09-300001160791us-gaap:ComputerSoftwareIntangibleAssetMember2020-09-300001160791us-gaap:AssetRetirementObligationCostsMember2020-09-300001160791goro:MineralInterestsAndMineralRightsMember2020-09-300001160791goro:MillFacilitiesAndInfrastructureMember2020-09-300001160791goro:LeachPadAndPondsMember2020-09-300001160791goro:FurnitureAndOfficeEquipmentMember2020-09-300001160791goro:AssetValueFinanceLeaseMember2020-09-300001160791us-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:GoldAndSilverMember2020-07-012020-09-300001160791goro:GoldAndSilverMember2020-01-012020-09-300001160791goro:GoldAndSilverMember2019-01-012019-12-310001160791goro:MineralExtractionProcessingAndMarketingCostsMember2020-07-012020-09-300001160791goro:MineralExtractionProcessingAndMarketingCostsMember2020-01-012020-09-300001160791goro:MineralExtractionProcessingAndMarketingCostsMember2019-07-012019-09-300001160791goro:MineralExtractionProcessingAndMarketingCostsMember2019-01-012019-09-300001160791goro:MaterialsAndSuppliesMember2020-09-300001160791goro:DoreMember2020-09-300001160791goro:MaterialsAndSuppliesMember2019-12-310001160791goro:DoreMember2019-12-310001160791goro:GlobalIntangibleLowTaxedIncomeMember2020-07-012020-09-300001160791us-gaap:OtherOperatingIncomeExpenseMember2020-07-012020-09-300001160791us-gaap:OtherOperatingIncomeExpenseMember2020-01-012020-09-300001160791us-gaap:OtherOperatingIncomeExpenseMember2019-07-012019-09-300001160791us-gaap:OtherOperatingIncomeExpenseMember2019-01-012019-09-300001160791us-gaap:GoldMember2020-07-012020-09-300001160791goro:ZincMember2020-07-012020-09-300001160791goro:SilverMember2020-07-012020-09-300001160791goro:LeadMember2020-07-012020-09-300001160791goro:CopperMember2020-07-012020-09-300001160791us-gaap:GoldMember2019-07-012019-09-300001160791goro:ZincMember2019-07-012019-09-300001160791goro:SilverMember2019-07-012019-09-300001160791goro:LeadMember2019-07-012019-09-300001160791goro:CopperMember2019-07-012019-09-300001160791us-gaap:GoldMember2019-01-012019-09-300001160791goro:ZincMember2019-01-012019-09-300001160791goro:SilverMember2019-01-012019-09-300001160791goro:LeadMember2019-01-012019-09-300001160791goro:CopperMember2019-01-012019-09-300001160791us-gaap:RetainedEarningsMember2020-07-012020-09-300001160791us-gaap:RetainedEarningsMember2020-01-012020-09-300001160791us-gaap:RetainedEarningsMember2019-07-012019-09-300001160791us-gaap:RetainedEarningsMember2019-01-012019-09-300001160791us-gaap:SalesMember2020-07-012020-09-300001160791us-gaap:SalesMember2020-01-012020-09-300001160791us-gaap:SalesMember2019-07-012019-09-300001160791us-gaap:SalesMember2019-01-012019-09-300001160791srt:MaximumMember2020-09-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2020-07-012020-09-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2020-07-012020-09-300001160791us-gaap:MineralExplorationMembercountry:MX2020-07-012020-09-300001160791us-gaap:MineralExplorationMember2020-07-012020-09-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2020-01-012020-09-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2020-01-012020-09-300001160791us-gaap:MineralExplorationMembercountry:MX2020-01-012020-09-300001160791us-gaap:MineralExplorationMember2020-01-012020-09-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2019-07-012019-09-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2019-07-012019-09-300001160791us-gaap:MineralExplorationMembercountry:MX2019-07-012019-09-300001160791us-gaap:MineralExplorationMember2019-07-012019-09-300001160791us-gaap:MineralExplorationMemberus-gaap:CorporateAndOtherMember2019-01-012019-09-300001160791us-gaap:MineralExplorationMembergoro:NevadaMember2019-01-012019-09-300001160791us-gaap:MineralExplorationMembercountry:MX2019-01-012019-09-300001160791us-gaap:MineralExplorationMember2019-01-012019-09-300001160791goro:DoreMember2020-07-012020-09-300001160791goro:ConcentrateMember2020-07-012020-09-300001160791goro:DoreMember2020-01-012020-09-300001160791goro:ConcentrateMember2020-01-012020-09-300001160791goro:DoreMember2019-07-012019-09-300001160791goro:ConcentrateMember2019-07-012019-09-300001160791goro:DoreMember2019-01-012019-09-300001160791goro:ConcentrateMember2019-01-012019-09-300001160791us-gaap:MineralMember2020-07-012020-09-300001160791us-gaap:MineralMember2020-01-012020-09-300001160791us-gaap:MineralMember2019-07-012019-09-300001160791us-gaap:MineralMember2019-01-012019-09-300001160791us-gaap:CommonStockMember2020-09-300001160791us-gaap:CommonStockMember2020-06-300001160791us-gaap:CommonStockMember2019-12-310001160791us-gaap:CommonStockMember2019-09-300001160791us-gaap:CommonStockMember2019-06-300001160791us-gaap:CommonStockMember2018-12-310001160791us-gaap:FairValueInputsLevel1Member2020-09-300001160791us-gaap:FairValueInputsLevel1Member2019-12-3100011607912019-09-300001160791us-gaap:CorporateAndOtherMember2020-07-012020-09-300001160791goro:NevadaMember2020-07-012020-09-300001160791country:MX2020-07-012020-09-300001160791us-gaap:CorporateAndOtherMember2020-01-012020-09-300001160791goro:NevadaMember2020-01-012020-09-300001160791country:MX2020-01-012020-09-300001160791us-gaap:CorporateAndOtherMember2019-07-012019-09-300001160791goro:NevadaMember2019-07-012019-09-300001160791country:MX2019-07-012019-09-300001160791us-gaap:CorporateAndOtherMember2019-01-012019-09-300001160791goro:NevadaMember2019-01-012019-09-300001160791country:MX2019-01-012019-09-300001160791us-gaap:CorporateAndOtherMember2020-09-300001160791us-gaap:CorporateAndOtherMember2019-12-310001160791goro:IsabellaPearlProjectMember2020-09-300001160791goro:AguilaProjectMember2020-09-300001160791goro:IsabellaPearlProjectMember2019-12-310001160791goro:AguilaProjectMember2019-12-310001160791us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001160791us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001160791us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001160791us-gaap:AdditionalPaidInCapitalMember2019-01-012019-09-300001160791goro:ShortTermIncentivePlanMember2020-09-300001160791goro:ShortTermIncentivePlanMember2019-12-310001160791us-gaap:FairValueInputsLevel2Member2020-09-300001160791us-gaap:FairValueInputsLevel2Member2019-12-310001160791goro:SilverBullionMember2020-07-012020-09-300001160791goro:GoldBullionMember2020-07-012020-09-300001160791goro:SilverBullionMember2020-01-012020-09-300001160791goro:GoldBullionMember2020-01-012020-09-300001160791goro:OperatingLeaseArrangementForInventoryMember2020-07-012020-09-300001160791goro:OperatingLeaseArrangementForPropertyPlantAndMineDevelopmentMember2020-01-012020-09-300001160791goro:OperatingLeaseArrangementForInventoryMember2020-01-012020-09-300001160791goro:OperatingLeaseArrangementForPropertyPlantAndMineDevelopmentMember2019-07-012019-09-300001160791goro:OperatingLeaseArrangementForInventoryMember2019-07-012019-09-300001160791goro:OperatingLeaseArrangementForPropertyPlantAndMineDevelopmentMember2019-01-012019-09-300001160791goro:OperatingLeaseArrangementForInventoryMember2019-01-012019-09-300001160791srt:MinimumMember2020-09-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2019-07-012019-09-300001160791us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-09-3000011607912018-12-3100011607912020-07-012020-09-300001160791goro:NevadaMember2020-09-300001160791country:MX2020-09-300001160791us-gaap:MineDevelopmentMember2020-04-010001160791goro:NevadaMember2019-12-310001160791country:MX2019-12-310001160791goro:AtMarketOfferingAgreementMember2020-04-012020-06-300001160791goro:AtMarketOfferingAgreementMember2020-01-012020-03-3100011607912019-01-012019-12-310001160791goro:SilverBullionMember2020-09-300001160791goro:GoldBullionMember2020-09-300001160791goro:SilverBullionMember2019-12-310001160791goro:GoldBullionMember2019-12-3100011607912019-07-012019-09-300001160791us-gaap:GoldMember2020-01-012020-09-300001160791goro:ZincMember2020-01-012020-09-300001160791goro:SilverMember2020-01-012020-09-300001160791goro:LeadMember2020-01-012020-09-300001160791goro:CopperMember2020-01-012020-09-3000011607912019-01-012019-09-300001160791srt:MaximumMembergoro:AtMarketOfferingAgreementMember2018-04-0300011607912020-09-3000011607912019-12-3100011607912020-11-0200011607912020-01-012020-09-30xbrli: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 September 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

Graphic

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:

a

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: 71,865,696 shares of common stock outstanding as of November 1, 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 September 30, 2020 (unaudited) and December 31, 2019

1

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

2

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2020 and 2019 (unaudited)

3

Condensed Consolidated Statements of Cash Flows for the nine months ended September 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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

36

Part II - OTHER INFORMATION

Item 4.

Mine Safety Disclosures

36

Item 6.

Exhibits

37

Signatures

39

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)

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

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 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

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 September 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, June 30, 2019 (unaudited)

65,147,953

$

66

$

144,812

$

14,710

$

(5,884)

$

(1,171)

$

152,533

Stock-based compensation

-

-

367

-

-

-

367

Common stock issued for vested restricted stock units

106,256

-

-

-

-

-

-

Dividends declared

-

-

-

(329)

-

-

(329)

Issuance of stock, net of issuance costs

773,716

-

2,642

-

-

-

2,642

Net income

-

-

-

2,978

-

-

2,978

Balance, September 30, 2019 (unaudited)

66,027,925

$

66

$

147,821

$

17,359

$

(5,884)

$

(1,171)

$

158,191

Balance, June 30, 2020 (unaudited)

70,397,497

$

70

$

160,937

$

10,570

$

(5,884)

$

(1,171)

$

164,522

Stock-based compensation

-

-

305

-

-

-

305

Dividends declared

-

-

-

(708)

-

-

(708)

Common stock issued for vested restricted stock units

58,133

-

-

-

-

-

-

Issuance of stock, net of issuance costs

1,731,433

2

6,872

-

-

-

6,874

Net income

-

-

-

5,001

-

-

5,001

Balance, September 30, 2020 (unaudited)

72,187,063

$

72

$

168,114

$

14,863

$

(5,884)

$

(1,171)

$

175,994

3

Table of Contents

Nine Months Ended September 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

-

-

1,581

-

-

-

1,581

Net stock options exercised

69,448

1

97

-

-

-

98

Common stock issued for vested restricted stock units

121,060

-

-

-

-

-

-

Dividends declared

-

-

-

(955)

-

-

(955)

Issuance of stock, net of issuance costs

6,650,588

6

24,541

-

-

-

24,547

Net income

-

-

-

5,658

-

-

5,658

Balance, September 30, 2019 (unaudited)

66,027,925

$

66

$

147,821

$

17,359

$

(5,884)

$

(1,171)

$

158,191

Balance, December 31, 2019

66,027,925

$

66

$

148,171

$

16,876

$

(5,884)

$

(1,171)

$

158,058

Stock-based compensation

-

-

1,175

-

-

-

1,175

Common stock issued for vested restricted stock units

93,205

-

-

-

-

-

-

Dividends declared

-

-

-

(2,081)

-

-

(2,081)

Issuance of stock, net of issuance costs

6,065,933

6

18,768

-

-

-

18,774

Net income

-

-

-

68

-

-

68

Balance, September 30, 2020 (unaudited)

72,187,063

$

72

$

168,114

$

14,863

$

(5,884)

$

(1,171)

$

175,994

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)

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

$

-

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

September 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 September 30, 

Nine months ended September 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

(in thousands)

Doré sales, net

Gold

$

17,449

$

7,399

$

35,663

$

12,192

Silver

878

619

2,232

1,670

Less: Refining charges

(170)

(39)

(436)

(138)

Total doré sales, net

18,157

7,979

37,459

13,724

Concentrate sales

Gold

5,211

7,767

13,894

19,072

Silver

6,857

6,370

14,638

15,673

Copper

2,911

2,502

6,470

7,237

Lead

3,501

4,480

8,730

11,874

Zinc

10,894

13,875

25,110

36,998

Less: Treatment and refining charges

(5,795)

(3,691)

(14,930)

(10,709)

Total concentrate sales, net

23,579

31,303

53,912

80,145

Realized/unrealized embedded derivative, net

550

784

18

2,149

Total sales, net

$

42,286

$

40,066

$

91,389

$

96,018

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. During the three and nine months ended September 30, 2020, the Company sold 32 ounces of gold and 3,000 ounces of silver for proceeds of $0.1 million. No sales of gold and silver occurred in 2019.

At September 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

1,816

$

1,887

$

3,426

1,866

$

1,515

$

2,827

Silver

76,481

$

23.73

1,815

79,662

$

18.05

1,438

Total holdings

$

5,241

$

4,265

7

Table of Contents

5. Inventories, net

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

    

2020

    

2019

(in thousands)

Stockpiles - underground mine

$

414

$

3,968

Stockpiles - open pit mine

615

833

Leach pad

16,261

9,103

Concentrates

1,716

1,340

Doré (1)

1,032

1,581

Subtotal - product inventories

20,038

16,825

Materials and supplies (2)

6,939

7,306

Total

$

26,977

$

24,131

(1)Net of reserve of $368 and $478 at September 30, 2020 and December 31, 2019, respectively.
(2)Net of reserve for obsolescence of $1,264 as of September 30, 2020 and December 31, 2019.

In addition to the current inventory above, as of September 30, 2020 and December 31, 2019, the Company has $5.2 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.

For the three and nine months ended September 30, 2020 the Company recorded nil and $3.6 million in net realizable value (“NRV”) inventory adjustments, respectively. For the three and nine months ended September 30, 2019, the Company recorded an NRV inventory adjustment of $1.6 million.

6. Income Taxes

The Company recorded income tax expense and income tax benefit of $2.0 million and $0.8 million for the three and nine months ended September 30, 2020, respectively. For the three and nine months ended September 30, 2019, the Company recorded income tax expense of $2.4 million and $4.9 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 income in Mexico taxed at 37.5% (30% income tax and 7.5% mining tax), which results 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 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 through 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 unless otherwise provided per tax treaty. 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 September 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 allow income to be excluded from GILTI tax that is subject to an effective tax rate higher than 90% of the U.S. tax rate (18.9%). The Company completed its assessment of the new legislation during the three months ended September 30, 2020 and determined that due to this high tax exception, that GILTI tax was not incurred in 2019. As a result of this analysis, the Company recorded a reversal of the prior year GILTI tax expense that resulted in $0.9 million tax benefit during the three months ended September 30, 2020.

7. Prepaid Expenses and Other Current Assets

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

    

2020

    

2019

(in thousands)

Advances to suppliers

$

635

$

109

Prepaid insurance

1,121

1,333

IVA taxes receivable, net

140

245

Prepaid royalties

-

127

Other current assets

272

218

Total

$

2,168

$

2,032

9

Table of Contents

8. Property, Plant and Mine Development, net

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

    

2020

    

2019

(in thousands)

Asset retirement costs

$

4,816

$

3,412

Construction-in-progress (1)

3,686

11,965

Furniture and office equipment

2,140

2,087

Leach pad and ponds

5,649

5,649

Land

242

242

Light vehicles and other mobile equipment

2,601

2,553

Machinery and equipment

45,005

43,364

Mill facilities and infrastructure

32,004

31,408

Mineral interests and mineral rights

18,878

18,228

Mine Development (2)

106,181

90,089

Software and licenses

1,659

1,659

Subtotal (3) (4)

222,861

210,656

Accumulated depreciation and amortization

(105,452)

(85,397)

Total

$

117,409

$

125,259

(1)Includes Nevada construction-in-progress and pre-production stripping costs of $0.2 million and $9.6 million at September 30, 2020 and December 31, 2019, respectively. Mexico construction-in-progress was $3.5 million and $2.4 million at September 30, 2020 and December 31, 2019, respectively.
(2)Pearl deposit 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 $1.6 million and $3.8 million at September 30, 2020 and December 31, 2019, respectively.

The Company recorded depreciation and amortization expense of $7.4 million and $20.0 million for the three and nine months ended September 30, 2020, respectively. For the three and nine months ended September 30, 2019, the Company recorded $6.3 million and $13.9 million, respectively.

9. Accrued Expenses and Other Current Liabilities

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

    

2020

    

2019

(in thousands)

Accrued insurance

$

653

$

452

Accrued royalty payments

2,410

2,212

Dividends payable

238

219

Other payables

453

483

Total

$

3,754

$

3,366

10

Table of Contents

10. Reclamation and Remediation

The following table presents the changes in reclamation and remediation obligations for the nine months ended September 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

(325)

87

Reclamation liabilities – balance at end of period

1,689

2,014

Asset retirement obligation – balance at beginning of period

3,591

1,289

Changes in estimate

1,404