Thank you for joining Gold Resource Corporation 2017 Q3 Earnings Conference Call. Mr. Jason Reid, President and Chief Executive Officer, will be hosting today's call. [Operator Instructions] As a reminder, today's call is being recorded. Please go ahead, Mr. Reid.

Thank you. Good morning, everyone, and thank you for joining Gold Resource Corporation's 2017 Third Quarter Conference Call. I expect my brief comments to run approximately 10 minutes, followed by a question-and-answer period. Joining me on the call today for the Q&A portion will be Mr. John Labate, our Chief Financial Officer. Let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued yesterday, along with the comments on this call, are made only as of today, November 1, 2017, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in our Form 10-K filed with the SEC for the year ended December 31, 2016. Third quarter highlights include net income of $4.6 million or earnings of $0.08 per share. Our Oaxaca Mining Unit generated net sales of $31.1 million and mine gross profit of $11.2 million. Our cash cost per ounce produced was $2 per ounce after base metal by-product credits. And our cash balance in the third quarter held steady as it did the first 2 quarters at $15.8 million. Overall, it was a solid quarter. Third quarter production from our Oaxaca Mining Unit totaled 6,465 gold ounces, 392,153 silver ounces, 291 tonnes of copper, 1,449 tonnes of lead and 4,628 tonnes of zinc before payable metal deductions. Calculating the gold and silver as a precious metal gold equivalent,…

[Operator Instructions] We have our first question.

It's [ Harvey Vollen ]. Congratulations on a really good third quarter. Jason, as I run the numbers myself, if you guys are still holding to your 27,500 gold and 1,850,000 ounces silver, it seems to me that fourth quarter is going to have to be a knockout compared to what's happened year-to-date. And I understand that you're moving into an area of the mine where the grades are expected to be higher. So assuming what I'm saying is true, does that -- will that have any effect on the base metal grades that you will encounter while you're mining during fourth quarter?

Listen, the base metal grades vary depending on what stopes we choose to take. And we always go into a quarter with a plan and then probably 9 times out of 10, that plan has changed depending on what we run into, and modified to a small extent, but we don't always take the stopes we target. So could they be higher or lower? Sure, they could. But we absolutely expect a solid fourth quarter. And at this point, there's no reason to think we're not going to have one. And therefore, we're holding our outlook as it's been. But we love the fact that the base metal prices are hitting highs, like in some instances, 5-year highs. And that additional revenue is great right now, especially given the fact we're building plan -- in the process of building another mine in Nevada. So as far as grade though, Harvey, just depends on what we ultimately take as far as stoping. I mean we've been very focused on not doing any long-hole, open stoping or cut-and-fill over at Switchback yet. We wanted to take the entire year to develop so that we had this -- a lot of development in front of us, and we've done that. So it just depends on what we ultimately take. But the grade varies from quarter-to-quarter, we all see that. Sometimes, it's up, sometimes it's down. So it's hard to speak exactly the grade of base metals.

Sure. But on the other hand, you're very comfortable that you're going to get a higher grade of precious metals during fourth quarter. So the first of my question is that if I look at third quarter, of the $31 million in revenues, $18 million-or-so came from base metals, overwhelming almost the amount of money that came from precious metals. So if precious metal production is going to be up in fourth quarter, which is what you're implying by staying with your original projections, then will base metals kind of stay the same as third quarter? Or when you're looking at higher grades in the mine, does that necessarily mean lower grades of base metals? Or is that totally independent?

No, that doesn't mean that. It's really -- the grade fluctuates. It's not uniform by any means. I mean there's a overall average grade, but quarter-on-quarter, you can't predict it like that. So there's no -- at this point, there's no reason to think we're not going to have a solid Q4. I mean things could change, we can run into challenges and not, but have a solid quarter. But at this point, we believe we're going to have a solid quarter, reach our numbers. And we'll just have to see how the chips fall out as far as where the revenue comes from. To me, I don't really care as long as our production is on and to a point where revenue not only keeps operations going, keeps the dividend going, keeps taxes paid. And we're able to allocate some cash in Nevada. That -- I'll be happy if that takes place.

I hear you. Can I ask one more follow-up unrelated question?

Sure.

So in Nevada, how much more capitalization costs do you expect? And have you decided on how you're going pay for it, i.e., out of overall company cash flow or finance like you did this one piece of equipment?

No, it's a great question. We've allocated about $10 million, both through cash and through financing for the crusher and the ADR, the conveyors, the generators. So these long lead-time items, we needed to get in our hands. And we have them or soon to have them once the ADR is done. But the remainder, we'll just have to see. I mean we are financing some equipment. We'll see where the metal prices go, whether we think we can bootstrap this thing through to the end or whether we think we need to evaluate other funding options, which as we've always said, could include cash, equity debt or a combination of those. But as you heard me reference in the conference call, we allocated almost $2 million in the quarter for equipment. So we are bootstrapping to some extent as we speak. But the ultimate outcome is yet to be known. I mean we're just going to have to see what happens with the metals, if they stay here or if they pull back in the barrel market or they keep running in a bull market, we'll just have to see. But I can't answer that yet. We don't know. But what we have been doing is bootstrapping thus far. It's tough, but we're doing it.

So are you saying there's another $10 million-or-so in capitalization costs?

Yes, at least, yes. More or less, let's say, this takes $25 million, plus or minus. We still have $10 million to $15 million. And most of that goes into dirt work in building the heap and mining. So there's still capital needed. But so far, so good. I mean we've done quite well, I think, to have allocated $10 million, basically, to the long lead-time equipment.

How does the dividend question play into all of this?

As it relates to whether it gets moved or not, upward, no, we're not going to move it at this point. We have a mine to build. I don't think it's prudent to increase the dividend when we have cash needs to build a mine. But what I like to see is basically, we're leaning on Mexico to help build this mine in Nevada. Nevada gets up and running and the cash flow we expect from Nevada, plus the fact we won't have to lean on Mexico, perhaps Mexico can kick into the dividend and obviously, we want Nevada to kick into a dividend. Once we get Nevada up and running, I really want this dividend to go up. So I wouldn't expect it to move until we get Nevada up [running].

[Operator Instructions] We have our next question.

Jason, [ Mark Smith ], just private investor. Harvey really delved into a lot of what I had to question you on. And my numbers were the same as his. I mean I'm getting 7,200 in gold -- just gold ounces just to make that quarter 4 and year, complete year forecast in gold, and 539,000 silver. Those are my numbers. But I wanted to ask you specifically on the grade at Mirador, and perhaps, you touched on that already. I was late getting on the call. But is the grade at Mirador coming along? And you certainly have some good drill results there.

Right. Yes, Mirador -- just to take a step back, Mirador had some old workings in it. And we utilized those old workings to keep capital load to access this mineral and really start on a shoestring budget. And that's what we've done. But in doing that, too, we've also had the growing pains of putting a mine into production on a shoestring budget. We -- as I referenced earlier in the year, we had a contractor that wasn't executing and was delaying us, so we terminated them and brought the development in-house. Then we ran across some bad ground and some of the development which delayed us. So we've had -- its had its year of challenges. We're starting to gain some ground. Now where we've come in on this mineral, historically, it's in an elevation, where they were not mining any deeper than this. And the point being is we have to mine up, but that's what you want to do as a miner. You want to come in as deep as you can and mine up from there and let gravity help you mine. But we've done that, and so now, we're working a ramp up to what we believe will be the higher silver grades in this particular ore shoot that we're chasing. So it was nice to see that some of the tonnages I referenced that were coming out of there were over 1 gram gold and 150 silver. It's just part of getting a mine up and running. I mean nothing ever is perfect. You go in with a plan, and you deal with the reality once reality hits you in the face and you modify as you need to. But we are -- we have modified and same thing with the mill. So we're still very optimistic with Mirador. And it will be nice once we get our feet under us a little more to have a consistent ore feed to -- to feed to the mill, to help supplement...

Now over there in general, do you see some development similar to what you're doing for Switchback? Or are you just going be kind of a straight to the mill feed with that more so?

Yes, we'll just hand-to-mouth over there. This is like us early on with the Arista. I mean, we're going straight in to get to the ore shoots as soon as we can and mine hand-to-mouth. Again, with the overview that when we originally made the decision to move forward on this, we didn't allocate a whole lot of capital to do it. And so shoestring budgets are tough, but we've done that and we're there and with the goal that it starts making money to pay for itself. And that's the whole point to keep capital down and doing it organically. So we just need more time. That's the way I see it. It's going to take time. This is a long lead-time industry, and Mirador's no different. But in the grand scheme of things, we've moved Mirador quite quickly, being able to leverage the historic workings that were there, cut down on a lot of development to access or get closer to the ore shoots.

Right. And you, thankfully, you've got a track record of actually doing these shoestring projects and that is much appreciated because just having the experience, it helps a lot. So that was my [ comment ]. As I said, I was late on the call. I'll listen to it when it gets posted and correspond more accordingly.

Mark, I appreciate you listening to the call and for your continued support. Have a good day.

[Operator Instructions] We have our next question.

Jason, this is [ Lee Pigorsch ]. I've got a question that pertains to a subject talked about many, many months ago, and that is how is the power line progressing into the mine site in Mexico?

Right. No, great question. We absolutely have remained focused on getting this power line in, and we are gaining some serious ground on doing so. We have made dramatic headway with the Federal Power Commission, and we've rerouted the power line to a different direction, and we've received approval from all the communities that the power line, it goes through, many of which don't have electricity so this is actually bringing electricity to them. So they very much want it, whereas in the other direction, we had a couple holdouts -- so were creating problems for us. We are moving forward on it as we speak. So what do I mean by that? We're putting money down on it. We're very optimistic it's going to happen. We've been reserved on comments in large part because we've been chasing this for 4 years now, almost 5 years, but it's big. And what do I mean by that? It's big, because it's really going to lower our cost, we believe. And we've been talking about it for so long that I'm just taking a conservative approach. But we are closer than we've ever been, and we're putting money down on the construction of it, and that's where we are. So it's happening. I don't want to say it's a foregone conclusion until it's actually finished. But it's pretty exciting for us because...

Well, let's keep our fingers crossed on this thing, and hopefully -- and get done here fairly quickly because I think it'd be a meaningful addition to this whole site.

Absolutely. It could lower our cost dramatically, not having to rely so much on diesel. And then if we can work the diesel, generate our power plants to do peak and off-peak hours for electricity and really optimize it going forward, I think we can lower our costs. But just by the very fact of getting on the electrical power grid, by all indications is going to lower our costs. And the payback on this project, which is about $4 million -- a little over $4 million, the payback on it is very good. I think it's less than 2 years. But Lee, it's happening is the point, it's happening. But having gone...

[indiscernible] going up so...

Yes, having gone through so many battles and hurdles and struggles to get this thing in, I'm just taking a very conservative approach. I mean, I look forward to the day when we can come out and say, " the power line is done!" And at that point, our costs drop and that's...

Well, good luck on that.

At this time, there are no further questions in the queue. I would like to turn it back over to you, Mr. Reid, for closing remarks.

Great. Thank you, everyone, for participating in the call, and look forward to the fourth quarter conference call. Have a good day.