Gold Resource Corporation (GORO) Q2 2021 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the Gold Resource Corporation's Second Quarter 2021 Conference Call. [Operator Instructions] And the conference is being recorded. After the prepared remarks, there will be an opportunity to ask questions. I would now like to turn the conference call over to Ann Wilkinson, Vice President, Investor Relations and Corporate Affairs. Please go ahead.

Thank you, Holly, and good morning, everyone. On behalf of the Gold Resource team, I would like to welcome everyone to our Second Quarter 2021 Results Conference Call. Before we begin the call, there are certain housekeeping matters I would like to cover. Please note that certain statements to be made today by the management team are forward-looking in nature, and as such are subject to numerous risks and uncertainties as described in our quarterly report on Form 10-Q and other SEC filings. On the call today we have Allen Palmiere, President and Chief Executive Officer; Kim Perry, Chief Financial Officer; and Alberto Reyes, Chief Operating Officer. Following Allen and Kim's prepared remarks, all 3 will be available to answer your questions. This conference call is being webcast. For those of you joining us on the webcast, you can download a PDF copy of the conference call slides from the materials tab under the ask-a-question tab. The event will also be available for replay on our website later today. Yesterday's news release issued following the close of the market and the accompanying financial statements and MD&A contained in our 10-Q have been filed with the SEC on EDGAR and are available on our website at www.goldresourcecorp.com. Also, please note that all amounts mentioned in this call are in U.S. dollars, unless otherwise stated. I will now turn the call over to Allen.

Thank you, Ann, and good morning, everyone. I would like to thank the participants for taking the time to join us and to welcome Alberto Reyes, our new Chief Operating Officer, to the call. Following my opening remarks, Kim Perry, our Chief Financial Officer, will describe our financial results. I will then provide you with a picture of our plans for the balance of 2021 and a few closing remarks, and then we will be able to take your questions. Before discussing the operating results, we want to note that our operations team continues to demonstrate their ability to be nimble and adaptive operators, all while focusing on excellent environmental, social and governance practices. Notwithstanding an excellent work culture, there were 2 lost time incidents at the Don David Gold Mine during second quarter. While these incidents did not result in serious injury, measures are ongoing to reinforce adherence to safety protocols and to strengthen the safety culture. Accordingly, a series of programs are underway to improve the overall culture of safety. Turning to our infrastructure projects. We made significant construction progress on our filtration plant and dry stacks tailings project, which is targeted for completion in Q3. As we've noted, the dry stack tailings will accelerate reclamation of certain areas of the open pit mine, provide efficient storage of tailings, and, importantly, reduce water consumption, as approximately 80% of the processed water will be recycled and available for use. During the quarter we completed 156 meters of underground development on the northern and southern exploration drifts. From these exploration drifts we completed over 3,400 meters of diamond drilling in 12 drill holes. Surface drilling on the Aguila project is ongoing, with 2069 meters of diamond drilling in 2 bowls. Exploration activities were focused on the Switchback vein system, which extends for over 1 kilometer of strike length and remains open both along strike and down dip, and as well as parallel structures to this system. Most notably, the Sandy vein system, which is located between the Switchback and Arista systems. Exploration drilling mainly targeted expansion and delineation of the principal Soledad vein to define additional resources, as well as step-out drilling on the parallel Sandy system of veins for resource expansion. Drilling is also targeting strike extensions of the Arista system beyond the current mine plan. We have also renewed our focus on near-mine exploration with surface geological mapping and rock chip sampling in the Cerro Colorado area, notably in the vicinity of Aguila open pit and as well the surrounding area with additional drilling planned for these areas in the second half of 2021. Turning to the second quarter operating results. I'm pleased to report that Gold Resource sold approximately 5,700 ounces of gold, 270,000 ounces of silver, 365 tonnes of copper, 1,200 tonnes of lead and 3,200 tons of zinc. During the second quarter, we processed ore at an average rate of 1,500 tonnes per day compared to 1,950 per day in 2020. While it was lower quarter-over-quarter, it was consistent with our mine plan for the year. The base plant continues to provide substantial efficiencies by the returning of processing waste to underground workings as backfill. During the second quarter, we processed ore with average gold and silver grades as 10% and 11% higher respectively than the same period last year. Overall base metal grades were lower during the 3 months ended June 30, 2021. As a result of a change in the mine plan necessitated by challenging ground conditions encountered in the first quarter. We are happy that these challenges have been overcome, and our mine plan is back on track. With that, I will turn the call over to Kim to discuss our financial results.

Thank you, Allen, and good morning, everyone. We closed the quarter with a strong balance sheet, consisting of just over $30.5 million cash and no debt. Cash from operating activities was $9.3 million for the quarter, and working capital from continuing operations was nearly $32.6 million at June 30, 2021. For the second quarter we reported net income of $1.3 million. Net income is a result of just over $30.8 million in revenue. Net revenues reflect a 12% decrease in concentrate treatment charges, which are netted against concentrate cells. These treatment charges for the 3 months ended June 30 were $2.9 million or $609 per base metal tons sold compared to $3.3 million or $864 per base metal tons sold for the same period 2020. This decrease is largely dependent on the spot treatment charge market for zinc, which can be volatile. Total production costs of $19.5 million for the 3 months ended June 30, 2021, were 84% higher than the production cost of $10.6 million for the same period 2020. This increase is primarily related to the increase in production volumes. Additionally, there was a $1.2 million impact related to the Mexican labor law reform. Finally, during the 3 months ended June 30, 2021, we were impacted by a 13% price increase in consumables used in the operations and a 5% increase in the volume of diesel consumed. The increased diesel consumed relates to increased power consumption, primarily from the diesel generators for the filtration plants and underground ventilation. The Don David Gold Mine total cash cost was $713 per ounce and total all-in sustaining cash costs were $1,250, this is -- excuse me, $1,280. This is after co-product credits. We expect these costs to significantly lower in the second half of 2021 and maintain our full year guidance of total cash costs of between $210 and $225 per gold equivalent ounce and total all-in sustaining cost between $800 and $900 per gold equivalent ounce. With that, I'll turn the call back over to Allen.

Thank you, Kim. Management continues its focus on unlocking the value of the mine, existing infrastructure and our large property position and providing growth to our shareholders. Accordingly, we invested $11.2 million in infrastructure and exploration in the Don David Gold Mine. In our process plant we completed metallurgical testing and initiated design and engineering of a tailing's regrind circuit, including procuring certain parts and equipment. The project, unfortunately, has been delayed due to longer lead times than expected. And this project is now expected to be completed in early 2022. The new circuit is expected to increase gold recovery by between 6% and 10%. The please note, it is unlikely that the full amount of $9.8 million for underground development will expense in 2021 as a result of the mine sequence changes made during the first half of the year. In closing, we remain on track for full year guidance, with exception of development capitals previously discussed. As we expect to see improvements in grades in the second half of the year, we have already seen encouraging and affirming results in July as we are back in the Soledad vein. With the expected second half results, we are well positioned to have more than $50 million in cash by the end of the year and a free cash flow yield greater than 15%. This, along with our dividend yield substantially outperforms our peers. I also want to repeat Kim's comment that the company has a strong balance sheet which provides us with flexibility for growth and exceptional returns for shareholders. Thank you all for taking your time to listen in. This concludes our prepared remarks. I'll now turn the call back over to the operator for any questions that may arise.

[Operator Instructions] Your first question for today is coming from Heiko Ihle.

And I just want to point out that the company has a bigger yield than the S&P 500. So clearly some optionality here. You stated in the release that you have started some profit sharing with your employees. Though there aren't really any details in the release. Just a couple of things. I'm just trying to clarify. What factors are people ranked on? Is it safety? Is it production? Is there anything else?

It's Tim. That's actually an excellent question. And there's actually very little guidance out regarding what factors will ultimately be -- companies will be able to incorporate. And there's a lot of legislation going on right now and discussions with the legislation regarding what that will look like. Right now we are taking the basis that is 10% of net income. And so with maybe taking a bit more of a conservative approach, we know it won't exceed that. Obviously we'll reward employees if it's appropriate to go higher than that. But at this point, that's the approach we're taking, the assumption we're taking and the path we're following to determine that, those factors.

You already answered one of my next questions, which was how much is it going to be? And then when does the whole thing start? And also, can we trendline the same 10% figure or whatever wherever it might come in this year into next year as well, please?

Yes, Heiko, I think that's a fair assumption to -- we did take the assumption based on a full year impact. So the $1.2 million for profit sharing was calculated from January through June. And unless there is any other changes in the legislation, that should continue into the future.

Got it. Okay. Very good. And then -- and just one little clarification at the end here. You came in at $1,280 for all-sustaining cost for GEO. Walk us through, I mean, as detailed as you can in this setting, if you could, what you expect to see for the remainder of the year there and factors that may sway this figure either direction, especially given all the capital improvements that are being undertaken at the site, please?

Heiko, the reason that our all-in sustaining was higher than originally projected was the fact that during Q2 we were mining in alternative mining zones. You'll recall in late Q1 we had some ground control issues, and that necessitated a change in plan. The result of that, we were in lower grade areas and our byproduct credit suffered. We are now back on track with our original mine plan in the original areas that we had anticipated. The result of that is our base metal credits, our by-product credits are going to increase significantly in the second half and bring our all-in sustaining and our cash costs back in line with our guidance. It was a timing issue and was stated by the ground control issues we had earlier in the year.

Holly, I think the next person in line is [ Ron Aubrey ]. Can you add him in?

[ Ron ], Your line is live.

Yes, this is [ Ron ] here. Allen, it's good to talk to you again. The company reached peak production last fall. So this is the third quarter in a row of sequential decline. So it's obvious that you inherited a challenge in the midst of completely rebuilding your management team. I'm comforted to hear that the Q1 ground conditions are now resolved and behind you. So I'm trying to get a sense of when you get back to your production growth again, including grade improvement. So can you just maybe take a step back and just summarize some of the mining challenges and your plans to address them going forward?

Sure, [ Ron ] The plan for this year has and always has been to reduce our production rate down to 1,500 tonnes a day. Last year we were running directionally at 1,980. The way that the company was able to sustain that level of production was to focus solely on the Soledad structure in Switchback. It's very wide with, it's long [ home ], it's almost bulk mining underground. So the volumes were relatively easy to sustain. However, if you focus exclusively on that, you miss opportunities for taking advantage of some of the narrow, very high-grade veins in the Arista system in particular. So we made a very conscious decision to reduce our volume and to refocus on some of the high-grade veins in Arista. You're going to be seeing increased grades in the second half of this year coming from 2 areas: Soledad over in Switchback and the Candelaria and other veins in Arista. It was a conscious decision because when you're mining in narrow veins your productivity is by definition lower. You just cannot move materials fast. However, the grades are good. The mine dictates what your level of production should be. So I am not going to suggest to you that we will be on an ever-increasing production rate. Geology dictates what you can get. What I can tell you is our focus is to maximize what is available to us by the dictates of geology and to operate in the most efficient manner possible. Now part and parcel of that is programs that we have initiated in the past several weeks to effectively go in, strip down, analyze and rebuild all of our systems within the mine, whether it's geology, whether it's operations, maintenance, processing, we are going in looking at them from an efficiency and a governance -- when I say governance, it's not corporate governance per se, but it's operational governance perspective. And while this work is just beginning, I believe that relatively soon, potentially as soon as Q4, you're going to start seeing increased profitability for those tonnes that we are able to mine underground. Does that address your question, [ Ron ]?

Yes, it does. And I appreciate that color. I just wanted to just follow on. I appreciate that you're sticking to your guidance for cash costs and all-in sustaining costs, certainly after by-product credits. Could you maybe then just take a step back and give us an updated outlook on just production, specifically silver and zinc, which I think has been below expectations so far. So it's implying that you're playing catch up there. Can you give us some -- maybe some color as to how confident you'll be, for example, meeting your 1.7 million, 1.8 million ounces of silver and 21,000 tons of zinc.

[ Ron ], as I've already discussed, we ended up mining in lower grade areas of the mine, in particular in Q2, but also a good portion of Q1. We will not be able to get completely caught up in zinc and silver tonnage. However, the run rate that you will see for the second half of the year will exceed what we had originally planned. So we are playing catch up to a certain extent, but the reality is we will never be able to completely recover it. The way that we're going to be hitting our targets, to be quite honest, is the fact that we still got very strong commodity prices. And that -- on one hand, I hate to take credit for something that I have no control over, but a rising tide floats all boats. We are back on track in terms of our production profile, but it is not something that we can recover from completely this year, [ Ron ].

No, that's fine. But at least directionally it appears that the worst is behind us and now we're back on a path to get to where you certainly would like to be, and that's good enough for me.

Okay. Thanks, Rob. We are back on track.

So Holly, [ James Tad ] is up next. Can you please make his line live?

James, your line is live.

And congrats on the team's results on the quarterly cash flow yield. I think most of my questions on the prudent stuff were answered. I just have some clarification points I want to ask. The first was probably to Kim. The $1.9 million that was spent on onboarding of the third-party employees that was incurred in Q2, will that -- any of that continue on and lead into Q3 or beyond? Or is that onetime charge done for the last quarter?

Yes. James, thank you for that question. First of all, I want to clarify that the total $1.9 million was not a cash impact during the quarter. It is $1.2 million related to the profit sharing. That will continue, and that's been reflected in short-term liabilities and will be paid in 2022. The other $700,000 that you've seen is actually sitting in our long-term liabilities and relates to severance payments that if an employee is terminated you're obligated to pay under Mexican law. We did honor tenure by substituting our employees from the third-party into our company. So we felt it was appropriate to report that liability so that those seniority payments would be paid upon termination should there be attrition. So that $700,000 really, James, is probably more of a onetime blip. There will be occasional adjustments to that for price increases if there's changes in employee headcount, inflation, et cetera, but it will be rather minimal.

Great. And the next question, I guess, is for Allen. In terms of the reduction in the budget for the underground mine development, what led to that reduction? And what impact will that have on operations going forward, if any?

It wasn't a reduction in budget. What it was is we had underperformed our plan. And the reason for that, James, as you'll recall, we did suffer some ground control issues of late Q1. That necessitated new development that was not in the plan to get back into the Soledad vein. We have done that. But by doing that, we were unable to maintain our development rate as originally planned. Effectively, we diverted scarce resources to maintaining our production profile at the expense of the longer term development. Will it have an impact? Yes. Do I expect it to be something that you will see in the financial statements? No. We do have scarce resources in terms of development. We've got limited development teams. We've got limited development equipment. We are placing a great deal of emphasis on our exploration development. And at the same time, we need to recoup the lost meterage that we suffered because of the ground control issues. Now mine like this, typically you want about a year of developed workings ahead of you. Today we don't have that. So we are going to be making a huge push over the remainder of this year and most of next year to get back on track. I do not expect it to impact our operating results. It is certainly going to impact the schedule of the guys at the mine, but I don't think it will surface us to the point of the financial statements.

Okay. That's good news. And then in terms of the renewed emphasis on the satellite areas such as Cerro Colorado and the area surrounding the Aguila project, should we expect any increase in the original exploration budget above the $7.2 million that was allocated? And also, can you give us any preview of the results to date on the drilling programs, either for delineation and expansion and its potential impact on the resource estimates?

It's premature for me to be able to address the latter at this point. However, what we are doing is placing a great deal of emphasis on in-mine and near-mine exploration. Those areas that you've just mentioned are all near-mine exploration. What we're trying to do is build up our resource and then subsequently our reserves to take away the perception in the marketplace that we're a short-lived asset. And that's really the thrust. We can go and focus on greenfields exploration miles away, but that doesn't move the dial in terms of resource growth. And we really do, I believe, need to be able to demonstrate increased resources just to put some investors at ease. Some investors do not understand that a mine of this type typically only has anywhere from 3 to 5 years ahead of it at any point in time. Exploration is difficult, mostly because it's primarily done underground. Driving exploration drifts is slow and time consuming. So it's difficult to get a big resource ahead of us. That being said, that is our focus right now, both in terms of exploration drilling and infill drilling to upgrade mineralized material up into the proven and probable categories. Does that answer your question?

It does, Allen. And that's fine. There's 2 last questions I have if time permits. One was for Kim. You had mentioned, Kim, that there was an increase on the consumable prices as well as the volume of diesel. Is that something we should be considering a ongoing increase for future quarters? Or is that a temporary onetime charge?

I'm going to take part of that question, James. Right now you're seeing increased cost per diesel for one primary reason. And that is we have been for this past quarter running 2 of our gen sets to supplement the grid power from Mexican authorities. We are anticipating that we will be getting an additional allocation of power from the grid beginning in September, which will hopefully eliminate that bump in diesel consumption, and you'll see that one decrease. There are in fact, and everybody knows it, whether the feds or anybody else is willing to admit it, there is in fact inflation. And we are seeing the impact of it. Is it significant? It doesn't move the dial dramatically. Is it going to continue? Your guess is as good as mine. I personally, I think it will. But typically what happens in that environment is your inputs increase because of rising commodity prices, so does your revenue. So that may be overly optimistic, I accept, but that's really what I think will happen.

Sure. That is something I'm hoping for in some ways. I guess the last question was something I've heard with some of my readership, which is concerns or questions about the large increase in the potential issuance of new shares outstanding and the growth in the balance sheet. On a prior call, Allen, you had mentioned that the company is looking and targeting potential acquisition opportunities. Do you have any further color on how that's progressing with any prospects? Or are you still anticipating that's going to be a 2022 time frame?

James, I don't have a time line. Let me back up and address the first part of that question first, and then I'll come back and talk about targets. The increase in authorized capital was a significant increase. However, one of the things that has to be understood is we have a shelf prospectus for the ATM on file with the SEC. And if we were to just issue the shares contemplated in that shelf prospectus, we would have exceeded our authorized capital. It was too tight to appropriately manage the capital structure of the company. And as a result, we felt it prudent just to increase flexibility. Yes, if we identify a target that is appropriate, yes, we would consider using our stock to acquire it, but only in the situation where the transaction is accretive on almost every metric. We are not going to go and issue a bunch of stock and dilute the per share net asset value attributable to our shareholders, that will not happen. We will not go and issue a bunch of shares and dilute our cash flow attributable to our shareholders. That's not going to happen. Now by imposing the discipline of ensuring that any transaction we contemplate is accretive, it reduces the universe of possible acquisitions. Historically, the mining industry, I am a bit embarrassed to say this because I've been in the mining industry for a very long period of time. But historically, the mining industry has been very undisciplined when it comes to mergers and acquisitions. And the industry is littered with the carcasses of bad deals because people have overpaid and they have not paid attention to fundamentals of M&A. You don't do it unless it makes sense. You don't do it unless it's going to create value, and you certainly don't do it just to get bigger. And unfortunately, the latter factor seems to be a motivating factor for a lot of M&A. That is not what we're doing. Having said all that, that's what makes it difficult for me to give you a time line on any potential activities for the company. I'm looking all the time just by being in this seat. Opportunities present themselves on a continual basis. I will tell you, in particular in the pure gold sector, it is very, very, very difficult to find a transaction that makes sense. You will see late development stage projects selling for 50% to 70% of NAV. Well, if you sit back and think about it, that doesn't leave a hell of a lot on the table for a purchaser. The only way that anybody could ever do that is they have to make the assumption that gold is going to go to 2,000 or 2,200, then it makes sense. But if gold goes back to 1,400, there's another carcass on the side of the road. And that is not something that I am prepared to do. Do I want to grow the company? Yes, I do. Am I willing to risk the company by making a undisciplined and inappropriate to transaction? No, I'm not. I can't give you timing, James. I wish I could, but this whole initiative is by definition opportunistic, and it happens -- if it happens, it happens when it happens.

That's fair, Allen. I appreciate the color, especially on the ATM as well as the metrics you might be looking at.

Your next question is coming from John Bair.

With Ascend Wealth Advisors. A number of them have been addressed here. I do want to go back to the onboarding aspect. And I guess, would it be fair to say that the requirements that you've had to address are across the board for other oil -- or not oil and gas, on energy -- mineral, I'm sorry. My brain is in it. No other mineral companies, other exploration…

-- yes. Let me answer it. I think I know where you're going. This onboarding process was necessitated by change in labor legislation in Mexico. Historically, most companies, mining and other companies, hired their employees indirectly through, I will call it a service provider who actually hired the employees and then the operating company would enter into a service contract with the third party. Under the terms of this legislation, the government has determined that they want to eliminate that and have companies employ their workers directly. This is across the board. This is not mining-specific, it's Mexico-specific. The 10% that we've talked about in terms of bonus is mandated by legislation. However, there is no guidance within the legislation as to what that really means. When you talk to legal counsel, they would suggest that that is the top end of the bonus range. And there may in fact, if you apply appropriate operating metrics and thresholds to it, it may be totally appropriate to pay a lesser amount, but we don't know yet. So we have taken a very conservative stance, taken the legislative amounts. So said that's what we're paying. The onetime cost that Kim alluded to of $700,000 is something that we would have incurred anyway. Our third-party service provider had to make severance payments when employees left. When we moved them across to our payroll, we carried with them their seniority and their history straight across. And that 700,000 effectively represents accrued severance and retirement obligations arising from past service. Does that put it in perspective for you a little bit?

Yes. That's very helpful. And so essentially they're eliminating staffing companies, that's basically what the legislation effectively does, assuming and that happens for mining or oil and gas or agriculture or anything, it's pretty much across the board, is that fair?

That is correct.

Okay. Along the same lines, are there -- does that mean you end up having to pick up, say, health care costs. I don't know what the structure down there is or legislation requirements. Has that is -- in other words, is it very different from kind of the U.S. framework if you're an employee of a company? There are certain [indiscernible] and so forth? Or is that all taken care of, like health care benefits, that kind of thing, taken care of by the government?

We pay -- we provide to our employees health care benefits just as a U.S. employer would. The difference is cost of health care in Mexico is significantly lower than it is in the United States. And that portion of the cost is substantially lower. This is a move straight across. So we were already paying all of those costs indirectly through our service provider. So we don't -- we haven't noticed any impact in terms of labor rates, in terms of benefits. Those were just a flow through. The only impact was this legislative change about the 10%. Now keep in mind that we have in fact paid bonuses in the past. So while it looks a little bit draconian, it's not really a major operational change in what we do. In some ways it's almost form over substance from a financial statement point of view.

Okay, very good. Shifting to the dry stack facilities and what you're doing there, is this going to allow for increased processing of material? Or are you just simply improving your disposal tailings and so forth that could be perhaps reprocessed at a later date should commodity prices rise? And what minerals are within that? Is it your byproducts as well as gold silver?

Okay. Let me -- I'll start from the first question and work through them. The reason for dry stack, conventional tailings facilities fill up. And over time, you either expand them, build new ones or you change your technology. And in our -- we're in an area that we felt would benefit from dry stack versus conventional tailings for 2 reasons. One, it allows us to reclaim the original open pit by using it as an area for dry stack deposition. So we actually are moving way ahead in terms of site remediation. And in fact, we will be exceeding the standards required for site mediation by utilizing the dry stack technology. It is not -- it's not because it's less expensive. If you look at run rate P&L on the 2 alternatives, the filtration in dry stack is going to be slightly higher than conventional tailings deposition. However, the cost of construction, the tailings management facility, is exorbitant. So you've got this capital versus operating cost trade-off. But from an environmental point of view, dry stack is far preferable. From a reclamation point of view, it's far preferable. From a water use perspective, it is incredibly preferable because we recycle 80% of our processed water now. That water used to go out in the tailings facility, and it was lost due to evaporation. So it substantially reduces our water consumption. As to what's in our tailings, there will be everything in our tailings that we produce. But if we are doing our job right, the amount of metals contained in our tailings is so de minimis that there really is no residual value nor would there likely ever be in the future. Now you may have heard of situations where companies go in and reprocess historic tailings. In some old gold mines they would have 4 and 5 grams going out in their tailings. They were mining 30 grams. So they didn't care, and they didn't take the time to really ensure that they extracted every bit of payable metal because they didn't need to. But if you look at practices over the past 20 years, the recovery of metal by way of either leaching technology or flotation technology has increased to the point where there's very little in the way of payable metal going out into our tailings. Does that answer your question?

Absolutely. That's very good. I appreciate that.

Your next question is coming from [ Lawrence Danny ].

I'm a private investor and shareholder. And first of all, I'd like to congratulate you all on a good second quarter. Here's my question. So given your strong cash flow and increased capital in the bank, is it feasible? I know you've got infrastructure that you're investing in, but is it feasible that in the next 6 to 18 months a dividend increase is possible?

What your -- your question is on the surface very simple. And when you drill down to it, it is incredibly complex. You're going to the heart of capital allocation and capital management. I've articulated consistently since I got into this seat, the desire and need to grow the company. If I am successful in doing that, there may be alternative uses of capital that should generate a higher return for investors than a modest increase in the dividend. If we were sitting here 18 months from now and we have accumulated directionally $80 million or so in the bank, and I don't have a strong use of capital immediately in front of me, yes, I would consider doing that. What I think is prudent for a company in our situation, number one, we want to maintain the dividend. And I think our current yield is running around 2%. I do not want to discontinue that. But what I do want to do is build up a sufficiently large cash reserve to enable us to take advantage of opportunities as they present themselves. And that's really the focus. So I'm not avoiding your question, but I am saying my priority is to establish cash reserves to give us flexibility to grow the company. And if in fact those don't present themselves, yes, I would certainly consider giving some of that capital back to the shareholders.

No, it totally makes sense.

Go ahead, Kim.

There was a question that came online from George regarding the number of employees that were impacted by the labor reforms. And George, thank you for that question. It was approximately 500 employees at some round numbers. And we do have other individuals on site, but they're working on construction and other projects.

And I have one question that was -- came in on the Internet. It was whether or not we had any thoughts about buying back shares of stock in the open market. This goes to the previous question that was asked, and there really is a capital allocation question. I am going to be -- I'm going to answer this by first declaring my bias. I've been involved as a director and in management of a number of companies over the years that have in fact gone through either a normal course issuer bid or a substantial issuer bid. And it's never accomplished what the intent was. In every case, the bank balance went down, the stock price didn't do anything, and your float was reduced. Can it work? It can work if you really want to go and have substantial issuer bids and buy back 20% of your company. But picking away on a normal course issuer bid really is not very effective. Personally -- and I'm one person on the Board of Directors. I do not speak for the entire board on this issue. I'm talking off the top of my head. But personally, I would rather see distributions to shareholders by way of dividends than I would by a share buyback. Now that is a personal preference and bias. It is not going to be universally accepted. But I think that's a more effective way of returning capital to shareholders, in stock buybacks. I don't…

So Allen, at this time, there are no further questions. So -- and as there are no further questions, we would like to thank you again for attending the call, and we will talk to you again next quarter.

Thanks, everyone.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.