Good morning, and welcome to the Q1 2023 Earnings Call. At this time, all lines are in listen-only mode. Following management’s presentation, there will be a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today April 26, 2023 at 10:00 a.m. Mountain Time. I will now turn the conference over to Kim Perry, Gold Resource Corporation, Chief Financial Officer. Ms. Perry, you may proceed.

Thank you, Joelle. And good morning, everyone. On behalf of the Gold Resource team, I would like to welcome you to our conference call covering our first quarter 2023 results. Before we begin the call, there are a couple of housekeeping matters I would like to address. Please note that certain statements to be made today are forward-looking in nature. And as such, are subject to numerous risks and uncertainties as described in our 2022 annual report on Form 10-K and other SEC filings. Please note all amounts referenced during the presentation are in U.S. dollars unless otherwise stated. Joining me on the call today is Allen Palmiere, our President and CEO; and Alberto Reyes, our Chief Operating Officer. Following Allen, Alberto and my prepared remarks, we will be available to answer 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. 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 Form 10-Q have been filed with the SEC and EDGAR, and are also available on our website at www.goldresourcecorp.com. I will now turn the call over to Allen.

Thank you, Kim, and good morning, everyone. I'd like to thank all of the listeners for taking the time to join us on this call. We faced several challenges in the first quarter, which we had anticipated. However, we're pleased with the results to date. While our production is down year-over-year, our metal production in Q1 2023 has remained strong due to higher grades continuing on from the fourth quarter of 2022. In the past five months, we replaced the entire management team at the Don David Gold Mine with experienced professionals whose focus on safety and operational efficiencies align well with our expectations and standards. We're very optimistic that the new management team will be able to affect significant changes in safety and operational standards and productivity. As most of you may be aware, there has been tabled a proposed reform to the Mexican mining law. Our initial review of the proposed legislation would suggest that while it is manageable, it will place increased pressures on all mining companies and make it more challenging to operate within Mexico. Now please turn to Slide 4, and I'll provide a brief update on our first quarter exploration results. Exploration efforts to date include four exploration drill holes totaling more than 2,500 meters and 26 infill drill holes totaling nearly 5,000 meters. This has allowed us to get a better understanding of the structures that control mineralization and the excellent potential at DDGM. After the promising fourth quarter exploration results, we continue to focus on the three sisters: Marena, near the Arista Zone; and South Soledad; and Sagrario on the Southeast portion of the Switchback Zone. While it takes time to develop a resource from initial drilling, we're excited about the future. The new geological team is taking a disciplined approach to interpretation and target identification, which we believe will pay dividends in the future. It's our objective to increase our resources and reserves this year through our exploration and infill drilling programs. I'll now turn the call over to Alberto for an update on the operations.

Thank you, Allen. And also, good morning to all. Starting with safety at DDGM, we have managed significant achievements in our underground mining operations. The introduction of a new management team has brought renewed focus on safety and compulsive training has improved current mining practices. We provided improved risk analysis training to all underground supervisors, ensuring that safety protocols are followed diligently. Two new designated hands-on training areas have been made available for underground and surface, allowing for more effective training. Additionally, multidisciplinary committees have been established to address safety findings, providing continuity to the reports that we're getting, and further enhancing our safety measures. Despite all the great efforts, we experienced one LTI at DDGM in March. The team has conducted a thorough investigation and implemented corrective measures to avoid exposure to the same type of risk. In Q1, we achieved our metal production targets as planned despite start-up delays after the holidays and small operational interruptions that impacted throughput. I'm excited to comment on our business improvement initiatives underground. We've hired an underground specialist that is assisting with our training. So far, we have noticed improvements in drilling accuracy, powder factor optimization, reducing dilution, improving cycle times and improving ground control conditions. At the plant, our team embarked on studies with consultants to improve the quality of our concentrate and metal recovery. The overall recovery in Q1 was lower than planned. This was due to higher grade zones containing quartz. It is worth noting that these areas were discovered through infill drilling in Q4 2022 and quickly developed for production in Q1. Overall, we made significant process -- progress in Q1 and remain focused on continuing to improve our operations. I am pleased to report that we processed nearly 118,000 tonnes of ore and sold approximately 6,500 ounces of gold and 295,000 ounces of silver, equating to over 10,000 gold equivalent ounces. We further sold over 330 tonnes of copper, approximately 1,400 tonnes of lead and more than 3,000 tonnes of zinc. Turning to Slide 6. Our capital expenditure in 2023 is driven mainly by our development underground. In Q1, our capital development was aligned with the plan, achieved approximately 750 meters, costing $1.3 million, excluding exploration development, which was an extra $500,000. Our development for exploration was focused on extension of Level 3. However, these meters were not completed as planned because we identified new areas with higher priority that required appropriate planning. We are pleased with the results of the team in Q1 as it sets a solid foundation for the rest of the year. I'll now pass over the presentation to Kim to discuss the financial results.

Thank you, Alberto. After our Q1 activities, our balance sheet remains solid with over $21 million in cash. While our cash balance declined $2 million, our working capital increased by $3 million as a result of a reduction in payables. For the first quarter 2023, we reported net losses of $1 million or $0.01 per share. While we do have a mining gross profit, the consolidated earnings reflect Mexico exploration expenses of $1.4 million, Back Forty exploration expenditures of approximately $0.5 million, severance costs related to the management changes in Mexico of $600,000, G&A of $1.2 million and other various noncash expenditures. Mining gross profit reflects an increase in depreciation expense due to the addition of the filtration plant and dry stack facilities; the addition of the gold regrind circuit, both of these additions occurring early in 2022; as well as a lower mineral reserve depreciation base. Net sales of nearly $31.2 million were 31% lower than the same period in 2022 due to both the lower volume of metals sold with the exception of silver and lower metal prices realized for all metals with the exception of gold. Total production costs of approximately $20 million for the quarter are in line with production costs for the same period in 2022. Don David Gold Mine's total cash cost after co-product credits was $711 per ounce, and total all-in sustaining cost per gold equivalent ounce sold were $1,221. Turning to Slide 8. I will provide an explanation of the increase in cash costs. The 2023 increase in cash cost per gold equivalent ounce sold are driven by three key factors: one, lower gold equivalent ounces sold; two, lower co-product credits; and three, higher treatment charges for zinc concentrates. These factors were not unexpected, but it clearly drives sustaining the cash costs year-over-year. The gold equivalent ounces are lower due to the lower tonnes ore processed and a lower grade mine, offset by realizing a higher payable metals percentage. The higher payable metals percentage is driven by the timing of final settlement of concentrate sales and the processing of zinc tails through regrind circuit, which started in Q2 2022. The lower co-product credits was a result of lower copper lead and zinc concentrates as compared to Q1 2022 and the lower realized price for these base metals. Treatment charges are higher due to zinc treatment charge -- due to the zinc treatment charge benchmark and spot rates increasing period-over-period. Again, while these factors are not ideal, we understood we would face these challenges in 2023 and therefore provided guidance of $1,000 to $1,050 per gold ounce sold for cash cost accordingly. Allen, back to you.

Thank you, Kim. With the Back Forty project, we remain optimistic. We made significant progress. As discussed before, the initial capital and operating cost estimates were influenced by inflation and supply chain issues in 2021 and 2022 and resulted in higher costs than we felt were acceptable. We made the decision to slow down work on the formal study to evaluate alternative mining approaches and process flow sheets as well as site infrastructure layouts, all in an effort to reduce capital and operating costs. The work has resulted in a number of potential improvements. And once the engineering work is complete and the costs are finalized, we will incorporate the costs into the financial model. The timing of this work is difficult to predict as it entails a substantial amount of testing and engineering. Upon completion of the current work program, we will present the economic model to our Board of Directors for a decision as to how we move the project forward. As I indicated a month ago with our 2022 year-end results, our team is progressing on safety and operational efficiencies to ensure the well-being of our employees and the optimal performance of the Don David Gold Mine. As previously discussed, our exploration program is ongoing, and the results continue to be encouraging. The first quarter was positive in that the results supported our annual guidance. And while we anticipate further challenges, we are confident that we will make 2023 another -- yet another successful year. And with that, I will turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from Heiko Ihle with H.C. Wainwright.

This is Marcus Giannini calling in for Heiko. Congrats on the good safety track record at Don David.

Thanks, Marcus. Good to hear from you.

Yes, no worries. So can you guys maybe break out some inflationary items at Don David? Is there anything that's come in line with -- or that hasn't come in line with your prior modeling? Are you seeing any bottlenecks the market may want to be aware of?

It's an interesting question, Marcus. Last year and in fact a portion of the prior year, we did experience significant inflationary pressures in Mexico. Interestingly enough, so far this year, we have not been subjected to anything that was unanticipated, nor are we seeing any significant supply chain issues. There is still perhaps slower than normal deliveries, but you can schedule it. So do I -- am I about to say that we're past the worst of the inflationary pressures? No. But certainly, what we are seeing so far is in line with are planning in our current budget, and that led to the guidance for the year.

Okay. Perfect. Yes, that makes sense. And then just switching over to Back Forty. To be clear, all your spending is the $450,000 on studies and permits? Or are there other cash flow needs for the project?

Right now, there are no additional cash flow needs. What I want to stress though is we are spending very little on external resources of Back Forty right now. We are fortunate in that we have a very strong technical services team in-house who are able to develop new mining approaches, develop schedules for the mine. We're doing all of our metallurgical testing in-house. And in fact, we've revised the flow sheet in-house. And by utilizing our in-house resources, we're able to keep the cost down to, as you said, $400,000. Going forward, when we reengaged to formalize the feasibility study, the cost will increase because we're going to have to engage external consultants to bless our work. But in the short term, I don't anticipate any significant increase or change the rate of expenditure.

Okay. Perfect. And then just one last quick one. What sort of turnaround times for assays are you seeing at Don David, given that you're drilling more than 2,500 meters?

Currently, it's running about between three and four weeks. The lab we're using is being reasonably responsive. Ideally for exploration, you would have it on a two or three-week turnaround. That's just not possible today. But three to four weeks isn't bad. That's for virtually all of our drilling. We're actually sending our infill drilling out to external assay as well so that we can incorporate the results of the infill into our resource modeling. It's not bad. Is it perfect? No, but it's not bad. If you look at the turnaround from drill -- pulling the drill core to getting the assays, you've got about two weeks for cutting cores, sample prep, shipping into the lab, and then you've got a three to four-week turnaround at the lab.

Okay. Perfect. Yes. I mean considering the last couple of years and some of the wait times there, yes, that's not bad like you said. All right. Well, thanks for taking my questions. That's it for me.

[Operator Instructions] There are no further questions at this time. Please proceed.

Thank you, operator. I would like to take this opportunity to thank everyone for participating. As we had indicated earlier, 2023 is going to be a challenging year for us in terms of metal production, primarily because the areas within which we are mining currently have lower grades than we had in prior years. We're getting the benefit currently of a nice uptick in grade because of a zone that we're exploiting. So we're running a bit ahead of our guidance. We actually expect that towards the latter half of this year, we'll trend back down towards our guidance. It will be a difficult year, but it's one that, given our new team, we are very optimistic about, and we're expecting good performance. We will keep you all apprised of any material changes that happened before. We have this conference at the end of Q2. I would thank you all for participating, and I hope you all have a great day. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.