Good morning, and welcome to the Gold Resource Corporation Third Quarter 2023 Financial and Operating Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, today, Tuesday, November 7, 2023. I will now turn the conference over to Chet Holyoak, Gold Resource Corporation Chief Financial Officer. Mr. Holyoak, you may proceed.

Thank you, Joelle, and good morning to everyone. On behalf of the Gold Resource team, I would like to welcome you to our conference call covering our third 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 this 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 that was issued following the close of the market and the accompanying Form 10-K have been filed with the SEC on EDGAR and are also available on our website at www.goldresource.com. I will now turn the call over to Allen.

Thank you, Chet, and good morning, everyone. I'd like to thank you for joining us on our third quarter conference call. I would like to address the two points first, and then Alberto will address operations followed by Chet's with the financial results. Following their remarks, I will then make a few closing comments and we will take questions. The third quarter, as you've observed, was a difficult one for us. As previously guided, mine sequencing resulted in lower ore grades. While this was always in the plan for the latter part of this year, the unexpected strengthening of the Mexican peso hurt us, and the lower-than-forecast price of zinc adversely affected our byproduct revenues. While commodity prices and foreign exchange rates are beyond our control, we're very focused on those factors we can control, cost and productivity. We have reduced our workforce by 10% and are looking at further reductions. We have renegotiated certain supply and service contracts that will have a material impact next year. We have changed certain practices underground to reduce cost, reduce dilution and increase productivity. We are also doing test work to attempt to improve recovery while maintaining concentrate quality. That being said, cash continues to be tight and remains our primary focus. We published a preliminary economic analysis for the Back Forty Project, which demonstrates the robust nature of the project and confirming our assumptions when we first acquired it. Net present value using a 6% discount rate of $215 million and an initial capital requirement of $325 million demonstrate economic viability, and we have identified additional opportunities to further reduce capital and improve capital intensity. This was a result of a great deal of hard and creative work by our technical team over the past year. The new approach to the project…

Thank you, Allen, and also good morning to all. In keeping with our long-standing tradition, I would like to begin by addressing the importance of our team's safety. Our collective dedication has led to a commendable achievement with DDGM successfully reaching over 1 million work hours with zero LTIs complemented by a low LTIFR of 0.11. This reflects our team's solid commitment to enhancing our safety practices, fostering discipline, and integrating a culture of safety that adheres to the highest international standards. The third quarter presented a share of challenges exacerbated by the prevailing inflationary pressures, volatile change rates and increasing labor costs. In response, we have strategically reduced our headcount by an additional 10% while implementing various cost savings measures to alleviate the financial strain. On a positive note, we are actively exploring technological solutions at our processing plant to adapt to the shift in ore type. Preliminary results from our study on the copper concentrate have shown promise, particularly in improving gold recoveries. Rest assured, we are diligently following our management of change protocols to seamlessly integrate this fine leads and capitalize on the potential benefits. As for production results, I am pleased to report that production for Q3 reached approximately 117,000 tonnes of ore, sold approximately 4,000 ounces of gold and 209,000 ounces of silver, equating to over 6,500 gold ounces. In addition, we sold 245 tonnes of copper, approximately 947 tonnes of lead and more than 2,500 tonnes of zinc. For the year-to-date through September 30, we processed nearly 347,000 tonnes of ore, sold approximately 14,800 ounces of gold and 778,000 ounces of silver equating to over 24,300 gold ounces. We further sold over 900 tonnes of copper, approximately 3,700 tonnes of lead and over 8,700 tonnes of zinc. Turning to Slide 5. DDGM's strategic cost revision has led to adjustments in our underground capital development and sustaining CapEx, resulting in a reduction to approximately 460 meters of development. This adjustment is strategic and ensures that our production remains on target, adhering to our guidance. We have integrated promising near-mine development exploration result into operational plan, effectively replacing ore zones that initially require extensive development work. In the third quarter, our exploration initiatives yielded impressive results. However, we enter the fourth quarter, we will be scaling back these exploration efforts. Our financial commitment to exploration nonsustaining capital expenditures is now approximately $300,000, while our sustaining CapEx is around $460,000. This, in addition to underground development brings our total CapEx for Q4 to an estimated $1.8 million. This reflects a judicious allocation of resources, allowing us to operate below our initial budget of $2.3 million for the same quarter. These changes have necessitated significant adjustments within our team and operational processes, showcasing the remarkable resilience and adaptability of the DDGM workforce. Our employees have demonstrated a sound commitment to excellence, ensuring the continued success and sustainability of our operations. I'll now pass the presentation over to Chet to discuss the financial results.

Thank you, Alberto. If we go to Slide 8, the third quarter has seen a decrease in our cash balance, and we ended the quarter with $6.7 million. The decline in cash is primarily due to increased cash costs at DDGM, which we'll discuss in just a moment, and to our exploration program. Cash used in operating activities of $7 million year-to-date, and this includes $4 million spent on exploration in Mexico and over $1 million spent in Michigan related to the Back Forty studies. For the third quarter 2023, we reported net losses of $7.3 million or $0.08 per share, and for the full nine months, we reported net losses of $13 million or $0.15 per share. For the quarter, net sales of $21 million were 14% lower than the same period in 2022 due to both lower volumes of all metals sold and significantly lower metal price for zinc. Year-to-date, net sales of $76.6 million were 20% lower than the same period in 2022, also due to both lower volumes of all metals sold, with the exception of silver, and lower base metal prices. The lower base metal prices are also impacting cash cost per ounce, which we discuss on the next page. While production costs for the quarter and year-to-date of approximately $19 million and $59 million are in line with the production costs for the same period in 2022, this is resulting in an unfavorable impact on unit costs, such as cost per tonne processed and cost per gold equivalent ounce sold. We will discuss this a bit on the next page. Depreciation for the period is largely in line with the depreciation for the same period in 2022. Finally, mining gross profit is lower in 2023, primarily due to the lower sales not being offset…

Thank you, Chet. Our share price, along with most of our peer group, continues to languish. Our producing mine in Mexico, which should have better operating results next year and a project having a $200-plus million NPV in Michigan are trading at what we consider to be totally unacceptable values. We aren't getting any market recognition for the intrinsic value of our assets, relatively strong balance sheet, we have no debt, and excellent technical and operating teams. The current market environment has and likely will persist for an indeterminate period of time. The Board of Directors and management have decided to be proactive and engaged the services of Cormark Securities Inc. as a financial adviser to explore and evaluate strategic alternatives to unlock value for our shareholders. This process will begin immediately, and while there's no certainty around the outcome, we're confident that the process is in the best interest of all stakeholders. With that, I'll turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from Jake Sekelsky with Alliance Global Partners. Please go ahead.

Hi Allen, and team. Thanks for taking my questions.

Good morning, Jake.

So you mentioned that costs were impacted by a variety of factors, mainly lower byproduct credits and the strengthening peso. Can you just touch a bit on your exposure to both of those going forward? Do you expect to remain fully exposed or do you have any plans for hedging programs? Any color there would be helpful.

Well, in terms of the peso, about 60% of our operating costs are denominated in Mexican peso. So as the peso fluctuates against the U.S. dollar, we will have fairly significant impact. Put it in context, the peso about a year ago was 20:1. Right now, it's 18:1. That's almost a 20% swing in - if my math's right, a 10% swing in the value of the peso increasing our operating cost by 10% and it's totally noncontrollable. The ability to hedge the peso at these prices is there, but these are certainly not exchange rates that we would want to lock in. In terms of the other major impacts, again, zinc a year ago, it was sitting at $1.45. Today, it's $1.17, $1.18. But in Q3, it went down as low as $1.05. And again, at the bottom, well, what we hope is the bottom of the market is not an appropriate time to look at hedging. We are, in fact, continually evaluating the potential for hedges in a stronger environment. As we have done in the past, we would definitely hedge some of our byproduct revenues, copper and zinc. In terms of the peso, if it moves back up towards 20:1, we would consider putting in a hedge there. But at the current time, we don't have any plans to do so, Jake.

Okay, that's helpful. And then just from a near-term capital standpoint, you touched on scaling back some sustaining capital items a bit in Q4. I'm just curious, was most of this related to exploration work? Or were there some development dollars thrown into that scaleback as well?

Primarily what we call exploration. We're continuing with infill and definition drilling, but it's a step-out drilling for long-dated resource expansion that we've cut back on. In terms of our sustaining CapEx, most of it relates to the underground development costs and we haven't touched those. That would not be productive. You've got to maintain your development ahead of your working areas. Otherwise, you're not going to be in operation very long.

Fair enough. Okay. That’s all for me. Thanks again.

Thanks Jacob. Appreciate it.

Your next question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Yes. Apologies if you hinted at anything. I have a lot to ask. I was about three or four minutes late for the call. I'm going to build on Jake's question here a little bit. Some of the challenges you're facing are obviously completely out of your control. Though some can also be hedged, albeit at unfavorable rates as you already pointed out in your answer to the last question. However, having some longer-term fixed fees would provide certainty, right? So maybe not hedging, but have you considered entering some longer-term contracts for things like treatment charges, power supply fees, et cetera? I mean, from what I hear is some treatment charges have finally started to actually improve a little bit, depending on the counterparty. But any consideration of doing longer-term agreements with counterparties?

Quick answer, Jake - Heiko is that we are, in fact, looking at a number of things. If I can address some of the measures that we have already achieved, ,we've negotiated significant reductions with some of our major suppliers, and that will have a fairly significant - it will have a material impact going forward into next year. That's for things like concentrate haulage, ore haulage, cement supply, camp services. When it comes to things like power, unfortunately, our energy is provided by a Mexican utility and there's no ability to fix those rates. So I wish there were, but because they have been a source of very significant cost increase. In terms of - well, the other thing I should touch on, I indicated my initial remarks, you may not have been on the call, but in September, we actually took a 10% reduction in our total workforce in Mexico. That, after severance costs, will start to show up in decreased operating costs in Q1 of next year. And we are evaluating the remaining workforce to determine whether it's rightsized. There may, in fact, be potential for further reductions without compromising our ability to produce. In terms of TCs, all of our contracts are up this year, copper, lead and zinc. Copper and lead were one year contracts last year. Zinc was 2023 was the last year but 3-year contract entered into with - by prior management. And as a result, we are looking at and are going out for tender within the next few weeks for new contracts in all of our TCs. I will tell you that one of the things we're looking at is not only the TCs but what kind of participation can we get on transport charges, what can we get in terms of advanced payments with respect to take, et cetera. We're evaluating all of it. The market currently does not allow you to lock in at TC. The best you're going to do is get something that would lock into a benchmark for directionally anywhere from 40% to 60% of your production, and then the balance would float a spot. So we're always going to be, to a fair degree, exposed to spot prices for our TCs. That's a long-winded answer, Heiko, but I think I covered most of your question.

No, you did. I appreciate it. And then just as a clarification and to confirm something that I'm pretty sure I know the answer, but I'm asking this in part because of the share price performance today. Initiation of your strategic review process is not an indicator of what you've seen in Q4 thus far, right? It's just a general statement as to what you feel the year and its challenges have been like thus far, correct?

Heiko, I will tell you that Q4, my expectation of Q4 will be an improvement over Q3. It's not a function of what we anticipate Q4 are for next year. It really is a function of our inability to unlock value or our apparent inability to unlock value for our shareholders. If you throw a reasonable valuation for Don David, add it to what we brought for Back Forty, we're trading at 10% of NAV as a producing company, which makes no sense whatsoever from a fundamental point of view. Now we recognize that we're not being treated any differently than a lot of our peers. But at the same time, we can't be complacent and say just because everybody else is suffering, we should be happy with what we're doing. So we've entered into this engagement with Cormark with a view to trying to unlock value what the possible outcomes are. You know as well as I do, there's mergers, there's outright sale, there's acquisitions. It's the entire gamut that we're looking at. You would normally assume that a company with a market cap like ours can't be acquisitive, but the reality is the entire sector are trading at multiples that make absolutely no sense, at least to me. So there's a lot of very, very undervalued assets out there. So when I say we don't have any idea what the outcome is, we're just exploring the entire range of potential alternatives to determine what would be, if anything, would be the best for us to pursue to create value for our shareholders.

Fantastic. Thank you very much. Go ahead.

No. Anything else, Heiko, I'd be happy to address. Otherwise, we will be talking soon.

Excellent. No. And I'll get back with you. Thank you very much.

Thanks Heiko.

Your next question comes from [Bradley Johnson with Silver City]. Please go ahead.

Hi. Thank you for taking my call. I'm most interested in the Back Forty Project. I get most of my information from the Internet. I think unfortunately, we all do, so it's an opportunity to ask this question directly. One of the things that I see that there's some value that's been unrealized is that when Gold Resource sold the projects that you had in Wisconsin, which were part of Aquila and you accepted paper for that transaction, and then basically then you forgave that transaction in exchange for a percentage of gold metals - or GreenLight Metals, sorry. And I'm questioning how that could happen because at one point, you owned all of it. And then you now own, what is it, 28% of the gold metal stock.

GreenLight.

Is there any way to back that up and actually get paid for that? Because that infusion of cash would go a long ways to, I think, bridging the gap from where you are today to where you need to be, say, in Q2 of next year. And I'll hang - I'm not hanging up. I'll just mute and listen to the answer.

Bradley, you have obviously done your homework. It's a very good question. The sale by Aquila of certain assets to a newly incorporated company called GreenLight Metals was entered into before we acquired Aquila. And in fact, the transaction had closed before we acquired it. So we had no influence over the sale of those assets in Wisconsin to GreenLight. The terms of the sale contemplated a significant cash payment to be made, I can't remember the exact time frame. I think it was the end of last year, although it could have been Q1 of this year. And GreenLight has been unable to raise money in the current economic environment or current market environment. The debt that we had was unsecured, and that was, as I said, negotiated by prior management of Aquila. And the options available to us were very, very limited. Like GreenLight continues to try and raise money, although I will say that in today's market, it's unlikely they'll do so. But what we chose to do was convert the debt obligation to equity because otherwise, it was just going to be a bad debt. If, in fact, they're ever able to take the company public at a reasonable market value, we would be able to get our cash out through sale of shares potentially. Yes, it's not a situation I'm completely comfortable with. But when we were faced with the fact that they could not pay the cash, we had no real alternatives. Again, it's something we inherited. We've made the best of it. I tend to agree with you. I would rather have the cash than the shares but that wasn't an option. Hopefully, I've addressed your question appropriately, Bradley.

You did. And I'll be candid, I mean, this is what these calls are for, is that again, reading the Internet, I strongly - I don't want to know the answer specifically, but I do believe that what you just described to me because the person at GreenLight Metals, I won't mention his name, was also the person who orchestrated the deal. And by all definition, that's self-dealing. And I know that I'm not an attorney but at some point, this is one of the, I'm going to call it albatrosses, around the neck of Gold Resource Corporation is what I consider to be the credibility factor. And I think if that deal hadn't taken place the way it was, I think that people would look at that Back Forty Project that's probably be more viable and more worthwhile. So I'll leave it at that, but I think that you've probably given that a lot of thought. But from the investor standpoint, I think it would be certainly good to readdress that issue and how that came about because I think that's what the investor public is really looking for, some solid answers as to why and how things happen. So again, I'll thank you for your time.

Bradley, I know you did not specifically ask me to address that statement, but I will anyway. When we acquired Aquila as part of our due diligence, we obviously looked at the transaction and whether or not it was done in accordance with securities laws in Canada. It was. As a statement of fact, it was. The Board of Directors, the independent Board of Directors excluding any related parties, voted on the transaction and approved it. And by doing so, they, at least, ticked the boxes. I don't disagree that on the surface of it, it looks as though there was perhaps preferential treatment to insiders. However, they did, in fact, at a time when Aquila desperately needed money, they did provide some cash at the time of closing. So it's not as though Aquila did not obtain some benefit. And certainly, they went through all of the requirements of the securities legislation to ensure that the transaction was appropriate and appropriately approved. So we did look at it. Whether or not we agree with the transaction is irrelevant because it closed before we acquired Aquila. I hear what you say, I understand it, but we did do our appropriate due diligence at the time.

Thank you.

Thanks Bradley.

[Operator Instructions] Your next question comes from [David Top with Top Holdings]. Please go ahead.

Hi. I hope you can hear me?

I can hear you David.

Thanks for taking my question. I have a few questions which is basically all going in one direction. So I'll just shoot off my first question. You don't have the answer. It's fully just to tell me if I'm getting things right or not. As an investor, the way I see the entire company is it looks to me like it's a company which has a lot of assets but is very low on working capital. Is this general perspective right or wrong?

Our current working capital is between $14 million and $15 million. So we do have working capital where we - our cash as $6-plus million is lower than I would like to see but our working capital is more than adequate for a company like this.

Okay. So I'll tell you why I'm asking this question because in the past four quarters, the company is losing money. And as you can see, the grade of all the mines and the minerals are going down. And it seems to be getting worse and worse as has happened in all mines where the grades become lower and lower and becomes less and less profitable. So we're putting aside all other projects and all other properties. Is there any way that Gold Resource is going to be profitable in the near future. I'm not speaking about big projects that could be done. Just continuing what's going on right now, continuing to mine what's - the mine is right now, is there any way Gold Resource is going to turn to be profitable in the near future?

Let me answer the question a couple of different ways. One, in my prepared remarks, I talked about our exploration results. When we got involved risk management of this company almost three years ago, we recognized that there had been very, very little drilling done and that in the absence of drilling, we are facing a depleting resource. The residual resources that had been identified were lower grade. However, we have spent, over the last 2.5 years, over $25 million on drilling. The result of that is we've identified areas that I talked about, the Three Sisters, Gloria, Splay 31, Marena. All of these are new discoveries, and all of those have higher grades than the historic resource. So in answer to your question, my anticipation is that you will see next year higher grades than you saw this year. Profitability is - that's a double-edged sword. You tell me what commodity prices are going to be. You tell me what the exchange rate is going to be for the peso, and I will tell you whether or not it will be profitable. But the objective at a bare minimum is to generate free cash flow for the corporation such that we will be rebuilding our cash balances. And that, I think, is something that I can state that we will be able to achieve. Profitability, I don't know.

Look, if a company has free cash flow, that's great. We can continue working at the current situation, that's okay. Of course, not everything is dependent on something that's uncontrollable. Okay, I just want to get that clear. So you think the grade is going to be higher. In what quarter do you think this is going to happen, Q1, Q2?

You'll start seeing it a little bit in Q4 of this year. You'll see some more and a continuation of that in Q2 - Q1, Q2, Q3 next year, you should see again an increase in grade.

Okay. My next question is I just want to get a broader understanding of the entire company. As I understand right now, Gold Resource only mines two of its properties out of six. So there's four properties which aren't - haven't been mined at all, right?

We have a number of concession. Yes, properties, concessions in Mexico, most of which have never had any work done on them.

Yes, yes. So my question is, if, let's say, the company decides to start mining the other four properties, does the company need to build a new facility to mine those properties? Or is it close enough to the current facility and only needs to be - I don't know exactly how it works. My question is like how much would the company have to invest to utilize all the other four properties?

That's a really difficult question to answer. The way I'm going to address it is two or three of the concessions are close enough to our existing infrastructure that it would enable us to truck or mine from those locations to our existing plant. The furthest concession away and a straight line is not that far. It's only about 40 miles. But by road, it's twice that. In fact, it's closer to 100 miles. The road through that area is very twisty, windy and slow. So it would depend on what kind of grade was discovered, whether or not we would have the ability to upgrade the ore at the mine portal. It's very, very difficult for me to answer that. Certainly, two or three of the concessions, should we find economic ore on them, would be close enough to truck the ore to the existing infrastructure. I'm not trying to hedge but there's too many variables there for me to give you a specific answer.

Yes, I understand. Okay, okay. The Back Forty Project is a totally new project from which means everything in new infrastructure and everything. Just wanted to know if the other four properties are exactly like the Back Forty or it's something like not exactly. That's what I wanted to know.

It's not exactly - it's not the same thing.

Not the same thing, okay. Another question I had about the Maritime and the GreenLight mines. Is there any news about the mines? Putting aside the company's interest in those mines, is there any actual news about the mine themselves, like have they found something not about what Gold Resource has in those mines? Is there any actual news about the mines themselves?

GreenLight Metals has got a number of properties in Wisconsin and they had a property in Nevada. Their inability to raise any significant amount of capital has not allowed them to do any drilling. So the answer there is no. Maritime Resources, I don't know if you're familiar with Maritime. It has a property in Newfoundland on Peninsula. In our opinion, they needed to do additional drilling to increase the identified - the resource amenable to mining before they move forward. They have done some drilling but they still need to do more. They recently, and by recently, it was within the past three or four months, they acquired a mill and some property from a company known as Century, not Century, losing the name. It's another mining company that had a mill tailings facility and several potential resources about 100 kilometers north of where the Maritime property is located. Maritime's feasibility had contemplated trucking ore 140 kilometers. Their acquisition of this new mill reduces the haul from 140 down to 100. But more importantly, the 100-kilometer segment is on very good highway as opposed to the last 40 kilometers, which was a gravel road that was subject to a lot of potholes and beat up equipment immersively. So they're making some progress, but again, they're struggling raising money like everybody in the sector is. So it's going quite slowly.

Okay. I have a general question. I'll try to break it up and I'd like a few pieces about it. I'm trying to understand the company's path forward, let's say, for the next year. I understood from the report on the last that the company believes it has enough cash flow for the next 12 months. And so if you could just try to explain to me like how you see the next year panning out. From the cash flow perspective, from what - is there any plans about the rest of the mines and the rest of the properties in the DDGM? Or just a general plan for the next year from the company's perspective?

Well, I'm going to qualify my answer by saying we have - we're in the budgeting process now so we do not have definitive plans that I didn't articulate at this point. But really, what we're looking at doing, cash is tight, the equity markets are not supporting us. We need to generate cash internally to support all of our activities. So as a result of that, our primary focus next year has to be on the Don David Mine in Mexico. So we need to provide sufficient capital to allow the mine to maintain its productivity. We need to do additional infill and near-mine exploration to continue to develop these new resources that we've identified, higher grade resources. And we have to manage our cost. So really, our primary focus is going to be on Don David in Mexico to ensure that we can rebuild our cash balances. Once we do that, and this is going to - this is - in today's environment, you manage for your bank account. If you don't, you're doing it the wrong thing. We're not going to commit to spending a bunch of money on exploration on those other concessions we have. We will not spend a lot of money on Back Forty next year. There are a couple of things that we could potentially do that we're evaluating. But the real focus is ensuring that Don David is operating to the best of its ability to reestablish our bank accounts. And that is our focus for next year.

Okay. I know in the last report, you didn't want to comment too much on the Back Forty Project. But I have a few questions if you can help me try to figure out. That's the first technical question. Did you start the work on the process of getting a permit to the Back Forty Project?

No. You don't - in theory, we could initiate it now. We would need to do some additional detailed engineering around water and design work around our tailings management and the waste storage facilities. That would be a cost of directionally $1 million to $2 million, and then we could begin the process of permitting. But we have not committed to doing that in the short term.

Do you have any plan when you are going to start this process?

It's a function of availability of cash. I would like to - what we produced a couple of the last week or the week before was a preliminary economic analysis. However, the amount of engineering that went into it far surpassed what is normal for a study of that type. And we believe that we could upgrade that study to a preliminary feasibility study, a prefeasibility study, I should say, for about $1 million to $1.5 million. And if we decide to spend money on Back Forty next year, it would be to take it up to that pre-feas level, after which we would begin the permitting process because then I would have all of the engineering complete to support the permit applications.

I understand.

Does that address your question?

Yes. No question has a perfect answer. I'm just trying to figure out the direction. Yes, so this comes back to my first general question is, and the way I see the company is - has great assets but I don't understand how the company is going to generate enough cash flow to finance the Back Forty Project and everything else. Am I missing something in the bigger picture about the current mines that could you enough cash flow? According to your - to the last report at the Back Forty Project, so $320 million, $330 million just to open up a facility over there. I understand it's - you don't know the answer but for a company with a market capital of $35 million and generate $330 million, that seems like something almost impossible.

I agree. Keep in mind that...

What's the big picture for the company? That's my big question.

Well, you heard my closing comments. We've engaged a financial adviser to evaluate those alternatives. Two years ago, when we acquired the Back Forty, we had a market capitalization of directionally $200 million. It was feasible for us at that time to contemplate putting it in production, raising the money and putting it into production. Off the back of a $35 million or $36 million market cap, in today's capital markets, it's not practical. And we recognize that it's not practical so we're exploring alternatives, and it may be we merge with somebody else to create a larger company, That, I think, is one possible outcome. A larger company will get more attention in the marketplace and create an environment where the Back Forty becomes viable to finance. And that's really one of the drivers between the - behind the appointment of a financial adviser.

Yes, yes. I understand all that. I'm looking at everything from an investor's perspective, and I'm thinking like what could the company do? So issuing shares is out of the question. Taking on debt doesn't seem very reasonable. So at least mainly the absence of selling growth for merging, whatever all these different kinds of things. So my question is, in the current situation, is the company planning on pursuing all these different options right now while you all continue to work on the DDGM? Or it's just like putting it aside for who knows when? So it's a huge question.

No, no. Thanks for that question because I need to clarify this. Everything that I talked about at DDGM is proceeding. We are not compromising on spending money there. We are moving forward to try and enhance the profitability of that mine to the greatest extent possible. We have no certainty that this process will result in anything. And it is a process. We felt it was necessary to explore alternatives. But I'm not making the assumption that we're going to do anything. We need to make Don David generate very substantial cash flow, and that is our focus. It's not being put on the back burner. Historically, Don David has generated anywhere from $20 million to $40 million in a year. Different commodity environment, different exchange rate environment, different inflationary environment. But you know as well as I know, economic times change, and there's nothing to preclude Don David from going back and generating those kind of cash flows. We have to spend the money and time to get it ready to take advantage of a different economic environment. What happens with the strategic review is totally separate. That's going on in the background. It may or may not result in anything, but it's not related to what we're focused on with Don David.

Okay, okay. Thank you very much, everything. You clarified a lot of things for me. Thank you very much.

Thank you. I appreciate your questions.

Your next question comes from [Ron Hart with Ron Heart Investments]. Please go ahead.

Yes. Hi how're you doing? Obviously, the key is to stop the bleeding of the cash, which you answered in the last few couple of calls. And to maintain the cash, as we've seen from $30 million down to what you said, $6 million there, besides the $14 million that you have to utilize. So your response is obviously something that we must do but something that we must reconsider what to do is the share price, that we should not have a reverse split because once you have the reverse split, that's the kiss of death. No matter what, even if it has to be delisted, the reverse split is over in everybody's interest. So that's something that you have to describe now.

Ron, we will not consider a reverse split.

Beautiful, beautiful. I appreciate your response and everything else that you've said.

No. Don't worry about that. You're right. A reverse split is the kiss of death. It's value destructive. It never achieves any kind of real objective. So - and I've been in the industry long enough and been involved in the capital markets long enough to know that it is not something that should ever be considered.

100%. Okay, and we'll go along with your plan for next year as your confidence is well respected. And I would assume that you know better as I'm not in that field, in the investment field. And let's hope the share price reflects everything that you said and takes that into consideration. And I do believe that you're - and willingness to combine your company with another and to strengthen the company's assets in that respect would do us a great favor. I really appreciate that.

Well, I will tell you that you do not have entrenched management and Board here. Our job is to create value. And if the merger or an outright sale is the best thing to do, we will do it.

Thank you very much. You have a nice day. Thank you.

Thanks Ron. You too.

There are no further questions at this time. Please proceed.

Thank you, operator. I would like to thank everyone for participating today. We are obviously not happy with the Q3 results, but I will say that the month of October was the best month in terms of production of material so far this year. And the benefits of the cost reductions that we have been working on will start to be felt in Q4 and will certainly take effect in Q1 of next year. As I indicated earlier, we're expecting to see somewhat increased grades next year reporting to the mill. If we get any cooperation from commodity prices and exchange rates, it will be a significantly different picture. I thank you all for attending and we will be talking - at this stage, we'll be talking when we issue our year-end results if I don't talk to each one of you individually before that. Thank you very much, and have a good afternoon.

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.