Operator:

Good afternoon, ladies and gentlemen, and welcome to the Gold Resource Q2 2024 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, August 7, 2024. I would now like to turn the conference over to Chet Holyoak. Please go ahead. Chet Holyoak: Thank you, Ina, and good morning to everyone. On behalf of the Gold Resource team, I would like to welcome you to our conference call covering our second quarter 2024 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 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-Q have been filed with the SEC on EDGAR and are also available on our website at www.goldresourcecorp.com. I will now turn the call over to Allen. Allen Palmiere: Thank you, Chet, and good morning, everyone. I'd like to thank you for joining our second quarter conference call. I would like to address a few points first and then Alberto will address operations, followed by Chet with the financial results. Following their remarks, I'll make a few closing comments, and we will take questions. The second quarter continued the trends that we have seen over the past few quarters with similar results. Limited working areas and challenging ground conditions resulted in lower mine production than planned. This was compounded by work stoppages due to blockades on the public roads and extremely wet weather conditions. That being said, we are continuing to cover our costs and anticipate positive cash flow for the balance of the year. We are looking at various alternatives to increase productivity and profitability and hopefully, we'll see results in the fourth quarter. The elephant in the room is the market meltdown earlier this week. The capital markets were off as well as commodities. The only bright spot for Gold Resource Corp was the significant devaluation of the peso. As you know, approximately 50% of our operating costs are denominated in the peso. So the relative decline in the rates results in a corresponding decrease in operating costs. This partially offsets the decline in commodity prices. We have undertaken a planning exercise to ensure that, to the extent possible, we can predict by stope for the balance of the year. This exercise reflects our year-to-date productivity and mechanical availability. The assumptions are conservative, and the forecast shows us to be beginning to build cash in Q4. Longer term, we are looking at what is necessary to allow us to accelerate access into the new areas of Three Sisters and Gloria. This is effectively a third mine within our existing two. Currently, it looks possible to access these areas in the first quarter of 2026. This is potentially very exciting as the drilling continues to provide very exciting results. Cash continues to be tight and remains a key focus for the company. I'll now turn the call over to Alberto for an update on the operations. Alberto Reyes: Thank you, Allen, and good morning to everyone. We successfully concluded our second quarter with zero lost time incidents, demonstrating our unwavering commitment to safety. Our safety program have made significant progress, showcasing the resilience and capability of our team as they navigate challenging situations. Employee morale remains high. And when combined with the discipline we consistently observe, it creates the perfect synergy to drive our operations forward. The team's dedication and positive attitude are the key drivers of our continued success. DDGM's cost reduction initiatives have paid dividends this quarter. Some projects are already showcasing -- are already showing cost savings while others are improving efficiencies in our production cycles. Mining development costs have shown a decrease of 10% in a cost per meter basis. Other initiatives include improving negotiation terms through the supply chain, the introduction of alternative consumables and an increase in suppliers offering consignment. Our operation encounter atypical challenges that impact our tonnage production in Q2 by approximately 50%. These challenges include road blocks that disrupted the supply chain as well as the rotation cycle of key personnel to consecutive tropical storms that impacted operations in the crushing circuit and on our smaller scale ground conditions and mechanical availability of critical equipment. It's important to recognize that this unpredictable circumstances have provided critical insights and opportunities for strategic adjustments. Despite these hurdles, the team has maintained rigorous procedures and we remain confident in their robustness. Production for quarter 2 reached approximately 94,000 tonnes. The processing plant is now operating at around 1,300 tonnes per day, in line with our 2024 targets. I am pleased to report that we processed nearly 94,000 tonnes of ore, sold approximately 2,724 ounces of gold and over 234,000 ounces of silver, equating to over 5,625 gold equivalent ounces. In addition, we sold 197 tonnes of copper, approximately 490 tonnes of lead and more than 1,770 tonnes of zinc. For the year-to-date through June 30, we processed nearly 192,000 tonnes of ore, sold approximately 7,700 ounces of gold and over 514,000 ounces of silver, equating to over 11,688 gold equivalent ounces. We further sold over 460 tonnes of copper, approximately 1,160 tonnes of lead and close to 3,450 tonnes of zinc. Now turning to Slide 6. DDGM's capital expenditure is within the year's plan, investing $1.3 million in underground development. Cost-saving initiatives have reduced development unit cost by 10%. Similarly, infill drilling unit costs were also reduced by 20% in comparison to 2023's unit costs. $345,000 were invested in promising drill hole results, $318,000 in other sustaining costs, including works with the TSF closure plan as well as various other smaller projects. Sustaining capital investment totaled $2.2 million, while growth investment reached $326,000, maintaining capital expenditures within annual guidance. We acknowledge that Q2 results fell short of our initial projections. However, it is important to highlight the discipline and positive drive demonstrated by our team during this period. The team effectively reduced costs while upholding the highest standards of safety performance. This commitment to excellence underscores our confidence in the team's ability to navigate challenges and maintain operational integrity. I'll now pass the presentation over to Chet to discuss financial results. Chet Holyoak: Thank you, Alberto. During the second quarter, we experienced a small decrease in our cash balance, and we ended the quarter with $5.3 million. The decline in cash is primarily due to lower sales due to lower production, as we've just discussed. Cash provided by operating activities was $1.4 million for the year and includes almost $1.1 million spent on exploration in Mexico and over $300,000 spent in Michigan related to Back Forty optimization. For the second quarter of 2024, we reported a net loss of $27.7 million, mainly due to a valuation allowance of $16.5 million to write off deferred tax assets in Mexico, and the addition of $3.7 million in interest on our streaming liability due to the increased gold prices. During the quarter, net sales of $20.8 million were 16% lower than the same period in 2023 due mainly to lower volumes of metal sold. While production costs for the quarter of approximately $17.8 million were slightly lower than the prior year, the significantly lower tonnes processed along with lower gold equivalent ounces sold resulted in an unfavorable impact on unit costs, such as cost per tonne processed and cost per gold equivalent ounce sold. Depreciation for the period is lower than depreciation for the same period in 2023, mainly because of lower UOP depreciation as a result of less tonnes mined. Finally, mining gross profit is lower in 2023, primarily due to the lower sales not being proportionally offset by lower production costs. For the quarter, Don David Gold Mine's total cash cost after co-product credits was $1,950 per gold equivalent ounce sold and total all-in sustaining cost per gold equivalent ounce sold was $2,661 per ounce sold. Turning to Slide 8, we will discuss cash costs for the quarter. The two key drivers related to the increase in cash cost per gold equivalent ounce sold are the reduction in gold equivalent ounces sold and a reduction in co-product credits. The gold equivalent ounces are lower due to the lower tonnes mined and processed due to reasons already explained by Alberto and the lower grade ore and recoveries realized during the quarter. While the above-mentioned drivers resulted in a negative impact for the quarter, we are seeing an increasing trend in metal prices and the dollar is strengthening against the peso, which has offset some of the impact. Allen, back to you. Allen Palmiere: Thanks, Chet. We continue to deal with many challenges, but the team at the mine is responding well and is continually looking for ways to reduce operating costs and increase production. While there are no quick fixes, marginal gains move us in the right direction. We're not happy with our share price and continue to look for opportunities to unlock shareholder value. And with that, I'll turn the call over to the operator for questions. Operator: [Operator Instructions] Your first question comes from the line of Jake Sekelsky from Alliance Global Partners. Jacob Sekelsky: So you mentioned the impact of the heavy rain and the wet ore on throughput rates during the quarter. Is there any other color you can provide here? I mean should we expect that material to aid Q3 throughput rates? Or how are you looking at that? Allen Palmiere: What happened was that in June, we had two tropical depressions back-to-back. The result of that was we had an abnormal amount of rain notwithstanding the fact that it is rainy season. What that did was it turned the fines in our ore that we feed to the crusher basically to mud and the screens on the crusher plugged up, which really inhibited our ability to get material through the crusher and into the mill. The weather is back to normal. We get some occasional rain, but nothing like what we were experiencing in June. So at this stage, although I don't control the weather, we're not anticipating it to impact Q3 or Q4. Jacob Sekelsky: Okay. That's helpful. And then on the FX side, I mean, you mentioned we've seen the peso weaken quite a bit. Can you just remind us where you are with any hedging programs as far as foreign exchange goes? And if the peso has weakened to a level where you might start getting a bit more aggressive on the hedging side? Allen Palmiere: Quick answer, Jake, is that we had a discussion at our Board meeting yesterday. We are going to be looking very seriously at putting on some hedges for the peso in the very near term. As of today, we are not hedged but that was intentional because we were anticipating perhaps not this trigger, but we were anticipating a collapse in the carry trade. And that has occurred, as you know, very, very rapidly. So we will be looking at putting in place some hedging on the peso. As you know, it's directionally 50% to 60% of our operating cost is denominated in the Mexican peso. So this has been a big move and it has quite a dramatic impact on our operating cost. Operator: And your next question comes from the line of Heiko Ihle from H.C. Wainwright. Heiko Ihle: Building a bit on Jake's question, you listed two factors in your prepared remarks that impacted operations, excessive rains during hurricane season you sort of discussed and the abnormal work delays from the election. Obviously, I assume the inefficiencies from the election won't be an impact in the current quarter since the election was obviously done in June. But how about the weather? I mean, has there been any impact at all in July and August? And if you could -- maybe I could trouble you for maybe the dollar impact that you think those two factors had in Q2 as well? Allen Palmiere: I'm going to deal with the easy part of that question first, and that is we're not anticipating any repetition. That being said, all the prognosticators are forecasting a very active hurricane season and I don't know any better than they do. We're currently not anticipating any significant stoppage. It is still the rainy season. We're still getting occasional rains, but nothing significant, and it's not impacting production at all. In terms of quantification, putting a dollar amount on it is going to be difficult. But what we did lose is effectively a week of production, that would translate into almost 6,000 tonnes of ore through the mill. 6,000 tonnes on a 36,000-tonne forecast, you're looking at 1/6 of your production for the month. That results in downstroke in revenue by about 1/6 while your costs largely are continuing. That's how I would try and quantify the direct impact, Heiko. Heiko Ihle: I'm not going to lie that's a much more detailed answer than I thought I was going to get out of you on a public call. That's fair enough. You had a slide for your drilling in the webcast presentation. Nice to see the strong focus across 30 exploration holes, 16 infill holes. What are you seeing with pricing for drilling, maybe both in the current quarter, but also maybe a little bit of an outlook for Q4? Allen Palmiere: Well, it's interesting. We made a change in our drilling contractor a few months ago. And we've started utilizing a Mexican drilling company who has been actually very professional and has performed very well for us. The result of that is our drilling cost has -- per meter has decreased relatively significantly, and we're not forecasting any significant increase on a go-forward basis. We've developed a very good relationship with this particular contractor and they are working with us very proactively to ensure that their costs don't climb. I'm happy with them, and I'm not expecting any significant change. Operator: And your last question comes from the line of John Bair from Ascend Wealth Advisors. John Bair: On a bigger picture, I mean, definitely benefited by increased metals prices, that's very good. What are you seeing in the way of increased grade, if any? And it seems to me that, that's what really needs to happen here. I'm going to assume that your millage rate and throughput and so forth will increase if these weather conditions abate. But what are you seeing in the way of the potential for grade improvement in the next few quarters that will help your financial result? Allen Palmiere: John, in my prepared remarks, what I indicated is we're anticipating beginning to rebuild our cash balance by the end of Q4. That is directly related to grade, and while we're not forecasting extremely high grades, for the next 18 months, the grades will be -- no, I'm misleading you. Q3, the grades are a little bit better. Q4, they will improve again, and then they will stay relatively static for most of 2025. We're currently forecasting that Q1 of 2026 and hopefully earlier, we will be getting into what we're calling the Three Sisters and with Gloria area. Effectively, what this is, is a new mineralized zone that we discovered about 1.5 years ago and have been actively exploring. It has already resulted in the identification of mineable ore at very good grades, significantly higher than what we are currently experiencing. We have every reason to believe that we will have continued exploration success and that new zone will be the future of the Don David mine. If you're familiar with it, the first area of mineralization that we mined was called the Arista system, followed by Switchback. This Three Sisters Gloria area is the third discrete mineralized system that we've identified in the area. It's very close to existing workings. And that is when I can foresee without any qualification, increased grades going through the mill. We will see some improvements over the next 18 months, but that's when I am expected to see a bit of a step change. John Bair: Okay. Yes, I'm familiar with the first few mines there. And I'm assuming -- I have to go back and look, but you've probably released some of the core results ongoing for the new -- and I don't have it in front of me here, the sisters... Allen Palmiere: We have, in fact, issued a couple of press releases over the last few months dealing with drill results primarily from the Three Sisters Gloria area. John Bair: Right. Okay. I'll go back and look at those. Yes, I'll go back and look at those. Okay. Allen Palmiere: They will give you a pretty good indicator about true thickness and grade, John. John Bair: Right. Okay. Very good. Then my other question is, it wasn't in the press release. There was a little reference to -- I think it was $300,000 towards Back Forty. Can you give us any updates on where you stand with that? Kind of is it in limbo right now? Or what's going on there? Allen Palmiere: I don't like the term limbo, but it's not inappropriate. John Bair: Well, it hasn't progressed unfortunately. Allen Palmiere: No, you're absolutely right. And we're at a state now where the next step will be concluding a feasibility study and doing -- getting into the permitting exercise. In the current financial climate for junior companies, it would be virtually impossible for us to finance it. And rather than spend money on Back Forty currently, what we've chosen to do is spend the money on exploration in Don David, where we know we can generate cash flow. It's going to be dependent on two things. So one, our ability to generate excess cash out of Mexico. And the second one is going to be the state of the capital markets broadly defined for the junior resource sector and hopefully enable us to get it financed. John Bair: Okay. And then there's another aspect, too. And of course, that's the one that you've been dealing with, and that's the environmental aspect and push back there. Is there any change in the climate with that, so to speak? Allen Palmiere: John, I know there's always noise around permitting, but the reality is Michigan is a good jurisdiction for permitting. The regulated -- the state controls all of the permits. There is no EPA involvement. It's strictly one agency within the state that controls all of them. And they're very professional and very knowledgeable about mining. We've had an ongoing dialogue with them now for several years. And we have to go through the process. But as long as we do our job properly, I feel very confident in our ability to get permits on a timely basis. It's -- in my mind, the risk is -- I won't -- there's always risk, but it's relatively low in my mind. John Bair: Okay. Fair enough. And looking forward to monitoring and following your progress. Allen Palmiere: My pleasure, John, and I hope to have better news in the future. Operator: Thank you. That concludes our question-and-answer session. I'll now hand the call back to Mr. Allen Palmiere for any closing remarks. Allen Palmiere: Thank you. And I would like to thank everyone for taking the time to join us today. It is a beautiful summer day, hopefully not too hot. And I look forward to speaking to you all at our Q3 conference call. It will be scheduled for early November. Thank you again, and have a good afternoon. Operator: Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.