# Fortitude Gold Corp: Form 10-Q for the period ended Sep 30, 2022

- Company: [Fortitude Gold Corp](/companies/ftco.md) (CIK 1828377)
- Form: 10-Q
- Filed: 2022-11-01
- Accepted by EDGAR: Nov 1, 2022, 16:05 ET
- Period: 2022-09-30
- Accession: 0001558370-22-015787
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1828377/000155837022015787/ftco-20220930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1828377/000155837022015787/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $16.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $55.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $71.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $277.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $7.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $25.7m | us-gaap:GrossProfit |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $15.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $59.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $248.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $2.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | $1.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | $10.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.07 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | $0.45 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.07 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | $0.45 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 24,190,375 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 24,201,239 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | $21.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $10.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2022-01-01 to 2022-09-30 | $8.6m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2022-09-30 | $42.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $89.5m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $127.4m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $6.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $12.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-09-30 | $114.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,305 characters.

We are a Colorado corporation and our subsidiaries are GRC Nevada Inc. (“GRCN”), Walker Lane Minerals Corp. (“WLMC”), County Line Holdings Inc. (“CLH”), County Line Minerals Corp. (“CLMC”), and Golden Mile Minerals Corp. (“GMMC”). WLMC, CLH, CLMH and GMMC are wholly-owned subsidiaries of GRCN. We are a mining company which pursues gold and silver projects that are expected to have both low operating costs and high returns on capital. We are presently focused on mineral production from our Isabella Pearl Mine in Nevada. The ore mined at Isabella Pearl is processed on site at our processing facilities and sold to a refiner as doré, which contains precious metals of gold and silver. We also continue exploration and evaluation work on our portfolio of other precious metal properties in Nevada and continue to evaluate other properties for possible acquisition.

#### Spin-Off from Gold Resource Corporation

Prior to December 31, 2020, we were a subsidiary of Gold Resource Corporation (“GRC”). On December 31, 2020, GRC completed the spin-off of our shares of common stock, which separated our business, activities, and operations into a separate public company. The spin-off was effected by the distribution of all of our outstanding shares of common stock to GRC’s shareholders. GRC’s shareholders received one share of our common stock for every 3.5 shares of GRC’s common stock held as of December 28, 2020.

In February 2021, we began trading on the OTC Market “pink sheets” operated by the OTC Markets Group under the ticker symbol "FRTT". Subsequently the symbol was changed to “FTCO”. Our common stock was subsequently up listed to the OTCQB on March 5, 2021.

During the second quarter of 2021, and in response to GRC terminating the Management Services Agreement (“MSA”) post spin-off, we completed the staffing of our executive and management team.

The following discussion summarizes our results of operations for the three and nine months ended September 30, 2022 and 2021. It also analyzes our financial condition at September 30, 2022. This discussion should be read in conjunction with the management’s discussion and analysis and the audited consolidated financial statements and footnotes for the year ended December 31, 2021 contained in our annual report on Form 10-K for the year ended December 31, 2021.

The discussion also presents certain financial measures that are not prepared in accordance with U.S. Generally Accepted Accounting Principles (“Non-GAAP”) but which are important to management in its evaluation of our operating results and are used by management to compare our performance with what we perceive to be peer group mining companies and are relied on as part of management’s decision-making process. Management believes these measures may also be important to investors in evaluating our performance. For a detailed description of each of the non-GAAP financial measures, please see the discussion below under **Non-GAAP Measures.**

See **Forward-Looking Statements** at the end of this Item 2 for important information regarding statements contained herein.

### Third Quarter 2022 Financial Results and Highlights

- $16.1 million net sales
- $1.7 million net income or $0.07 per share
- $42.2 million cash balance on September 30, 2022
- 9,500 gold ounces produced
- 5.69 grams per tonne average gold grade mined
- $82.6 million working capital at September 30, 2022
- $7.4 million mine gross profit
- $613 total cash cost after by-product credits per gold ounce sold
- $687 per ounce total all-in sustaining cost
- $2.9 million dividends paid

*Operating Data*: The following tables summarize certain information about our operations at our Isabella Pearl Mine for the periods indicated:

| ​ ​ ​ ​ Ore mined | ​ ​ | ​ ​ Three months ended September 30, 2022 | ​ ​ | ​ ​ 2021 | ​ ​ | ​ ​ Nine months ended September 30, 2022 | ​ ​ | ​ ​ 2021 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Ore (tonnes) |  | 113,111 |  | 139,950 |  | 490,764 |  | 454,679 |
| Gold grade (g/t) |  | 5.69 |  | 1.42 |  | 3.30 |  | 4.52 |
| Low-grade stockpile |  |  |  |  |  |  |  |  |
| Ore (tonnes) |  | — |  | 8,600 |  | 34,501 |  | 8,600 |
| Gold grade (g/t) |  | — |  | 0.33 |  | 0.43 |  | 0.33 |
| Waste (tonnes) |  | 202,201 |  | 1,838,027 |  | 1,696,225 |  | 4,894,937 |
| **Metal production (before payable metal deductions)(1)** | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| Gold (ozs.) |  | 9,500 |  | 11,478 |  | 30,355 |  | 37,593 |
| Silver (ozs.) |  | 12,497 |  | 16,467 |  | 45,047 |  | 33,643 |

(1) The difference between what we report as “metal production” and “metal sold” is attributable to the difference between the quantities of metals contained in the doré we produce versus the portion of those metals actually paid for according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades and recoveries which impact the amounts of metals contained in doré produced and sold.

| ​ ​ ​ ​ Metal sold | ​ ​ ​ | ​ ​ ​ ​ Three months ended September 30, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ 2021 ​ | ​ ​ ​ | ​ ​ ​ ​ Nine months ended September 30, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ 2021 ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Gold (ozs.) | ​ | ​ 9,419 |  | ​ 11,454 | ​ | ​ 30,567 |  | ​ 37,436 |
| Silver (ozs.) | ​ | ​ 12,111 |  | ​ 16,330 | ​ | ​ 44,819 |  | ​ 33,171 |
| **Average metal prices realized (1)** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gold ($per oz.) | ​ | ​ 1,719 |  | ​ 1,789 | ​ | ​ 1,871 |  | ​ 1,796 |
| Silver ($per oz.) | ​ | ​ 19.44 |  | ​ 23.98 | ​ | ​ 23.34 |  | ​ 25.14 |
| **Precious metal gold equivalent ounces sold** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gold Ounces | ​ | ​ 9,419 | ​ | ​ 11,454 | ​ | ​ 30,567 | ​ | ​ 37,436 |
| Gold Equivalent Ounces from Silver | ​ | ​ 137 | ​ | ​ 219 | ​ | ​ 559 | ​ | ​ 464 |
| ​ | ​ | ​ 9,556 | ​ | ​ 11,673 | ​ | ​ 31,126 | ​ | ​ 37,900 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Total cash cost before by-product credits per gold ounce sold | ​ | $638 | ​ | $658 | ​ | $685 | ​ | $596 |
| Total cash cost after by-product credits per gold ounce sold | ​ | $613 | ​ | $624 | ​ | $652 | ​ | $574 |
| Total all-in sustaining cost per gold ounce sold | ​ | $687 | ​ | $793 | ​ | $749 | ​ | $663 |

(1) Average metal prices realized vary from the market metal prices due to final settlement adjustments from our provisional invoices when they are settled. Our average metal prices realized will therefore differ from the market average metal prices in most cases.

During the three months ended September 30, 2022 and 2021, we produced 9,500 and 11,478 ounces of gold. The lower production is primarily due to lower leach pad recoveries due to timing of material placed under leach and higher utilization of the low-grade stockpile for blending of ore on the pad. Cash cost after by-product credit decreased due to lower mining costs due to less waste mining, mostly offset by lower ounces sold.

During the nine months ended September 30, 2022 and 2021, we produced 30,355 and 37,593 ounces of gold. The lower production is primarily due to lower leach pad recoveries due to timing of material placed under leach and higher utilization of the low-grade stockpile for blending of ore on the pad. Cash cost after by-product credit increased primarily due lower ounces sold.

### Consolidated Results of Operations – Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

*Sales, net.* For the three months ended September 30, 2022, consolidated sales, net were $16.1 million as compared to $20.4 million for the same period in 2021. The decrease is attributable to lower sales volumes and lower average sales price. Third quarter 2022 gold sales volumes decreased 18% and the average realized price for gold decreased 4%, from the same period in 2021. Sales volumes decreased as a result of lower production, as discussed above.

*Mine gross profit.* For the three months ended September 30, 2022, we recorded $7.4 million mine gross profit compared to $9.6 million mine gross profit for the same period in 2021. The change is primarily attributable to lower sales, as discussed above.

*General and administrative*. For the three months ended September 30, 2022, general and administrative expenses totaled $1.6 million as compared to $1.4 million for the same period in 2021. The increase in 2022 was primarily the result of the Company being fully staffed as a post spin-off as a standalone entity.

*Exploration expenses*. For the three months ended September 30, 2022, property exploration expenses totaled $3.7 million as compared to $2.0 million for the same period of 2021. The increased exploration expense was the result of drilling at the Golden Mile and County Line properties to further define resources.

*Other expense, net*. For the three months ended September 30, 2022, other expense, net did not materially change from the same period in 2021.

*Income and mining tax expense.* For the three months ended September 30, 2022, income and mining tax expense was $0.2 million as compared to $1.5 million for the same period in 2021. The decrease is the result of our lower income before income and mining taxes and decreased Nevada net proceeds of minerals tax as a result of decreased metal sales. See **Note 5** to the **Condensed Consolidated Financial Statements.**

*Net income*. For the three months ended September 30, 2022 we recorded net income of $1.7 million as compared to $4.6 million in the corresponding period for 2021. The decrease is due to the changes in our consolidated results of operations, as discussed above.

### Consolidated Results of Operations – Nine months Ended September 30, 2022 Compared to Nine months Ended September 30, 2021

*Sales, net.* For the nine months ended September 30, 2022, consolidated sales, net were $55.5 million as compared to $67.0 million for the same period in 2021. The decrease is attributable to lower sales volumes, partially offset by higher average sales price. Third quarter 2022 gold sales volumes decreased 18%, while the average realized price for gold increased 4%, from the same period in 2021. Sales volumes decreased as a result of lower production, as discussed above.

*Mine gross profit.* For the nine months ended September 30, 2022, we recorded $25.7 million mine gross profit compared to $33.7 million mine gross profit for the same period in 2021. The change is primarily attributable to lower sales, as discussed above.

*General and administrative*. For the nine months ended September 30, 2022, general and administrative expenses totaled $3.9 million as compared to $8.7 million for the same period in 2021. The decrease in 2022 was primarily the result of costs incurred in 2021 to fully staff the Company post spin-off as a standalone entity.

*Exploration expenses*. For the nine months ended September 30, 2022, property exploration expenses totaled $8.6 million as compared to $4.4 million for the same period of 2021. The increased exploration expense was the result of drilling at the Golden Mile and County Line properties to further define resources.

*Other expense, net*. For the nine months ended September 30, 2022, other expense, net did not materially change from the same period in 2021.

*Income and mining tax expense.* For the nine months ended September 30, 2022, income and mining tax expense was $2.1 million as compared to $5.1 million for the same period in 2021. The decrease is the result of our lower income before income and mining taxes and decreased Nevada net proceeds of minerals tax as a result of decreased metal sales. See **Note 5** to the **Condensed Consolidated Financial Statements.**

*Net income*. For the nine months ended September 30, 2022 we recorded net income of $10.9 million as compared to $15.4 million in the corresponding period for 2021. The decrease is due to the changes in our consolidated results of operations, as discussed above.

### Non-GAAP Measures

Throughout this report, we have provided information prepared or calculated according to U.S. GAAP and have referenced some non-GAAP performance measures which we believe will assist with understanding the performance of our business. These measures are based on precious metal gold equivalent ounces sold and include cash cost before by-product credits per ounce, total cash cost after by-product credits per ounce, and total all-in sustaining cost per ounce (“AISC”). Because the non-GAAP performance measures do not have any standardized meaning prescribed by U.S. GAAP, they may not be comparable to similar measures presented by other companies. Accordingly, these measures should not be considered in isolation, or as a substitute for measures of performance prepared in accordance with U.S. GAAP. These non-GAAP measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.

Revenue generated from the sale of silver is considered a by-product of our gold production for the purpose of our total cash cost after by-product credits for our Isabella Pearl Mine. We periodically review our revenues to ensure that our reporting of primary products and by-products is appropriate. Because we consider silver to be a by-product of our gold production, the value of silver continues to be applied as a reduction to total cash costs in our calculation of total cash cost after by-product credits per precious metal gold equivalent ounce sold. Likewise, we believe the identification of silver as by-product credits is appropriate because of its lower individual economic value compared to gold and since gold is the primary product we produce.

Total cash cost, after by-product credits, is a measure developed by the Gold Institute to provide a uniform standard for comparison purposes. AISC is calculated based on the current guidance from the World Gold Council.

Total cash cost before by-product credits includes all direct and indirect production costs related to our production of metals (including mining, crushing and conveying and other plant facility costs, royalties, and site general and administrative costs) plus treatment and refining costs.

Total cash cost after by-product credits includes total cash cost before by-product credits less by-product credits, or revenues earned from silver.

AISC includes total cash cost after by-product credits plus other costs related to sustaining production, including sustaining allocated general and administrative expenses and sustaining capital expenditures. We determined sustaining capital expenditures as those capital expenditures that are necessary to maintain current production and execute the current mine plan.

Cash cost before by-product credits per ounce, total cash cost after by-product credits per ounce and AISC are calculated by dividing the relevant costs, as determined using the cost elements noted above, by gold ounces sold for the periods presented.

### Reconciliations to U.S. GAAP

The following table provides a reconciliation of total cash cost after by-product credits to total mine cost of sales (a U.S. GAAP measure) as presented in the Consolidated Statements of Operations:

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended September 30, 2022 | ​ | ​ ​ 2021 | ​ ​ ​ | ​ ​ Nine months ended September 30, 2022 | ​ | ​ ​ 2021 |
| --- | --- | ---: | --- | --- | --- | ---: | --- | --- |
| Total cash cost after by-product credits | ​ | $5,774 | ​ | $7,144 | ​ | $19,950 | ​ | $21,461 |
| Treatment and refining charges | ​ | (71) | ​ | ​ (69) | ​ | (277) | ​ | ​ (242) |
| Depreciation and amortization | ​ | 3,005 | ​ | ​ 3,668 | ​ | 9,938 | ​ | ​ 11,953 |
| Reclamation and remediation | ​ | ​ 60 | ​ | ​ 40 | ​ | ​ 183 | ​ | ​ 116 |
| Total consolidated mine cost of sales | ​ | $8,768 | ​ | $10,783 | ​ | $29,794 | ​ | $33,288 |

The following table presents the non-GAAP measures of total cash cost and AISC *(in thousands, except ounces sold and cost per gold ounce sold):*

*(in thousands, except ounces sold and cost per precious metal gold equivalent ounce sold)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended September 30, 2022 | ​ | ​ ​ 2021 | ​ ​ ​ | ​ ​ Nine months ended September 30, 2022 | ​ | ​ ​ 2021 |
| --- | --- | ---: | --- | --- | --- | ---: | --- | --- |
| Total cash cost before by-product credits (1) | ​ | $6,010 | ​ | $7,536 | ​ | $20,949 | ​ | $22,295 |
| By-product credits (2) | ​ | (236) | ​ | ​ (392) | ​ | (999) | ​ | ​ (834) |
| Total cash cost after by-product credits | ​ | $5,774 | ​ | $7,144 | ​ | $19,950 | ​ | $21,461 |
| Sustaining capital expenditures | ​ | ​ 376 | ​ | ​ 1,491 | ​ | ​ 2,339 | ​ | ​ 2,188 |
| Sustaining exploration expenses | ​ | ​ 318 | ​ | ​ 441 | ​ | ​ 640 | ​ | ​ 1,147 |
| Total all-in sustaining cost | ​ | $6,468 | ​ | $9,076 | ​ | $22,929 | ​ | $24,796 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gold ounces sold | ​ | 9,419 | ​ | ​ 11,454 | ​ | 30,567 | ​ | ​ 37,436 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Total cash cost before by-product credits per gold ounce sold | ​ | $638 | ​ | $658 | ​ | $685 | ​ | $596 |
| By-product credits per gold ounce sold (2) | ​ | ​ (25) | ​ | ​ (34) | ​ | ​ (33) | ​ | ​ (22) |
| Total cash cost after by-product credits per gold ounce sold | ​ | ​ 613 | ​ | ​ 624 | ​ | ​ 652 | ​ | ​ 574 |
| Other sustaining expenditures per gold ounce sold (3) | ​ | ​ 74 | ​ | ​ 169 | ​ | ​ 97 | ​ | ​ 89 |
| Total all-in sustaining cost per gold ounce sold | ​ | $687 | ​ | $793 | ​ | $749 | ​ | $663 |

(1) Production cost plus treatment and refining charges.

(2) Please see the tables below for a summary of our by-product revenue and by-product credit per precious metal equivalent ounces sold.

(3) Sustaining capital expenditures and sustaining exploration expenses divided by gold ounces sold.

The following tables summarize our by-product revenue and by-product credit gold ounce sold *(in thousands):*

*(in thousands)*

| ​ ​ ​ ​ By-product credits by dollar value: | ​ ​ ​ ​ | ​ ​ Three months ended September 30, 2022 ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ ​ | ​ ​ Nine months ended September 30, 2022 ​ | ​ ​ | ​ ​ 2021 ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Silver sales | ​ | $236 | ​ | $392 | ​ | $999 | ​ | $834 |
| Total sales from by-products | ​ | $236 | ​ | $392 | ​ | $999 | ​ | $834 |

| ​ ​ ​ By-product credits: | ​ ​ ​ | ​ ​ Three months ended September 30, 2022 ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ ​ | ​ ​ Nine months ended September 30, 2022 ​ | ​ ​ | ​ ​ 2021 ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Silver sales | ​ | $25 | ​ | $34 | ​ | $33 | ​ | $22 |
| Total by-product credits | ​ | $25 | ​ | $34 | ​ | $33 | ​ | $22 |

### Liquidity and Capital Resources

As of September 30, 2022, we had a cash position of $42.2 million compared to $40.0 million at December 31, 2021. The increase is primarily due to cash from operations which was offset by increased capital and exploration expenditures for the Golden Mile property.

As of September 30, 2022, we had working capital of $82.6 million compared to $76.0 million at December 31, 2021. Our working capital balance fluctuates as we use cash to fund our operations, financing and investing activities, including exploration, mine development and income taxes. With our working capital balance as of September 30, 2022, we believe that our liquidity and capital resources are adequate to fund our operations, exploration, capital, and corporate activities for the next twelve months.

Net cash provided by operating activities for the nine months ended September 30, 2022 was $21.0 million, compared to $23.2 million for nine months ended September 30, 2021. The decrease is primarily due to lower net income which was partially offset by changes in accounts receivable and inventories.

Net cash used in investing activities for the nine months ended September 30, 2022 was $10.2 million compared to $1.8 million during the same period in 2021. The increase is primarily due to capital expenditures related to Golden Mile and capital expenditures at Isabella Pearl for a new water well and completion of the heap leach expansion.

Net cash used in financing activities for nine months ended September 30, 2022 was $8.7 million compared to $4.9 million for the same period in 2021. The net change is due to dividends paid for a full nine months in 2022, whereas in 2021, dividends began in April. Offsetting the dividend payments in 2021 was the cash received from the private sale of our common stock.

### Development and Exploration Activities

*Isabella Pearl Mine*: During the third quarter, our open-pit, heap leach operations at the Isabella Pearl Mine continued. Exploration activities during the quarter included 10 reverse circulation (“RC”) drill holes totaling 956 meters. These holes were drilled from inside the Pearl open-pit to define limits of gold mineralization and transitional zone oxidation and to commence characterization of the deeper sulfide mineralization. Data review and field investigations along the Isabella Pearl mineralized trend continued during the third quarter. Fieldwork, mainly surface geological mapping and rock chip sampling, was conducted with the purpose of identifying targets for future drilling and expansion outside the current permitted mine plan.

*Golden Mile property*: During the third quarter, we continued Phase 2 Reverse Circulation (“RC”) drilling for primarily infill, step-down as well as step-out drill holes to test the depth and strike extent of the mineralization. During the quarter, we completed 22 RC holes totaling 4,647 meters. The results from this drilling are being incorporated into our geological model. We are targeting to update our resource estimate and potentially convert mineral resources to mineral reserves in late 2022 or early 2023. Additional fieldwork during the quarter included surface geological mapping and rock chip sampling along the extensions of mineralized structures at Golden Mile. Engineering, base line and background studies are also on-going for our process facility layout, open-pit design, and infrastructure evaluations at Golden Mile. We continue to advance our hydrogeological and geotechnical understanding of the property. We also successfully completed a water well with potential capacity to be our primary production water resource at Golden Mile. During 2022, we will continue to evaluate the known mineralized zones among a much larger conceptual project plan of multiple open-pits along a trend at Golden Mile to the northwest and onto the Mina Gold property. We are evaluating the potential of at least three pits feeding ore to a strategically located heap leach and process facility. The project’s ADR process plant is being designed and engineered to take the gold to carbon stage and then haul the carbon for processing at our ADR plant at Isabella Pearl for final doré production.

*County Line property*: At our County Line property during the third quarter, we commenced Phase 2 RC drilling for primarily infill and step-out drill holes to test the extent of the gold mineralization. During the quarter, we completed 31 RC holes totaling 2,855 meters. This program is designed to evaluate the resource potential of the gold-bearing volcanic rocks remaining in the vicinity of the historic County Line open-pit. Additional fieldwork during the quarter included surface geological mapping and rock chip sampling along the extensions of mineralized structures at County Line.

*East Camp Douglas property*: During the third quarter, we commenced Phase 1 RC drilling at our East Camp Douglas property. During the quarter, we completed 2 RC holes totaling 169 meters. This program is designed to follow-up our exploration drill results reported in 2021 from the East Camp Douglas property’s lithocap target located at the southern end of the property. The objective of this program is to continue to evaluate the resource potential of the gold-bearing silicified volcanic rocks of the lithocap target area.

*Ripper property*: Exploration activities commenced on our Ripper property during the third quarter. Field activities during the quarter included detailed mapping and sampling of known gold mineralization at Ripper which occurs in a Triassic package of limestones, limestone collapse breccias, and mudstones of the Auld Lang Syne group. Detailed mapping and sampling continues at Ripper to expand on the significant gold mineralization at surface and a first drill program is targeted in 2023.

### Accounting Developments

Recently issued accounting pronouncements have been evaluated and do not presently impact our financial statements and supplemental data.

### Forward-Looking Statements

This report contains or incorporates by reference “forward-looking statements,” as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:

- the extent of the impact of the COVID-19 pandemic, including the duration, spread, severity, and any repeated resurgence of the COVID-19 pandemic, the duration and scope of related government orders and restrictions
- statements about our future exploration, permitting, production, development, and plans for development of our properties
- statements concerning the benefits that we expect will result from our business activities and certain transactions that we contemplate or have completed, such as receipt of proceeds, decreased expenses and avoided expenses and expenditures
- statements of our expectations, beliefs, future plans and strategies, our targets, exploration activities, anticipated developments and other matters that are not historical facts

These statements may be made expressly in this document or may be incorporated by reference from other documents that we will file with the SEC. You can find many of these statements by looking for words such as “believes,” “expects,” “targets,” “anticipates,” “estimates,” or similar expressions used in this report or incorporated by reference in this report.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements, which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, which may change at any time and without notice, based on changes in such facts or assumptions.

### Risk Factors Impacting Forward-Looking Statements

The important factors that could prevent us from achieving our stated goals and objectives include, but are not limited to, those set forth in other reports we have filed with the SEC, including our Form 10-K for the year ended December 31, 2021, and the following:

- The Biden administration’s current and future stance on resource permitting and development
- Inflationary pressures and supply chain disruptions, with particular consideration on the outlook for increased costs specific to labor, materials, consumables and fuel and energy on operations
- Global pandemics such as COVID-19 and governmental responses designed to control the pandemic
- Changes in the worldwide price for gold and/or silver
- Volatility in the equities markets
- Adverse results from our exploration or production efforts
- Producing at rates lower than those targeted
- Political and regulatory risks
- Weather conditions, including unusually heavy rains
- Earthquakes or other unforeseen ground movements impacting mining or processing
- Failure to meet our revenue or profit goals or operating budget
- Technological innovations by competitors or in competing technologies
- Cybersecurity threats
- Investor perception of our industry or our prospects
- Lawsuits
- General economic trends

## Controls and procedures

As filed, 1,719 characters.

#### Disclosure Controls and Procedures

As required by Rule 13a-15 under the 1934 Act, as of September 30, 2022, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer). Based upon and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the 1934 Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

#### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the 1934 Act) during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 1, 2022.
Source: SEC EDGAR, the filing index for accession 0001558370-22-015787. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.