# Golden Minerals Co: Form 10-Q for the period ended Sep 30, 2022

- Company: [Golden Minerals Co](/companies/aumn.md) (CIK 1011509)
- Form: 10-Q
- Filed: 2022-11-10
- Accepted by EDGAR: Nov 9, 2022, 22:35 ET
- Period: 2022-09-30
- Accession: 0001558370-22-017222
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1011509/000155837022017222/aumn-20220930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1011509/000155837022017222/

## 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 | $5.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $18.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $4.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $13.3m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$2.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$6.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | −$46.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | −$90.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$2.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$5.8m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$6.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-07-01 to 2022-09-30 | $19.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $46.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2022-09-30 | $6.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $11.3m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $18.5m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $5.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $8.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-09-30 | $9.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,043 characters.

### Our Company

We were incorporated in Delaware in March 2009 under the Delaware General Corporation Law. During the nine months ended September 30, 2022, our principal source of revenue was from the sale of gold and silver from our Rodeo Property in Durango, Mexico. We incurred net operating losses for the nine months ended September 30, 2022, and 2021.

We remain focused on mining operations at the Rodeo Property as well as further studies of a potential restart plan for Velardeña including the use of bio-oxidation to improve the payable gold recovery. We also continue to evaluate and search for mining opportunities in North America (including Mexico) with near-term prospects of mining, and particularly for properties within reasonable haulage distances of our Velardeña Properties. We are also focused on advancing our El Quevar exploration property in Argentina through the Earn-In Agreement with Barrick and on advancing selected properties in our portfolio of approximately 12 properties, located in Mexico, Nevada and Argentina. We are reviewing strategic opportunities, focusing primarily on development or operating properties in North America, including Mexico.

This discussion should be read in conjunction with Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 23, 2022.

### 2022 Highlights

#### Rodeo Property

From inception in January 2021, through the end of Q3 2022, we have produced 24,014 ounces of gold and 90,408 ounces of silver from Rodeo. Cash costs per payable gold ounce, net of silver by-product credits have averaged $1,089 during that period. The operation continues to be a significant source of positive cash flow for the Company.

We began mining activities at the Rodeo Property, using contracted equipment, in December 2020. We began hauling the mined material, using a contracted fleet of trucks, for processing at our Velardeña oxide plant beginning in January 2021. We provide the mine planning, management, and engineering, which includes in-pit technicians who determine whether material is suitable for process or placement on the waste dump. We also employ and supervise the workforce responsible for processing activities at our oxide plant. Our assay lab, located in Velardeña, Durango, Mexico is used for the project’s assaying requirements.

Mill throughput averaged 523 tonnes per day in the nine months ended September 30, 2022. At approximately 500 tonnes per day, the current life of the Rodeo mine is estimated to run through the third quarter of 2023, based on our current estimate of remaining mineral resources as reported in our most recently filed Technical Report Summary.

The table below sets forth the key processing and sales statistics for the Rodeo operation for the three and nine months ended September 30, 2022:

*Rodeo Operations Statistics*

*(in thousands except per unit amounts)*

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2022 | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2022 |
| --- | --- | ---: | --- | ---: |
| Tonnes mined (1) | ​ | 192,545 | ​ | 610,061 |
| Tonnes in stockpiles awaiting processing (2) | ​ | 23,618 | ​ | 23,618 |
| Tonnes in low grade stockpiles (3) | ​ | 121,202 | ​ | 121,202 |
| Tonnes processed | ​ | 47,947 | ​ | 142,863 |
| Average tonnes per day processed | ​ | 521 | ​ | 523 |
| ​ | ​ | ​ | ​ | ​ |
| Average gold grade processed (grams per tonne) | ​ | 2.6 | ​ | 2.8 |
| Average silver grade processed (grams per tonne) | ​ | 10.4 | ​ | 10.8 |
| ​ | ​ | ​ | ​ | ​ |
| Plant recovery - gold (%) | ​ | 74.6 | ​ | 75.1 |
| Plant recovery - silver (%) | ​ | 77.6 | ​ | 81.0 |
| ​ | ​ | ​ | ​ | ​ |
| Payable gold produced in doré (ounces) | ​ | 2,972 | ​ | 9,584 |
| Payable silver produced in doré (ounces) | ​ | 11,907 | ​ | 38,619 |
| Payable gold equivalent produced in doré (ounces) (4) | ​ | 3,103 | ​ | 10,050 |
| ​ | ​ | ​ | ​ | ​ |
| Gold sold in doré (ounces) | ​ | 3,018 | ​ | 9,933 |
| Silver sold in doré (ounces) | ​ | 11,609 | ​ | 39,269 |
| Gold equivalent sold in doré (ounces) (4) | ​ | 3,145 | ​ | 10,405 |
| ​ | ​ | ​ | ​ | ​ |
| Average realized price, before refining and selling costs | ​ | ​ | ​ | ​ |
| Gold (dollar per ounce) | ​ | $1,703 | ​ | $1,825 |
| Silver (dollar per ounce) | ​ | $18.72 | ​ | $22.02 |
| ​ | ​ | ​ | ​ | ​ |
| (1) Includes all mined material transported to the plant, stockpiled or designated as waste |  |  |  |  |
| (2) Includes mined material stockpiled at the mine or transported to the plant awaiting processing in the plant |  |  |  |  |
| (3) Material grading between 1.6 g/t (current cutoff grade) and 1 g/t Au held for possible future processing |  |  |  |  |
| (4) Gold equivalents based on realized $ Au and $ Ag price |  |  |  |  |

The following table highlights additional non-GAAP cost and revenue statistics related to the Rodeo operations:

*(in thousands except per unit amounts)*

| ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2022 ​ Nine Months Ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ |
| --- | --- |
| Total cash operating costs ​ $4,255 ​ $13,175 | ​ |
| Treatment and refining costs ​ 95 ​ 307 | ​ |
| Silver by-product credits ​ ​ (217) ​ ​ (865) | ​ |
| **Total cash costs, net of by-product credits** **​** $4,133 ​ $12,617 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| **Total cash cost per unit** **​** ​ ​ ​ ​ ​ | ​ |
| Payable gold ounces produced in doré ​ 2,972 ​ 9,584 | ​ |
| Total cash operating costs ​ $1,432 ​ $1,375 | ​ |
| Treatment and refining charges ​ 32 ​ 32 | ​ |
| Silver by-product credits ​ (73) ​ (90) | ​ |
| **Total cash costs, net of by-product credits, per payable gold ounce (1)** **​** $1,391 ​ $1,316 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| Tonnes Processed in plant ​ ​ 47,947 ​ ​ 142,863 | ​ |
| Total cash operating costs per tonne processed ​ $89 ​ $92 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| (1) Cash costs, net of by-product credits, per payable ounce of gold is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below for a reconciliation to the GAAP financial measure. | ​ |

Total cash operating costs for the three months and nine months ended September 30, 2022, as depicted in the table above, include all production costs during the period, including mining, milling and general and administrative costs related to mined material.

Total operating margin for the three months and nine months ended September 30, 2022, were $0.9 million and $5.4 million respectively on sales of metal of $5.3 million and $18.7 million respectively offset by cost of metal sold of $4.4 million and $13.3 million.

For the full year 2022, we are estimating that we will process 180,000 to 190,000 tonnes in the oxide plant, or approximately 520 tonnes per day, with payable extraction for 2022 of approximately 12,000 to 14,000 ounces of gold and 47,000 to 50,000 ounces of silver. Average grades for 2022 are estimated to be approximately 2.8 grams per tonne for gold and 10.8 grams per tonne for silver, lower than grades achieved in 2021, but as anticipated in the PEA mine plan for 2022. Mill recoveries are expected to continue during 2022 near current rates of between 75 and 80 percent for gold and 80 to 85 percent for silver. Higher expected total throughput in the oxide plant for the year 2022, as compared to 2021, will help offset the lower gold grades anticipated for 2022 resulting in similar payable gold extraction in 2022 as compared to 2021, but unit costs are expected to be higher in 2022 as a result of higher plant throughput. Cash costs per payable gold ounce, net of silver by-product credits, are expected to be approximately $1,300 for the full year 2022 which is slightly higher than previously forecast. The higher-than-previously forecast full year unit cash costs are due to the higher-than-expected mining rates and slightly lower-than-expected recoveries.

Using an assumed gold price of $1,800/oz and an assumed silver price of $25.00/oz, net operating margin for the full year 2022 from the Rodeo Property (defined as revenue from the sale of metals less the cost of metals sold) is estimated at approximately $6.0 million to $8.0 million which is in line with our previous estimations. Our average realized prices for the three and nine months ended September 30, 2022, as shown above, were $1,703 and $1,825 for gold and $18.72 and $22.02 for silver, respectively. The estimates detailed above for 2022 were derived using the actual results of operations achieved year to date through September 30, 2022, and a projection of the mine plan, grades, plant throughput, and recoveries for the fourth quarter 2022. Actual future results from mining at Rodeo may vary significantly based upon, among other things, unanticipated variations in grade, unexpected challenges associated with our proposed mining plan, volatility in commodity prices, variations in expected recoveries, increases in projected operating costs, working capital or capital costs or interruptions in mining. See “*Risk Factors – Risk Factors related to our Mining and Processing Activities” as described in our Form 10-K for the period ended December 31, 2021.*

### Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles. These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

“Total cash costs, net of by-product credits, per payable gold ounce”, is a non-GAAP financial measure calculated by the Company as set forth below and may not be comparable to similar measures reported by other companies.

“Total cash costs, net of by-product credits, per payable gold ounce”, includes all direct and indirect operating cash costs associated with the physical activities that would generate doré products for sale to customers, including mining to gain access to mineralized materials, mining of mineralized materials and waste, milling, third-party related treatment, refining and transportation costs, on-site administrative costs and royalties. Total cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the Rodeo project. By-product credits include revenues from silver contained in the products sold to customers during the period. “Total cash costs, net of by-product credits”, are divided by the number of payable gold ounces generated by the plant for the period to arrive at “Total cash costs, net of by-product credits, per payable gold ounce.”

“*Cost of metals sold”*, reported as a separate line item in our Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2022, is the most comparable financial measure, calculated in accordance with GAAP, to “Total cash costs, net of by-product credits”. “*Cost of metals sold”*, includes adjustments for changes in inventory and excludes third-party related treatment and refining costs, which are reported as part of revenue in accordance with GAAP. The following table presents a reconciliation for the three months and nine months ended September 30, 2022, between the non-GAAP measure of “Total cash cost, net of by-product credits” to the most directly comparable GAAP measure, “*Cost of metals sold”.*

### Reconciliation of Cash Costs to Cost of Metals Sold

*(in thousands)*

| ​ ​ ​ Three Months Ended September 30, 2022 | ​ ​ ​ ​ | ​ ​ ​ Reconciliation of Costs of Metals Sold (GAAP) to Total Cash Costs, net of By-product Credits (Non-GAAP) ​ ​ | ​ ​ ​ ​ |
| --- | --- | ---: | --- |
| Total cash costs, net of by-product credits |  | $4,133 | ​ |
| ​ | ​ | ​ ​ | ​ |
| Reconciliation to GAAP measure: | ​ | ​ ​ | ​ |
| Treatment and refining costs | ​ | $(95) | ​ |
| Silver by-product credits | ​ | ​ 217 | ​ |
| Write down of inventories to net realizable value | ​ | (75) | ​ |
| Change in inventory (excluding depreciation, depletion and amortization) | ​ | 194 | ​ |
| Cost of metals sold |  | $4,374 | ​ |
| ​ | ​ | ​ ​ | ​ |
| **Nine Months Ended September 30, 2022** | ​ | ​ ​ | ​ |
| Total cash costs, net of by-product credits |  | $12,617 | ​ |
| ​ | ​ | ​ ​ | ​ |
| Reconciliation to GAAP measure: | ​ | ​ ​ | ​ |
| Treatment and refining costs | ​ | $(307) | ​ |
| Silver by-product credits | ​ | ​ 865 | ​ |
| Write down of inventories to net realizable value | ​ | (75) | ​ |
| Change in inventory (excluding depreciation, depletion and amortization) | ​ | 235 | ​ |
| Cost of metals sold |  | $13,335 | ​ |

#### Rodeo Exploration

The drill programs completed in 2021 extended the life of mine plan for Rodeo through the third quarter of 2023 based on processing material at a cut-off grade of 1.6 g/t Au. In March 2022, we finished a small additional RC drill program (approximately 2,500 m) to finish delineating the mineralized area on the south side of the current pit. The 2022 drilling did not appreciably change the resource or extend the anticipated life of mine.

#### Velardeña

The Velardeña Properties contain two underground mines that were last operated in late 2015, at which point mining activities were suspended when a combination of low metals prices, mining dilution and metallurgical challenges rendered operations unprofitable. We elected to preserve the asset for future use, and since that time we have evaluated and tested various mining methods and processing alternatives that could enable sustainable profitable operations.

In June 2021, we began limited-scale mining activities at our Velardeña underground mine to obtain further bulk samples for use in final optimization of the bio-oxidation (BIOX™) plant design and for use in additional flotation separation studies (BIOX is a trademark of Metso-Outotec for its proprietary bio-oxidation process.). Test results using the BIOX pre-treatment oxidation process continue to support the use of the technology in future processing at Velardeña. In March 2022 we filed an updated PEA Technical Report Summary and 43-101 Technical Report supporting a possible economic operation at Velardeña using the optimized flotation parameters, BIOX treatment of pyrite concentrates and employing resue mining techniques to control dilution. In May 2022 we began additional test-mining activities with a new mining contractor to evaluate productivity and dilution of resue mining on the principal veins accessible from the San Mateo decline in part to validate the PEA assumptions. The results of the test mining met expected productivity metrics but did not meet anticipated dilution metrics on some of the veins mined. We are continuing to evaluate modified mine plans and mining techniques to address dilution issues including new test work on automated ore sorting which shows potential to allow for upgrading mined material by rejecting waste rock after crushing.

#### Yoquivo

We completed a second drill program of 3,949 meters in 21 holes exploring the Pertenencia, Esperanza and Dolar vein systems in 2021. The drill program demonstrated the potential for the Pertenencia vein to host significant high-grade mineralization and hit multiple high-grade veins, suggesting there may be additional blind veins to be found on the property.

In July 2022, we completed a third drilling program of 5,693 meters in 24 drill holes designed to further delineate the previously encountered vein-hosted mineralized intervals.

A fourth round of drilling of approximately 3000 meters is currently underway and we plan to complete a maiden resource estimate for the property for release Q1 of 2023.

#### El Quevar

In April 2020, we entered into the Earn-in Agreement with Barrick, pursuant to which Barrick has acquired an option to earn a 70% interest in the Company’s El Quevar project located in the Salta Province of Argentina (the “Option”). For a description of the Earn-In Agreement, see “*Our Material Mining Properties – El Quevar”* in our Annual Report Form 10-K for the year ended December 31, 2021. During the earn-in period, in addition to required exploration spending, Barrick will fund the holding costs of the property, which will qualify as work expenditures. Barrick will reimburse us for expenses related to maintaining the exploration camp, which will initially be run by us under a service agreement, and which will also qualify as work expenditures. As of September 31, 2022, approximately $0.3 million of expenses incurred by us are expected to be reimbursable under the Earn-in Agreement. Barrick has met the minimum $1.0 million in work expenditures required by the Earn-in Agreement. If Barrick elects to terminate the Earn-In Agreement, we will become responsible for future holding costs and exploration spending related to the property.

In June 2022, Barrick completed a 5-hole 1300-meter initial diamond drill program to test highest priority targets at El Quevar. Barrick reported to us the occurrence of vuggy silica alteration, which is commonly associated with high sulfidation epithermal gold-silver deposits, in all of the drill holes. Final assay results are pending, however, initial results confirm the occurrence of potentially economic gold values in vuggy silica in one of the drill holes.

#### Sarita Este

In December 2019, we entered into an option agreement with Cascadero Minerals Corporation (“Cascadero”) to acquire a 51% interest in the gold/copper Sarita Este concession, located in the northwest portion of the Province of Salta, Argentina, adjacent to the Taca project owned by First Quantum Minerals. The option agreement calls for us to spend a total $2.5 million over four years including a minimum of 2,000 meters of drilling. We have exceeded the drilling requirement and have spent approximately $2.3 million since entering into the agreement in December 2019.

In the fourth quarter of 2021, we completed the first drill program ever conducted at Sarita Este, which involved drilling 10 diamond drill holes totaling 2,518 meters to explore untested epithermal gold-silver and copper porphyry targets. In January 2022, we announced assay results from the drill program, including the potential of an oxidized gold system. We completed a second drill program in June 2022 designed to offset and further delineate mineralization associated with the gold interval encountered in the first drill program. Recently released assay results from that program point to a potentially economic shallow oxidized gold system. Further drilling was recently completed for a project total since inception of 4,925 meters in 51 core drill holes.

### Financial Results of Operations

For the results of continuing operations discussed below, we compare the results from operations for the three and nine months ended September 30, 2022, to the results from operations for the three and nine months ended September 30, 2021.

### Three Months Ended September 30, 2022

*Revenue from the sale of metals.* We recorded $5.3 million in revenue from doré sales for the three months ended September 30, 2022, and $8.5 million for the three months ended September 30, 2021. Lower revenue in 2022 resulted from 1,659 fewer gold equivalent ounces sold combined with a lower realized price of $1,703 per ounce for the three months ended September 30, 2022, compared to $1,783 per ounce for the three months ended September 30, 2021. Fewer gold ounces were sold in the three months ended September 30, 2022 compared to the three months ended September 30, 2021 due to the lower grade of material processed.

*Cost of metals sold.* For each of the three months ended September 30, 2022, and 2021, we recorded $4.4 million and $4.4 million of cost of metals sold, respectively.

*Exploration expense.* Our exploration expense, including property holding costs and allocated administrative expenses, totaled $2.4 million and $2.1 million for the three months ended September 30, 2022, and September 30, 2021, respectively. The higher exploration expense for 2022 is primarily related to costs required to increase the capacity of the tailings facility at Velardeña.

*Velardeña care and maintenance costs*. We recorded $0.4 million for each of the three-month periods ended September 30, 2022, and September 30, 2021, for expenses related to care and maintenance at our Velardeña Properties as the result of the suspension of mining and processing activities in November 2015.

*El Quevar project expense.* We incurred $0.2 million and $0.1 million for the three-month periods ended September 30, 2022, and September 30, 2021, respectively, related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During each of the three months ended September 30, 2022, and September 30, 2021, approximately $0.2 million of costs actually incurred were offset by reimbursements from Barrick as discussed above.

*Administrative expense.* Administrative expenses totaled $0.9 million for each of the three months ended September 30, 2022, and September 30, 2021. Administrative expenses, including costs associated with being a public company, are incurred primarily by our corporate activities in support of the Rodeo Property, Velardeña Properties, El Quevar project and our exploration portfolio.

*Stock-based compensation.* During the three months ended September 30, 2022, we incurred approximately $0.2 million of expense related to stock-based compensation. Stock-based compensation varies from period to period depending on the number and timing of shares granted, the type of grant, the market value of the shares on the date of grant and other variables. During the three months ended September 30, 2021, we incurred approximately $0.1 million of expense related to stock-based compensation. Stock-based compensation was higher in the 2022 period primarily due to more awards granted to executives.

*Reclamation and accretion expense.* During each of the three months ended September 30, 2022, and September 30, 2021, we incurred approximately $0.1 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña Properties and environmental liabilities associated with the Rodeo operation.

*Other operating income (expense), net.* We recorded $0.4 million of other operating income for the three months ended September 30, 2022, related to the amortization of deferred income related to the option agreement for the sale of the Santa Maria property, as discussed above. We recorded $0.1 million of other operating income for the three months ended September 30, 2021, primarily related to the amortization of deferred income related to the option agreement for the sale of the Santa Maria property.

*Depreciation, depletion and amortization.* During each of the three months ended September 30, 2022, and September 30, 2021, we incurred depreciation, depletion and amortization expense of approximately $0.1 million.

*Interest and other expense, net.* We recorded a nominal amount of interest and other expense, net for each of the three months ended September 30, 2022, and September 30, 2021.

*Gain (Loss) on foreign currency losses.* During the three months ended September 30, 2022 we recorded approximately $0.2 million of foreign exchange gains. During the three months ended September 30, 2021, we recorded approximately $0.1 million of foreign currency gains. Foreign currency gains and losses are primarily related to the effect of currency fluctuations on monetary transactions incurred by our foreign subsidiaries that are denominated in currencies other than US dollars.

*Income taxes.* We recorded a $46,000 tax benefit for the three months ended September 30, 2022. We recorded $0.2 million of tax expense for the three months ended September 30, 2021.

### Nine Months Ended September 30, 2022

*Revenue from the sale of metals.* We recorded $18.7 million and $16.1 million in revenue from doré sales for the nine months ended September 30, 2022, and 2021, respectively. The nine-month period of 2021 included the startup phase at our Rodeo property resulting in lower revenue as compared to the same period of 2022.

*Cost of metals sold.* For the nine months ended September 30, 2022, and 2021, we recorded $13.3 million and $9.2 million of cost of metals sold, respectively. The nine-month period of 2021 included the startup phase at our Rodeo property resulting in lower cost of metals sold as compared to the same period of 2022. During the 2022 period, we processed lower-grade material resulting in slightly higher costs as compared to the same period of 2021.

*Exploration expense.* Our exploration expense, including work at Rodeo and other properties, property holding costs and allocated administrative expenses, totaled $7.0 million and $4.0 million for the nine months ended September 30, 2022, and September 30, 2021, respectively. The increase in exploration expense for 2022 is primarily related to increased exploration at the Yoquivo property in Mexico, the Sarita Este property in Argentina as well as costs to support the potential restart of our Velardeña Properties. The $7.0 million of exploration expenses we incurred during the nine months of 2022 is comprised of $1.2 million of test mining and optimization of the bio-oxidation plant design conducted at Velardeña, $1.1 million of exploration at Yoquivo, $1.0 million at our Sarita Este property in Argentina, $0.8 million at our Rodeo operation, $0.6 million on tailing capacity expansion to support Rodeo production and $2.3 million in other general exploration expenses. The $4.0 million of exploration expenses we incurred during the nine months of 2021 is comprised of $1.2 million at our Rodeo operation, $0.8 million at our Argentina properties that had been previously capitalized which were expensed, $0.2 million at Velardeña and $1.8 million in other general exploration expenses.

*El Quevar project expense.* For the nine months ended September 30, 2022, and September 30, 2021, we incurred $0.4 million and $0.2 million, respectively related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During the nine months ended September 30, 2022, and September 30, 2021, approximately $0.7 million and $0.5 million of costs were reimbursed by Barrick, respectively as discussed above.

*Velardeña care and maintenance costs*. We recorded $0.8 million for each of the nine months ended September 30, 2022, and 2021, respectively, for expenses related to shut down and care and maintenance at our Velardeña Properties as the result of the suspension of mining and processing activities in November 2015.

*Administrative expense.* Administrative expenses totaled $3.5 million for each of the nine months ended September 30, 2022, and September 30, 2021. Administrative expenses, including costs associated with being a public company, are incurred primarily by our corporate activities in support of the Velardeña Properties, El Quevar project and our exploration portfolio. The $3.5 million of administrative expenses we incurred during the nine months of 2022 is comprised of $1.5 million of employee compensation and directors’ fees, $0.9 million of professional fees and $1.1 million of insurance, rents, travel expenses, utilities, and other office costs. The $3.5 million of administrative expenses we incurred during the nine months of 2021 is comprised of $1.6 million of employee compensation and directors’ fees, $1.0 million of professional fees and $0.9 million of insurance, rents, travel expenses, utilities and other office.

*Stock-based compensation.* During the nine months ended September 30, 2022, we incurred approximately $0.5 million of expense related to stock-based compensation. During the nine months ended September 30, 2021, we incurred approximately $1.5 million of expense related to stock-based compensation. Stock-based compensation varies from period to period depending on the number and timing of shares granted, the type of grant, the market value of the shares on the date of grant and other variables. Stock-based compensation was higher in the 2021 period due primarily to accelerated vesting of stock awards granted to executives and a consultant.

*Reclamation and accretion expense.* During each of the nine months ended September 30, 2022, and 2021 we incurred approximately $0.2 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña Properties.

*Other operating income (expense), net.* We recorded $1.3 million of other operating income for the nine months ended September 30, 2022, related to $1.2 million of amortization of deferred income related to the option agreement for the sale of the Santa Maria property, as discussed above, and $0.1 million related to the sale of non-essential mining equipment in Mexico. We recorded $0.5 million of other operating income for the nine months ended September 30, 2021, primarily related to the amortization of deferred income related to the option agreement for the sale of the Santa Maria property.

*Depreciation, depletion and amortization.* During the nine months ended September 30, 2022, and September 30, 2021, we incurred depreciation, depletion and amortization expense of approximately $0.2 million and $0.5 million, respectively.

*Interest and other expense, net.* We recorded a nominal amount of interest and other expense, net for the nine-month period ended September 30, 2022. We recorded approximately $0.3 million of interest and other expense, net for the nine-month period ended September 30, 2021, primarily related to write-off of deferred costs related to the Lincoln Park Capital program.

*Gain (Loss) on foreign currency.* We recorded a $0.3 million foreign currency gain for the nine months ended September 30, 2022, and $0.2 million for the nine months ended September 30, 2021. Foreign currency gains and losses are primarily related to the effect of currency fluctuations on monetary transactions incurred by our foreign subsidiaries that are denominated in currencies other than US dollars.

*Income taxes.* We recorded a $0.1 tax benefit for the nine months ended September 30, 2022. We recorded $0.2 million of tax expense for the nine months ended September 30, 2021.

### Liquidity and Capital Resources

At September 30, 2022, our aggregate cash and cash equivalents totaled $6.5 million, compared to the $12.2 million in similar assets held at December 31, 2021. The September 30, 2022 balance is due in part to the following expenditures and cash inflows for the nine months ended June 30, 2022. Expenditures totaled $12.1 million from the following:

- $7.0 million for exploration expenditures at the Rodeo, Yoquivo and other properties, costs associated with the potential restart of Velardeña and other general exploration expenses;
- $0.8 million in care and maintenance costs at the Velardeña Properties;
- $0.4 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project, net of reimbursements from Barrick;
- $3.5 million in general and administrative expenses; and
- $0.4 million related to a net working capital change.

The foregoing expenditures were offset by cash inflows of $6.4 million from the following:

- $5.4 million of net operating margin from the Rodeo operation (defined as revenue from the sale of metals less the cost of metals sold) and
- $1.0 million from the exercise of warrants

In addition to the $6.5 million cash balance at September 30, 2022, we expect to receive approximately $5.5 million to $6.5 million in net operating margin from the Rodeo Property (defined as revenue from the sale of metals less the cost of metals sold) during the twelve months ending September 30, 2023, assuming average gold and silver prices during that period of $1,800 and $25.00 oz respectively (our realized prices for the nine months ended June 30, 2022, as shown above, were $1,825 and $22.02 for gold and silver, respectively). Our forecasted cash inflows during the twelve months ending

September 30, 2023 also include the anticipated receipts of $1.75 million from the sale of the Santa Maria property to Fabled.

Our forecasted expenditures during the twelve months ending September 30, 2023, apart from Rodeo cost of metals sold, which is already included in our forecast of net operating margin, total approximately $9.6 million as follows:

- Approximately $4.3 million on exploration activities and property holding costs related to our portfolio of exploration properties located in Mexico, Argentina and Nevada, including project assessment and evaluation costs relating to additional exploration at Rodeo and Yoquivo as well as costs associated with the potential restart of Velardeña and costs to increase the capacity of the tailing facility to process the Rodeo material;
- Approximately $1.0 million at the Velardeña Properties for care and maintenance;
- Approximately $0.4 million at the El Quevar project to fund care and maintenance and property holding costs, net of reimbursement from Barrick; and
- Approximately $3.9 million on general and administrative costs.

Our forecasted cash resources of approximately $13.5 to $15.5 million, which include cash on hand at September 30, 2022, the forecasted net operating margin from the Rodeo Property, and the anticipated payments of $1.75 million from the sale of the Santa Maria property to Fabled, are greater than our forecasted expenditures of approximately $10.4 million for the twelve months ended September 30, 2023. The actual net operating margin received from the Rodeo Property could be negatively impacted if further interruptions due to COVID-19 occur in Mexico, or if costs rise further due to global supply chain or other issues. The actual amount of cash resources that we receive during the period from the Rodeo operation may also vary significantly from the amounts specified above due to, among other things: (i) unanticipated variations in grade, (ii) unexpected challenges associated with our proposed mining plan, (iii) decreases in commodity prices below those used in calculating the estimates shown above, (iv) variations in expected recoveries, (v) increases in operating costs above those used in calculating the estimates shown above, or (vi) interruptions in production at Rodeo. The actual amount of cash expenditures that we incur at properties other than Rodeo during the twelve-month period ending September 30, 2023, may vary significantly from the amounts specified above and will depend on a number of factors, including variations in the anticipated care and maintenance costs at the Velardeña Properties or at El Quevar, and costs for continued exploration, project assessment, and development at our other exploration properties. Likewise, if cash expenditures are greater than anticipated or if cash receipts are less than anticipated, we may need to take certain actions to maintain sufficient cash balances over the next nine months, including additional asset dispositions or raising additional equity capital through sales under the ATM Program or otherwise.

The condensed consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business. However, our continuing long-term operations may be dependent upon our ability to continue currently profitable operations and to secure sufficient funding, if needed, to generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in our condensed consolidated financial statements are dependent on our ability to continue to generate positive cash flows from operations and to continue to fund exploration and development activities that would lead to additional profitable mining and processing activities or to generate proceeds from the disposition of property, plant and equipment. There can be no assurance that we will be successful in continuing to generate profitable mining and processing activities or to securing additional funding, if needed, to generate future profitable operations on terms acceptable to us or at all. We believe the cash on hand, anticipated positive net operating margins from the Rodeo operation, the payments received for Santa Maria, the potential use of the ATM Program, and the potential for additional asset dispositions make it probable that we will have sufficient cash to meet our financial obligations and continue our business strategy beyond one year from the filing of our condensed consolidated financial statements for the period ended September 30, 2022.

### Recent Accounting Pronouncements

There were no new accounting pronouncements issued during 2022 that would affect the Company or have a material impact on its consolidated financial position or results of operations.

### Forward-Looking Statements

Some information contained in or incorporated by reference into this Quarterly Report on Form 10-Q may contain forward-looking statements. These statements include comments relating to: (i) the Rodeo mine, including anticipated life of mine and production, payable extraction, anticipated grades, recoveries, estimated unit costs and net operating margin for 2022, (ii) our plans regarding further advancement of the El Quevar project and reimbursements paid by Barrick under the Earn-in Agreement, to fund the El Quevar project; (iii) timing and results of test mining at Velardeña and the potential restart of mining activities at Velardeña; (iv) information regarding the Yoquivo property, including future evaluation and drilling plans, information gained from drilling activities, exploration activities, the potential of additional blind veins to be found and our plan to produce an initial resource estimate; (v) information regarding the Sarita Este property, including future evaluation and drilling plans, the potential of an oxidized gold system and a copper porphyry system and exploration activities; (vi) our plans to defend ourself against claims by Unifin if served with notice of a lawsuit; (vii) expectations pertaining to the recovery of VAT refunds from the Mexican government; (viii) projected spending for the twelve months ended September 30, 2023; and (ix) statements concerning our financial condition, business strategies and business and legal risks.

The use of any of the words “anticipate,” “continues,” “likely,” “estimate,” “expect,” “may,” “will,” “project,” “should,” “could,” “believe” and similar expressions are intended to identify uncertainties. We believe the expectations reflected in those forward-looking statements are reasonable. However, we cannot assure that these expectations will prove to be correct. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors set forth below and other factors set forth in, or incorporated by reference into this report:

- Timing duration and overall impact of the COVID-19 pandemic, including potential future suspension of activities at Rodeo or the Velardeña Properties in the event of future orders of the Mexican Federal Government;
- Deviations from the projected timing, amount of estimated production and projected costs at Rodeo due to unanticipated variations in grade, unexpected challenges associated with our proposed mining plan, volatility in commodity prices, variations in expected recoveries, increases in projected operating costs, working capital, capital costs or delays in commencement of or interruptions in production;
- Higher than anticipated care and maintenance costs at the Velardeña Properties in Mexico or at El Quevar in Argentina;
- Risks related to the El Quevar project in Argentina, including unfavorable results from our evaluation activities and whether the option with respect to the El Quevar project is exercised pursuant to the terms of the Earn-in Agreement;
- Decreases in silver and gold prices;
- Whether we are able to raise the necessary capital required to continue our business on terms acceptable to us or at all, and the likely negative effect of volatility in silver and gold prices or unfavorable exploration results;
- Unfavorable results from exploration at the Yoquivo, Sarita Este, Sand Canyon or other exploration properties and whether we will be able to advance these or other exploration properties;
- The Rodeo project, including potential inaccuracies in our assumptions and projections contained in the Rodeo PEA (including life of mine and production expectations), and our plans for further exploration drilling;
- Variations in the nature, quality and quantity of any mineral deposits that are or may be located at the Velardeña Properties or our exploration properties, changes in interpretations of geological information, unfavorable results of metallurgical and other tests, and the timing and scope of our further evaluation activities at the Velardeña Properties;
- Potential delays in our exploration activities or other activities to advance properties towards mining resulting from environmental consents or permitting delays or problems, accidents, problems with contractors, disputes under agreements related to exploration properties, unanticipated costs and other unexpected events;
- Our ability to retain key management and mining personnel necessary to successfully operate and grow our business;
- Economic and political events negatively affecting the market prices for gold, silver, zinc, lead and other minerals that may be found on our exploration properties;
- Political and economic instability in Mexico, Argentina, and other countries in which we conduct our business and future actions of any of these governments with respect to nationalization of natural resources or other changes in mining or taxation policies;
- Volatility in the market price of our common stock; and
- The factors discussed under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.

Many of these factors are beyond our ability to control or predict. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risks and uncertainties. You should not unduly rely on any of our forward-looking statements. These statements speak only as of the date of this quarterly report on Form 10-Q. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or developments.

## Market risk

As filed, 1,252 characters.

### Interest Rate Risk

We invest substantially all of our excess cash in U.S. government and debt securities rated “investment grade” or better. The rates received on such investments may fluctuate with changes in economic conditions. Based on the average cash and investment balances outstanding during the first nine months of 2022, a 1% decrease in interest rates would have resulted in only a nominal reduction in interest income for the period.

### Foreign Currency Exchange Risk

Although most of our expenditures are in U.S. dollars, certain purchases of labor, supplies and capital assets are denominated in other currencies, primarily in Mexico. As a result, currency exchange fluctuations may impact the costs of our exploration and mining activities. To reduce this risk, we maintain minimum cash balances in foreign currencies and complete most of our purchases in U.S. dollars.

### Commodity Price Risk

We are primarily engaged in the exploration and mining of properties containing gold, silver, zinc, lead and other minerals. As a result, decreases in the price of any of these metals have the potential to negatively impact our ability to establish reserves and mine on our properties. We currently hold no commodity derivative positions.

## Controls and procedures

As filed, 1,413 characters.

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2022, (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 199 characters.

The risk factors for the nine months ended September 30, 2022, are substantially the same as those set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

Filed Nov 10, 2022.
Source: SEC EDGAR, the filing index for accession 0001558370-22-017222. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.