# Fortitude Gold Corp: Form 10-Q for the period ended Mar 31, 2023

- Company: [Fortitude Gold Corp](/companies/ftco.md) (CIK 1828377)
- Form: 10-Q
- Filed: 2023-05-08
- Accepted by EDGAR: May 8, 2023, 16:05 ET
- Period: 2023-03-31
- Accession: 0001558370-23-008508
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1828377/000155837023008508/ftco-20230331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1828377/000155837023008508/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $21.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $48.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $12.3m | us-gaap:GrossProfit |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $1.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $6.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.26 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.26 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 24,208,676 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $11.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $1.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $2.9m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-03-31 | $52.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $100.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $135.2m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $9.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $15.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | $119.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 21,245 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, CLMC 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.

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.

The following discussion summarizes our results of operations for the three ended March 31, 2023 and 2022. It also analyzes our financial condition at March 31, 2023. 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, 2022 contained in our annual report on Form 10-K for the year ended December 31, 2022.

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.

### First Quarter 2023 Financial Results and Highlights

- $21.5 million net sales
- $6.4 million net income or $0.26 per share
- $52.3 million cash balance on March 31, 2023
- 11,487 gold ounces produced
- 3.83 grams per tonne average gold grade mined
- $90.1 million working capital at March 31, 2023
- $12.3 million mine gross profit
- $499 total cash cost after by-product credits per gold ounce sold
- $578 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 March 31, 2023 | ​ ​ | ​ ​ 2022 | ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Ore (tonnes) |  | 106,475 |  | 253,843 |  |
| Gold grade (g/t) |  | 3.83 |  | 2.16 |  |
| Low-grade stockpile |  |  |  |  |  |
| Ore (tonnes) |  | 2,118 |  | 23,490 |  |
| Gold grade (g/t) |  | 0.46 |  | 0.44 |  |
| Waste (tonnes) |  | 218,127 |  | 1,252,524 |  |
| **Metal production (before payable metal deductions)(1)** | ​ | ​ | ​ | ​ | ​ |
| Gold (ozs.) |  | 11,487 |  | 9,875 |  |
| Silver (ozs.) |  | 17,649 |  | 16,523 |  |

(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 March 31, 2023 ​ | ​ ​ ​ | ​ ​ ​ ​ 2022 ​ |
| --- | --- | --- | --- | --- |
| Gold (ozs.) | ​ | ​ 11,429 |  | ​ 8,297 |
| Silver (ozs.) | ​ | ​ 17,480 |  | ​ 13,928 |
| **Average metal prices realized (1)** | ​ | ​ ​ | ​ | ​ ​ |
| Gold ($per oz.) | ​ | ​ 1,889 |  | ​ 1,863 |
| Silver ($per oz.) | ​ | ​ 22.72 |  | ​ 23.76 |
| **Precious metal gold equivalent ounces sold** | ​ | ​ ​ | ​ | ​ ​ |
| Gold Ounces | ​ | ​ 11,429 | ​ | ​ 8,297 |
| Gold Equivalent Ounces from Silver | ​ | ​ 210 | ​ | ​ 178 |
| ​ | ​ | ​ 11,639 | ​ | ​ 8,475 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Total cash cost before by-product credits per gold ounce sold | ​ | $534 | ​ | $748 |
| Total cash cost after by-product credits per gold ounce sold | ​ | $499 | ​ | $708 |
| Total all-in sustaining cost per gold ounce sold | ​ | $578 | ​ | $848 |

(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 March 31, 2023 and 2022, we produced 11,487 and 9,875 ounces of gold, respectively. The higher production is primarily due to higher-grade ore mined and lower 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.

### Consolidated Results of Operations – Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

*Sales, net.* For the three months ended March 31, 2023, consolidated sales, net were $21.5 million as compared to $15.4 million for the same period in 2022. The increase is attributable to a 38% increase in sales volumes due to increased production, as well as a 1% increase is average sales price.

*Mine gross profit.* For the three months ended March 31, 2023, we recorded $12.3 million mine gross profit compared to $6.8 million mine gross profit for the same period in 2022. The increase is primarily attributable to higher sales and lower cash cost after by-product credit per ounce sold, as discussed above.

*General and administrative*. For the three months ended March 31, 2023, general and administrative expenses of $1.1 million did not materially change from the same period in 2022.

*Exploration expenses*. For the three months ending March 31, 2023, property exploration expenses totaled $3.7 million as compared to $2.5 million for the same period of 2022. The increase was largely due to increased geotechnical and metallurgical studies at the County Line property and the completion of the monitoring well at the Golden Mile property.

*Other (income) expense, net*. For the three months ending March 31, 2023, other income totaled $0.3 million as compared to other expense of $0.02 million for the same period of 2022. The change is due to an increase in interest income in 2023.

*Income and mining tax expense.* For the three months ended March 31, 2023, income and mining tax expense was $1.5 million as compared to $0.4 million for the same period in 2022. The increase is the result of our higher income before income and mining taxes and increased Nevada net proceeds of minerals tax due to higher metal sales. See **Note 4** to the **Condensed Consolidated Financial Statements.**

*Net income*. For the three months ended March 31, 2023 we recorded net income of $6.4 million as compared to $2.6 million in the corresponding period for 2022. The increase 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 March 31, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ |
| --- | --- | ---: | --- | --- |
| Total cash cost after by-product credits | ​ | $5,701 | ​ | $5,873 |
| Treatment and refining charges | ​ | (48) | ​ | ​ (92) |
| Depreciation and amortization | ​ | 3,479 | ​ | ​ 2,778 |
| Reclamation and remediation | ​ | ​ 72 | ​ | ​ 47 |
| Total consolidated mine cost of sales | ​ | $9,204 | ​ | $8,606 |

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):*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three months ended March 31, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ |
| --- | --- | --- | ---: | --- | --- |
| Total cash cost before by-product credits (1) | ​ | ​ | $6,098 | ​ | $6,204 |
| By-product credits (2) | ​ | ​ | (397) | ​ | ​ (331) |
| Total cash cost after by-product credits | ​ | ​ | $5,701 | ​ | $5,873 |
| Sustaining capital expenditures | ​ | ​ | ​ 113 | ​ | ​ 938 |
| Sustaining exploration expenses | ​ | ​ | ​ 790 | ​ | ​ 227 |
| Total all-in sustaining cost | ​ | ​ | $6,604 | ​ | $7,038 |
| ​ | ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gold ounces sold | ​ | ​ | 11,429 | ​ | ​ 8,297 |
| ​ | ​ | ​ | ​ ​ | ​ | ​ ​ |
| Total cash cost before by-product credits per gold ounce sold | ​ | ​ | $534 | ​ | $748 |
| By-product credits per gold ounce sold (2) | ​ | ​ | ​ (35) | ​ | ​ (40) |
| Total cash cost after by-product credits per gold ounce sold | ​ | ​ | ​ 499 | ​ | ​ 708 |
| Other sustaining expenditures per gold ounce sold (3) | ​ | ​ | ​ 79 | ​ | ​ 140 |
| Total all-in sustaining cost per gold ounce sold | ​ | ​ | $578 | ​ | $848 |

(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):*

| ​ ​ ​ By-product credits by dollar value: | ​ ​ ​ | ​ ​ Three months ended March 31, 2023 ​ | ​ ​ | ​ ​ 2022 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Silver sales | ​ | $397 | ​ | $331 |
| Total sales from by-products | ​ | $397 | ​ | $331 |

| ​ ​ ​ By-product credits per gold ounce sold: | ​ ​ ​ | ​ ​ Three months ended March 31, 2023 ​ | ​ ​ | ​ ​ 2022 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Silver sales | ​ | $35 | ​ | $40 |
| Total by-product credits per gold ounce sold | ​ | $35 | ​ | $40 |

### Liquidity and Capital Resources

As of March 31, 2023, we had a cash position of $52.3 million compared to $45.1 million at December 31, 2022. The increase is primarily due to increased cash from operations.

As of March 31, 2023, we had working capital of $90.1 million compared to $84.1 million at December 31, 2022. 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 March 31, 2023, 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 three months ended March 31, 2023 was $11.3 million, compared to $4.1 million for three months ended March 31, 2022. The increase is primarily due to higher net income and changes in inventory.

Net cash used in investing activities for the three months ended March 31, 2023 was $1.2 million compared to $4.9 million during the same period in 2022. The decrease is primarily due to less capital expenditures.

Net cash used in financing activities for the three months ended March 31, 2023 of $2.9 million did not materially change compared to $2.8 million for the same period in 2022.

### Development and Exploration Activities

*Isabella Pearl Mine*: During the first quarter, our open-pit, heap leach operations at the Isabella Pearl Mine continued. The revised S-K 1300 Technical Report Summary for the Isabella Pearl Mine was released in late February 2023. Exploration activities during the quarter included 42 reverse circulation (“RC”) drill holes totaling 6,040 meters. These holes were drilled in the Scarlet and Twin Hills areas that are to the northwest of the Isabella Pearl mine. The focus of these exploration drilling programs was on identifying areas with oxide extractable gold. Also, our geologists continued reviewing and interpreting data from other areas of interest along the Isabella Pearl mineralized trend, such as the Wildhorse and Nevada Juneau targets.

*County Line property:* Environmental Assessment (“EA”) permit preparation continued with the goal to submit the EA to regulatory authorities during the second quarter of 2023. Building on the momentum of 2022, an S-K 1300 Technical Report Summary that included a maiden resource was published for the County Line property in February 2023. Based on this initial model, studies were undertaken for pit optimization. Several drilling programs commenced during the first quarter that included the completion of 47 RC exploration holes totaling 6,736 meters, six geotechnical core holes totaling 752 meters, and six large diameter core drilling for metallurgical studies that totaled 115 meters. A hydrogeological desktop study was also completed on the County Line pit in March to locate an optimal location for a water monitoring well and a production well.

*Golden Mile property:* Environmental Assessment permit preparation continued with the goal to submit the EA to regulatory authorities by mid-2023. Focus during the quarter included the development of a more in depth understanding of the mineralized body with an updated geologic model of both vertical and horizontal mineralized structures. Studies included the commencement of a spectral analytical program on the chips from the RC drill holes. Interpretation of the data collected from this spectral study commenced in March. Also, an additional water monitoring well was drilled and installed and phase one open pit optimization continued.

*East Camp Douglas property:* Desktop evaluations focused on assessing the gold-bearing silicified volcanic rocks of the lithocap target area. The next phase of RC drill hole planning was completed, and a drilling Notice of Intent that allows drilling to commence, was approved in April 2023 by the Bureau of Land Management.

*Ripper property:* Compilation and interpretation of the 2022 field work and geochemical results from the Ripper property were finalized in the first quarter of 2023. A drilling application with the Bureau of Land Management was completed in the quarter ended March 31, 2023, and environmental studies are currently underway.

### 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:

- 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, 2022, 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, 1,707 characters.

#### Disclosure Controls and Procedures

As required by Rule 15d-15 under the 1934 Act, as of March 31, 2023, 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 March 31, 2023.

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 March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed May 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-008508. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.