# Golden Minerals Co: Form 10-Q for the period ended Jun 30, 2023

- Company: [Golden Minerals Co](/companies/aumn.md) (CIK 1011509)
- Form: 10-Q
- Filed: 2023-08-09
- Accepted by EDGAR: Aug 9, 2023, 01:26 ET
- Period: 2023-06-30
- Accession: 0001558370-23-014059
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1011509/000155837023014059/aumn-20230630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1011509/000155837023014059/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $5.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $9.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $3.8m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $7.9m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$1.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | −$4.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | −$51.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$1.5m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | −$4.8m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.21 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.68 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$4.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $5.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2023-06-30 | $3.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $8.6m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $15.2m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $5.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $9.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $5.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 47,150 characters.

### Our Company

We were incorporated in Delaware in March 2009 under the Delaware General Corporation Law. During the six months ended June 30, 2023, our principal source of revenue was from the sale of gold and silver from our Rodeo Property in Durango, Mexico. We also had a secondary source of revenue from concentrate produced from material previously mined in 2022 at our Velardeña Property during a test mining study. We incurred net operating losses for the six months ended June 30, 2023 and 2022.

Mining operations at the Rodeo Property concluded in the second quarter of 2023, and we are engaged in activities to restart Velardeña. 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 Yoquivo exploration property in Mexico, and through the Earn-In Agreement with Barrick, our El Quevar exploration property in Argentina. We are advancing additional 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.

Because we have ceased production at the Rodeo mine, our only near-term opportunity to generate cash flow from mining to support continued operations is the Velardeña mine. In order to restart production at the Velardeña mine, we will require additional capital. Without additional near-term capital, which we are attempting to obtain, we will be forced to liquidate the Company’s business, potentially before the fourth quarter of 2023. See “—*Liquidity, Capital Resources and Going Concern—2023 Liquidity Forecast and Going Concern Qualification”* below.

This discussion should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” included in our 2022 Annual Report.

### 2023 Highlights

#### Rodeo Property

From inception in January 2021, through the end of the second quarter of 2023, we have produced 30,289 ounces of gold and 122,384 ounces of silver from Rodeo. Cash costs per payable gold ounce, net of silver by-product credits have averaged $1,228 during that period.

Mill throughput averaged 603 tonnes per day in the first quarter 2023 and 558 tonnes per day in the second quarter 2022. We ceased mining activities at Rodeo during the second quarter of 2023. Currently we are processing stockpiled material from Rodeo, and depending on the gold price and operating costs, we may continue processing stockpiled material from Rodeo through the third quarter of 2023 or longer at higher throughput but with significantly lower recovered ounces of Au and Ag and at higher unit costs. However, due to the high level of uncertainty associated with that potential, it is not included in our current forecast.

The table below sets forth the key processing and sales statistics for the Rodeo operation for the three and six months ended June 30, 2023:

*Rodeo Operations Statistics*

*(in thousands except per unit amounts)*

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2022 |
| --- | --- | ---: | --- | ---: |
| Tonnes mined (1) | ​ | 72,525 | ​ | 226,896 |
| Tonnes in stockpiles awaiting processing (2) | ​ | 10,669 | ​ | 10,669 |
| Tonnes in low grade stockpiles (3) | ​ | 111,422 | ​ | 111,422 |
| Tonnes processed | ​ | 50,787 | ​ | 105,059 |
| Average tonnes per day processed | ​ | 558 | ​ | 580 |
| ​ | ​ | ​ | ​ | ​ |
| Average gold grade processed (grams per tonne) | ​ | 1.6 | ​ | 1.6 |
| Average silver grade processed (grams per tonne) | ​ | 5.8 | ​ | 7.4 |
| ​ | ​ | ​ | ​ | ​ |
| Plant recovery - gold (%) | ​ | 71.6 | ​ | 72.2 |
| Plant recovery - silver (%) | ​ | 85.6 | ​ | 80.4 |
| ​ | ​ | ​ | ​ | ​ |
| Payable gold produced in doré (ounces) | ​ | 1,828 | ​ | 3,909 |
| Payable silver produced in doré (ounces) | ​ | 7,742 | ​ | 19,277 |
| Payable gold equivalent produced in doré (ounces) (4) | ​ | 1,923 | ​ | 4,142 |
| ​ | ​ | ​ | ​ | ​ |
| Gold sold in doré (ounces) | ​ | 1,726 | ​ | 3,838 |
| Silver sold in doré (ounces) | ​ | 7,745 | ​ | 19,114 |
| Gold equivalent sold in doré (ounces) (4) | ​ | 1,821 | ​ | 4,069 |
| ​ | ​ | ​ | ​ | ​ |
| Average realized price, before refining and selling costs | ​ | ​ | ​ | ​ |
| Gold (dollar per ounce) | ​ | $ 1,976.45 | ​ | $ 1,929.56 |
| Silver (dollar per ounce) | ​ | $ 24.34 | ​ | $ 23.31 |
| ​ | ​ | ​ | ​ | ​ |
| (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:

| ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, 2023 ​ Six Months Ended June 30, 2023 | ​ ​ |
| --- | --- |
| Total cash operating costs ​ $3,564 ​ $7,621 | ​ |
| Treatment and refining costs ​ 83 ​ 199 | ​ |
| Silver by-product credits ​ ​ (188) ​ ​ (445) | ​ |
| Total cash costs, net of by-product credits ​ $3,459 ​ $7,375 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| Cash cost per unit ​ ​ ​ ​ ​ ​ | ​ |
| Payable gold ounces produced in doré ​ 1,828 ​ 3,909 | ​ |
| Total cash operating costs ​ $1,950 ​ $1,950 | ​ |
| Treatment and refining charges ​ 45 ​ 51 | ​ |
| Silver by-product credits ​ (103) ​ (114) | ​ |
| Total cash costs, net of by-product credits, per payable gold ounce (1) ​ $1,892 ​ $1,887 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| Tonnes processed in plant ​ ​ 50,787 ​ ​ 105,059 | ​ |
| Total cash operating costs per tonne processed ​ $70 ​ $73 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| (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 and six months ended June 30, 2023, 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 including full administrative costs in Mexico that are not categorized as exploration or Velardeña care and maintenance costs.

Total operating margin related to the Rodeo operations for the three and six months ended June 30, 2023 were $0.2 million and zero, respectively, on sales of metal of $3.7 million and $7.9 million, respectively, offset by cost of metal sold of $3.7 million and $7.9 million, respectively.

For the full year 2023, we are estimating that we will process between 105,000 and 120,000 tonnes in the oxide plant, or approximately 580 tonnes per day, with payable extraction for 2023 of approximately 4,200 to 4,400 ounces of gold and 20,000 to 23,000 ounces of silver. Average grades for 2023 are estimated to be approximately 1.6 grams per tonne for gold and 7.4 grams per tonne for silver, lower than grades achieved in 2022, but as anticipated in the mine plan for 2023. Mill recoveries are expected to continue during the remaining operations near current rates of between 70% and 75% for gold and 75% to 80% for silver. Projected operating margins during the third quarter of 2023 at Rodeo are expected to range between zero and negative $0.5 million.

The estimates detailed above for 2023 were derived using the actual results of operations achieved during the first six months ended June 30, 2023 and a projection of the stockpile grades, plant throughput and recoveries for 2023. Actual future results from processing the stockpiled material at Rodeo may vary significantly based upon, among other things, unanticipated variations in grade, unexpected challenges associated with processing the material, 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 Operations”* as described in our 2022 Annual Report.

### 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 the six months ended June 30, 2023, 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 six months ended June 30, 2023, 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

| ​ ​ ​ ​ | ​ ​ ​ Reconciliation of Costs of Metals Sold (GAAP) to Total Cash Costs, net of By-product Credits (Non-GAAP) ​ Three Months Ended ​ June 30, 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 |
| --- | ---: | --- | ---: |
| Total cash costs, net of by-product credits | $3,459 |  | $7,375 |
| ​ | ​ ​ | ​ | ​ ​ |
| Reconciliation to GAAP measure: | ​ ​ | ​ | ​ ​ |
| Treatment and refining costs | $(83) | ​ | $(199) |
| Silver by-product credits | ​ 188 | ​ | ​ 445 |
| Write down of inventories to net realizable value | 166 | ​ | 138 |
| Change in inventory (excluding depreciation, depletion and amortization) | (79) | ​ | (62) |
| Costs of metal unrelated to Rodeo Operations | ​ 181 | ​ | ​ 181 |
| Cost of metals sold | $3,832 |  | $7,878 |

#### Velardeña Properties

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 Oyj for its proprietary bio-oxidation process.). Test results using the BIOX™ pre-treatment oxidation process supported the use of the technology in future processing at Velardeña. In March 2022 we filed an updated PEA Technical Report Summary and NI 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 initiated ore-sorting studies to limit the negative effects of the excess dilution. Initial results of these tests were positive, and we continue to work on incorporating these results in our mine planning.

In late 2022, a tailing storage facility expansion project was initiated to provide storage volume for the remainder of the Rodeo mine life. The project was completed in May 2023. A total of $2.6 million was expended for this project of which $0.6 million was expended in 2023.

In early 2023, the terms for the sale of our gold-rich pyrite concentrates improved significantly over previously-available terms. We believe that the recently improved terms allow us to consider re-opening the Velardeña Properties’ mines without the BIOX™ plant. Internal cash flow models using the new concentrate sales terms yield results only slightly less attractive than models using BIOX™ treatment; however, the new models require low capital investment and so are much less risky to implement. We are now planning to restart production at Velardeña during the third quarter 2023 without the need for the BIOX™ facility, subject to our ability to obtain sufficient capital to do so. See “—*Liquidity, Capital Resources and Going Concern—2023 Liquidity Forecast and Going Concern Qualification”* below.

In March 2023, we restarted our flotation plant (Plant I) to process 3,000 tonnes of mineralized material that had been stockpiled during the test mining in 2022. Under the new concentrate sales terms, 656 tonnes of gold-rich pyrite concentrate, 118 tonnes of silver-rich lead concentrate and 63 tonnes of zinc concentrate have been sold under an offtake agreement through June 30, 2023. The three shipments that have been completed in the six months ended June 30, 2023 generated cash receipts of approximately $1.3 million with an additional $0.2 million received subsequent to June 30, 2023. These successful sales of concentrates on the improved terms have caused us to shift our efforts towards a restart of Velardeña without the requirement of constructing and using the BIOX™ technology. An internally prepared updated forecast assuming gold and silver prices of $1,900 and $22.50 per ounce, respectively, indicates that Velardeña can generate a positive net operating margin within around six months of restarting operations. We have included cash flow from Velardeña production in our updated liquidity forecast for the next twelve months ending June 30, 2024, which forecast future cash flow from positive operating margins assuming Velardeña operations restart in August 2023. See “—*Liquidity, Capital Resources and Going Concern—2023 Liquidity Forecast and Going Concern Qualification”* below.

Preparations to restart the operation are progressing on schedule including arrangements with union staff, contract miners, plant operators, and support personnel. Our ability to restart production is dependent on our ability to raise sufficient capital in the near-term.

#### Yoquivo

During 2022, we completed payments required under Yoquivo’s two option agreements and now hold 100% ownership of the Yoquivo concessions subject to royalty interests between 2% and 3% net smelter return payable on production to third parties and capped at $2.8 million in the aggregate.

With an effective date of February 24, 2023, an initial mineral resource estimate was completed for Yoquivo that estimates an inferred mineral resource of 937,000 tonnes at 570 g/t Ag eq (equivalent ounces are calculated using prices of $1,840/oz Au and $24.00/oz Ag) on five veins that had enough drill density to support mineral resources. Further information regarding this initial mineral resource estimate is included in our 2022 Annual Report. Numerous other veins on the property have yet to be drilled sufficiently to allow estimation of additional resources.

Since 2020, exploration and delineation drilling of 16,565 meters in 70 holes has advanced the project to this stage. The Company plans to continue drilling with the goal of expanding the resource as funding allows.

#### El Quevar

In April 2020, we entered into the Earn-in Agreement with Barrick. For a description of the Earn-In Agreement, see “Our Material Mining Properties—El Quevar” in our 2022 Annual Report. 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. Barrick met the minimum $1.0 million in work expenditures required by the Earn-in Agreement in September 2021. If Barrick elects to terminate the Earn-In Agreement, we will become responsible for future holding costs and exploration spending related to the property. At this time, the Company expects Barrick will continue its exploration program with additional geophysical studies followed by additional drilling.

#### Sarita Este / Desierto

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 Taca project owned by First Quantum Minerals. The option agreement calls for us to spend a total of $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 $3.0 million since entering into the agreement in December 2019. We have notified Cascadero of our intention to proceed with the joint venture as 51% owners of the concession. Completion of the joint venture documents and formation of the joint venture company are in progress.

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. In August 2022, we released partial results from the second drill program which point to a potentially economic shallow oxidized gold system. Our third drill program, completed in October 2022, returned results confirming that the mineralization at the Sico epithermal targets is concentrated on the eastern flank of the prospect.

The Desierto concessions (Desierto 1 and 2) which are adjacent to and south of the Sarita Este concession are subject to an option agreement with a third-party partial owner and a proposed joint venture agreement also between the Company and Cascadero. The Desierto 1 concession is the object of a legal dispute between the Company and the Salta Ministry of Mines in which the Company is disputing the cancellation of the concession by the province. The dispute is expected to be resolved before the end of 2023.

#### Santa Maria

In December 2020, we entered into the Option Agreement to sell our interest in the Santa Maria properties to Fabled. Pursuant to the Option Agreement, during the Exercise Period, Fabled was obligated to pay to each of the owners of the Concessions (the “Owners”) any remaining required payments due to the Owners pursuant to the various underlying option agreements between the Owners and the Company, and to make all payments and perform all other requirements needed to maintain the Concessions in good standing. Fabled did not make the payment due on January 31, 2023, and we issued a notice of default under the Option agreement. Fabled did not cure the default as required within 5 days; therefore, we have taken back the property as allowed under the Option Agreement.

The Company has entered into a non-binding agreement to sell the Santa Maria concessions to a private third party and, if the transaction proceeds, we anticipate that we may close as soon as the third quarter of 2023.

### Financial Results of Operations

For the results of continuing operations discussed below, we compare the results from operations for the three months ended June 30, 2023, to the three months ended June 30, 2022.

#### Three Months Ended June 30, 2023

*Revenue from the sale of metals.* In addition to the sales of doré from Rodeo, beginning in April of 2023, we also sold three types of concentrates which were produced from Velardeña material that had been mined in 2022 as part of the test mining to analyze the potential restart of the Velardeña Properties. We also sold slag remaining from previous doré sales and doré production at Plant 2.

- *Doré Sales* - We recorded $3.5 million in revenue related to gold and silver in doré for the three months ended June 30, 2023, and $5.9 million for the three months ended June 30, 2022. Lower revenue in 2023 resulted from 1,398 fewer gold equivalent ounces sold partially offset by a slightly higher realized price of $1,976 per ounce for the three months ended June 30, 2023, compared to $1,865 per ounce for the three months ended June 30, 2022. Fewer gold ounces were sold in the three months ended June 30, 2023, compared to the three months ended June 30, 2022, due mainly to the lower grade of material processed.
- *Concentrate Sales –* We recorded $1.2 million in the three months ended June 30, 2023 from the sale of 656 tonnes of gold-rich pyrite concentrate, 118 tonnes of silver-rich lead concentrate and 63 tonnes of zinc concentrate. There were no concentrate sales in the three months ended June 30, 2022.
- *Slag Sales –* We recorded $0.2 million in revenue related to the gold and silver in slag that was sold to a refiner in the United States in the three months ended June 30, 2023. There were no slag sales in the three months ended June 30, 2022.

*Cost of metals sold.* For the three months ended June 30, 2023 and 2022, we recorded $3.9 million and $4.6 million of cost of metals sold, respectively. Lower costs in 2023 compared to 2022 were due primarily to lower mining costs related to fewer tonnes mined and lower processing costs related to lower cyanide consumption and lower grinding costs due to a change in the metallurgy of the lower grade material processed in 2023.

*Exploration expense.* Our exploration expense, including property holding costs and allocated administrative expenses, totaled $2.1 million and $4.7 million for the three months ended June 30, 2023 and 2022, respectively. The lower exploration expense for 2023 is primarily related to the absence of costs related to support the potential restart of Velardeña and exploration costs at Rodeo and Sarita Este incurred in the three months ended June 30, 2022 which were not incurred during the three months ended June 30, 2023.

*Velardeña care and maintenance costs*. We recorded $0.3 million and $0.1 million for the three-month periods ended June 30, 2023 and 2022, 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 for each of the three-month periods ended June 30, 2023 and 2022, related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During each of the three months ended June 30, 2023 and 2022, approximately $0.1 million and $0.2 million, respectively, of costs actually incurred were offset by reimbursements from Barrick as discussed above.

*Administrative expense.* Administrative expenses totaled $1.2 million and $1.3 million for the three months ended June 30, 2023 and 2022, respectively. 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 June 30, 2023 and 2022, we incurred approximately $0.0 million and $0.2 million, respectively, 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.

*Reclamation and accretion expense.* During each of the three months ended June 30, 2023 and 2022, 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 $0.1 million of other operating income for the three months ended June 30, 2023. For the three months ended June 30, 2022, we recorded $0.5 million of other operating income primarily related to the amortization of deferred income related to the option agreement for the sale of the Santa Maria property described in our 10-K report for the year ended December 31, 2022.

*Depreciation, depletion and amortization.* During each of the three months ended June 30, 2023 and 2022, 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 June 30, 2023 and 2022.

*Gain (loss) on foreign currency losses.* During the three months ended June 30, 2023, we recorded a nominal amount of foreign exchange gains. During the three months ended June 30, 2022, we recorded $0.1 million of foreign exchange 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 U.S. dollars.

*Income taxes.* We recorded a $51,000 tax benefit for the three months ended June 30, 2023. We recorded a $129,000 tax benefit for the three months ended June 30, 2022.

#### Six Months Ended June 30, 2023

*Revenue from the sale of metals.* As discussed above, in addition to the sales of doré from Rodeo, beginning in April of 2023, we also sold three types of concentrates which were produced from Velardeña material that had been mined in 2022 as part of the test mining to analyze the potential restart of the Velardeña Properties. We also sold slag remaining from previous doré sales and doré production at Plant 2.

- *Doré Sales* - We recorded $7.8 million in revenue related to gold and silver in doré for the six months ended June 30, 2023, and $13.4 million for the six months ended June 30, 2022. Lower revenue in 2023 resulted from 3,191 fewer gold equivalent ounces sold partially offset by a slightly higher realized price of $1,930 per ounce for the six months ended June 30, 2023, compared to $1,878 per ounce for the six months ended June 30, 2022. Fewer gold ounces were sold in the three months ended June 30, 2023 compared to the three months ended June 30, 2022, due mainly to the lower grade of material processed.
- *Concentrate Sales –* We recorded $1.2 million in the six months ended June 30, 2023 from the sale of 656 tonnes of gold-rich pyrite concentrate, 118 tonnes of silver-rich lead concentrate and 63 tonnes of zinc concentrate. There were no concentrate sales in the six months ended June 30, 2022.
- *Slag Sales –* We recorded $0.2 million in revenue related to the gold and silver in slag that was sold to a refiner in the United States in the six months ended June 30, 2023. There were no slag sales in the six months ended June 30, 2022.

*Cost of metals sold.* For the six months ended June 30, 2023 we recorded $7.9 million of cost of metals sold, and we recorded $9.0 million during the six months ended June 30,2022 for cost of metals sold. Lower costs in 2023 compared to 2022 were due primarily to lower mining costs related to fewer tonnes mined and lower processing costs related to lower cyanide consumption and lower grinding costs due to a change in the metallurgy of the lower grade material processed in 2023.

*Exploration expense.* For the six months ended June 30, 2023 we incurred exploration expense of $2.2 million. This included $0.6 million for work on the tailings dam at Plant 2, $0.2 million for general expenses in Argentina and $1.4 million for property holding costs and other allocated administrative expenses. For the six months ended June 30, 2022, we incurred exploration expense of $4.7 million. The higher costs in 2022 was comprised of $1.2 million of test mining and optimization of the bio-oxidation plant design conducted at Velardeña, $0.7 million of exploration at Yoquivo, $0.5 million at our Rodeo operation, $0.3 million at our Sarita Este property in Argentina and $2.0 million in other general exploration expenses.

*El Quevar project expense.* For each of the six months ended June 30, 2023, and June 30, 2022, we incurred $0.3 million related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During the six months ended June 30, 2023, and June 30, 2022, approximately $0.1 million and $0.4 million of costs were reimbursed by Barrick, respectively as discussed above.

*Velardeña care and maintenance costs*. We recorded $0.7 million and $0.5 million for the six months ended June 30, 2023 and 2022, respectively, for expenses related to shut down and care and maintenance at our Velardeña Properties as a result of the suspension of mining and processing activities in November 2015.

*Administrative expense.* Administrative expenses totaled $2.5 million for each of the six months ended June 30, 2023 and June 30, 2022. 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 $2.5 million of administrative expenses we incurred during the six months of 2023 is comprised of $0.9 million of employee compensation and directors’ fees, $0.9 million of professional fees and $0.7 million of insurance, rents, travel expenses, utilities, and other office costs. The $2.5 million of administrative expenses we incurred during the six months of 2022 is comprised of $1.1 million of employee compensation and directors’ fees, $0.7 million of professional fees and $0.7 million of insurance, rents, travel expenses, utilities, and other office costs.

*Stock-based compensation.* During the six months ended June 30, 2023 we incurred approximately $0.2 million of expense related to stock-based compensation. During the six months ended June 30, 2022, we incurred approximately $0.3 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.

*Reclamation and accretion expense.* During each of the six-month periods ended June 30, 2023 and 2022 we incurred approximately $0.1 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña Properties.

*Other operating income (expense), net.* We recorded $0.1 million of other operating income for the six months ended June 30, 2023. We recorded $0.9 million in the six months ended June 30, 2022 mainly 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 six-month periods ended June 30, 2023 and June 30, 2022, we incurred depreciation, depletion and amortization expense of approximately $0.2 million.

*Interest and other expense, net.* We recorded a nominal amount of interest and other expense, net for each of the six-month periods ended June 30, 2023 and 2022.

*Gain (loss) on foreign currency.* We recorded a $0.1 million foreign currency gain for each of the six months ended June 30, 2023 and June 30, 2022. 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 tax expense of less than $1,000 for the six months ended June 30, 2023. We recorded a $44,000 tax benefit for the six months ended June 30, 2022.

### Liquidity, Capital Resources and Going Concern

#### 2023 Liquidity Forecast and Going Concern Qualification

At June 30, 2023, we had current assets of $8.6 million, including cash and cash equivalents of approximately $3.4 million. On the same date, we had accounts payable and other current liabilities of $5.4 million. (At July 31, 2023, our aggregate cash and cash equivalents totaled approximately $2.8 million.) Because we have ceased production at the Rodeo mine, our only near-term opportunity to generate cash flow from mining to support continued operations is the Velardeña mine. Without near-term financing, we will be forced to liquidate the Company’s business, potentially as soon as the third quarter of 2023.

Our forecasted expenditures during the twelve months ending June 30, 2024, excluding Rodeo and Velardeña cost of metals sold, which is included in our forecast of net operating margin discussed below, total approximately $7.6 million. These forecasted expenditures include: (i) exploration expenses of $1.4 million, (ii) El Quevar spending (net of Barrick reimbursements) of $0.3 million and (iii) administrative expense, including Mexico general and administrative costs of $5.1 million and (iv) working capital needs of $0.8 million. The actual amount of cash expenditures that we incur during the twelve-month period ending June 30, 2024 may vary significantly from the amounts specified above and will depend on a number of factors, including variations in the anticipated administrative costs, costs at El Quevar, and costs for continued exploration, project assessment, and advancement of our other exploration properties.

In order to restart production at the Velardeña mine, we require additional financing of approximately $2 to $3 million. In addition, because the Velardeña mine is not expected to generate cumulative positive net cash flow until 2024 at the earliest, we also require additional capital of approximately $1 to $3 million in order to cover the Company’s general and administrative and other expenses for the twelve months ending June 30, 2024.

We are evaluating numerous alternatives for this additional capital. We are engaged in several discussions for the sale of assets. We have also held discussions with various financing parties with regard to equity and/or debt financing as well as streaming or royalty arrangements involving future production at Velardeña. And we are evaluating potential avenues to monetize some or all of our $2.9 million VAT receivable in Mexico.

**In the absence of sufficient asset sales, external financing and/or receipt of the VAT receivables, the Company’s cash balance may be depleted during the third quarter 2023. In that event, we will be forced to liquidate our business.**

The capital estimate described above assumes that we are successful in re-starting production at the Velardeña mine and that the forecasted net operating margin from the Velardeña mine during the twelve-month period ended June 30, 2024 is between zero and $1.0 million. Net operating margin is defined as revenue from the sale of metals less the cost of metals sold. Our estimate for Velardeña assumes gold prices average $1,900 per ounce and silver prices average $22.50 per ounce. The actual amount that we receive in net operating margin from Velardeña during the period may 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 plans, including our ability to achieve dilution targets; (iii) decreases in commodity prices or the prices paid by our concentrate purchasers 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 mining. There is no assurance that we will be successful in generating the anticipated operating margins described above. Notably, the anticipated net operating margin from the Velardeña Properties is not based on the results of a full feasibility study. While we believe our internal estimates are realistic, the lack of a full feasibility study may increase the uncertainty associated with our estimates. If our net operating margin is below our estimates, our capital need will increase above the estimates described above.

The 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, as noted above, our continuing long-term operations will be dependent upon our ability to secure sufficient funding to generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in our consolidated financial statements are dependent on our ability to continue to generate positive cash flows from operations and to continue to fund exploration activities that would lead to additional profitable mining and processing activities or to generate proceeds from the disposition of property, plant and equipment.

The ability of the Company to maintain a positive cash balance for a period of twelve months beyond the filing date of this Quarterly Report on Form 10-Q is dependent upon its ability to generate sufficient cash flow from operations, collect VAT receivable from the Mexican government, reduce expenses, sell non-core assets, and raise sufficient funds through the ATM program and other equity or external sources. There can be no assurance the Company will be successful in generating sufficient funds from these sources to maintain liquidity throughout the twelve-month period. These material uncertainties cast significant doubt on the Company’s ability to continue as a going concern. Therefore, the Company cannot conclude that substantial doubt does not exist as to the Company’s ability to continue as a going concern for the twelve months following the filing date of the second quarter 2023 10-Q. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or liabilities, which might be necessary should the Company not continue as a going concern.

#### 2023 Liquidity Discussion

At June 30, 2023, our aggregate cash and cash equivalents totaled $3.4 million, compared to the $4.0 million in similar assets held at December 31, 2022. The June 30, 2023 decrease is the result of the following expenditures and cash inflows for the six months ended June 30, 2023. Expenditures totaled $5.6 million from the following:

- $2.2 million in exploration expenditures;
- $0.6 million in care and maintenance costs at the Velardeña Properties;
- $0.3 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project, net of reimbursements from Barrick; and
- $2.5 million in general and administrative expenses.

The above expenditures were offset by cash inflows of $5.0 million from the following:

- $0.2 million of net operating margin from the Rodeo operation (defined as revenue from the sale of metals less the cost of metals sold);
- $1.1 million of net operating margin from sales of concentrate produced from Velardeña material mined in 2022;
- $1.8 million, net of fees from our ATM Program (as further described in Note 16); and
- $1.9 million, net of fees from the Transactions (as further described in Note 16).

### Recent Accounting Pronouncements

There were no new accounting pronouncements issued during 2023 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) our anticipated near-term capital needs, potential sources of capital, and likelihood of liquidation the Company’s business if capital is not obtained; (ii) the Rodeo mine, including the anticipated end of processing of stockpiles in the third quarter of 2023, payable extraction, anticipated grades, recoveries, estimated unit costs and net operating margin for 2023; (iii) our plans for restart of mining activities at Velardeña, including our expectations regarding future commodity prices and concentrate sales terms, the results of our internal cash flow forecast, and our expectation regarding the timing for restart; (iv) 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; (v) information regarding the Yoquivo property, including the estimates included in our initial mineral resource study, our future evaluation and drilling plans, information gained from drilling activities, and exploration activities; (vi) our plans to defend against claims by Unifin and a potential settlement agreement between Minera William and Unifin; (vii) expectations pertaining to the recovery of VAT refunds from the Mexican government; (viii) projected revenue and spending for the twelve months ending June 30, 2024; 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:

- 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;
- unanticipated difficulties in the restart of production activities at the Velardeña Properties;
- 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;
- 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;
- higher than anticipated care and maintenance costs at El Quevar in Argentina;
- risks related to the El Quevar project in Argentina, including unfavorable results from Barrick’s 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;
- 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;
- 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 2022 Annual Report.

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. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

## Market risk

As filed, 1,251 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 six months of 2023, 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, 1,404 characters.

### 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 June 30, 2023, (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.

### 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, 9,080 characters.

Other than the risk factors set out below, the risk factors for the six months ended June 30, 2023, are substantially the same as those set forth in Part I, Item 1A of our 2022 Annual Report

***The impact of our 1-for-25 reverse stock split on the future market price of our common stock, and our ability to maintain the listing of our common stock on the NYSE American, is uncertain.***

On May 30, 2023, we filed an amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate, effective June 9, 2023, a one-for-25 reverse stock split of the shares of the Company’s common stock, par value $0.01 per share. The Company’s common stock began trading on a split-adjusted basis on June 9, 2023. In connection with the reverse stock split, the total number of shares of common stock authorized for issuance was reduced from 350,000,000 shares to 28,000,000 shares in proportion to the reverse stock split.

The effect of the reverse stock split on our stock price cannot be predicted with any certainty, and the history of reverse stock splits for us and other companies, is varied, particularly since some investors may view a reverse stock split negatively. It is possible that our stock price after a reverse stock split will not increase in the same proportion as the reduction in the number of shares outstanding, causing a reduction in our overall market capitalization. Further, our stock price may decline due to various factors, including our future performance and general industry, market and economic conditions.

Our decision to undergo the reverse stock split was prompted by receipt of a notice letter from NYSE American citing our low stock price and NYSE American’s concerns about our compliance with its continued listing standards. If our stock price falls below the NYSE American’s listing requirements, NYSE American may suspend trading of our common stock and commence delisting proceedings.

In addition, the reverse stock split may decrease the liquidity of our common stock and result in higher transaction costs. The liquidity of our common stock may be negatively impacted by the reduced number of shares outstanding after the reverse stock split, which would be exacerbated if the stock price does not increase following the reverse stock split. In addition, the reverse stock split increased the number of stockholders owning “odd lots” of fewer than 100 shares, which generally means that trading our stock results in higher transaction costs. Accordingly, the reverse stock split may not achieve the desired results of increasing marketability and liquidity.

The implementation of the reverse stock split did not have an effect on the actual or intrinsic value of our business or a shareholder’s proportional ownership interest (subject to the treatment of fractional shares as a result of the reverse stock split). However, should the overall value of our common stock decline after the reverse stock split, then the actual or intrinsic value of shares held by shareholders will also proportionately decrease as a result of the overall decline in value.

***Failure to meet the maintenance criteria of the NYSE American may result in the delisting of our common stock, which could result in lower trading volumes and liquidity, lower prices of our common shares and make it more difficult for us to raise capital.***

Our common stock is listed on the NYSE American LLC (the “NYSE American”), and we are subject to its continued listing requirements, including maintaining certain share prices and a minimum amount of stockholders’ equity On June 6, 2023, we received written notification (the “Notice”) from the NYSE American LLC (the “NYSE American”) that the Company was not in compliance with Section 1003(a)(iii) of the NYSE American Company Guide (the “Company Guide”). We are required to report a stockholders’ equity of $6.0 million or more if the Company has reported losses from continuing operations and/or net losses in its five most recent fiscal years. The Notice noted that the Company reported a stockholders’ equity of $4.1 million as of March 31, 2023, and losses from continuing operations and/or net losses in each of its five most recent fiscal years ended December 31, 2022. As a result, we have become subject to the procedures and requirements of Section 1009 of the Company Guide and were required to submit a plan of compliance by July 6, 2023, addressing how the Company intends to regain compliance with Section 1003(a)(iii) of the Company Guide by December 6, 2024 (the “Compliance Deadline”).

In order to maintain our listing, we timely submitted a plan of compliance to the NYSE American addressing how we intend to regain compliance with Section 1003(a)(iii) of the Company Guide by the Compliance Deadline, and the plan is currently under review by the NYSE American.

If we are not in compliance with the continued listing standards by the Compliance Deadline, or if we do not make progress consistent with the plan of compliance during the plan period, the NYSE American staff may initiate delisting proceedings as appropriate. If we are delisted from the NYSE American, it may have an adverse impact on our share price and may make it more difficult for us to raise capital in the future. In particular, if we are delisted from the NYSE American, we will be unable to sell our common stock pursuant to the ATM Program.

***We may not collect refunds of VAT in Mexico on the schedule we anticipate or at all.***

We do not currently have sufficient resources to meet our expected cash needs during the twelve months ended June 30, 2024. As of June 30, 2023, we have recorded approximately $2.9 million in receivables from the Mexican government related to value added tax paid in Mexico. While we expect to recover approximately $1.5 million of that amount during the twelve months ended June 30, 2024, there is no certainty that it will be collected on a timely basis or at all. To the extent that we have forecast the collection of the VAT receivable in our cash forecast for the period, any delay in receiving payment of the VAT receivable will exacerbate our liquidity challenges and require further additional funding in order for us to continue as a going concern.

***The labor union representing mine employees in Mexico is negotiating a new collective bargaining agreement that, together with labor and employment regulations, could adversely affect our mining activities and financial condition.***

Mine employees in Mexico are typically represented by a union, and our relationship with our employees is, and we expect in the future will be, governed in part by collective bargaining agreements. Currently, the union representing mine employees in Mexico is negotiating a new collective bargaining agreement. We are uncertain of the terms of the new collective bargaining agreement but any collective bargaining agreement that we enter into with a union is likely to restrict our mining flexibility in and impose additional costs on our mining activities. In addition, relations between us and our employees in Mexico may be affected by changes in regulations or labor union requirements regarding labor relations that may be introduced by the Mexican authorities or by labor unions. Changes in legislation, the collective bargaining agreement, or in the relationship between us and our employees may have a material adverse effect on our mining activities and financial condition.

***Recent amendments to the Mexican mining law may have an adverse impact on our operations in Mexico.***

A significant portion of our properties are located in Mexico, including the Rodeo Property and the Velardeña Properties. In April 2023, the government of Mexico adopted a series of changes to the law governing mining operations in the country. Under the new mining law, among other changes, the maximum length of new mining concessions has been reduced from 50 to 30 years, the ability to obtain water extraction permits has been somewhat constrained, and a new mining profit tax has been established for the benefit of local communities. Government authorities will also be permitted to cancel concessions if no work has been done on them within two years. The full impact of the mining law reform is uncertain and may be subject to legal challenges in Mexico. However, we currently anticipate that the changes to the mining law will make it somewhat more difficult, time-consuming and expensive to conduct exploration activities in Mexico, as it will make it more challenging to obtain, maintain and develop mining concessions. We do not currently expect that the mining law reform will materially impede our current development plans at Velardeña, however, there is no assurance that mining laws in Mexico will not be further modified in the future. Moreover, to the extent that investors perceive Mexico as being less attractive to mining investment, it may be more difficult and expensive for us to satisfy our future capital needs.

Filed Aug 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-014059. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.