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

- Company: [Golden Minerals Co](/companies/aumn.md) (CIK 1011509)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 9, 2023, 22:54 ET
- Period: 2023-09-30
- Accession: 0001558370-23-018635
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1011509/000155837023018635/aumn-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1011509/000155837023018635/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $2.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $11.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $3.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $11.2m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$2.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$7.8m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$3.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$7.9m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.38 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.06 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$6.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $1.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $5.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $12.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $5.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $9.8m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $2.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 45,469 characters.

### Our Company

We were incorporated in Delaware in March 2009 under the Delaware General Corporation Law. During the nine months ended September 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 nine months ended September 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 as funds become available, and through the Earn-In Agreement with Barrick, our El Quevar exploration property in Argentina. We are holding an additional portfolio of approximately 12 properties, located in Mexico, Nevada and Argentina for sale or advancement when possible.

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. 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 third quarter of 2023, we have produced 31,126 ounces of gold and 126,151 ounces of silver from Rodeo. Cash costs per payable gold ounce, net of silver by-product credits averaged $1,275 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. During the third quarter of 2023, we processed stockpiled material from Rodeo. We stopped processing the stockpiled material during September 2023 as the grades dropped to an uneconomic level.

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

*Rodeo Operations Statistics*

*(in thousands except per unit amounts)*

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 |
| --- | --- | ---: | --- | ---: |
| Tonnes mined (1) | ​ | - | ​ | 226,896 |
| Tonnes in stockpiles awaiting processing (2) | ​ | - | ​ | - |
| Tonnes in low grade stockpiles (3) | ​ | - | ​ | - |
| Tonnes processed | ​ | 30,841 | ​ | 135,900 |
| Average tonnes per day processed | ​ | 335 | ​ | 498 |
| ​ | ​ | ​ | ​ | ​ |
| Average gold grade processed (grams per tonne) | ​ | 1.2 | ​ | 1.5 |
| Average silver grade processed (grams per tonne) | ​ | 5.8 | ​ | 7.1 |
| ​ | ​ | ​ | ​ | ​ |
| Plant recovery - gold (%) | ​ | 71.6 | ​ | 72.1 |
| Plant recovery - silver (%) | ​ | 85.6 | ​ | 81.7 |
| ​ | ​ | ​ | ​ | ​ |
| Payable gold produced in doré (ounces) | ​ | 837 | ​ | 4,746 |
| Payable silver produced in doré (ounces) | ​ | 3,767 | ​ | 23,044 |
| Payable gold equivalent produced in doré (ounces) (4) | ​ | 883 | ​ | 5,025 |
| ​ | ​ | ​ | ​ | ​ |
| Gold sold in doré (ounces) | ​ | 1,044 | ​ | 4,882 |
| Silver sold in doré (ounces) | ​ | 4,525 | ​ | 23,639 |
| Gold equivalent sold in doré (ounces) (4) | ​ | 1,099 | ​ | 5,168 |
| ​ | ​ | ​ | ​ | ​ |
| Average realized price, before refining and selling costs | ​ | ​ | ​ | ​ |
| Gold (dollar per ounce) | ​ | $ 1,931.42 | ​ | $ 1,929.96 |
| Silver (dollar per ounce) | ​ | $ 23.67 | ​ | $ 23.37 |
| ​ | ​ | ​ | ​ | ​ |
| (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 September 30, 2023 ​ Nine Months Ended September 30, 2023 | ​ ​ |
| --- | --- |
| Total cash operating costs ​ $2,533 ​ $10,154 | ​ |
| Treatment and refining costs ​ 64 ​ 263 | ​ |
| Silver by-product credits ​ ​ (107) ​ ​ (552) | ​ |
| Total cash costs, net of by-product credits ​ $2,490 ​ $9,865 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| Cash cost per unit ​ ​ ​ ​ ​ ​ | ​ |
| Payable gold ounces produced in doré ​ 837 ​ 4,746 | ​ |
| Total cash operating costs ​ $3,026 ​ $2,139 | ​ |
| Treatment and refining charges ​ 77 ​ 56 | ​ |
| Silver by-product credits ​ (128) ​ (116) | ​ |
| Total cash costs, net of by-product credits, per payable gold ounce (1) ​ $2,975 ​ $2,079 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| Tonnes processed in plant ​ ​ 30,841 ​ ​ 135,900 | ​ |
| Total cash operating costs per tonne processed ​ $82 ​ $75 | ​ |
| ​ ​ ​ ​ ​ ​ ​ | ​ |
| (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 nine months ended September 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 and material including full administrative costs in Mexico that are not categorized as costs to produce concentrate or exploration or Velardeña care and maintenance costs.

Total operating margin related to the Rodeo operations for the three and nine months ended September 30, 2023 were negative $1.0 million and negative $0.7 million, respectively, on sales of metal in doré and slag of $2.3 million and $10.2 million, respectively, offset by cost of metal sold of $3.3 million and $11.0 million, respectively.

All operating activity at Rodeo and Plant II concluded by September 30, 2023.

### 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 nine months ended September 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 nine months ended September 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 ​ September 30, 2023 | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 |
| --- | ---: | --- | ---: |
| Total cash costs, net of by-product credits | $2,490 |  | $9,865 |
| ​ | ​ ​ | ​ | ​ ​ |
| Reconciliation to GAAP measure: | ​ ​ | ​ | ​ ​ |
| Treatment and refining costs | $(64) | ​ | $(263) |
| Silver by-product credits | ​ 107 | ​ | ​ 553 |
| Write down of inventories to net realizable value | (75) | ​ | 63 |
| Change in inventory (excluding depreciation, depletion and amortization) | 842 | ​ | 776 |
| Costs of metal unrelated to Rodeo Operations | ​ 20 | ​ | ​ 231 |
| Cost of metals sold | $3,320 |  | $11,225 |

#### 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. The recently improved terms allow us to re-open 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 fourth quarter 2023 without the need for the BIOX™ facility, subject to our ability to obtain sufficient capital to do so.

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 September 30, 2023. The three shipments that have been completed in the nine months ended September 30, 2023 generated cash receipts of approximately $1.5 million. 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 September 30, 2024, which forecasts future cash flow from operating margins assuming Velardeña operations restart in November 2023. See “—*Liquidity, Capital Resources and Going Concern—2023 Liquidity Forecast and Going Concern Qualification”* below.

In August 2023 we released and filed the results of an updated independent technical report prepared under S-K 1300 guidelines. The report validates our internal economic models for the Velardeña resource and potential economic results. For purposes of our internal cash flow projections, we have utilized more conservative assumptions than those reflected in the technical report summary.

Preparations to restart the operation have progressed 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 will close in the fourth 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 September 30, 2023, to the three months ended September 30, 2022.

#### Three Months Ended September 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 $2.1 million in revenue related to gold and silver in doré for the three months ended September 30, 2023, and $5.3 million for the three months ended September 30, 2022. Lower revenue in 2023 resulted from 2,046 fewer gold equivalent ounces sold partially offset by a slightly higher realized price of $1,931 per ounce for the three months ended September 30, 2023, compared to $1,703 per ounce for the three months ended September 30, 2022. Fewer gold ounces were sold in the three months ended September 30, 2023, compared to the three months ended September 30, 2022, due to the lower amount and grade of the material processed mainly attributed to the cessation of mining at Rodeo in the second quarter 2023.
- *Concentrate Sales –* We recorded $0.2 million in the three months ended September 30, 2023 from the final settlement of previous sales of gold-rich pyrite concentrate, silver-rich lead concentrate and zinc concentrate. There were no concentrate sales in the three months ended September 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 September 30, 2023. There were no slag sales in the three months ended September 30, 2022.

*Cost of metals sold.* For the three months ended September 30, 2023 and 2022, we recorded $3.3 million and $4.4 million of cost of metals sold, respectively. Lower costs in 2023 compared to 2022 were due primarily to lower mining costs as mining operations at Rodeo concluded at the end of June 2023.

*Exploration expense.* Our exploration expense, including property holding costs and allocated administrative expenses, totaled $0.7 million and $2.4 million for the three months ended September 30, 2023 and 2022, respectively. The lower exploration expense for 2023 is primarily related to the absence of costs related to increase the capacity of the tailings facility at Velardeña incurred in the three months ended September 30, 2022 which were not incurred during the three months ended September 30, 2023.

*Velardeña care and maintenance costs*. We recorded $0.3 million and $0.4 million for the three-month periods ended September 30, 2023 and 2022, respectively, 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 $0.1 million and $0.2 million for the three-month periods ended September 30, 2023 and 2022, respectively, related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During the three months ended September 30, 2023 and 2022, approximately $0.0 million and $0.1 million, respectively, of costs actually incurred were offset by reimbursements from Barrick as discussed above.

*Administrative expense.* Administrative expenses totaled $1.1 million and $0.9 million for the three months ended September 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 September 30, 2023 and 2022, we incurred approximately $0.1 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 September 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, net.* We recorded $0.5 million of other operating income for the three months ended September 30, 2023 primarily related to the sale of non-core assets. For the three months ended September 30, 2022, we recorded $0.4 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 September 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 September 30, 2023 and 2022.

*Litigation settlement expense.* During the three months ended September 30, 2023, we recorded approximately $0.3 million to settle the Unifin matter discussed below in item 1 of Part II. During the three months ended September 30, 2022, we recorded approximately $0.0 million.

*Gain (loss) on foreign currency losses.* During the three months ended September 30, 2023, we recorded a nominal amount of foreign exchange gains. During the three months ended September 30, 2022, we recorded $0.2 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 zero tax benefit for the three months ended September 30, 2023. We recorded a nominal amount for an income tax benefit for the three months ended September 30, 2022.

#### Nine Months Ended September 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 $9.7 million in revenue related to gold and silver in doré for the nine months ended September 30, 2023, and $18.7 million for the nine months ended September 30, 2022. Lower revenue in 2023 resulted from 5,239 fewer gold equivalent ounces sold partially offset by a slightly higher realized price of $1,930 per ounce for the nine months ended September 30, 2023, compared to $1,825 per ounce for the nine months ended September 30, 2022. Fewer gold ounces were sold in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, due to the lower amount and grade of material processed mainly attributed to the cessation of mining at Rodeo in the second quarter 2023.
- *Concentrate Sales –* We recorded $1.5 million in the nine months ended September 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 nine months ended September 30, 2022.
- *Slag Sales –* We recorded $0.5 million in revenue related to the gold and silver in slag that was sold to a refiner with operations in Mexico and United States in the nine months ended September 30, 2023. There were no slag sales in the nine months ended September 30, 2022.

*Cost of metals sold.* For the nine months ended September 30, 2023 we recorded $11.2 million of cost of metals sold, and we recorded $13.3 million during the nine months ended September 30, 2022 for cost of metals sold. Lower costs in 2023 compared to 2022 were due primarily to lower mining costs related to cessation of mining at Rodeo at the end of June along with 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 nine months ended September 30, 2023 we incurred exploration expense of $2.9 million. This included $0.6 million for work on the tailings dam at Plant 2, $0.3 million for general expenses in Argentina and $2.0 million for property holding costs and other allocated administrative expenses. For the nine months ended September 30, 2022, we incurred exploration expense of $7.0 million. The higher costs in 2022 were 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.

*El Quevar project expense.* For each of the nine months ended September 30, 2023, and 2022, we incurred $0.4 million related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During the nine months ended September 30, 2023, and 2022, approximately $0.1 million and $0.7 million of costs were reimbursed by Barrick, respectively as discussed above.

*Velardeña care and maintenance costs*. We recorded $0.9 million and $0.8 million for the nine months ended September 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 $3.7 million and $3.5 million for the nine months ended September 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 and Velardeña Properties, El Quevar project and our exploration portfolio. The $3.7 million of administrative expenses we incurred during the nine months of 2023 is comprised of $1.6 million of employee compensation and directors’ fees, $1.1 million of professional fees and $1.0 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 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.

*Stock-based compensation.* During the nine months ended September 30, 2023 we incurred approximately $0.3 million of expense related to stock-based compensation. During the nine months ended September 30, 2022, we incurred approximately $0.5 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.

*Reclamation and accretion expense.* During each of the nine-month periods ended September 30, 2023 and 2022 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 $0.6 million of other operating income for the nine months ended September 30, 2023 mainly related to the sale of non-core assets. We recorded $1.3 million in the nine months ended September 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.* We recorded $0.4 million and $0.2 million during the nine-month periods ended September 30, 2023 and 2022, respectively, for depreciation, depletion and amortization expense.

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

*Litigation settlement expense.* During the nine months ended September 30, 2023 we recorded approximately $0.3 million to expense to settle the Unifin matter discussed below in item 1 of Part II. During the nine months ended September 30, 2022 we recorded approximately $0.0 million to expense.

*Gain (loss) on foreign currency.* We recorded $0.1 million and $0.3 million in foreign currency gain for the nine months ended September 30, 2023 and 2022, respectively. 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 nine months ended September 30, 2023. We recorded a $90,000 tax benefit for the nine months ended September 30, 2022.

### Liquidity, Capital Resources and Going Concern

#### 2023 Liquidity Forecast and Going Concern Qualification

We do not currently have sufficient resources to meet our expected cash needs during the twelve months ended September 30, 2024. At September 30, 2023, we had current assets of approximately $5.9 million, including cash and cash equivalents of approximately $1.6 million. On the same date, we had accounts payable and other current liabilities of approximately $5.6 million. Because we have ceased mining at the Rodeo mine, our only near-term opportunity to generate cash flow from mining to support continued operations is the Velardeña mine.

On November 8, 2023, the Company closed the November 2023 Offering which raised $4.2 million and netted approximately $3.8 million after expenses (see Note 23 in the interim condensed consolidated financial statements). These funds were anticipated in the Company’s forecast. Also included in the Company’s forecast is the projected receipt of additional capital of $3.0 to $4.5 million during the next twelve-month period ending September 30, 2024. In order to commence and maintain production at Velardeña, the Company expects to spend approximately $3.0 to $3.5 over the first five months of production primarily for additional underground development, which is included in the capital forecast discussed above. The actual amount of additional capital inflows required during the twelve-month period ending September 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 to restart Velardeña, costs at El Quevar, and costs for continued exploration, project assessment, and advancement of our other exploration properties. Assuming that we are successful in restarting production and that we meet our production objectives at the Velardeña Properties, cash flow from Velardeña is expected to be positive by the end of the second quarter of 2024. Additional capital inflows may take the form of non-core asset sales (as the one described below), equity financing activities, debt financing, production-based financing (such as streaming or royalty financing), collection of our outstanding VAT receivable, or otherwise. After the November 2023 Offering, the Company’s available shares authorized but not issued, outstanding or reserved are approximately 2.2 million shares. Should the Company desire to make future stock offerings of more than 2.2 million shares, the number of authorized shares will need to be increased which will require shareholder approval.

In regards to the sale of non-core assets, we executed a non-binding letter of intent for the sale of our Santa Maria property for a total consideration consisting of (i) initial cash proceeds of $1.5 million (plus an additional $0.24 million in VAT payment that we would retain) and (2) a 1.5% net smelter return royalty on the Santa Maria concession up to a cap of $1.0 million (which may be purchased by the potential buyer from us for $0.5 million at any time prior to the commencement of commercial production on the Santa Maria property). If that transaction is consummated, the funds would likely be received in November 2023 or later. 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.

The interim 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, 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 interim condensed consolidated financial statements are dependent on our ability to continue to generate positive cash flows from operations and to continue to fund general administrative, and 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 accounts receivable from the Mexican government, reduce expenses, sell non-core assets, and raise sufficient funds through equity or external sources. 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 this Quarterly Report on Form 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 September 30, 2023, our aggregate cash and cash equivalents totaled $1.6 million, compared to the $4.0 million in similar assets held at December 31, 2022. The September 30, 2023 decrease is the result of the following expenditures and cash inflows for the nine months ended September 30, 2023. Expenditures totaled $8.6 million from the following:

- $2.9 million in exploration expenditures;
- $0.9 million in care and maintenance costs at the Velardeña Properties;
- $0.4 million in care and maintenance costs at the El Quevar project, net of reimbursements from Barrick;
- $3.7 million in general and administrative expenses; and
- $0.7 million of net operating margin from the Rodeo operation (defined as revenue from the sale of metals less the cost of metals sold)

The above expenditures were offset by cash inflows of $6.2 million from the following:

- $1.2 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);
- $1.9 million, net of fees from the Transactions (as further described in Note 16); and
- $1.3 million from changes in working capital (mainly due to a decrease in inventory associated with the end of operations at Rodeo.)

### 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 within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable securities laws. These statements include comments relating to: (i) our anticipated near-term capital needs, and potential sources of capital; (ii) our plans for a 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; (iii) 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; (iv) 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; (v) our plans to defend against claims by Unifin and a potential settlement agreement between Minera William and Unifin; (vi) expectations pertaining to the recovery of VAT refunds from the Mexican government; (vii) projected revenue and spending for the twelve months ending September 30, 2024; and (viii) statements concerning our financial condition, business strategies and business and legal risks and our financial outlook for 2023, including anticipated expenditures and cash inflows during the year.

We use the words “anticipate,” “continue,” “likely,” “estimate,” “expect,” “may,” “believe,” “will,” “project,” “should,” “could,” “believe” and similar expressions (including negative and grammatical variations) to identify forward-looking statements. Although we believe the expectations and assumptions reflected in those forward-looking statements are reasonable, we cannot assure you that these expectations and assumptions will prove to be correct. Our actual results could differ materially from those expressed or implied 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;
- higher than anticipated care and maintenance costs at the Properties in Mexico or at El Quevar in Argentina;
- decreases in silver and gold prices;
- risks related to our exploration properties, including unfavorable results from exploration and whether we will be able to advance our exploration 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;
- whether we will be able to continue or begin to mine and sell minerals successfully or profitably at any of our current properties at current or future silver and gold prices and achieve our objective of becoming a mid-tier mining company
- 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.

These factors are not intended to represent a complete list of the general or specific factors that could affect us. 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, 1,252 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 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, 1,409 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 September 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, 245 characters.

Other than the risk factors set out below, the risk factors for the nine months ended September 30, 2023, are substantially the same as those set forth in Part I, Item 1A of our 2022 Annual Report and in our prior quarterly reports on Form 10-Q.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-018635. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.