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spk01: Good morning and welcome to the Gold Resource Corporation first quarter 2022 financial and operating results conference call. At this time, all participants are in a listen-only mode. Following management's presentation, there will be a question and answer session open to financial analysts only. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, May 10th, 2022, at 11 o'clock Eastern Time. I will now turn the conference over to Kim Perry, Gold Resource Corporation Chief Financial Officer. Ms. Perry, you may proceed.
spk06: Thank you, Chris, and good morning to everyone. On behalf of the Gold Resource team, I would like to welcome you to our conference call covering our Q1 2022 results. Before we begin the call, there are a couple of housekeeping matters I'd like to address. Please note that certain statements to be made today are forward-looking in nature and, as such, are subject to numerous risks and uncertainties, as described in our annual report on Form 10-K and other SEC filings. Joining me on the call today is Alan Palmier, our President and CEO, and Alberta Reyes, our Chief Operating Officer. Following Alan, Alberto, and my prepared remarks, we'll be available to answer questions. This conference call is being webcast. For those of you joining us on the webcast, you can download a PDF copy of the conference call slides. The event will also be available for replay on our website later today. Yesterday's news release issued following the close of the market and the accompanying financial statements and MD&A contained in our Form 10-Q have been filed with the FCC on EDGAR and are also available on our website at www.goldresourcecorp.com. Please note that all amounts mentioned in this call are in U.S. dollars unless otherwise stated. I will now turn the call over to Alex.
spk03: Thank you, Kim, and good morning, everyone. I would like to thank all of the listeners for taking the time to join us on this call. This year is off to a good start. Our team in Mexico maintained the momentum they created in the fourth quarter of 2021. Quarter over quarter tons through the mill and gold equivalent ounces produced continue to increase. I'd like to point out a few achievements relating to ESG before handing the call over to Alberto to provide an update on our Don David Gold operations. Excuse me. We will then proceed with marks from Kim on our Q1 financial results. Lastly, we'll provide a few closing remarks, and then we will take questions from participants. The most important asset that we have is our people. We have a very good team in Mexico who are responding well to the new culture and operational methodologies that are being introduced. Our corporate team is first class, and I'm very happy with the quality and ability of the team. It shows by the results achieved and bodes very well for the future. We've continued to invest heavily in Mexico, which will benefit us going forward from an operational, financial, and in many cases, an environmental standpoint. With the completion of the filtration plant and dry stack facility in 2021, we are processing the tailings through the new plant. The facilities not only conserve water, they reduce the traditional risks associated with the tailings storage facility and accelerate the reclamation of the original open pit. We also processed over 1,000 tons of artisanal tailings from a local community. In addition to financially giving back to the community, we're able to ensure that they were properly handled and stored. In Michigan, we continue to progress the Black 40 feasibility study. An internal commitment we made when we acquired the project was to ensure that the optimized design deployed incorporated environmentally friendly designs and advances in the mining industry. So far, we are on track to achieve this objective. The optimized feasibility study should be released in the second half of this year with permit applications following shortly thereafter. I'll now pass the presentation to Alberta to discuss the Don Davids Don David Gold's first quarter operational results.
spk04: Thank you, Alan, and also good morning to all. We experienced a positive quarter for Don David Gold Mine. Turning to the results of operations, I am pleased to report that we processed nearly 137,000 tons of ore and sold approximately 8,000 ounces of gold, 265,000 ounces of silver, equating to a combined 11.7 thousand ounces of gold equivalent. We further sold over 400 tons of copper, 1,600 tons of lead, and 4,300 tons of zinc. As to our investment in infrastructure, as Alan highlighted earlier, I want to point out progress on the construction of the zinc tails, gold rigging circuit. As you may recall, we expect the circuit to provide for a 6% to 10% increase in gold recovery. We are pleased to inform you that the five new cells have been installed. The project has been commissioned and it is fully operational. Other infrastructure needs include a new business improvement project that is on its way. The underground ventilation circuit is currently being enhanced. The new circuit will improve ventilation throughout the mine. A new 350 horsepower fan already installed replaces the 400 horsepower fan, thus reducing energy consumption while providing the system the flexibility to extend at depth. The circuit will be fully operational by the end of Q2. Continuing with the underground, our exploration development program in Level 3 is progressing slowly as development rates adapt to the ground conditions. The delay in development will not impact the total drill meters in the year. Higher priority is being placed on other areas in the underground that are delivering interesting results regarding the potential down-dip extension of switchback and lateral extension of aresta. Now switching our focus to a BAT40 project, the feasibility study is progressing according to plan. Currently undergoing final reviews are the block models for the open pit in the underground, mine designs, processing plant, and surface infrastructure. It is worth noticing that we have bolstered the team driving the feasibility study and can expect to reach completion during the second half of 2022. I'll now pass over the presentation to Kim to discuss Q1 financial results.
spk06: Thank you, Alberto. We closed the quarter with a strong balance sheet consisting of just over $31 million cash and working capital increased more than $3 million at March 31st. For the first quarter, we reported net income of $4 million. Net sales of over $45 million were 67% higher than the same period in 2021 due to higher gold sales and higher average base metal prices. Total production costs of $20.1 million for the quarter is 32% higher than the production costs for the same period in 2021. The increase is primarily due to higher royalties as a result of higher metal sales and price increases in reagents consumed in the process plant. While we have experienced approximately 14% inflationary pressure on many consumables over the last year, we've been able to maintain the processing costs per ton quarter over quarter. Another contributing factor on production costs was the impact of the Mexican labor reform related to profit sharing, which was effective in the second half of 2021. Don David Goldmine's total cash cost after co-product credit was a negative $121 per gold equivalent ounce sold. In total, all unsustaining costs per gold equivalent ounce sold were $499 per ounce. These costs are significantly lower than 2021 costs per ounce sold and directly related to the higher base metal prices realized. Alan, back to you.
spk03: Thank you, Karen. As you've heard me say before, we are focused on creating value through disciplined growth and capital allocation. And as I noted in my opening comments, we've made tremendous strides to demonstrate our commitment to advance initiatives around health, safety, community development, and really our overall ESG programs. We plan to continually expand our efforts in this area. With our healthy balance sheet and strong management team, we look forward to advancing the Back 40 project and continuing to focus on improvements at the Don David Goldmine. while maintaining our status as a low-cost producer with a focus on disciplined growth. With that, I'll turn the call over to the operator for questions.
spk01: Thank you. If you'd like to ask a question, please press star then 1 on your telephone keypad. Our first question is from Heiko Eil with HC Wainwright. Your line is open.
spk05: Hey there. Thanks for taking my questions. It's nice to see that breakdown of your capital and exploration investment summary in the release. Building on that, you spent $1.1 million at BAC 40 in Q1, and you're guiding to a total spend of $8 million to $9 million for the year. Would you be so kind to just break that down a bit, those $8 million to $9 million? How much of that is drilling? How many meters are you shooting for? And, you know, the feasibility study is expected to come out the second half of 2022. Anyway, you can maybe just define, or like, Give us a little bit more color when you think we'll see it given the Q3 starts in three weeks. I'm sorry, yeah, Q3 starts in three weeks.
spk03: Michael, I will answer that a couple of ways. Most of the expenditure at BAC 40 this year relates to completion of the feasibility study and preparation of the permit applications. There is a small amount of drilling in the budget, directionally above a million dollars, and that is aimed at condemnation drilling, a little bit of additional geotechnical drilling, and a little bit of exploration drilling. When I say a little bit, we're looking at the southwest extension of the deposit just to see what potential is.
spk02: We believe it's significant, but we haven't tested it. I think I've covered most of it in terms of timing.
spk03: I would like to give you a hard date. The reality is we're working with our consultants and trying to pin it down. Our target is to have the feasibility complete the end of September. However, some of our consultants are squirming a little bit with that. The target is certainly this year, our internal target is the end of September, hopefully no later than October. After that, probably two months after we have the feasibility complete, we will be submitting our permit applications.
spk05: Got it. And building on the last question a little bit, what we're seeing with wage inflation, both in Michigan and Mexico,
spk03: Well, Michigan, we're not seeing a great deal just because of our very small or very low staffing levels. However, in Mexico, we've been able to negotiate increases with the union of just under 5%, which is, I think, a major accomplishment. We are seeing further inflationary pressures primarily in the area of reagents and consumables. But so far, through increased productivity, that hasn't adversely impacted our operating costs for the time. Can we maintain that? I don't know. I would love to say we can, but it's really going to be a function of how high the inflation rates are and how persistent they are. Ultimately, we will have to recognize some increased costs potentially. But at this point, we're managing quite well.
spk05: Perfect. And then finally, with the dry stack tailings project, I mean, your total investments have been 14.8 million. Just think it out loud a bit. Would you be willing to guesstimate and quantify the actual cash savings you've seen from this so far since it just uses so much less water? Cash savings cycle, zero.
spk03: Just a quick answer. Dry stack tailings is operationally a little bit more expensive than conventional thickened tailings. Where the real benefit comes from is, as you've identified, a reduction in water consumed. But that really isn't a cost. That's more of an environmental benefit. We're recirculating direction about 80% of our process with water now, whereas before, the majority of that went out into the tailings pond. And while we did recycle some of it, we presumably had to top up with fresh water. That amount of top up is diminished significantly with dry stack. Dry stack is preferable from an environmental point of view because you don't have the dam, number one. You don't have wet material exposed and you don't have a long-term reclamation problem. So that is a real benefit arising from dry stacking. We had an old open pit at the site, and what we're doing is using that as a first area of deposition for the dry stack. So ultimately, we will, through dry stacking, complete the remediation of the open pit, which is a major step forward. It's not a cost savings.
spk02: Tri-Stack is more expensive. There. Okay. Simple enough. I appreciate your time. Thanks, Michael. I appreciate the questions.
spk01: Again, please press star 1 if you would like to ask a question. And it appears that we have no further questions at this time. I'll turn it over to Mr. Palmir for any closing remarks.
spk03: Thanks, Chris. I do appreciate it. I do appreciate everyone's time. It was a good quarter. Hopefully, you'll be able to see that sustained through the second quarter, and I look forward to speaking to you at our next quarterly conference call. Thank you all, and have a great morning.
spk01: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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