Gold Resource Corporation

Good morning, ladies and gentlemen, and welcome to Gold Resource First Quarter Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we've opened up a question-and-answer session. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would now like to turn the conference call over to Chet Holyoke. Please go ahead.

Thank you, Jenny, and good morning to everyone. On behalf of the Gold Resource Team, I would like to welcome you to our conference call covering our first quarter 2026 results. Before we begin the call, there are a couple of housekeeping matters I would 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. Please note all amounts referenced during the presentation are in U.S. dollars unless otherwise stated. Joining me on the call today is Alan Palmier, our President and CEO, and Armando Alexandre, our Chief Operating Officer. Following our prepared remarks, we will be available to answer questions. This conference call is being webcast and will be available for replay on our website later today. Last week's news release that was issued following the close of the market and the accompanying Form 10-K have been filed with the SEC on EDGAR and are also available at our website at www.goldresourcecorp.com. I will now turn the call over to Alan.

Thank you, Chuck. Good morning, everyone. I'd like to thank you for joining our first quarter conference calls. I'd like to address a few points first and then address operations followed by chat addressing the financials. Following his remarks, I will then make a few closing comments and we will take questions. I'm pleased to report this quarter continued the company's trend of improving operations resulting in the achievement of positive net income for the quarter for the first time since 2021. This milestone represents a significant accomplishment for the company and reflects the hard work, dedication, and resilience of the exceptional team we have built. The perseverance through challenging periods assisted by strong commodity prices has been instrumental in bringing us to this position. Further, we have assembled a team of consultants led by SLR to complete a definitive feasibility study for our Back 40 project in the Upper Peninsula of Michigan. This study will be complete in Q1 of next year and will be followed by the submission of the necessary permit applications, upon receipt of which we plan on beginning construction. During the quarter, the operation recorded two lost time injury incidents, which, while minor in nature, are concerning but do not reflect our longstanding commitment to a safe and healthy workplace. The operation is implementing the immediate containment and prevention plan supported by an external consultant in alignment with our zero accident mindset. Despite the challenges, the operation maintained a stable pace and is aligned with quality and productivity standards for narrow vein mining methods to reduce dilution. To put that in context, the former mining method, which was predominantly long-haul mining, experienced dilution of up to 45%. By changing to cut and fill mining, our dilution has declined to approximately 12%, thus reducing the material delivered to the mill while maintaining the same nettle credits. In support of our production and growth strategy, mine development is maintaining the pace to reach new productive areas and prepare drill stations. The Altagracia mine had a successful reopening, contributing good head grades while an intensive drilling program is underway to increase mineable resources. The operation focuses on producing high-quality concentrate implementing improvements and rehabilitating part of the infrastructure to support and maintain production volumes and metallurgical recoveries across all metals. A third filter press, the dry stack tailing system is on site with installation plan for the next quarter. These enhancements are keys to increasing productivity per cycle, enabling us to maintain steady production and increase recovery. I'll now pass the presentation over to Chet to discuss the financial results.

Thank you, Alan. As was mentioned, we are experiencing a very strong start to 2026. I'd like to take a moment to highlight a few of the key accomplishments that contributed to that performance. We continued to strengthen our cash position during the first quarter, ending the period with $31 million, reflecting our disciplined approach to cash management. In addition to this solid balance, strong production resulted in nearly $44 million in net sales for the quarter, generating a robust mining gross profit of $19 million. Most importantly, our first quarter performance delivered net income of $4.7 million, or three cents per share. As Alan noted, this marks a significant milestone for the company, representing our first quarter of positive net income since 2021. Our cash costs per gold equivalent ounce of $2,164 and all-in sustaining costs of $3,476 per gold equivalent ounce remain above our long-term targets. However, we continue to see a consistent downward trend, which indicates that the actions we have implemented are delivering the intended results. While there is still room for further improvement, we are closely monitoring mining activities and maintaining a disciplined focus on operating as efficiently and economically as possible. It is also important to highlight the continued strength of precious metal grades produced from the mine, particularly silver. Although metal prices have moderated somewhat, the overall price environment for both gold and silver remains very favorable and continues to support positive operating results for the business. With the improvement in profitability, we have also continued to advance underground development and exploration activities at the Don David Mine. During the quarter, we invested approximately $3.8 million in underground development, more than $600,000 in infiltrating, and nearly $900,000 in underground exploration development. These investments have continued to expand access to the Three Sisters area and mining activities commenced from Altagracia during the quarter. We will continue to advance development and exploration in these areas as part of our long-term strategy to support sustainable mine growth. I will now pass the presentation back to Alan for his concluding remarks.

Thank you, Chuck. And thank you all once again for joining us today and for your continued support. It has been a long time since we've been able to report results as positive as these, and we're extremely proud of our entire team for their hard work and dedication in delivering this performance. I'd now like to take a moment to discuss the proposed business combination with Gold Group Mining Inc., which we announced in January. The transaction is structured as a reverse triangular merger through which Gold Resource Corporation will become a wholly owned subsidiary of Gold Group. There are several strategic reasons why we believe this combination will create meaningful value for our shareholders. First, the combined company will benefit from a greatly enhanced asset portfolio. This includes our producing Don David gold mine and the feasibility stage back 40 project along with gold groups producing Sierra Prieto mine and the recently acquired San Francisco mine. San Francisco mine is not currently operating. Our plans are to complete a drilling program to confirm the geological data develop our own resource estimate, our own mine plans, refurbish the infrastructure, and recommence mining early in Q1 of 2027. Together, these assets create a stronger, more diversified portfolio with pro forma production run rate of greater than 100,000 ounces of gold equivalent within 12 months. Additionally, the exploration potential is extremely attractive. and we plan on a very active program of over 50,000 meters of drilling this year. Importantly, the transaction reduces reliance on single operation, thereby reducing the impact of any operational interruption at any one mine. Second, the combined combination creates a larger and more diversified mining company with a strong geographic focus on Mexico. One of the world's premier mining jurisdictions, with a long history of mineral production. The asset base is also heavily weighted towards precious metals, currently silver being dominant, and next year, silver and gold, both of which are currently experiencing strong price momentum and provides an attractive tailwind for the combined business. The merged company will have a strong balance sheet, no debt, and greater financial flexibility to fund growth projects exploration initiatives, and opportunistic acquisitions. Its increased scale and enhanced market profile are also anticipated to attract a broader institutional investor base, supporting long-term value creation for all shareholders. We are very excited to take advantage of a perfect storm. Strong commodity prices, extensive Mexican support from the team at Gold Group, and opportunities unique to Mexico. We look forward to unlocking the value proposition that is derived from the transaction. With that, I'll turn the call over to the operator for questions.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the one in the text on the phone. Should you wish to cancel your request, please press the star followed by If you are using a speakerphone, please lift your hands up before pressing . Once again, that is should you wish to ask a question. Your first question is from Stuart McDougall from Research Capital. Your finest are open.

Thanks, Operator. Hi, Ellen. I'm still getting up to speed on the story. I'd like to, just off the bat, know if you're just switching to the cut and fill and grades have obviously gone up, do you expect them to continue to go higher over the course of the year? And secondly, if you could just confirm that I heard correctly, if you plan 50,000 meters of drilling in 2026, that is corporate-wide or just for San Fran? And secondly, I want to make sure I heard correctly, the 100,000-ounce target, that's corporate as well. Thanks.

Okay. Thanks, Stuart. Cut and fill, we began the transition from long-haul to cut and fill July of last year. And at this point, we're pushing 70% of our production from the Don David mine coming from cut and fill stoves. That is going to continue. What it does do is deliver a higher head grade to the mill because of the decrease in dilution. And it really is a much more effective mining method for the narrow veins that we're working in. The numbers I referred to, 70,000 meters, could be split basically 50,000 for export. There's 50,000 for exploration, and then there's an incremental 20,000 for definition drilling at Don David. If I split it out further, we've got about 24,000 In exploration at Cerro Prieto, we've got a similar amount at San Francisco, which is part exploration, part confirmatory drilling, and then the balance is going to be in and around the Don David mine. I think the 100,000 ounce plus is for production corporately. Ballparking it, Our current run rate for Don David in today's price environment is roughly 50,000 ounces a year. San Francisco, a PEA that was done in 2020, forecast about 50,000 ounces a year. And Gold Group Management is predicting between 20,000 and 30,000 ounces per year from Cerro Prieto. That's where the numbers come from.

Thanks, that's perfect.

Okay. Thanks, Stuart.

Thank you once again. That is star one. Should you wish to ask a question? And your next question is from Rex Rogash. Your line is open.

Thank you very much. Good morning, and thank you for your time. I'm a small investor compared to you guys, but some red flags are going up for me. I understand in the first, second, and third quarter of 25 why the AISC would be so high. Fourth quarter was a silver medium at 52 an ounce. You guys killed it. You paid off the emergency debt. You got zero debt now. You made a meager profit. what's confusing is the aisc dropped in december at 52 an ounce but now in january uh january february march first quarter the the it almost doubled in ounce but your aisc also increased um almost to the second quarter of 25 So I'm confused at what's going on with this AISC and is that reducing shareable profit? The other thing is I'm curious about the condition of all equipment, extraction, transportation, processing at the Don David. And then is gold resources going to be kind of financially responsible prior to acquisitions to helping bring up San Francisco. And I have more questions, but I'm going to leave it at that, and I do appreciate your time. Thank you.

No, I appreciate the questions, and I'm going to, you asked the numbers, so I'm going to try and address them, but please come back at me if I've missed something. ASEC did increase into one of this year, and there's two reasons for it. We lost approximately two weeks of production, nine days in January, and a further five days in February. The January loss of production was due to a work stoppage, basically a blockade caused two factions of our union fighting each other and we were stuck in the middle trying to mediate the dispute, ultimately successfully. They did not have a dispute with us, the dispute was within the union. The other factor was we have a very long portal accessing the mine and in one area of the portal we determined that we wanted to reinstall and improve the ground support because it's a very heavily traveled area. So we actually took a five day stoppage of mine production just to improve the ground support and maintain safety. Had we not lost the two weeks out of the three months, you would have seen higher production and you would have seen lower ASIC. The other factor contributing to an increase in the all-in sustaining cost is a very, very heavy emphasis this quarter on development, both at the Don David mine and the restart of another area just to the north, Alta Gracia. Altagracia is an area that was mined historically. We went back in, we did some drilling, and we mobilized a contractor in January to reopen that mine. We incurred costs doing that without any production initially because we had to rehab the access, redo ground support, and then develop into the productive areas but I'm happy to tell you we're currently at a run rate small, 1500 tons a month. That will be up to 3000 tons a month in Q3 and by year end we're targeting 5000 tons a month. I'm sorry?

That tonnage is of what? Copper?

Gold? No, no, it's predominantly a silver ore Minimal copper, a bit of zinc. The silver is running on about 350 grams per ton. So you've got ballpark 10 or 11 ounces of silver per ton of ore. In today's world, that's obviously $750 to $800 ore. So it's a nice sweetener, and the 5,000 tons a month by year end, will have increased their production from currently 30,000 tons through the mill to 35,000 tons. So it is significant. But those are the factors that contributed to the increase in ASIC.

Okay. So there's a trend, though, that without the merger that grows has always had above industry standards AISC. I could understand the first, second, and third quarter. Fourth quarter, it dropped. First quarter, you just explained. Is there a bringing it down into industry standards, which is usually, I think, 14. High end is 1,900 AU. So, well, I put an exponential rise all the time.

uh i'm going to if you take a look at some of the biggest gold mining companies in the world they're running 23 and 2400 asset right now and that's barracks of newmont uh you know because how many employees do they have how much land mass do they have and how much equipment do they have compared to gold resources i don't know that that there's I'm struggling to see how that is relevant. I'm talking about the cost of producing an ounce of gold, whether it's in a big mine or a small mine. Bigger mines typically are more efficient, and the unit cost of operation is lower. So the only mines that are producing with an ASIC of $1,500 to $1,900 in today's world are heat bleach operations like San Francisco when we get it reopened. That is the range that I'm anticipating San Francisco to operate because number one, it's open pit. Number two, it's heap leach. And that is a very much different cost profile than an underground mine like Don David. The other thing I'd like to address briefly, you mentioned the equipment and the status of the equipment at Don David. You may recall that we brought in a mining contractor in Q2 of last year to develop the area that we call the Three Sisters. It's a new vein swarm that we had identified about two and a half years ago. Yes. The contractor brought with them all of their own equipment. And approximately 50% of our production right now is coming from that area. In addition to that, what we've been doing gradually over the last year is replacing or rebuilding our mining fleet. More importantly, what we've been doing is buying equipment properly sized for cut and fill mining. You probably heard that historically, this was a longhole mine, which tended to use big equipment, such as six-yard scoops. And the result of that was bigger mining widths, more dilution, higher production, but higher dilution, so the grade delivered to the mill was lower. What we're doing now is we're going to smaller equipment, two and a half-yard scoops, And with the cut and fill mining, which is appropriate for cut and fill, because you're mining, you're developing and mining narrower widths, so you need smaller equipment. Smaller equipment results in lower productivity, higher cost, but at the end of the day, we are delivering metal units, containing metal to the mill for less than we were with Longhole delivering a lot of rock with the metal units. The other thing that we've done is we have purchased a third filter for our filtered tailings plant. Why that's relevant is we currently only have two operating, and by the end of Q3, we'll be installing a third. The two operating allow us to operate at a rate 1500 tons a day, but if one of them goes down, we've got a major problem on our hands. Installing the third one will allow us to run two filters and keep one on standby to maintain our productivity. We've also ordered and purchased a couple of critical spares for the mill, bow rings for the mills, notably. because they're critical spares and we didn't have those before. We're also in the process of refurbing a lot of the flotation tanks that over time were a bit worn and we're rebuilding them in real time as we go. I think I covered your questions.

Yes, you did. And thank you very much. And I didn't mean to take up everybody's time with such a long-winded question. I appreciate your replies. Thank you.

No, I thank you for the questions because if you had them, others had them as well. So I do appreciate them.

Yeah, I think Friday kind of floored a lot of the small investors, kind of a shock. And we make that in expectations without knowledge or there's knowledge and, you know, a lot of people did a dump sell.

Well, I am, I'll be honest with you, I was shocked by it as well. It makes no sense to me. The best operating quarter we've had in now five years, and people assume that's a sell signal, which is, look, I'm not a market expert. I don't make forecasts in the market, but it floored me as well.

Well, you guys pulled it out of the red, so congratulations. Good job. And I hope Gold Group doesn't delude us into dust.

Well, I'm going to tell you that Gold Group will provide us with directionally 70,000 to 80,000 ounces of gold a year at an asset of under $2,000 by this time next year. And that will generate very significant ground numbers. If it's 2000, assume $4,000 gold, you've got a $2,000 margin on even 60,000 ounces. That's 120 million a year in operating cash flow. Gold group is going to contribute significantly to our future.

Yeah, the cautionary point on that, though, is just like, uh don david experienced with an internal rift between union um the two gold mining that gold um bull group has are in the middle of cartel war zones and cartel war zones have been shut down on their drug trafficking because of the u.s military so now they're going to be looking at um other revenue sources So I'm a little concerned that those two coal mines are in the middle of the cartel war zone.

Well, I will, I understand your concern, and I think there's been, obviously there's been a great deal of news in the media about cartels, et cetera, and I'm actually I don't know if this is a politically correct thing to say or not, but I'm actually glad the US is becoming more forceful in addressing some of the issues with the cartels. I think that bodes well for Mexico and it bodes well for the US. The area that the mines are located in, in Sonora, is relatively close to the uh nevada border our arizona border but one of the things to keep in mind is it is a very very active mining area you know there's a number of big mines in the area they've been operating there for decades and the relationships with the cartels are well established now there's there's other there's other in Mexico where, you know, just based on the news, there's far more violence. But in Sonora itself, it's minimal. You know, there hasn't been any disruption due to cartel activity in any of the mines, certainly in the past number of years. I'm not going to predict the future, but I actually think I'm encouraged by what's happening. And one of the things I will point out, one of the hidden assets with Gold Group is a very, very strong Mexican team that has been together for many years working on socials. Got it. Maintaining social license and that goes to the federal government, the state government. municipalities, indigenous communities, and the cartels. And they have been dealing with these various groups for many years very successfully. So, that is a very significant hidden asset that we are acquiring by putting these two companies together.

Well, thank you so much. I could just keep going, but I know there's other people that have questions, and you guys are busy. I couldn't get the webcast on the live webcast on the Internet, so I did the call-in.

Call-in works. We'll look into the webcast, though. But I do thank you for your questions. I appreciate them.

All right. You guys stay safe, and thank you. You're very welcome, sir.

Thank you. There are no further questions at this time. Please proceed with the closing remarks.

Thank you all for joining our call this morning. We are obviously happy with the results and look forward to continuing the progress that we have made. The other thing and it's probably apparent from my comments, but we are very excited about the transaction with Gold Group, which is going to create a much larger, much stronger company, both in terms of people, balance sheet, production profile, and potential. Next time we talk, Bob, I would assume that the transaction will have closed, and it will be a Gold Group call, but it will be the same team talking to you on this side. Thank you again. Appreciate your time this morning.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining me now. Disconnect your lines.