Gold Resource Corporation (AMEX:GORO) Q1 2026 Earnings Call Transcript

Gold Resource Corporation (AMEX:GORO) Q1 2026 Earnings Call Transcript May 12, 2026

Operator: Good morning, ladies and gentlemen, and welcome to Gold Resource First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference call over to Chet Holyoak. Please go ahead.

Chet Holyoak: 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 Allen Palmiere, our President and CEO; and Armando Alexandri, 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. Yesterday — or 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 Allen.

Allen Palmiere: Thank you, Chet, and good morning, everyone. I would like to thank you for joining our first quarter conference call. I’d like to address a few points first and then address operations, followed by Chet 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. Their perseverance through challenging periods assisted by strong commodity prices has been instrumental in previous to this position.

Further, we have assembled a team of consultants led by SLR to complete a definitive feasibility study for our Back Forty 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 2 lost time injury incidents, which, while minor in nature, are concerning, but do not reflect our long-standing 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 0 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 into context, the former mining method, which was predominantly long-hole 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 metal 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 Alta Gracia mining 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 by implementing improvements and rehabilitating part of the infrastructure to support and maintain production volumes and metallurgical recoveries across all metals.

A clear filter press, the dry stack tailing system is on site with installation plan for the next quarter. These enhancements are key 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.

Chet Holyoak: Thank you, Allen. 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 continue 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 $0.03 per share. As Allen noted, this marks a significant milestone for the company, representing our first quarter of positive net income since 2021.

Our cash cost 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 remained very favorable and continues to support positive operating results for the business.

With the improvement in profitability, we have also continued to advance underground developments 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 infill drilling 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 Alta Gracia 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 Allen for his concluding remarks.

Allen Palmiere: Thank you, Chet. 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 Forty project, along with Gold Groups producing Cerro 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 to 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 line. 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 experience 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.

Q&A Session

Operator: [Operator Instructions] Your first question is from Stuart McDougall from Research Capital.

Stuart McDougall: Thanks, operator. Allen, I’m still getting up to speed on the story, but I’d like to, just off the bat, know, if you — you’re just switching to the cut and fill and grades have obviously gone up. Do you expect it to continue to go higher over the course of the year? And secondly, if you could just confirm that I heard correctly, it’s — you planned 50,000 meters of drilling in 2026. That is corporate-wide or just for San Fran. And secondly, I wanted to make sure I heard correctly, the 100,000 ounce target, that’s corporate as well.

Allen Palmiere: Thanks, Stuart. Cut and fill, we began the transition from long-hole to cut and fill in 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 stopes. That is going to continue. What it does do is deliver a higher head grade to the mill because of the decrease in the 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 free definition drilling at Don David. If I split it out further, we’ve got about 24,000 at the 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, ball-parking 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. And that’s where the numbers come from.

Operator: [Operator Instructions] And your next question is from [ Alex Rogaish.]

Unknown Analyst: Good morning, and thank you for your time. I’m a small investor compared to you guys. But I do 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 with a silver medium at $52 announced, you guys killed it. You paid off your emergency debt. You got the 0 debt now. You made a meager profit. What’s confusing is the AISC dropped in December at $52 an ounce. But now in January, January, February, March, first quarter, the — it almost doubled an ounce, but your AISC also increased 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 Resource is 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.

Allen Palmiere: No, I appreciate the questions. And I’m going to — you asked a number, so I’m going to try and address them, but please come back at me if I’ve missed something. AISC did increase in Q1 of this year, and there’s 2 reasons for it. We lost approximately 2 weeks of production, 9 days in January and further 5 days in February. The January loss of production was due to a work stoppage, basically a blockade caused by 2 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 5-day stoppage of mine production just to improve the ground support and maintain safety. Had we not lost the 2 weeks out of the 3 months, you would have seen higher production and you would have seen lower AISC. The other factor contributing to an increase in the all-in sustaining cost is a very, very heavy emphasis this quarter on development, both the Don David mine and the restart of another area just to the north, Alta Gracia. Alta Gracia is a historic — 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, it’s small, 1,500 tonnes a month. That will be up to 3,000 tonnes a month in Q3. And by year-end, we’re targeting 5,000 tonnes a month.

Unknown Analyst: [indiscernible]

Allen Palmiere: I’m sorry?

Unknown Analyst: That tonnage is of what, Of copper?

Allen Palmiere: No, no, it’s predominantly a silver ore, minimal copper, a bit of zinc. The silver is running on about 350 grams per tonne. So you’ve got ballpark 10 or 11 ounces of silver per tonne of ore. In today’s world, that’s obviously $750 to $800 ore. So it’s a nice sweetener and the 5,000 tonnes a month by year-end will have increased our production from currently 30,000 tonnes through the mill to 35,000 tonnes. So it is significant. But those are the factors that contributed to the increase in AISC.

Unknown Analyst: Okay. So there’s a trend though that without the merger that growth has always had above industry standards of AISC. I could understand the first, second and third quarter. Fourth quarter had dropped, first quarter, you just explained. Is there a bringing it down into industry standards, which is usually I think 1,400 high end is 1,900 AU. So an exponential rise all the time.

Allen Palmiere: I’m going to — if you take a look at some of the biggest global mining companies in the world, they’re running 2,300 and 2,400 AISC right now. And that’s Barrick and Newmont because…

Unknown Analyst: How many employees do they have? How much land mass do they have and how much equipment do they have compared to Gold Resouce.

Allen Palmiere: I don’t know that there’s — I’m struggling to see what — 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 AISC of $1,500 to $1,900 in today’s world are heap leach operations like San Francisco when we get it reopened. That is the range that I’m anticipating in 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 2.5 years ago.

Unknown Analyst: Yes.

Allen Palmiere: 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 long-hole mine, which tended to use big equipment, such as 6-yard scoops and as a result of that was bigger mining width, more dilution, higher production, but lower — higher dilution. So the grade delivered to the mill was lower. What we’re doing now is we’re going through smaller equipment, 2.5 yard scoops and with the cut and fill mining, which is appropriate for cut and fill because you’re developing and mining narrower width, 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 long hole, 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 2 operating and by the — in Q3, we’ll be installing a third. The 2 operating allow us to operate at a rate of 1,500 tonnes a day. But if 1 of them goes down, we’ve got a major problem on our hands. Installing the third one will allow us to run 2 filters and keep 1 on standby to maintain our own productivity. We’ve also ordered and purchased a couple of critical spares for the mill [ bearing ] 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.

Unknown Analyst: 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.

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

Unknown Analyst: Yes. I think Friday kind of floored a lot of the small investors kind of a shock. And we may have in expectations without knowledge or there’s knowledge and a lot of people did a dump sell.

Allen Palmiere: 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 that we’ve had in now 5 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.

Unknown Analyst: Well, you guys pulled it out of the red. So congratulations, good job. And I hope Gold Group doesn’t dilute us into dust.

Allen Palmiere: Well, I’m going to tell you that Gold Group will provide us with directionally 70,000 ounces, 80,000 ounces of gold a year at an AISC of under $2,000 by this time next year. And that will generate very significant round numbers, if it’s $2,000, 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.

Unknown Analyst: Yes. The cautionary point on that, though, is just like Don David experienced with an internal riff between union. The 2 gold mining that Gold 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 other revenue sources. So I’m a little concerned that those gold mines are in the middle of the cartel war zone.

Allen Palmiere: 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, both cartels and 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 U.S. 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 U.S. The area that the mines are located in Sonora is relatively close to the Nevada border — Arizona border. But one of the things to keep in mind is it is a very, very active mining area 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.

There’s other states in Mexico where, just based on the news, there’s far more violence. But in Sonora itself, it’s minimal. 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’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 — 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 2 companies together.

Unknown Analyst: 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.

Allen Palmiere: Call in works. We’ll look into the webcast though. But I do thank you for your questions. I appreciate them.

Unknown Analyst: You guys stay safe, and thank you.

Operator: [Operator Instructions] There are no further questions at this time. Please proceed with the closing remarks.

Allen Palmiere: 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 is 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, and appreciate your time this morning.

Operator: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may now disconnect your lines.