UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2019~~2020

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34857

Gold Resource Corporation

_{(Exact Name of Registrant as Specified in its charter)}

Colorado

84-1473173

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2886 Carriage Manor Point, Colorado Springs, Colorado 80906

(Address of Principal Executive Offices) (Zip Code)

(303) 320-7708

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange where registered
Common Stock	GORO	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


~~Larger~~Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐
			
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~62,410,521~~70,026,027 shares of common stock outstanding as of May ~~6, 2019~~4, 2020.

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GOLD RESOURCE CORPORATION

FORM 10-Q

Index

		Page
Part I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets at March 31, ~~2019~~2020 (unaudited) and December 31, ~~2018~~2019	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 (unaudited)	2
	Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29

Part II - OTHER INFORMATION


Item 2.1a	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Risk Factors	29
Item 4.	Mine Safety Disclosures	2930
Item 6.	Exhibits	3031
Signatures		3132

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PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share amounts)


	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
	(Unaudited)				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	8,527	$	7,762	$	18,366	$	11,076
Gold and silver rounds/bullion		3,650		3,637		4,111		4,265
Accounts receivable		4,515		1,744
Accounts receivable, net						4,043		8,362
Inventories, net		20,464		14,342		24,805		24,131
Prepaid taxes		1,957		1,126		118		786
Prepaid expenses and other current assets		2,607		2,450		1,266		2,032
Total current assets		41,720		31,061		52,709		50,652
Property, plant and mine development, net		119,617		111,242		124,450		125,259
Operating lease assets, net		12,681		-		5,305		7,436
Deferred tax assets, net		6,570		7,372		8,433		4,635
Other non-current assets		575		656		5,176		5,030
Total assets	$	181,163	$	150,331	$	196,073	$	193,012
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	18,176	$	12,429	$	12,092	$	14,456
Loans payable, current		840		765		888		879
Finance lease liabilities, current		418		412		452		446
Operating lease liabilities, current		7,868		-		5,192		7,287
Income taxes payable, net						1,289		-
Mining royalty taxes payable, net		2,003		1,926		1,018		1,538
Accrued expenses and other current liabilities		1,889		2,030		3,563		3,366
Total current liabilities		31,194		17,562		24,494		27,972
Reclamation and remediation liabilities		3,811		3,298		5,487		5,605
Loans payable, long-term		1,444		1,378		556		782
Finance lease liabilities, long-term		724		831		320		435
Operating lease liabilities, long-term		4,816		-		124		160
Total liabilities		41,989		23,069		30,981		34,954
Shareholders' equity:
Common stock - $0.001 par value, 100,000,000 shares authorized:
61,496,813 and 58,850,431 shares outstanding at March 31, 2019 and December 31, 2018, respectively		95		69
69,541,527 and 65,691,527 shares outstanding at March 31, 2020 and December 31, 2019, respectively						70		66
Additional paid-in capital		132,903		121,592		158,987		148,171
Retained earnings		13,231		12,656		13,090		16,876
Treasury stock at cost, 336,398 shares		(5,884)		(5,884)		(5,884)		(5,884)
Accumulated other comprehensive loss		(1,171)		(1,171)		(1,171)		(1,171)
Total shareholders' equity		139,174		127,262		165,092		158,058
Total liabilities and shareholders' equity	$	181,163	$	150,331	$	196,073	$	193,012

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share amounts)

(Unaudited)


	Three months ended March 31,				Three months ended March 31,
	2019		2018		2020		2019
Sales, net	$	26,578	$	32,151	$	28,005	$	26,578
Mine cost of sales:
Production costs		17,679		15,535		20,885		17,477
Depreciation and amortization		3,444		3,493		7,398		3,646
Reclamation and remediation		16		203		38		16
Total mine cost of sales		21,139		19,231		28,321		21,139
Mine gross profit		5,439		12,920
Mine gross (loss) profit						(316)		5,439
Costs and expenses:
General and administrative expenses		2,011		2,354		2,274		2,011
Exploration expenses		1,450		1,185		1,155		1,450
Other expense, net		25		278		1,513		25
Total costs and expenses		3,486		3,817		4,942		3,486
Income before income taxes		1,953		9,103
Provision for income taxes		1,071		3,646
Net income	$	882	$	5,457
Net income per common share:
Basic	$	0.01	$	0.10
Diluted	$	0.01	$	0.09
(Loss) income before income taxes						(5,258)		1,953
(Benefit) provision for income taxes						(2,137)		1,071
Net (loss) income					$	(3,121)	$	882
Net (loss) income per common share:
Basic and diluted					$	(0.05)	$	0.01
Weighted average shares outstanding:
Basic		60,672,133		57,120,077		66,022,202		60,672,133
Diluted		61,142,088		57,911,299		66,022,202		61,142,088

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(U.S. dollars in thousands, except share amounts)


	Number of Common Shares	Par Value of Common Shares		Additional Paid- in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Three Months Ended March 31, 2020 and 2019
Balance, December 31, 2017	57,252,882	$	57	$	114,584	$	4,520	$	(5,884)	$	(1,171)	$	112,106
Stock-based compensation	-		-		236		-		-		-		236
Net stock options exercised	299,345		-		187		-		-		-		187
Common stock issued for vested restricted stock units	14,964		-		-		-		-		-		-
Dividends declared	-		-		-		(286)		-		-		(286)
Net income	-		-		-		5,457		-		-		5,457
Balance, March 31, 2018 (unaudited)	57,567,191	$	57	$	115,007	$	9,691	$	(5,884)	$	(1,171)	$	117,700
														Number of Common Shares	Par Value of Common Shares		Additional Paid- in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance, December 31, 2018	59,186,829	$	69	$	121,592	$	12,656	$	(5,884)	$	(1,171)	$	127,262	59,186,829	$	59	$	121,602	$	12,656	$	(5,884)	$	(1,171)	$	127,262
Stock-based compensation	-		-		336		-		-		-		336	-		-		336		-		-		-		336
Net stock options exercised	69,448		1		97		-		-		-		98	69,448		1		97		-		-		-		98
Common stock issued for vested restricted stock units	14,804		-		-		-		-		-		-	14,804		-		-		-		-		-		-
Dividends declared	-		-		-		(307)		-		-		(307)	-		-		-		(307)		-		-		(307)
Issuance of stock, net of issuance costs	2,562,130		25		10,878		-		-		-		10,903	2,562,130		3		10,900		-		-		-		10,903
Net income	-		-		-		882		-		-		882	-		-		-		882		-		-		882
Balance, March 31, 2019 (unaudited)	61,833,211	$	95	$	132,903	$	13,231	$	(5,884)	$	(1,171)	$	139,174	61,833,211	$	63	$	132,935	$	13,231	$	(5,884)	$	(1,171)	$	139,174

Balance, December 31, 2019														66,027,925	$	66	$	148,171	$	16,876	$	(5,884)	$	(1,171)	$	158,058
Stock-based compensation														-		-		470		-		-		-		470
Dividends declared														-		-		-		(665)		-		-		(665)
Issuance of stock, net of issuance costs														3,850,000		4		10,346		-		-		-		10,350
Net loss														-		-		-		(3,121)		-		-		(3,121)
Balance, March 31, 2020 (unaudited)														69,877,925	$	70	$	158,987	$	13,090	$	(5,884)	$	(1,171)	$	165,092

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)


	Three months ended March 31,				Three Months Ended March 31,
	2019		2018		2020		2019
Cash flows from operating activities:
Net income	$	882	$	5,457
Adjustments to reconcile net income to net cash from operating activities:
Net (loss) income					$	(3,121)	$	882
Adjustments to reconcile net (loss) income to net cash from operating activities:
Deferred income taxes		895		412		(4,650)		895
Depreciation and amortization		3,561		3,652		7,535		3,763
Stock-based compensation		336		236		470		336
Other operating adjustments		(128)		(906)		1,780		(128)
Changes in operating assets and liabilities:
Accounts receivable		(2,771)		1,242		4,320		(2,771)
Inventories		(6,122)		(1,283)		(3,495)		(6,324)
Prepaid expenses and other current assets		221		868		175		221
Other non-current assets		40		65		921		40
Accounts payable and other accrued liabilities		3,222		2,726		(802)		3,222
Mining royalty and income taxes payable, net		(784)		1,489		1,844		(784)
Net cash (used in) provided by operating activities		(648)		13,958
Net cash provided by (used in) operating activities						4,977		(648)

Cash flows from investing activities:
Capital expenditures		(8,786)		(7,332)		(6,929)		(8,786)
Other investing activities		1		2		1		1
Net cash used in investing activities		(8,785)		(7,330)		(6,928)		(8,785)

Cash flows from financing activities:
Proceeds from the exercise of stock options		98		244		-		98
Proceeds from at-the-market sales		10,806		-
Proceeds from issuance of stock						10,350		10,806
Dividends paid		(303)		(285)		(657)		(303)
Repayment of loan payable		(187)		(140)
Repayment of loans payable						(216)		(187)
Repayment of finance leases		(101)		(93)		(109)		(101)
Net cash provided by (used in) financing activities		10,313		(274)
Net cash provided by financing activities						9,368		10,313

Effect of exchange rate changes on cash and cash equivalents		(115)		(127)		(127)		(115)
Net increase in cash and cash equivalents		765		6,227		7,290		765
Cash and cash equivalents at beginning of period		7,762		22,390		11,076		7,762
Cash and cash equivalents at end of period	$	8,527	$	28,617	$	18,366	$	8,527

Supplemental Cash Flow Information
Interest expense paid	$	42	$	49	$	32	$	42
Income and mining taxes paid	$	209	$	730	$	197	$	209
Non-cash investing activities:
Change in accrued capital expenditures	$	2,303	$	(193)
Change in estimate for asset retirement cost	$	462	$	-
Change in capital expenditures in accounts payable					$	(950)	$	2,303
Change in estimate for asset retirement costs					$	435	$	462
Equipment purchased through loan payable	$	330	$	-	$	-	$	330

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOLD RESOURCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2019~~

2020
(Unaudited)

1. Basis of Preparation of Financial Statements

The interim Condensed Consolidated Financial Statements (“interim financial statements”) of Gold Resource Corporation and its subsidiaries (collectively, the “Company”) are unaudited and have been prepared in accordance with the rules of the Securities and Exchange Commission for interim statements. Certain information and footnote disclosures required by United States Generally Accepted Accounting Principles (“U.S. GAAP”) have been condensed or omitted as permitted by such rules, although the Company believes that the disclosures included are adequate to make the information presented not misleading. In the opinion of management, all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim financial statements have been included. The results reported in these interim financial statements are not necessarily indicative of the results that may be reported for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2018~~2019 included in the Company’s annual report on Form 10-K. The year-end balance sheet data was derived from the audited financial statements. Unless otherwise noted, there have been no material changes to the footnotes from those accompanying the audited consolidated financial statements contained in the Company’s annual report on Form 10-K.

~~2. Recent Accounting Pronouncements~~Certain items in the prior period’s Condensed Consolidated Financial Statements have been reclassified to conform to the current presentation.

~~Recently Adopted Accounting Pronouncements~~

~~Accounting Standards Update No. 2016-02~~—~~Leases (Topic 842~~).In February 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company is also required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.

The Company adopted the standard effective January 1, 2019 and elected certain available practical expedients and implemented internal controls and key system functionality to enable the preparation of financial information on adoption.

The standard had a material impact on the Company’s consolidated balance sheets but did not have a material impact on its consolidated statements of operations. The most significant impact was the recognition of ROU assets and the current and long-term components of lease liabilities for operating leases, while the Company’s accounting for finance leases remained substantially unchanged. See ~~Note 13~~ ~~for more information.~~

~~Recently Issued Accounting Pronouncements~~

~~Accounting Standards Update No. 2018-07~~—~~Compensation — Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting (“ASU 2018-07”).~~ In June 2018, the FASB issued new guidance regarding accounting for stock compensation. The new guidance expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods or services from non-employees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods or services to be used or consumed in its operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with

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~~selling goods or services~~

2. Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”. The standard modifies the measurement approach for credit losses on financial instruments, including trade receivables, from an incurred loss method to ~~customers as part~~a current expected credit loss method. The standard requires the measurement of expected credit losses to be based on relevant information, including historical experiences, current conditions and a ~~contract accounted for under ASC 606. ASU 2018-07~~forecast that is ~~effective for public entities beginning December~~supportable. The Company adopted the new standard on January 1, ~~2019, with early adoption permitted, but no earlier than the~~2020. The adoption of ~~ASC 606. The Company does~~the standard did not ~~expect the adoption of this guidance to~~ have ~~material impact~~any effect on ~~its consolidated financial statements.~~our Condensed Consolidated Financial Statements.

~~Accounting Standards Update No. 2018-09~~—~~Codification Improvements (“ASU 2018-09”).~~ In July 2018, the FASB issued new guidance which makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification (“ASC’). The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and were effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company does not expect the adoption of this guidance to have material impact on its consolidated financial statements.

3. Revenue

The Company derives its revenue from the sale of doré and ~~concentrate.~~concentrates. The following table presents the Company’s net sales for each period presented, disaggregated by source:


	Three months ended March 31,				Three months ended March 31,
	2019		2018		2020		2019
	(in thousands)				(in thousands)
Doré sales, net
Gold	$	1,683	$	1,909	$	7,683	$	1,683
Silver		400		297		676		400
Less: Refining charges		(38)		(25)		(92)		(38)
Total doré sales, net		2,045		2,181		8,267		2,045
Concentrate sales
Gold		4,565		5,541		6,216		4,565
Silver		3,761		6,081		5,215		3,761
Copper		2,114		2,380		2,361		2,114
Lead		3,395		3,847		3,479		3,395
Zinc		12,271		13,384		9,040		12,271
Less: Treatment and refining charges		(3,410)		(1,834)		(5,835)		(3,410)
Total concentrate sales, net		22,696		29,399		20,476		22,696
Realized/unrealized embedded derivative, net		1,837		571		(738)		1,837
Total sales, net	$	26,578	$	32,151	$	28,005	$	26,578

4. Gold and Silver Rounds/Bullion

The Company periodically purchases gold and silver bullion on the open market for investment purposes and to use in its dividend exchange program under which shareholders may exchange their cash dividends for minted gold and silver rounds.

At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company’s holdings of rounds/bullion, using quoted market prices, consisted of the following:


	2019					2018					2020					2019
	Ounces	Per Ounce		Amount		Ounces	Per Ounce		Amount		Ounces	Per Ounce		Amount		Ounces	Per Ounce		Amount
				(in thousands)					(in thousands)					(in thousands)					(in thousands)
Gold	1,888	$	1,295	$	2,445	1,888	$	1,279	$	2,415	1,866	$	1,609	$	3,002	1,866	$	1,515	$	2,827
Silver	79,795	$	15.10		1,205	79,864	$	15.30		1,222	79,605	$	13.93		1,109	79,662	$	18.05		1,438
Total holdings				$	3,650				$	3,637				$	4,111				$	4,265

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5. Inventories, net

At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, inventories, net consisted of the following:


		2019		2018		2020		2019
	��	(in thousands)				(in thousands)
Stockpiles - underground mine		$	2,705	$	2,365	$	3,301	$	3,968
Stockpiles - open pit mine			1,516		414		165		833
Leach pad			4,065		376		11,542		9,103
Concentrates			1,485		1,231		1,826		1,340
Doré(1)			1,510		1,289		1,233		1,581
Subtotal - product inventory			11,281		5,675
Subtotal - product inventories							18,067		16,825
Materials and supplies ~~(1)~~(2)			9,183		8,667		6,738		7,306
Total		$	20,464	$	14,342	$	24,805	$	24,131

(1)

Net of reserve of $378 and $478 at March 31, 2020 and December 31, 2019, respectively.

(2)

Net of reserve for obsolescence of ~~$857.~~$1,264.

In addition to the inventory above, as of March 31, 2020 and December 31, 2019, the Company has $4.8 million and $4.7 million, respectively, of low-grade ore stockpile inventory included in other non-current assets on the accompanying Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2020 and 2019, the Company recorded a net realizable value inventory adjustment of $1.6 million and nil, respectively, for inventories at its Isabella Pearl Mine.

6. Income Taxes

The Company recorded income tax benefit of $2.1 million and income tax expense of $1.1 ~~million and $3.6~~ million for the three months ended March 31, 2020 and 2019, ~~and 2018, respectively.~~ respectively. In accordance with applicable accounting rules, the interim provision for taxes was calculated by using the consolidated effective tax rate. The consolidated effective tax rate is a function of the combined effective tax rates for the jurisdictions in which ~~we operate.~~the Company operates. Variations in the relative proportions of jurisdictional income could result in fluctuations to ~~our~~the Company’s consolidated effective tax rate. ~~The~~At the federal level, the Company’s losses in the U.S. are taxed at 21% ~~and~~, while a 5% net proceeds of minerals tax applies to the Company’s operations in Nevada. The U.S. tax results are netted against the Company’s income in Mexico which is taxed at 37.5% (30% income tax and 7.5% mining tax), which has resulted in a consolidated effective tax rate above statutory rates.

Enacted in response to the novel coronavirus (“COVID-19”) pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provides roughly $2 trillion in economic relief to eligible businesses and individuals impacted by the novel coronavirus outbreak. The CARES Act is significant legislation that will affect nearly every aspect of the economy. The CARES Act affected corporate taxpayers, including corporations seeking sources of liquidity through net operating loss (“NOL”) carryback claims and income tax refunds. The Company has not applied for aid or relief funds under the CARES Act and in most cases will not qualify for such aid as our operations in the U.S. have continued uninterrupted and our suspended operation in Mexico is considered to be foreign business, thus not qualifying for benefits under the Act. However, as a result of changes under the CARES Act, corporate taxpayers with eligible NOLs may now carryback those losses to prior years to receive a refund of up to five years of prior taxes paid. As the CARES Act did not modify IRC Section 172(b)(3), a taxpayer, where advantageous, can still waive the carryback and elect to carry NOLs forward to subsequent tax years. Further, for years 2018 thru 2020, the CARES Act removed the 80% NOL utilization limitation on corporate taxpayers, thus the Company may use NOLs to fully offset taxable income in those years. The CARES Act has no immediate impact on the Company’s income taxes, however removal of the NOL utilization limitation will expedite its future realization of US losses generated post Tax Cuts and Jobs Act of 2017.

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The Company periodically transfers funds from its Mexican wholly-owned subsidiary to the U.S. in the form of dividends. Mexico requires a 10% withholding tax on dividends to foreign parent companies on all post-2013 earnings. Dividends from earnings generated prior to 2014 were exempted from the new dividend withholding tax. The Company commenced distribution of post-2013 earnings from Mexico in 2018. According to the existing U.S. – Mexico tax treaty, the dividend withholding tax between these countries is limited to 5% if certain requirements are met. Based on the Company’s review of these requirements, it estimates it will pay a 5% withholding tax on dividends received from Mexico in ~~2019.~~2020. The impact of the planned annual dividends for ~~2019~~2020 is reflected in the estimated annual effective tax rate.

As of March 31, ~~2019,~~2020, the Company believes that it has no liability for uncertain tax positions.

7. Prepaid Expenses and Other Current Assets

At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, prepaid expenses and other current assets consisted of the following:


	2019		2018		2020		2019
	(in thousands)				(in thousands)
Advances to suppliers	$	256	$	289	$	89	$	109
Prepaid insurance		729		1,179		767		1,333
Vendor deposits		237		236
IVA taxes receivable, net		1,065		538		-		245
Prepaid royalties						103		127
Other current assets		320		208		307		218
Total	$	2,607	$	2,450	$	1,266	$	2,032

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8. Property, Plant and Mine Development, net

At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, property, plant and mine development, net consisted of the following:


	2019		2018		2020		2019
	(in thousands)				(in thousands)
Asset retirement costs	$	1,702	$	1,240	$	3,847	$	3,412
Construction-in-progress (1)		34,897		34,335		15,279		11,965
Furniture and office equipment		1,893		1,861		2,101		2,087
Leach pad and ponds						5,649		5,649
Land		242		242		242		242
Light vehicles and other mobile equipment		2,496		2,508		2,553		2,553
Machinery and equipment		30,712		27,485		44,125		43,364
Mill facilities and infrastructure		17,236		11,712		31,966		31,408
Mineral interests and mineral rights		18,423		17,958		18,228		18,228
Mine development		71,426		69,487		91,422		90,089
Software and licenses		1,659		1,659		1,659		1,659
Subtotal (2) (3)		180,686		168,487		217,071		210,656
Accumulated depreciation and amortization		(61,069)		(57,245)		(92,621)		(85,397)
Total	$	119,617	$	111,242	$	124,450	$	125,259

(1)

Includes Nevada ~~construction-in-progress~~pre-production stripping costs of ~~$25.1~~$13.3 million and ~~$21.6~~$9.6 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Mexico construction-in-progress ~~of $9.8~~was $1.9 million and ~~$12.7~~$2.4 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

(2)

Includes ~~$1.6~~$1.8 million of assets recorded under finance ~~leases at March 31, 2019 and December 31, 2018.~~leases. Please see Note 13 for additional information.

(3)

Includes accrued capital expenditures of ~~$6.6~~$2.8 million and ~~$4.3~~$3.8 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

During the second quarter of 2018, the Company commenced development and construction of the mine and processing facilities at its Isabella Pearl project. Accordingly, the Company began capitalizing development and construction costs associated with Isabella Pearl.

The Company recorded depreciation and amortization expense of ~~$3.6~~$7.5 million and ~~$3.7~~$3.8 million for the three months ended March 31, 2020 and 2019, ~~and 2018, respectively.~~respectively.

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9. Accrued Expenses and Other Current Liabilities

At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, accrued expenses and other current liabilities consisted of the following:


	2019		2018		2020		2019
	(in thousands)				(in thousands)
Accrued insurance	$	187	$	364	$	216	$	452
Accrued royalty payments		1,467		1,432		2,316		2,212
Dividends payable		102		98		227		219
IVA taxes payable, net						514		-
Other payables		133		136		290		483
Total	$	1,889	$	2,030	$	3,563	$	3,366

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10. Reclamation and Remediation

The following table presents the changes in reclamation and remediation obligations for the three months ended March 31, ~~2019~~2020 and year ended December 31, ~~2018:~~2019:


	2019		2018		2020		2019
	(in thousands)				(in thousands)
Reclamation liabilities – balance at beginning of period	$	2,009	$	2,005	$	2,014	$	2,009
Changes in estimate		-		-		-		(82)
Foreign currency exchange loss		30		4
Foreign currency exchange (gain) loss						(401)		87
Reclamation liabilities – balance at end of period		2,039		2,009		1,613		2,014

Asset retirement obligation – balance at beginning of period		1,289		941		3,591		1,289
Changes in estimate		462		271		435		2,172
Accretion expense		12		78
Foreign currency exchange loss		9		(1)
Accretion						71		102
Foreign currency exchange (gain) loss						(223)		28
Asset retirement obligation – balance at end of period		1,772		1,289		3,874		3,591
Total period end balance	$	3,811	$	3,298	$	5,487	$	5,605

The Company’s reclamation ~~and remediation~~ liabilities are related to the Aguila project in Mexico.

The Company’s asset retirement obligations ~~for the Company~~ were discounted using a credit adjusted risk-free rate of 8%. As of March 31, ~~2019,~~2020 and December 31, ~~2018,~~2019, the Company recorded an asset retirement obligation of ~~$1.2~~$3.0 million and ~~$0.8~~$2.5 million, respectively, related to the Isabella Pearl project. ~~The~~As of March 31, 2020 and December 31, 2019, the Company’s ~~Aguila project’s~~ asset retirement obligation ~~as of March 31, 2019 and December 31, 2018~~related to the Aguila project in Mexico was ~~$0.6~~$0.9 million and ~~$0.5~~$1.1 million, respectively.

11. Loans Payable

The Company has financed certain equipment ~~purchases.~~purchases on a long-term basis. The loans bear annual interest at rates ranging from 3% to 4.48%, are collateralized by the equipment, and require monthly principal and interest payments of $0.08 million. As of March 31, 2020, and December 31, 2019, there iswas an outstanding balance of ~~$2.3 million.~~$1.4 million and $1.7 million, respectively. Scheduled minimum repayments are ~~$0.6 million in 2019, $0.9~~$0.7 million in 2020, $0.7 million in 2021, and $0.1 million in 2022. One of the loan agreements is subject to a prepayment penalty ~~ranging from~~of 1% ~~to 2%~~ of the outstanding loan balance at ~~time of full repayment, depending on the~~ time of repayment. The fair value of the loans payable, based on Level 2 inputs, approximated ~~book value~~the outstanding balance at both March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. See Note 19 for the definition of a Level 2 input.

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12. Commitments and Contingencies

The Company has a Contract Mining Agreement with a ~~contract miner~~mining contractor relating to mining activities at its Isabella Pearl project. Included in this ~~agreement~~Agreement is an embedded lease for the mining equipment for which the Company has recognized a right-of-use asset and corresponding operating lease liability. Please see Note 13 for more information. In addition to the embedded lease payments, the Company pays the contract miner operational costs in the normal course of business. These costs represent the remaining future contractual payments for the Contract Mining Agreement over its term. The contractual payments are determined by rates within the Contract Mining Agreement, estimated tonnes moved and bank cubic yards for drilling and blasting. ~~Total~~As of March 31, 2020, total estimated contractual payments remaining, excluding embedded lease payments, are ~~$6.8 million and $8.7~~$5.4 million for the ~~years~~year ended December 31, ~~2019 and 2020, respectively.~~2020.

As of March 31, ~~2019,~~2020, the Company has equipment purchase commitments aggregating approximately ~~$2.5~~$1.1 million.

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13. Leases

Operating Leases

~~As discussed in~~ ~~Note 2~~ to the interim financial statements (see "Recent Accounting Pronouncements"), the Company adopted the new lease accounting standard on January 1, 2019. Upon adoption, the Company recognized right-of-use assets and corresponding operating lease liabilities totaling $14.2 million. The Company’s finance leases did not change from December 31, 2018.

The Company leases office equipment and administrative offices from third parties as well as an administrative office from a related party. In addition, the Company has an embedded lease in its Contract Mining Agreement. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases as incurred over the lease term. For leases beginning in 2019 and later, the Company accounts for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs).

Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to two years. The exercise of lease renewal options is at the Company’s sole discretion. The depreciable life of assets are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The weighted average remaining lease term for the Company’s operating leases as of March 31, ~~2019~~2020 is ~~1.62~~0.65 years.

The discount rate implicit within the Company’s leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for the Company’s leases is determined based on the lease term adjusted for impacts of collateral. The weighted average discount rate used to measure the Company’s operating lease liabilities as of March 31, ~~2019~~2020 was 4.48%.

There are no material residual value guarantees and no restrictions or covenants imposed by the Company’s leases.

Most of the Company’s leases have a standard payment schedule; however, the payments for its mining equipment embedded lease are determined by tonnage hauled. This embedded lease is within a Contract Mining Agreement entered into for the mining activities ofat the Company’s Isabella Pearl project. The payments, amortization of the right-of-use asset, and interest vary immaterially from forecasted amounts due to variable conditions at the mine. During the three months ended March 31, ~~2019,~~2020, the Company capitalized variable lease costs of ~~$0.8~~$0.7 million to Inventory and ~~$0.8~~$1.5 million to Property, plant, and mine development, ~~as the Isabella Pearl project is in the development stage as of March 31, 2019.~~respectively.

The components of all other lease ~~cost~~costs recognized within the Company’s Condensed Consolidated Statements of Operations are as follows:


		Three months ended March 31,			Three months ended March 31,
Lease Cost Type	Condensed Consolidated Statements of Operation Location	2019		Consolidated Statements of Operations Location	2020		2019
		(in thousands)			(in thousands)
Operating lease cost	General and administrative expenses	$	20	General and administrative expenses	$	18	$	20
Operating lease cost	Production costs		19	Production costs		20		19
Related party lease cost	General and administrative expenses		11	General and administrative expenses		13		11
Short-term lease cost	Production costs		191
Short term lease cost				Production costs		66		191

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Maturities of operating lease liabilities as of March 31, ~~2019~~2020 are as follows (in thousands):

Year Ending December 31:

2019

$
6,205
2020

6,813
2021

151
2022

13
Thereafter

-
Total lease payments

13,182
Less imputed interest

(498)
Present value of minimum payments

12,684
Less: current portion

(7,868)
Present value of minimum payments

$
4,816

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2018 and under legacy lease accounting (ASC 840), future minimum lease payments, including both the future minimum lease payments and the other non-lease element payments for the Contract Mining Agreement, as of December 31, 2018 are as follows ~~(in thousands)~~:


Year Ending December 31:
2019	$	16,259
2020		14,839	$	5,230
2021		72		151
2022		-		13
2023				-
Thereafter		-		-
Total lease payments	$	31,170		5,394
Less imputed interest				(78)
Present value of minimum payments				5,316
Less: current portion				(5,192)
Long-term portion of minimum payments			$	124

Finance Leases

The Company has finance lease agreements for certain equipment. The leases bear annual imputed interest of 1.58% to 5.95% and require monthly principal, interest, and sales tax payments of $0.04 million. The weighted average discount rate for the Company’s finance leases is ~~5.87%~~5.80%. Scheduled minimum annual payments as of March 31, ~~2019~~2020 are as follows (in thousands):

Year Ending December 31:

2019

$
353
2020

470
2021

406
2022

-
Thereafter

-
Total minimum obligations

1,229
Less: interest portion

(87)
Present value of minimum payments

1,142
Less: current portion

(418)
Present value of minimum payments

$
724

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~~Scheduled minimum annual payments as of December 31, 2018 were as follows~~ ~~(in thousands)~~:


Year Ending December 31:
2019	$	470
2020		470	$	362
2021		406		419
2022		-		13
2023				13
Thereafter		-		3
Total minimum obligations		1,346		810
Less: interest portion		(103)		(38)
Present value of minimum payments		1,243		772
Less: current portion		(412)		(452)
Present value of minimum payments	$	831
Long-term portion of minimum payments			$	320

The weighted average remaining lease term for the Company’s finance leases as of March 31, ~~2019~~2020 is ~~2.63~~1.77 years.

Supplemental cash flow information related to the Company’s operating and finance leases is as follows for the three months ended March 31, 2020 and 2019:


	Three months ended March 31,		Three months ended March 31,
	2019		2020		2019
	(in thousands)		(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	798	$	766	$	798
Operating cash flows from finance leases		93		12		93
Investing cash flows from operating lease		846		1,452		846
Financing cash flows from finance leases		17		110		17

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14. Embedded Derivatives

Concentrate sales contracts contain embedded derivatives due to the provisional pricing terms for unsettled shipments. At the end of each reporting period, the Company records an adjustment to accounts receivable and revenue to reflect the mark-to-market adjustments for outstanding provisional invoices based on metal forward prices. Please see Note 19 for additional information.

The following table summarizes the Company’s unsettled sales contracts as of March 31, ~~2019~~2020 with the quantities of metals under contract subject to final pricing occurring through May ~~2019:~~2020:


	Gold		Silver		Copper		Lead		Zinc		Gold		Silver		Copper		Lead		Zinc
	(ounces)		(ounces)		(tonnes)		(tonnes)		(tonnes)		(ounces)		(ounces)		(tonnes)		(tonnes)		(tonnes)
Under contract		5,075		270,768		378		1,880		4,857		3,584		219,721		436		989		1,169
Average forward price (per ounce or tonne)	$	1,281	$	15.21	$	6,299	$	2,033	$	2,707	$	1,569	$	15.77	$	5,484	$	1,699	$	1,878

15. Stock-Based Compensation

~~During 2016, the Company replaced its Amended and Restated Stock Option and Stock Grant Plan (the “Prior Plan”) with the~~The Gold Resource Corporation 2016 Equity Incentive Plan (the “Incentive Plan”)~~. The Incentive Plan~~ allows for the issuance of up to 5 million shares of common stock in the form of incentive and non-qualified stock options, stock appreciation rights, ~~RSUs,~~restricted stock units (“RSUs”), stock grants, stock units, performance shares, performance share units and performance cash. Additionally, pursuant to the terms of the Incentive Plan, any award outstanding under the ~~Prior Plan~~any prior plan that is terminated, expired, forfeited, or canceled for any reason, will be available for grant under the Incentive Plan.

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During the three months ended March 31, 2019, ~~and 2018,~~ a total of 14,804 ~~and 14,964 restricted stock units (“RSUs”)~~RSUs vested ~~respectively,~~ and shares were issued with an intrinsic value of $0.1 million and a fair value of $0.1 million. No RSU’s vested during the three months ended March 31, 2020.

During the three months ended March 31, 2019, stock options to purchase an aggregate of 274,750 shares of the Company’s common stock were exercised at a weighted average exercise price of $3.95 per share. Of that amount, 250,000 of the options were exercised on a net exercise basis, resulting in 44,698 shares being delivered. The remaining 24,750 options were exercised for cash.

~~During~~No stock options were exercised during the three months ended March 31, ~~2018, stock options to purchase an aggregate of 1,000,000 shares of the Company’s common stock were exercised~~ ~~at a weighted average exercise price of $3.40 per share. Of that amount, 945,000 of the options were exercised on a net exercise basis, resulting in 244,345 shares being delivered. The remaining 55,000 options were exercised for cash.~~2020.

Stock-based compensation expense for stock options and RSUs for the periods presented is as follows:

Three months ended March 31,

2019

2018

(in thousands)
Stock options

$
211

$
174
Restricted stock units

125

62
Total

$
336

$
236

~~Total stock-based compensation related to stock options and RSUs has been allocated between production costs, general and administrative expenses, and exploration expense as follows:~~

Three months ended March 31,

2019

2018

(in thousands)
Production costs

$
29

$
(8)
General and administrative expenses

317

223
Exploration expense

(10)

21
Total

$
336

$
236


	Three months ended March 31,
	2020		2019
	(in thousands)
Stock options	$	222	$	211
Restricted stock units		248		125
Total	$	470	$	336

The Company ~~sponsors~~has a short-term incentive plan for its executive officers that provides for the grant of either cash or stock-based bonus awards payable upon achievement of specified performance metrics (the “STIP”). As of March 31, 2020 and December 31, 2019, nil has been accrued related to the STIP.

16. Shareholders’ Equity

On April 3, 2018, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with an investment banking firm (“Agent”) pursuant to which the Agent agreed to act as the Company’s sales agent with respect to the offer and sale from time to time of the Company’s common stock having an aggregate gross sales price of up to $75.0 million (the “Shares”). The ATM Agreement will remain in full force and effect until the earlier of (i) April 3, 2021, (ii) the effective date for a shelf registration filed with the Securities and Exchange Commission, when a new ATM agreement will be effective, or (iii) the date that the ATM Agreement is terminated in accordance with ~~the terms therein.~~its

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terms. An aggregate of ~~2,537,130~~3,850,000 shares and 2,562,130 shares of the Company’s common stock were sold through the ATM Agreement during the three months ended March 31, 2020 and 2019, for net proceeds to the Company, after deducting the Agent’s commissions and other expenses, of $10.4 million and $10.8 ~~million.~~million, respectively.

During the three months ended March 31, 2019, the Company issued 25,000 shares of its common stock at a value of $3.88 per share as payment for a ~~1-year~~one-year investor relations agreement with a third-party.

During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the Company declared and paid dividends of $0.01 and $0.005 per common ~~share.~~

~~Table~~share, respectively, for an aggregate total of ~~Contents~~

$0.7 million and $0.3 million, respectively.

17. Other Expense, net

Other expense, net, for the periods presented consisted of the following:

Three months ended March 31,

2019

2018

(in thousands)
Unrealized currency exchange gain

$
(127)

$
(1,026)
Realized currency exchange loss

151

1,324
Unrealized gain from gold and silver rounds/bullion, net (1)

(17)

(18)
Loss on disposal of fixed assets

-

5
Other expense (income)

18

(7)
Total

$
25

$
278


	Three months ended March 31,
	2020		2019
	(in thousands)
Unrealized currency exchange loss (gain)	$	1,618	$	(127)
Realized currency exchange (gain) loss		(291)		151
Unrealized loss (gain) from gold and silver rounds/bullion, net (1)		151		(17)
Other expense		35		18
Total	$	1,513	$	25

(1)

Gains and losses due to changes in fair value are non-cash in nature until such time that they are realized through cash transactions. For additional information regarding ~~our~~the Company’s fair value measurements and investments, please see Note 19.

18. Net (Loss) Income per Common Share

Basic earnings or loss per common share is calculated based on the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated based on the assumption that stock options and other dilutive securities outstanding, which have an exercise price less than the average market price of the Company’s common shares during the period, would have been exercised on the later of the beginning of the period or the date granted and that the funds obtained from the exercise were used to purchase common shares at the average market price during the period. All of the Company’s ~~restricted stock units~~RSUs are considered to be dilutive.

The effect of the Company’s dilutive securities is calculated using the treasury stock method and only those instruments that result in a reduction in net income per common share are included in the calculation. Options to purchase ~~3.6~~3.3 million and ~~3.1~~3.6 million shares of common stock at weighted average exercise prices of ~~$10.48~~$9.48 and ~~$11.41~~$10.48 were outstanding at March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, but were not included in the computation of diluted weighted average common shares outstanding, as the exercise price of the options exceeded the average price of the Company’s common stock during those periods, and therefore are anti-dilutive.

Basic and diluted net ~~(loss)~~ income per common share is calculated as follows:

Three months ended March 31,

2019

2018
Net income (in thousands)

$
882

$
5,457
Basic weighted average shares of common stock outstanding

60,672,133

57,120,077
Dilutive effect of share-based awards

469,955

791,222
Diluted weighted average common shares outstanding

61,142,088

57,911,299
Net income per share:

Basic

$
0.01

$
0.10
Diluted

$
0.01

$
0.09


	Three months ended March 31,
	2020		2019
Net (loss) income (in thousands)	$	(3,121)	$	882
Basic weighted average shares of common stock outstanding		66,022,202		60,672,133
Dilutive effect of share-based awards		-		469,955
Diluted weighted average common shares outstanding		66,022,202		61,142,088
Net (loss) income per share:
Basic and diluted	$	(0.05)	$	0.01

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19. Fair Value Measurement

Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

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Level 2Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth certain of the Company’s assets and liabilities measured at fair value by level within the fair value hierarchy as of March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:

2019

2018

Input Hierarchy Level

(in thousands)

Cash and cash equivalents:

Bank deposits

$
8,527

$
7,762

Level 1
Gold and silver rounds/bullion

3,650

3,637

Level 1
Accounts receivable:

Receivables from provisional concentrate sales

4,515

1,744

Level 2

$
16,692

$
13,143


	2020		2019		Input Hierarchy Level
	(in thousands)
Cash and cash equivalents	$	18,366	$	11,076	Level 1
Gold and silver rounds/bullion	$	4,111	$	4,265	Level 1
Receivables from provisional concentrate sales	$	4,043	$	8,362	Level 2
Loans payable	$	1,444	$	1,661	Level 2

Cash and cash equivalents consist primarily of cash deposits and are valued at cost, which approximates fair value. Gold and silver rounds/bullion consist of precious metals used for investment purposes and in the dividend program which are valued using quoted market prices. Please see Note 4 for additional information.

Trade accounts receivable include amounts due to the Company for deliveries of concentrates and doré sold to customers, net of allowance for doubtful accounts of $1.4 million. Concentrate sales contracts provide for provisional pricing as specified in such contracts. These sales contain an embedded derivative related to the provisional pricing mechanism which is bifurcated and accounted for as a derivative. At the end of each reporting period, the Company records an adjustment to sales to reflect the mark-to-market of outstanding provisional invoices based on the forward price curve. Because these provisionally priced sales have not yet settled as of the reporting date, the mark-to-market adjustment related to these invoices is included in accounts receivable as of each reporting date. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had an unrealized ~~gain~~losses of ~~$0.9~~$0.1 million and an unrealized ~~loss~~gains of ~~$0.1~~$0.2 million, respectively, included in its accounts receivable on the accompanying Condensed Consolidated Balance Sheets related to mark-to-market adjustments. Please see Note 14 for additional information.

Loans payable consist of obligations for equipment purchases financed on a long-term basis. Loans payable are recorded at amortized cost, which approximates fair value. See Note 11for additional information.

Gains and losses related to changes in the fair value of these financial instruments were included in the Company’s Condensed Consolidated Statements of Operations as shown in the following table:

Three months ended March 31,


2019

2018

Statement of Operations Classification


(in thousands)

Realized/unrealized derivative gain

$
1,837

$
571

Sales, net
Gold and silver rounds/bullion gain

$
15

$
16

Other expense, net


	Three months ended March 31,
	2020		2019		Statement of Operations Classification

Realized/unrealized derivative (loss) gain, net	$	(738)	$	1,837	Sales, net
Realized/unrealized gold and silver rounds/bullion (loss) gain, net	$	(152)	$	15	Other expense, net

1514

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Realized/Unrealized Derivatives

The following tables summarize the Company’s realized/unrealized derivatives for the periods presented (in thousands):


	Gold		Silver		Copper		Lead		Zinc		Total		Gold		Silver		Copper		Lead		Zinc		Total
Three months ended March 31, 2019
Three months ended March 31, 2020
Realized gain (loss)	$	124	$	60	$	14	$	15	$	598	$	811	$	351	$	160	$	5	$	(157)	$	(817)	$	(458)
Unrealized (loss) gain		(23)		(2)		153		(3)		901		1,026		(128)		(325)		(119)		50		242		(280)
Total realized/unrealized derivatives, net	$	101	$	58	$	167	$	12	$	1,499	$	1,837	$	223	$	(165)	$	(114)	$	(107)	$	(575)	$	(738)

Gold

Silver

Copper

Lead

Zinc

Total
Three months ended March 31, 2018

Realized gain (loss)

$
14

$
(53)

$
53

$
(5)

$
991

$
1,000
Unrealized gain (loss)

100

149

(100)

(23)

(555)

(429)
Total realized/unrealized derivatives, net

$
114

$
96

$
(47)

$
(28)

$
436

$
571


	Gold		Silver		Copper		Lead		Zinc		Total
Three months ended March 31, 2019
Realized gain	$	124	$	60	$	14	$	15	$	598	$	811
Unrealized (loss) gain		(23)		(2)		153		(3)		901		1,026
Total realized/unrealized derivatives, net	$	101	$	58	$	167	$	12	$	1,499	$	1,837

20. Supplementary Cash Flow Information

Other operating adjustments and write-downs within the net cash provided by operations on the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 consisted of the following:

2019

2018

(in thousands)
Unrealized gain on gold and silver rounds/bullion

$
(17)

$
(18)
Unrealized foreign currency exchange gain

(127)

(1,026)
Loss on disposition of fixed assets

-

5
Other

16

133
Total other operating adjustments

$
(128)

$
(906)


	2020		2019
	(in thousands)
Unrealized loss (gain) on gold and silver rounds/bullion	$	151	$	(17)
Unrealized foreign currency exchange loss (gain)		1,618		(127)
Other		11		16
Total other operating adjustments	$	1,780	$	(128)

21. Segment Reporting

The Company has organized its operations into two geographic regions. The geographic regions include Oaxaca, Mexico and Nevada, U.S.A. and represent the Company’s operating segments. Inter-company revenue and expense amounts have been eliminated within each segment in order to report on the basis that management uses internally for evaluating segment performance. The Company’s business activities that are not considered operating segments are included in Corporate and Other.

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The financial information relating to the Company’s segments is as follows (in thousands):


									Mexico		Nevada		Corporate and Other		Consolidated
Three months ended March 31, 2020
Revenue									$	22,148	$	5,857	$	-	$	28,005
Exploration expense										968		177		10		1,155
Net loss										(952)		(793)		(1,376)		(3,121)
Capital expenditures (1)										1,979		4,398		37		6,414

	Mexico		Nevada		Corporate and Other		Consolidated			Mexico		Nevada	Corporate and Other			Consolidated
Three months ended March 31, 2019
Revenue	$	26,578	$	-	$	-	$	26,578	$	26,578	$	-	$	-	$	26,578
Exploration expense		1,068		383		(1)		1,450		1,068		383		(1)		1,450
Net income (loss)		3,396		(419)		(2,095)		882		3,396		(419)		(2,095)		882
Capital expenditures (1)		4,682		7,199		-		11,881

		Mexico		Nevada	Corporate and Other			Consolidated
Three months ended March 31, 2018
Revenue	$	32,151	$	-	$	-	$	32,151
Exploration expense		496		651		38		1,185
Net income (loss)		8,588		(708)		(2,423)		5,457
Capital expenditures (2)		5,872		1,267		-		7,139		4,682		7,199		-		11,881

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(1)

Includes a decrease in capital expenditures in accounts payable of $950 and non-cash additions of $435; consolidated capital expenditures on a cash basis were $6,929.

(2)

Includes an increase in ~~accrued~~ capital expenditures in accounts payable of $2,303 and non-cash additions of $792; consolidated capital expenditures on a cash basis were ~~$8,786.~~

~~(2)~~

~~Includes a decrease in accrued capital expenditures of $193; consolidated capital expenditures on a cash basis were $7,332~~$8,786.

Total asset balances, excluding intercompany balances, at March 31, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows:


	2019		2018		2020		2019
	(in thousands)				(in thousands)
Mexico	$	97,754	$	91,590	$	89,677	$	98,718
Nevada		71,011		46,677		85,947		84,669
Corporate and Other		12,398		12,064		20,449		9,625
Consolidated	$	181,163	$	150,331	$	196,073	$	193,012

22. Subsequent Events

On March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a new novel coronavirus (“COVID-19”) as a “pandemic”. On March 31, 2020, the Mexican government issued a national health emergency order with an immediate suspension order for 30 days of all “non-essential” public and private sector business (which included mining) in order to mitigate the spread and transmission of COVID-19. As a result of this order, the Company suspended its Mexico operations on April 1, 2020. On April 20, 2020 the suspension order was extended to May 30, 2020. As of the date of the issuance of these unaudited Condensed Consolidated Financial Statements, there have been no other significant impacts, including impairments, to the Company’s operations and financial statements. The Company continues to monitor the situation and due to uncertainty of the pandemic, management's judgment regarding its impact on the results of operations, cash flows, and financial condition may change in the future and the extent of the impact cannot be reasonably estimated at this time.

Subsequent to March 31, ~~2019,~~2020, the Company sold ~~1,129,787~~484,500 shares of its common stock under ~~its~~the ATM ~~agreement~~Agreement for net proceeds of ~~$4.1~~$1.6 million.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion summarizes the results of operations of Gold Resource Corporation and its subsidiaries (“we”, “our”, or “us”) for the three months ended March 31, ~~2019~~2020 and compares those results to the three months ended March 31, ~~2018.~~2019. It also analyzes our financial condition at March 31, ~~2019~~2020 and compares it to our financial condition at December 31, ~~2018.~~2019. This discussion should be read in conjunction with the management’s discussion and analysis and the audited consolidated financial statements and footnotes for the year ended December 31, ~~2018~~2019 contained in our annual report on Form 10-K for the year ended December 31, ~~2018.~~2019.

The discussion also presents certain financial measures that are not prepared in accordance with U.S. Generally Accepted Accounting Principles (“non-GAAP”) but which are important to management in its evaluation of our operating results and are used by management to compare our performance with what we perceive to be peer group mining companies and are relied on as part of management’s decision-making process. Management believes these measures may also be important to investors in evaluating our performance. For a detailed description of each of the non-GAAP financial measures, please see the discussion below under Non-GAAP Measures.

See Forward-Looking Statements at the end of this Item 2 for important information regarding statements contained herein.

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Highlights

~~Highlights~~Consolidated highlights for the first quarter of ~~2019~~2020 are summarized below and discussed further in our Management’s Discussion and Analysis:

~~Our sales were $26.6 million;~~$28.0 million net sales;

~~Our~~$18.4 million cash balance ~~was $8.5 million~~ at March 31, ~~2019;~~2020;

~~We made~~$0.7 million dividend distributions, ~~of $0.3 million,~~ or ~~$0.005~~$0.01 per share for the quarter; and

~~Total cash cost after by-product credits per precious metal~~Consolidated production of 10,142 gold ~~equivalent ounce sold was $340*;~~ounces and 407,625 silver ounces.

~~We began initial stages of gold processing at Isabella Pearl with the application of solution on the leach pad.~~

* Non-GAAP Measure. ~~Please see~~ ~~Non-GAAP Measures~~ ~~below for additional information.~~

Overview

We are a mining company which pursues gold and silver projects that are expected to have both low operating costs and high returns on capital. We are presently focused on mineral production ~~from the Aguila~~ and ~~Alta Gracia projects within~~exploration at our Mining Units in Oaxaca Mexico and Nevada U.S.A. Our Oaxaca Mining Unit and on the construction and development and near-term production from the mine and processing facilities at our Isabella Pearl project within our Nevada Mining Unit. Our processing facilities at the Aguila project produceproduces doré and concentrates primarily ~~from ore mined~~ from the Arista underground mine, which contains precious metals of gold and silver and base metals of copper, lead and ~~zinc, and from the Mirador underground mine, which contains gold and silver~~zinc.~~. Additionally, we are focused on the~~ ~~exploration and evaluation of our other properties at both our Oaxaca~~Our Nevada Mining Unit ~~and our Nevada Mining Unit.~~produces doré from its Isabella Pearl open pit mine.

Precious metal gold equivalent, used periodically throughout this discussion, is determined by taking gold ounces produced or sold, plus silver ounces produced or sold converted to precious metal gold equivalent ounces using the gold to silver average price ratio for the period. The gold and silver average prices used to determine the gold to silver average price ratio are the actual metal prices realized from sales of our gold and silver.

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COVID-19 Pandemic

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (“COVID-19”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure. In response to the pandemic, many jurisdictions, including the United States and Mexico, instituted restrictions on travel, public gatherings and certain business operations.

Currently the mining industry is listed as an essential business in the state of Nevada and the Company continues to operate its mining unit accordingly while utilizing safety measures. On March 31, 2020, the Mexican government issued a national health emergency with an immediate suspension order for 30 days of all “non-essential” public and private sector business (which included mining) to mitigate the spread and transmission of the COVID-19. As a result, the Company suspended its Mexico operations and production on April 1, 2020. The Mexican government has given additional guidance requiring miners to remain closed until May 30, 2020. The Company plans to keep its Mexico operations suspended until governmental approval has been granted to re-start its operations.

In an effort to mitigate the spread of COVID-19 and protect the health and safety of our employees, contractors, and communities, we have taken precautionary measures including specialized training, social distancing, a work from home mandate where possible, and close monitoring of national and regional COVID-19 impacts and governmental guidelines. We are currently evaluating and optimizing recommencement of our Mexico operations in this rapidly changing environment. Our management and Board of Directors have analyzed various scenarios that might result from the effects of the pandemic, including one under which we might be forced to suspend operations at both of our mining units for several months due to mandates and or COVID-19 infections. While the numerous variables are difficult to assess given the ever-evolving COVID-19 global pandemic and various governmental approaches, we believe we have the necessary liquidity and capital resources to sustain such a prolonged impact. We are also evaluating potential supply chain disruptions. Due to the suspension of our Mexico operations and the uncertainty surrounding the long-term impact of the COVID-19 virus, we have withdrawn our 2020 production outlook.

The full impact of the COVID-19 outbreak continues to evolve subsequent to the quarter ended March 31, 2020 and as of the date the unaudited Condensed Consolidated Financial Statements are issued. As such, the full magnitude that the pandemic will have on the Company’s financial condition, liquidity and future results of operations is uncertain. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not presently able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition or liquidity for fiscal year 2020.

Exploration and Development Activities

~~Exploration~~We perform exploration activities ~~are performed on~~at our portfolio of exploration properties in Oaxaca, Mexico and Nevada, U.S.A. All of the properties that make up our Oaxaca Mining Unit are located along what is known as the San Jose structural corridor in the Sierra Madre Sur, which runs north 70 degrees west. Our properties comprise 55 kilometers of this structural corridor which spans three historic mining districts in Oaxaca. Our Nevada Mining Unit properties are in the Walker Lane Mineral Belt which is known for its significant and high-grade gold-silver production from current and historic mines. ~~Our Nevada properties are in close proximity to each other for potential equipment and manpower synergies of future operations.~~

Oaxaca Mining Unit, Mexico

~~The~~ Aguila project: ~~Our mine activities during~~During the first quarter of ~~2019~~2020, we continued to focus on development and ore extraction from the Arista mine. Exploration during the quarter focused on underground drilling at the Arista and Switchback vein systems. ~~Exploration activities during the quarter continued to focus on underground exploration drilling at the Switchback vein system in the Arista Mine.~~ The Switchback drilling program targeted further expansion and delineation of the multiple ~~high-grade~~ parallel veins for reserve definition, expansion and mine plan optimization. The Switchback vein system remains open on strike and vertical extent. ~~Eight~~Six underground diamond drill holes totaling ~~4,069~~2,487 meters were completed at the Aguila project during the first

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quarter of ~~2019.~~2020. During the quarter, we also conducted surface geologic mapping and rock chip sampling in the Cerro Pilon area of the Aguila project. Surface diamond drilling is planned to target mineralized veins identified in this area.

Alta Gracia project: Mirador Mine development ~~and access to previously identified mineralization~~ continued during the first quarter of ~~2019.~~2020. Development ~~during~~and production was conducted on the ~~quarter included completion of a new crosscut to the wide, high-grade~~ ore shoot discovered on the Independencia vein during 2018 exploration. ~~A second access portal into this~~

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~~vein system, called the Independencia portal, crosscut the vein system approximately 500 meters southwest of the~~We continue to truck and process Mirador ~~Portal. The Company is trucking and processing this~~ ore at the Aguila mill. ~~Analysis of underground mine~~During the quarter, only minor production came from Mirador while we focused higher volume production from Switchback in the Arista mine. Field exploration activities including surface geologic mapping and rock chip sampling ~~and surface drill exploration generated additional targets for future surface drilling. In addition, a geochemical soil sampling program was initiated~~continued at the Aguacatillo prospect on the ~~western extension of~~Alta Gracia project during the ~~Independencia vein.~~quarter. Surface investigations were also completed on a new mineralized area at Alta Gracia.

Nevada Mining Unit, U.S.A.

Isabella Pearl project: ~~Construction of the mine and processing facilities at our Isabella Pearl project continued during~~During the first quarter, ~~of 2019. As of March 31, 2019, we have substantially completed the construction of the mine facilities, with the exception of the~~our ADR process plant ~~completion, which is scheduled during the second quarter. During the quarter, we~~ continued ~~mining and placing run of mine ore on the~~to produce doré from our open pit, heap leach pad and started placement of crushed ore onto the pad with the newly commissioned grasshopper and radial stacker system. We began applying and circulating leach solution to three panels of the ore on the heap leach pad for gold dissolution and gold recovery to carbon. Subsequent to March 31, 2019, we shipped gold loaded carbon to be processed into doré and sold our first gold fromoperation at the Isabella Pearl ~~project, thereby beating our stated goal to produce gold within 12 months from project breaking ground, which was June 2018.~~

Mine. Exploration ~~work~~ during the ~~first~~ quarter ~~included~~ targeted expansion of the Isabella Pearl open pit deposit, including 3237 in-fill and step-out drill holes totaling ~~1,507~~2,557 meters on the ~~Pearl~~Isabella and ~~Civit Cat North~~Scarlet targets. ~~In addition,~~Drilling also targeted additional high-grade surface samples situated over historic drill intercepts at Scarlet not previously drill-tested. Surface geological and alteration mapping and rock chip sampling ~~was initiated on~~continued from Scarlet to the historic mining area at the Civit Cat North West target. ~~This~~The Company currently has an effective Notice of Intent with permission to drill the Scarlet target which is located outside the current permitted mine plan. The Company targets drilling this new area ~~is targeted for surface drilling~~ in ~~the future.~~mid-2020.

East Camp Douglas property: ~~During the first quarter~~We continued our review of ~~2019, we continued surface mapping, rock chip sampling~~historical geological, exploration and ~~collection of samples for spectral analysis in the Cerro Duro mine area~~mining data on the East Camp Douglas ~~property. Exploration activities~~property during the first quarter of 2020. We also ~~included analysis and three-dimensional modeling~~continued 3D-modeling in the vicinity of workings of the Kernick, Sunset, and Triumph historic mine ~~workings and drilling in the Cerro Duro mine area. The Cerro Duro mine~~areas and lithocap ~~areas~~area. These historic mines and the lithocap area continue to be evaluated for surface ~~drill targeting~~drilling in the ~~future.~~future.

Consolidated Results of Operations

The following table summarizes our consolidated results of ~~operations:~~operations for the periods presented:

Three months ended March 31,

2019

2018

(in thousands)
Sales, net

$
26,578

$
32,151
Mine gross profit

5,439

12,920
General and administrative expenses

2,011

2,354
Exploration expenses

1,450

1,185
Other expense

25

278
Income before income taxes

1,953

9,103
Provision for income taxes

1,071

3,646
Net income

$
882

$
5,457


	Three months ended March 31,
	2020		2019
	(in thousands)
Sales, net	$	28,005	$	26,578
Mine gross (loss) profit		(316)		5,439
General and administrative expenses		2,274		2,011
Exploration expenses		1,155		1,450
Other expense, net		1,513		25
(Loss) income before income taxes		(5,258)		1,953
(Benefit) provision for income taxes		(2,137)		1,071
Net (loss) income	$	(3,121)	$	882

~~Oaxaca Mining Unit~~

Sales, ~~net~~

net. ~~Net~~During the three months ended March 31, 2020, consolidated sales ofwere $28.0 million as compared to $26.6 million for the ~~first quarter~~same period in 2019. The increase is attributable to an increase in gold metal sales volumes in 2020, of ~~2019 decreased by $5.6~~which 3,755 gold ounces or $5.9 million ~~or 17%, when~~was from the Isabella Pearl Mine from which we began selling doré in May 2019. Offsetting the increase in gold sales was a decrease in zinc sales as a result of lower prices and higher concentrate treatment and refining costs. For the three months ended March 31, 2020, consolidated sales volumes totaled 8,747 ounces and 360,807 ounces of gold and silver, respectively, as compared to 4,758 ounces and 268,189 ounces of gold and silver, respectively, for the same period in ~~2018. The decrease was primarily a result of higher concentrate treatment charges, lower precious metal~~2019. Please see the Oaxaca and Nevada Mining Unit’s sales ~~volumes and lower average realized base metals prices partially offset by higher base metal volume sold.~~discussion below for more information.

Mine gross (loss) profit. For the three months ended March 31, ~~2019, base metals prices~~2020, mine gross profit decreased ~~from~~by $5.8 million or 106% compared to the same period in ~~2018 as follows: copper by 12%~~2019. The decrease was primarily due to ~~$6,291 per tonne, lead by 20% to $2,063 per tonne,~~higher base metal treatment and ~~zinc by 25% to $2,856 per tonne.~~refining costs. In addition, during the three months ended March 31, 2020, we recorded a net realizable value inventory

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~~Please see~~adjustment of $1.6 million for Isabella Pearl that reduced consolidated mine gross profit. This adjustment was primarily due to low grade ore that was placed on the ~~Sales Statistics~~ ~~table below for additional information regarding our mineral sales statistics.~~leach pad during the quarter.

~~Production~~

~~Gold~~General and silver production for the first quarter of 2019 totaled 6,538 ounces and 364,653 ounces, respectively, compared to 6,647 and 425,884 ounces over the same period in 2018. The overall decrease in precious metal production was due to the expected lower grade ore, which was mostly offset by increased average milled tonnage of 1,917 tonnes per day or 17% increase when compared to the same period in 2018. The additional mill throughput was for the most part a result of minor improvements to the Arista mill grinding capacity.

During the first quarter of 2019, the Arista Mine accounted for 91% of the production tonnage followed by the Aguila open pit and Mirador Mine with 7% and 2%, respectively. Near the end of the quarter, development of the Independencia Vein at the Mirador Mine reached the targeted ore zone, increasing silver production in the agitated leach process plant.

~~On a precious metal gold equivalent basis, our mill production totaled 10,825 ounces for the first quarter of 2019, compared to 11,909 ounces for the same period of 2018. See the~~administrative expenses. ~~Production Statistics~~ ~~table below for additional information regarding our mineral production statistics.~~

~~During~~For the three months ended March 31, ~~2019, we sold 4,758 gold ounces~~2020, general and ~~268,189 silver ounces at a total cash cost after by-product credits per precious metal gold equivalent ounce of $340, a significant increase from a cash credit of $316 in~~administrative expenses totaled $2.3 million as compared to $2.0 million for the same period in ~~2018.~~2019. The increase was due to increased stock-based compensation and legal and accounting fees.

Exploration expenses.For the three months ended March 31, 2020, exploration expenses totaled $1.2 million as compared to $1.5 million for the same period in 2019. The decreased exploration expense was primarily the result of decreased drilling at our Aguila project in Mexico.

Other expense, net. For the three months ended March 31, 2020 and 2019, we recorded other expense of $1.5 million and $0.03 million. The increase in the 2020 period was a result of ~~lower by-product credits~~currency exchange losses due to changes in the Mexican Peso exchange rate, and an unrealized loss on our gold and silver bullion/rounds as a result of decreasing gold and silver prices from ~~the sale of base metals and lower gold equivalent ounces from silver.~~December 31, 2019. Please see ~~Non-GAAP Measures~~Note 17 to the Condensed Consolidated Financial Statements ~~below~~ for additional ~~information concerning the cash cost per ounce measures~~. information.

(Benefit) provision for income taxes. For the three months ended March 31, 2020 and 2019, our benefit for income taxes was $2.1 million and an income tax expense of $1.1 million, respectively. The tax benefit in 2020 is due to the loss before income taxes. Please seeNote 6 to the Condensed Consolidated Financial Statements for additional information.

~~Table~~Net (loss) income. For the three months ended March 31, 2020 and 2019, we recorded net loss of ~~Contents~~$3.1 million and net income of $0.9 million, respectively. The decrease is due to the changes in our consolidated results of operations as discussed above.

Oaxaca Mining Unit Sales

The following ~~Production~~Sales Statistics table summarizes certain information about our Oaxaca Mining Unit operations for the periods indicated:

Three months ended March 31,

2019

2018
Arista Mine

Milled

Tonnes Milled

150,061

130,789
Grade

Average Gold Grade (g/t)

1.51

1.92
Average Silver Grade (g/t)

74

106
Average Copper Grade (%)

0.36

0.39
Average Lead Grade (%)

1.87

1.63
Average Zinc Grade (%)

4.67

4.41
Aguila Open Pit Mine

Milled

Tonnes Milled

11,464

5,108
Grade

Average Gold Grade (g/t)

2.11

2.16
Average Silver Grade (g/t)

43

45
Mirador Mine

Milled

Tonnes Milled

4,113

3,192
Grade

Average Gold Grade (g/t)

1.26

1.16
Average Silver Grade (g/t)

226

182
Combined

Tonnes milled

165,638

139,089
Tonnes Milled per Day (1)

1,917

1,636
Metal production (before payable metal deductions) (2)

Gold (ozs.)

6,538

6,647
Silver (ozs.)

364,653

425,884
Copper (tonnes)

433

385
Lead (tonnes)

2,153

1,615
Zinc (tonnes)

5,838

4,793
Precious metal gold equivalent ounces produced (mill production) (2)

Gold Ounces

6,538

6,647
Gold Equivalent Ounces from Silver

4,287

5,262
Total Precious Metal Gold Equivalent Ounces

10,825

11,909

~~(1)~~

~~Based on actual days the mill operated during the period.~~

~~(2)~~

The difference between what we report as "ounces/tonnes produced" and "payable ounces/tonnes sold" is attributable to the difference between the quantities of metals contained in the concentrates we produce versus the portion of those metals actually paid for by our customers according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades which impact the amount of metals contained in concentrates produced and sold.

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~~The following~~ ~~Sales Statistics~~ ~~table summarizes certain information about our combined Oaxaca Mining Unit operations for the periods indicated:~~


	Three months ended March 31,				Three months ended March 31,
	2019		2018		2020		2019

Metal sold
Gold (ozs.)		4,758		5,563		4,992		4,758
Silver (ozs.)		268,189		381,366		355,228		268,189
Copper (tonnes)		338		340		428		338
Lead (tonnes)		1,653		1,493		1,964		1,653
Zinc (tonnes)		4,506		3,778		4,356		4,506
Average metal prices realized (1)
Gold ($ per oz.)		1,339		1,342		1,670		1,339
Silver ($ per oz.)		15.74		16.58		17.03		15.74
Copper ($ per tonne)		6,291		7,156		5,530		6,291
Lead ($ per tonne)		2,063		2,573		1,691		2,063
Zinc ($ per tonne)		2,856		3,805		1,888		2,856
Precious metal gold equivalent ounces sold
Gold Ounces		4,758		5,563		4,992		4,758
Gold Equivalent Ounces from Silver		3,153		4,712		3,622		3,153
Total Precious Metal Gold Equivalent Ounces		7,911		10,275		8,614		7,911
Total cash cost before by-product credits per precious metal gold equivalent ounce sold ~~(2)~~	$	2,667	$	1,694	$	2,534	$	2,641
Total cash cost after by-product credits per precious metal gold equivalent ounce sold (2) (3)	$	340	$	(316)
Total cash cost after by-product credits per precious metal gold equivalent ounce sold (2)					$	918	$	314
Total all-in sustaining cost per precious metal gold equivalent ounce sold ~~(2)~~	$	834	$	347	$	1,229	$	808

(1)

Average metal prices realized vary from the market metal prices due to final settlement adjustments from our provisional invoices when they are settled. Our average metal prices realized will therefore differ from the market average metal prices in most cases.

(2)

~~For a reconciliation of this non-GAAP measure to total mine cost of sales, which is the most comparable U.S. GAAP measure, please see~~ ~~Non-GAAP Measures~~.

~~(3)~~

Total cash cost after by-product credits are significantly affected by base metals sales during the periods presented.

~~Consolidated Other Financial Results~~

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~~Mine gross profit.~~Oaxaca Mining Unit net sales of $22.1 million for the first quarter of 2020 decreased by $4.5 million, or 17%, when compared to the same period in 2019. The decrease was primarily a result of decreased average realized prices for base metals, which were slightly offset by increased average realized prices for gold and silver. Also contributing to the decrease in net sales was an increase in concentrate treatment and refining costs. For the three months ended March 31, ~~2019, mine gross profit decreased by $7.5 million or 58%, compared to~~2020, precious metal prices increased from the same period in ~~2018. The decrease was primarily due~~2019 as follows: gold by 25% to ~~higher concentrate treatment charges as compared~~$1,670, silver by 8% to ~~2018, lower metals sales in the 2019 period, and higher production costs as a result of increased mining and mill throughput.~~

~~General and administrative expenses.~~ For the three ended March 31, 2019, general and administrative expenses totaled $2.0 million, as compared to $2.4 million for the same period in 2018. The decrease in general and administrative expenses for the three months ended March 31, 2019 was primarily due to lower legal and accounting fees.

~~Exploration expenses.~~$17.09 per ounce. For the three months ended March 31, 2020, base metal prices decreased from the same period in 2019 ~~exploration expenses increased $0.3 million~~as follows: copper by 12% to ~~$1.5 million as a result of increased drilling in our Oaxaca Mining Unit.~~$5,530 per tonne, lead by 18% to $1,691 per tonne, and zinc by 34% to $1,888 per tonne.

~~Other expense.~~ ForDuring the three months ended March 31, ~~2019,~~2020, we ~~recorded other expense~~sold 4,992 gold ounces and 355,228 silver ounces at a total cash cost after by-product credits per precious metal gold equivalent ounce of ~~$0.03 million~~$918, as compared to ~~other expense~~a cash cost after by-products of ~~$0.3 million for~~$314 in the same period in ~~2018.~~2019. The ~~decrease~~increased cost per ounce was a result of ~~less currency exchange losses due to changes in~~lower by-product credits from the ~~Mexican Peso exchange rate.~~sale of base metals. Please see ~~Note 17 to the Condensed Consolidated Financial Statements~~Non-GAAP Measures below for additional ~~information.~~information concerning the cash cost per ounce measures.

~~Provision~~Oaxaca Mining Unit Production

The following Production Statistics table summarizes certain information about our Oaxaca Mining Unit operations for ~~income taxes.~~ the periods indicated:F


	Three months ended March 31,
	2020		2019
Arista Mine
Milled
Tonnes Milled		158,036		150,061
Grade
Average Gold Grade (g/t)		1.54		1.51
Average Silver Grade (g/t)		82		74
Average Copper Grade (%)		0.39		0.36
Average Lead Grade (%)		1.99		1.87
Average Zinc Grade (%)		4.67		4.67
Aguila Open Pit Mine
Milled
Tonnes Milled		14,248		11,464
Grade
Average Gold Grade (g/t)		1.26		2.11
Average Silver Grade (g/t)		38		43
Mirador Mine
Milled
Tonnes Milled		2,204		4,113
Grade
Average Gold Grade (g/t)		1.86		1.26
Average Silver Grade (g/t)		198		226
Combined
Tonnes milled		174,488		165,638
Tonnes Milled per Day (1)		1,994		1,917
Metal production (before payable metal deductions) (2)
Gold (ozs.)		6,450		6,538
Silver (ozs.)		402,542		364,653
Copper (tonnes)		488		433
Lead (tonnes)		2,514		2,153
Zinc (tonnes)		5,844		5,838

(1)

Based on actual days the mill operated during the period.

(2)

The difference between what we report as "ounces/tonnes produced" and "payable ounces/tonnes sold" is attributable to the difference between the quantities of metals contained in the concentrates we produce versus the portion of those metals actually paid for according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades and recoveries which impact the amount of metals contained in concentrates produced and sold.

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Gold and silver production for the first quarter of 2020 totaled 6,450 ounces and 402,542 ounces, respectively, compared to 6,538 and 364,653 ounces over the same period in 2019. The slight decrease in gold production was the result of decreased grade from Aguila open-pit production, somewhat offset by higher overall mill throughput. The increase in silver production was the result of higher grades from Arista as well as higher throughput. Overall production benefited from increased average milled tonnage of 1,994 tonnes per day, or 4% increase, when compared to the same period in 2019. The additional mill throughput was for the most part a result of improvements to the Arista mill grinding capacity.

Nevada Mining Unit Sales

In May 2019, we began selling gold and silver doré from our Isabella Pearl Mine. During the three months ended March 31, ~~2019, our provision~~2020, we sold 3,755 and 5,579 ounces of gold and silver, respectively, for income taxes was $1.1 million, as compared to $3.6 million for the three months ended March 31, 2018. The decrease in 2019 is commensurate with our decrease in income before income taxes as compared to 2018. ~~Please seeNote 6 to the Condensed Consolidated Financial Statements~~ ~~for additional information.~~net sales of $5.9 million.

~~Net income~~The following ~~. For the three months ended March 31, 2019, we recorded net income of $0.9 million as compared to net income of $5.5 million~~Sales Statistics table summarizes certain information about our Nevada Mining Unit operations for the ~~corresponding period in 2018.~~ periods indicated:


	Three months ended March 31,
	2020		2019

Metal sold
Gold (ozs.)		3,755		-
Silver (ozs.)		5,579		-
Average metal prices realized (1)
Gold ($ per oz.)		1,575		-
Silver ($ per oz.)		16.63		-

Total cash cost before by-product credits per gold ounce sold	$	1,352	$	-
Total cash cost after by-product credits per gold ounce sold	$	1,327	$	-
Total all-in sustaining cost per gold ounce sold	$	1,330	$	-

(1)

Nevada Mining Unit Production

The following Production Statistics table summarizes certain information about our Isabella Pearl operations for the periods indicated:


	Three months ended March 31,
	2020		2019

Ore mined
Ore (tonnes)		158,754		-
Gold grade (g/t)		1.15		-
Low-grade stockpile (tonnes)
Ore (tonnes)		18,490		-
Gold grade (g/t)		0.57		-
Waste (tonnes)		1,791,048		-
Metal production (before payable metal deductions) (1)
Gold (ozs.)		3,692		-
Silver (ozs.)		5,083		-

(1)

The difference between what we report as "ounces produced" and "payable ounces sold" is attributable to the difference between the quantities of metals contained in the doré we produce versus the portion of those metals actually paid for according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades and recoveries which impact the amount of metals contained in doré produced and sold.

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During the three months ended March 31, 2020, our Isabella Pearl Mine produced 3,692 ounces and 5,083 ounces of gold and silver, respectively. Gold and silver production was a result of expected lower grade ore mined in the Isabella zone, and therefore lower placement of ounces during the fourth quarter of 2019. The Company remains on schedule to access the upper portion of the higher-grade Pearl zone mid-year 2020, when gold grades and production are expected to gradually ramp higher for the remainder of 2020, primarily in the fourth quarter. This ramp up is a function of the continued removal of overburden waste above the Pearl zone.

Non-GAAP Measures

Throughout this report, we have provided information prepared or calculated according to U.S. GAAP and have referenced some non-GAAP performance measures which we believe will assist with understanding the performance of our business. These measures are based on precious metal gold equivalent ounces sold and include cash cost before by-product credits per ounce, total cash ~~cost/credit~~cost after by-product credits per ounce, and total all-in sustaining cost per ounce (“AISC”). Because the non-GAAP performance measures do not have any standardized meaning prescribed by U.S. GAAP, they may not be comparable to similar measures presented by other companies. Accordingly, these measures should not be considered in isolation, or as a substitute for, measures of performance prepared in accordance with U.S. GAAP. These non-GAAP measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.

For financial reporting purposes, we report the sale of base metals as part of our revenue. Revenue generated from the sale of base metals in our concentrates is considered a by-product of our gold and silver production for the purpose of our total cash ~~cost/credit~~cost after by-product ~~credits.~~credits for our Oaxaca Mining Unit. We periodically review our revenues to ensure that our reporting of primary products and by-products is appropriate. Because we consider copper, lead and zinc to be by-products of our precious metal production, the value of these metals continues to be applied as a reduction to total cash costs in our calculation of total cash ~~cost/credit~~cost after by-product credits per precious metal gold equivalent ounce sold. Likewise, we believe the identification of copper, lead and zinc as by-product credits is appropriate because of their lower individual economic value compared to gold and silver and due to the fact that gold and silver are the primary products we intend to produce. For our Nevada Mining Unit, silver sales are treated as a by-product.

Total cash ~~cost/credit,~~cost, after by-product credits, is a measure developed by the Gold Institute in an effort to provide a uniform standard for comparison purposes. ~~The guidance was first issued in 1996 and revised in November 1999.~~ AISC is calculated based on the current guidance from the World Gold ~~Council issued in June 2013.~~Council.

Total cash cost before by-product credits includes all direct and indirect production costs related to our production of metals (including mining, milling and other plant facility costs, smelter treatment and refining charges, royalties, and site general and administrative costs) less stock-based compensation allocated to production costs plus treatment and refining costs.

Total cash ~~cost/credit~~cost after by-product credits includes total cash cost before by-product credits less by-product credits, or revenues earned from base metals.

AISC includes total cash ~~cost/credit~~cost after by-product credits plus other costs related to sustaining production, including sustaining allocated general and administrative expenses and sustaining capital expenditures. We determined sustaining capital expenditures as those capital expenditures that are necessary to maintain current production and execute the current mine plan.

Cash cost before by-product credits per ounce, total cash ~~cost/credit~~cost after by-product credits per ounce and AISC are calculated by dividing the relevant costs, as determined using the cost elements noted above, by precious metal gold equivalent ounces sold for the periods presented.

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Reconciliations to U.S. GAAP

The following table provides a reconciliation of Oaxaca and Nevada Mining Units’ total cash cost after by-product credits to total mine cost of sales (a U.S. GAAP measure) as presented in the Condensed Consolidated Statements of Operations:


	Three months ended March 31,				Three months ended March 31,
	2019		2018		2020		2019
	(in thousands)				(in thousands)
Oaxaca Mining Unit
Total cash cost after by-product credits	$	2,691	$	(3,248)	$	7,917	$	2,489
Treatment and refining charges		(3,448)		(1,859)		(5,870)		(3,448)
By-product credits		18,407		20,650		13,911		18,407
Depreciation and amortization		3,444		3,492		6,013		3,646
Reclamation and remediation		16		204		49		16
Share-based compensation allocated to production costs		29		(8)		-		29
Total mine cost of sales	$	21,139	$	19,231
Total Oaxaca Mining Unit mine cost of sales						22,020		21,139
Nevada Mining Unit
Total cash cost after by-product credits						4,984		-
Treatment and refining charges						(57)		-
Depreciation and amortization						1,385		-
Reclamation and remediation						(11)		-
Total Nevada Mining Unit mine cost of sales						6,301		-

Total consolidated mine cost of sales					$	28,321	$	21,139

The following table presents a reconciliation of the non-GAAP measures of total cash cost before by-product credits, total cash cost after by-product credits and AISC ~~to AIC:~~for our Oaxaca Mining Unit:


	Three months ended March 31,				Three months ended March 31,
	2019		2018		2020		2019
	(in thousands, except ounces sold and cost per precious metal gold equivalent ounce sold)				(in thousands, except ounces sold and cost per precious metal gold equivalent ounce sold)
Total cash cost before by-product credits (1)	$	21,098	$	17,402	$	21,828	$	20,896
By-product credits (2)		(18,407)		(20,650)		(13,911)		(18,407)
Total cash cost after by-product credits		2,691		(3,248)		7,917		2,489
Sustaining capital expenditures		3,080		6,064		1,880		3,080
Sustaining general and administrative expenses		825		744		798		825
Total all-in sustaining cost	$	6,596	$	3,560	$	10,595	$	6,394

Precious metal gold equivalent ounces sold (3)		7,911		10,275		8,614		7,911

Total cash cost before by-product credits per precious metal gold equivalent ounce sold	$	2,667	$	1,694	$	2,534	$	2,641
By-product credits per precious metal gold equivalent ounce sold		(2,327)		(2,010)		(1,616)		(2,327)
Total cash cost after by-product credits per precious metal gold equivalent ounce sold		340		(316)		918		314
Other sustaining expenditures per precious metal gold equivalent ounce sold		494		663		311		494
Total all-in sustaining cost per precious metal gold equivalent ounce sold	$	834	$	347	$	1,229	$	808

(1)

Production cost less stock-based compensation allocated to production cost plus treatment and refining charges.

(2)

Please see the tables below for a summary of our by-product revenue and by-product credit per precious metal equivalent ounces sold.

(3)

Gold ounces sold, plus gold equivalent silver ounces sold converted to gold ounces using our realized gold price per ounce to silver price per ounce ratio.

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The following tables summarize our Oaxaca Mining Unit’s by-product revenue and by-product credit per precious metal gold equivalent ounce sold:


	Three months ended March 31,				Three months ended March 31,
	2019		2018		2020		2019
	(in thousands)				(in thousands)
By-product credits by dollar value:
Copper sales	$	2,128	$	2,433	$	2,366	$	2,128
Lead sales		3,410		3,842		3,322		3,410
Zinc sales		12,869		14,375		8,223		12,869
Total sales from by-products (1)	$	18,407	$	20,650	$	13,911	$	18,407

(1)

Amounts include realized gain (loss) on embedded derivative. Please see Note 19 to the Condensed Consolidated Financial Statements for additional information.


	Three months ended March 31,				Three months ended March 31,
	2019		2018		2020		2019
By-product credits per precious metal gold equivalent ounce sold:
Copper sales	$	269	$	237	$	275	$	269
Lead sales		431		374		386		431
Zinc sales		1,627		1,399		955		1,627
Total by-product credits per precious metal gold ounces sold	$	2,327	$	2,010	$	1,616	$	2,327

The following table presents a reconciliation of the non-GAAP measures of total cash cost and AISC for our Nevada Mining Unit:


	Three months ended March 31,
	2020		2019
	(in thousands, except ounces sold and cost per precious metal gold equivalent ounce sold)
Total cash cost before by-product credits (1)	$	5,076	$	-
By-product credits (2)		(92)		-
Total cash cost after by-product credits	$	4,984	$	-
Sustaining exploration expenses		12		-
Total all-in sustaining cost	$	4,996	$	-

Gold ounces sold		3,755		-

Total cash cost before by-product credits per gold ounce sold	$	1,352	$	-
By-product credits per gold ounce sold (2)		(25)		-
Total cash cost after by-product credits per gold ounce sold		1,327		-
Other sustaining expenditures per gold ounce sold		3		-
Total all-in sustaining cost per gold ounce sold	$	1,330	$	-

(1)

Production cost plus treatment and refining charges.

(2)

Please see the tables below for a summary of our by-product revenue and by-product credit per precious metal equivalent ounces sold.

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The following tables summarize our Nevada Mining Unit’s by-product revenue and by-product credit per precious metal gold equivalent ounce sold:


	Three months ended March 31,
	2020		2019
	(in thousands)
By-product credits by dollar value:
Silver sales	$	92	$	-
Total sales from by-products	$	92	$	-

Liquidity and Capital Resources

As of March 31, ~~2019,~~2020, we had working capital of ~~$10.5~~$28.2 million, consisting of current assets of ~~$41.7~~$52.7 million and current liabilities of ~~$31.2~~$24.5 million. This represents ~~a decrease~~an increase of ~~$3.0~~$5.5 million from the working capital balance of ~~$13.5~~$22.7 million at December 31, ~~2018.~~ 2019. Our working capital balance fluctuates as we use cash to fund our operations, financing and investing activities, including exploration, mine development, income taxes and shareholder dividends.Our March 31, 2020 and December 31, 2019 working capital was negatively affected by the current operating lease liability of $5.2 million and $7.3 million, respectively, as a result of the adoption of the new leasing standard in 2019. Please see Note 13 to the Condensed Consolidated Financial Statements for more information.

~~Cash~~While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and ~~cash equivalents increased $0.8 million~~the impact on our business operations cannot be reasonably estimated at this time. We are not eligible for any relief under the Coronavirus Aid, Relief and Economic Security Act passed by the U.S Government on March 26, 2020 as only our foreign operations have been affected by COVID-19 and our Nevada mining operations are still operating as normal. We have taken additional safety precautions in Nevada to ~~$8.5 million during~~help alleviate the ~~first three months~~risk of ~~2019.~~

~~Net cash used in operating activities for the three months ended March 31, 2019 was $0.6 million compared to net cash provided~~contraction and spread of ~~$14.0 million for the same period in 2018. The $14.6 million change is primarily due to a decrease in net income and changes in operating assets and liabilities. During the quarter, inventories~~COVID-19 at ~~Isabella Pearl increased by $4.9 million.~~

~~Net cash used in investing activities of $8.8 million increased $1.5 million for the first three months of 2019 compared to the same period in 2018 due to the development and construction of~~ our Isabella Pearl ~~project.~~

~~Net~~mine. We anticipate COVID-19 to have an adverse impact on our exploration plans, results of operations, financial position and cash ~~provided by financing activities for~~flows during the ~~three months ended March 31, 2019 was $10.3 million compared~~current fiscal year. We have raised additional capital through selling securities pursuant to ~~a net cash use of $0.3 million for same period~~our At-the-Market Offering Agreement in ~~2018 due proceeds from the sale of our common shares under the ATM agreement. During the quarter, we sold~~ ~~2,537,130 shares of common stock for net proceeds of $10.8 million under the ATM Agreement, as disclosed in our 2018 Form 10-K as a subsequent event.~~

~~Subsequent~~order to March 31, 2019, we sold 1,129,787 common shares under the ATM Agreement for total net proceeds of $4.1 million through May 6, 2019 to fund the inventory build-up and completion of construction and plant commissioning of Isabella Pearl.

~~We believe that~~ensure our liquidity and capital resources are adequate to fund our operations and corporate activities for the foreseeable ~~future.~~ future under various scenarios.

Cash and cash equivalents increased $7.3 million to $18.4 million during the first three months of 2020.

Net cash provided by operating activities for the three months ended March 31, 2020 was $5.0 million compared to a cash use of $0.6 million for the same period in 2019. The change is primarily due to changes in operating assets and liabilities, primarily inventories related to Isabella Pearl and receivables.

Net cash used in investing activities of $6.9 million for the three months ended March 31, 2020 decreased $1.9 million from the same period in 2019 as a result of less Isabella Pearl mine development and less capital expenditures in Mexico as projects were completed in 2019.

Net cash provided by financing activities for the three months ended March 31, 2020 was $9.4 million compared to $10.3 million for same period in 2019. The decrease is primarily related to due to less proceeds from the sale of our common shares under the ATM agreement as well as higher dividend payments in 2020 as compared to 2019.

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Accounting Developments

For a discussion of Recently Adopted and Recently Issued Accounting Pronouncements, please see Note 2 to the Condensed Consolidated Financial Statements.

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~~Off-Balance Sheet Arrangements~~

There have been no material changes in our off-balance sheet arrangements since December 31, 2018. Refer to Part II, Item 7 in our annual report on Form 10-K, for the year ended December 31, 2018, for information regarding our off-balance sheet arrangements.

~~Contractual Obligations~~

~~The following table presents a summary of our contractual obligations at March 31, 2019, except short-term purchase order commitments arising in the ordinary course of business:~~

Payments due by Period


Total

2019

2020

2021

2022

2023 and
Thereafter

(in thousands)
Loan payable

$
2,284

$
623

$
879

$
665

$
87

$
30
Finance lease obligation

1,142

312

436

394

-

-
Interest on loan payable

123

58

49

14

2

-
Interest on finance lease obligation

87

41

35

9

2

-
Operating lease obligations

13,182

6,205

6,813

151

13

-
Contract Mining Agreement(1)

15,530

6,843

8,687

-

-

-
Equipment purchase commitments

2,467

2,467

-

-

-

-

$
34,815

$
16,549

$
16,899

$
1,233

$
104

$
30

~~(1)~~

We signed a 24-month Contract Mining Agreement with a contract miner on November 14, 2018 to conduct mining activities at our Isabella Pearl project. We will be paying the contract miner operational costs in the normal course of business. These costs represent the remaining future minimum payments for operating costs for the Contract Mining Agreement over the initial 24 months of the agreement. The future minimum payments are determined by rates within the Contract Mining Agreement, estimated tonnes moved and bank cubic yards for drilling and blasting.

~~Critical Accounting Estimates~~

~~Leases~~ - Effective January 1, 2019, we adopted ASC Topic 842, Leases. ASC Topic 842 requires the recognition of lease rights and obligations as assets and liabilities on the balance sheet. Previously, lessees were not required to recognize on the balance sheet assets and liabilities arising from operating leases. As we elected the cumulative-effect adoption method, prior-period information has not been restated. The most significant effects of the standard on our Consolidated Financial Statements are (1) the recognition of new right-of-use assets and lease liabilities on our Consolidated Balance Sheet for our operating leases, and (2) significant new disclosures about our leasing activities (see Note 13 to the unaudited Consolidated Financial Statements in Part 1, Item1). On January 1, 2019, we recognized operating lease liabilities and right-of-use assets of $14.2 million based on the present value of the remaining lease payments over the lease term. The adoption did not result in a cumulative-effect adjustment to retained earnings. The new standard did not have a material impact on our results of operations or cash flows.

~~There have been no other changes in our critical accounting estimates~~ ~~since December 31, 2018.~~

Forward-Looking Statements

This report contains or incorporates by reference “forward-looking statements,” as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:

statements about our future exploration, permitting, production, development, and plans for development of our properties;

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statements concerning the benefits that we expect will result from our business activities and certain transactions that we contemplate or have completed, such as receipt of proceeds, decreased expenses and avoided expenses and expenditures; ~~and~~

statements of our expectations, beliefs, future plans and strategies, our targets, exploration activities, anticipated developments and other matters that are not historical ~~facts.~~facts; and

statements with respect to the COVID-19 pandemic and its impact on the Company’s operations and financial performance, actions taken in response by the Mexican and U.S. governments, and the mining industry in general.

These statements may be made expressly in this document or may be incorporated by reference from other documents that we will file with the SEC. You can find many of these statements by looking for words such as “believes,” “expects,” “targets,” “anticipates,” “estimates,” or similar expressions used in this report or incorporated by reference in this report.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements, which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, which may change at any time and without notice, based on changes in such facts or assumptions.

Risk Factors Impacting Forward-Looking Statements

The important factors that could prevent us from achieving our stated goals and objectives include, but are not limited to, those set forth in other reports we have filed with the SEC, including our Form 10-K for the year ended December 31, ~~2018,~~2019, and the following:

Global pandemics such as COVID-19 and governmental responses designed to control the pandemic;

Changes in the worldwide price for gold and/or silver;

Volatility in the equities markets;

Adverse results from our exploration or production efforts;

Producing at rates lower than those targeted;

Political and regulatory risks;

Weather conditions, including unusually heavy rains;

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Earthquakes or other unforeseen ground movements impacting mining or processing;

Failure to meet our revenue or profit goals or operating budget;

Decline in demand for our common stock;

Downward revisions in securities analysts’ estimates or changes in general market conditions;

Technological innovations by competitors or in competing technologies;

Cybersecurity threats;

Investor perception of our industry or our prospects;

Lawsuits;

Economic impact from spread of disease;

Actions by government central banks; and

General economic trends.

We undertake no responsibility or obligation to update publicly these forward-looking statements but may do so in the future in written or oral statements. Investors should take note of any future statements made by us or on our behalf.

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ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risks includes, but is not limited to, the following risks: changes in commodity prices, foreign currency exchange rates, provisional sales contract risks, changes in interest rates, and equity price risks. We do not use derivative financial instruments as part of an overall strategy to manage market risk; however, we may consider such arrangements in the future as we evaluate our business and financial strategy.

Commodity Price Risk

The results of our operations, cash flow, and financial condition depend in large part upon the market prices of gold and silver, and base metal prices of copper, lead and zinc. Gold and silver prices fluctuate widely and are affected by numerous factors beyond our control. The level of interest rates, the rate of inflation, the stability of exchange rates, the world supply of and demand for gold, silver and other metals, among other factors, can all cause significant fluctuations in commodity prices. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems and political developments. The price of gold and silver has fluctuated widely in recent years, and future price declines could cause a mineral project to become uneconomic, thereby having a material adverse effect on our business and financial condition. We have not entered into derivative contracts to protect the selling price for gold or silver. We may in the future more actively manage our exposure through derivative contracts or other commodity price risk management programs, although we have no intention of doing so in the near-term.

In addition to adversely affecting our reserve estimates, results of operations and/or our financial condition, declining gold and silver prices could require a reassessment of the feasibility of a project. Even if a project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause delays in the implementation of a project.

Foreign Currency Risk

Foreign currency exchange rate fluctuations can increase or decrease our costs to the extent we pay costs in currencies other than the U.S. ~~dollar.~~Dollar. We are primarily impacted by Mexican peso rate changes relative to the U.S. Dollar, as we incur some costs in the Mexican peso. When the value of the peso rises in relation to the U.S. Dollar, some of our costs in Mexico may increase, thus adversely affecting our operating results. Alternatively, when the value of the peso drops in relation to the U.S. Dollar, peso-denominated costs in Mexico will decrease in U.S. Dollar terms. These

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fluctuations do not impact our revenues since we sell our metals in U.S. dollars. Future fluctuations may give rise to foreign currency exposure, which may affect our financial results.

We have not utilized market-risk sensitive instruments to manage our exposure to foreign currency exchange rates but may in the future actively manage our exposure to foreign currency exchange rate risk.

Provisional Sales Contract Risk

We enter into concentrate sales contracts which, in general, provide for a provisional payment to us based upon provisional assays and prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates determined at the quoted metal prices at the time of shipment. The embedded derivative, which does not qualify for hedge accounting, is adjusted to market through revenue each period prior to settlement. Changes in the prices of metals between the shipment and final settlement date will result in adjustments to revenues related to the sales of concentrate previously recorded upon shipment. Please see Note 14 in the Condensed Consolidated Financial Statements for additional information.

Interest Rate Risk

Our outstanding debt consists of equipment loans and leased equipment classified as capital leases. As the debt is at fixed rates, we consider our interest rate risk exposure to be insignificant at this time.

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Equity Price Risk

We have in the past, and may in the future, seek to acquire additional funding by sale of common stock and other equity. The price of our common stock has been volatile in the past and may also be volatile in the future. As a result, there is a risk that we may not be able to sell our common stock at an acceptable price should the need for new equity funding arise.

ITEM 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures - During the fiscal period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the required time periods and are designed to ensure that information required to be disclosed in our reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting – Beginning January 1, 2019, we implemented ASC Topic 842, Leases. Although the adoption of the new accounting standard did not have a material impact on our Condensed Consolidated Statement of Operations or Condensed Consolidated Statement of Cash Flows for the three-month period ended March 31, 2019, we did implement changes to our internal controls related to the implementation of the lease accounting standard. These changes included performing a comprehensive lease scoping analysis to identify, disaggregate and evaluate each of our lease categories to calculate ROU assets and lease liabilities values for our leases. There were no changes that occurred during the three months ended March 31, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM ~~2. Unregistered sales of Equity Securities and Use of Proceeds~~1A: Risk Factors

~~Recent Sales~~Except as follows, there were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019. For more information concerning our risk factors, please see “Item 1A. Risk Factors” in our Form 10-K.

Table of ~~Unregistered Equity Securities~~Contents

Our activities may be adversely affected by unforeseeable and unquantifiable health risks, such as COVID-19, whether those effects are local, nationwide or global. Matters outside our control may prevent us from executing on our operations and/or exploration programs, limit travel of Company representatives, adversely affect the health and welfare of Company personnel or prevent important vendors and contractors from performing normal and contracted activities.

The novel coronavirus, COVID-19, has been declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention and has spread globally, including throughout the United States. In response, many jurisdictions, including in the United States, some of its political subdivisions and Mexico have instituted restrictions on travel, public gatherings and certain business operations. These restrictions have significantly disrupted economic activity in both the world, national and local economies and have caused volatility in capital markets. Our operations at the Aguila project in Oaxaca have already been temporarily suspended. The effects of the continued outbreak of COVID-19 and related government responses could include extended disruptions to supply chains and capital markets, reduced labor availability and productivity and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on us, including reduced demand for our products, impairment of goodwill or long-lived assets and impairment of our ability to develop and construct new mines and operate existing projects and to access funds from financial institutions and capital markets. In particular, these effects could disrupt or delay mining at our operating projects, which in turn could have a material adverse effect on our operations, cash flow and financial condition. However, at this time, we are unable to determine the extent of the impact that the COVID-19 outbreak will have on current operations ~~– During the first quarter of 2019, we issued 25,000 unregistered common shares as a payment for an investor relations service agreement with a third-party.~~.

ITEM 4.4: Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report.

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ITEM 6: Exhibits

The following exhibits are filed or furnished ~~herewith:~~herewith or incorporated herein by reference:


Exhibit Number		Descriptions

3.1		Articles of Incorporation of the Company as filed with the Colorado Secretary of State on August 24, 1998 (incorporated by reference from our registration statement on Form SB-2 filed on October 28, 2005, Exhibit 3.1, File No. 333-129321).

3.1.1		Articles of Amendment to the Articles of Incorporation as filed with the Colorado Secretary of State on September 16, 2005 (incorporated by reference from our registration statement on Form SB-2 filed on October 28, 2005, Exhibit 3.1.1, File No. 333-129321).

3.1.2		Articles of Amendment to the Articles of Incorporation as filed with the Colorado Secretary of State on November 8, 2010 (incorporated by reference from our quarterly report on Form 10-Q filed on November 10, 2010, Exhibit 3.1, File No. 001-34857).

3.2		Amended and Restated Bylaws of the Company dated August 9, 2010 (incorporated by reference from our current report on Form 8-K filed on August 12, 2010, Exhibit 3.2, File No. 333-129321).

3.2.1		Amendment dated March 25, 2013 to Amended and Restated Bylaws of the Company dated August 9, 2010 (incorporated by reference from our current report on Form 8-K filed on March 27, 2013, Exhibit 3.2, File No. 001-34857).

~~10.12~~3.2.2		Amendment ~~No. 2~~dated April 3, 2018 to ~~Office Lease between~~Amended and Restated Bylaws of the Company ~~and Lincoln ASB Colorado Center LLC~~ dated ~~January 24, 2019~~August 9, 2010 (incorporated by reference from our ~~annual~~current report on Form ~~10-K for the year ended December 31,~~8-K filed on April 3, 2018, Exhibit ~~10.12,~~3.2, File No. 001-34857).

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Jason D. Reid.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for John A. Labate.

32*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Jason D. Reid and John A. Labate.

95		Mine safety information listed in Section 1503 of the Dodd-Frank Act.

101		Financial statements from the Quarterly Report on Form 10-Q of Gold Resource Corporation for the three months ended March 31, ~~2019,~~2020, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements.

*This document is not being “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Registration Statements or other documents filed with the SEC shall not incorporate this exhibit by reference, except as otherwise expressly stated in such filing.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the Company has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	GOLD RESOURCE CORPORATION

Dated: May ~~7, 2019~~5, 2020		/s/ Jason D. Reid
	By:	Jason D. Reid,
		Chief Executive Officer and President




Dated: May ~~7, 2019~~5, 2020		/s/ John A. Labate
	By:	John A. Labate,
		Chief Financial Officer

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Year Ending December 31:
2019	$	6,205
2020		6,813
2021		151
2022		13
Thereafter		-
Total lease payments		13,182
Less imputed interest		(498)
Present value of minimum payments		12,684
Less: current portion		(7,868)
Present value of minimum payments	$	4,816


	Payments due by Period
	Total		2019		2020		2021		2022		2023 and Thereafter
	(in thousands)
Loan payable	$	2,284	$	623	$	879	$	665	$	87	$	30
Finance lease obligation		1,142		312		436		394		-		-
Interest on loan payable		123		58		49		14		2		-
Interest on finance lease obligation		87		41		35		9		2		-
Operating lease obligations		13,182		6,205		6,813		151		13		-
Contract Mining Agreement(1)		15,530		6,843		8,687		-		-		-
Equipment purchase commitments		2,467		2,467		-		-		-		-
	$	34,815	$	16,549	$	16,899	$	1,233	$	104	$	30

Three months ended March 31,

By-product credits per gold ounce sold:

Silver sales

Total by-product credits per gold ounce sold