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 ~~September~~June 30, ~~2020~~2021

☐	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~~2000 South Colorado Blvd,, ~~Colorado Springs~~Tower One,,Suite 10200,Denver, Colorado ~~80906~~80222

(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:

a
a
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.



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: ~~71,865,696~~74,531,924 shares of common stock outstanding as of ~~November 1, 2020~~July 26, 2021.

Table of Contents

GOLD RESOURCE CORPORATION

FORM 10-Q

Index

			Page
~~Part I - FINANCIAL INFORMATION~~				Second Quarter 2021 Highlights	1
~~Item 1~~.	~~Financial Statements~~
	~~Condensed Consolidated Balance Sheets at September 30, 2020 (unaudited) and December 31, 2019~~Part I - FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Ø Condensed Consolidated ~~Statements of Operations for the three~~Interim Balance Sheets at June 30, 2021 (unaudited) and ~~nine months ended September 30,~~December 31, 2020 ~~and 2019 (unaudited)~~		2
	Ø Condensed Consolidated Interim Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)	3
	Ø Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)		3	4
	Ø Condensed Consolidated Interim Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)		5	6
	Ø Notes to the Condensed Consolidated Interim Financial Statements (unaudited)		6	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35	31
Item 4.	Controls and Procedures		36	33

~~Part II - OTHER INFORMATION~~

	Part II - OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	36Other Information	34
Item 6.	Exhibits		37	34
Signatures			39	35

Table of Contents

SECOND QUARTER 2021 HIGHLIGHTS

Highlights for the three months ended June 30, 2021 are summarized below and discussed further in our Management’s Discussion and Analysis:

Strategic

●

The Company continues to strengthen our senior leadership team with the addition of Alberto Reyes as the new Chief Operating Officer. Mr. Reyes has more than 20 years of international mining experience. This addition adds to the expertise necessary to focus on unlocking the value of our assets while implementing best in class governance.

●

Annual Meeting of Shareholders was held on June 4, 2021. During the meeting, shareholders approved our current five Directors to serve another annual term and approved an amendment to the articles of incorporation to increase the number of authorized shares of common stock from 100 million to 200 million shares, among other items. More information can be found in the 2021 Proxy Statement posted to our website at www.goldresourcecorp.com and filed with the SEC at www.SEC.gov.

●

$1.0 million distributed in shareholder dividends this quarter, totaling $117.8 million since 2010.

Operational

●

There were two lost time incidents in 2021 at the Don David Gold Mine as of the date of this report, which were investigated, and measures were taken to reinforce adherence to safety protocols. While there were no serious injuries, the Company recognized the need to modify the safety program, and a series of programs are underway to improve the overall safety culture.

●

The Don David Gold Mine produced and sold a total of 9,685 gold equivalent ounces, comprising 5,697 gold ounces and 270,321 silver ounces sold at an average price per ounce of $1,822 and $26.88, respectively.

●

Construction of the water filtration plant and dry stack tailings facilities progressed with an expected completion in the third quarter. The dry stack facilities will conserve water, accelerate reclamation of certain areas of the open pit mine, as well as extend the life of tailings storage facilities.

●

The exploration program progressed with the development of 156 meters of development drifts and 3,421 meters of diamond drilling in 12 drill holes underground at our Arista and Switchback vein systems and 2,069 meters in two surface drill holes at the Aguila project. Additionally, there is a renewed emphasis on satellite areas, including Cerro Colorado and the area surrounding the Aguila project with drilling planned for the second half of 2021.

●

With a focus on unlocking the future value at the Don David Gold Mine, a total review of first principles commenced to review the geology, metallurgy, block models, mining methods and other key details of the mineral reserve and mineral resource models.

●

Due to the adoption of the new Mexican labor reform, effective June 2021, we onboarded all employees from the outsourced third-party provider to our wholly-owned subsidiary, Don David Gold Mexico. Recognition of Mexican statutory profit sharing had a $1.9 million total impact on income.

Financial

●

Our balance sheet remains strong with $30.5 million in cash as of June 30, 2021, an increase of $5.1 million since December 31, 2020.

●

Year to date cash inflow from operating activities was $16.1 million.

●

Net income was $1.3 million or $0.02 earnings per share for the quarter.

●

Working capital was $32.6 million at June 30, 2021.

●

Total cash cost for the quarter was $713 per gold ounce equivalent (after co-product credits).¹

●

Total all-in sustaining cost for the quarter was $1,280 per gold ounce equivalent (after co-product credits).¹

¹ Total cash cost after co-product credits and all-in sustaining cost per gold equivalent ounce sold are non-GAAP financial measures. Please see the Non-GAAP Measures section of the Management's Discussion and Analysis and Results of Operations for a complete reconciliation of the non-GAAP measures.

‌1

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

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

(Unaudited)

September 30,

December 31,

2020

2019

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$
31,313

$
11,076
Gold and silver rounds/bullion

5,241

4,265
Accounts receivable, net

4,777

8,362
Inventories, net

26,977

24,131
Prepaid taxes

-

786
Prepaid expenses and other current assets

2,168

2,032
Total current assets

70,476

50,652
Property, plant and mine development, net

117,409

125,259
Operating lease assets, net

1,411

7,436
Deferred tax assets, net

8,617

4,635
Other non-current assets

5,550

5,030
Total assets

$
203,463

$
193,012
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$
11,991

$
14,456
Loans payable, current

840

879
Finance lease liabilities, current

465

446
Operating lease liabilities, current

1,371

7,287
Income taxes payable, net

876

-
Mining royalty taxes payable, net

1,162

1,538
Accrued expenses and other current liabilities

3,754

3,366
Total current liabilities

20,459

27,972
Reclamation and remediation liabilities

6,710

5,605
Loans payable, long-term

165

782
Finance lease liabilities, long-term

84

435
Operating lease liabilities, long-term

51

160
Total liabilities

27,469

34,954
Shareholders' equity:

Common stock - $0.001 par value, 100,000,000 shares authorized:

71,850,665 and 65,691,527 shares outstanding at September 30, 2020 and December 31, 2019, respectively

72

66
Additional paid-in capital

168,114

148,171
Retained earnings

14,863

16,876
Treasury stock at cost, 336,398 shares

(5,884)

(5,884)
Accumulated other comprehensive loss

(1,171)

(1,171)
Total shareholders' equity

175,994

158,058
Total liabilities and shareholders' equity

$
203,463

$
193,012


		As of		As of
		June 30,		December 31,
	Note	2021		2020
ASSETS
Current assets:
Cash and cash equivalents		$	30,535	$	25,405
Gold and silver rounds/bullion	5		627		671
Accounts receivable, net			5,142		4,226
Inventories, net	6		10,485		9,995
Prepaid expenses and other current assets	8		2,916		2,576
Total current assets			49,705		42,873
Property, plant and mine development, net	9		63,868		62,511
Deferred tax assets, net			991		309
Other non-current assets			45		41
Total assets		$	114,609	$	105,734
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	9,529	$	8,782
Income taxes payable, net			2,471		73
Mining royalty taxes payable, net			1,695		955
Accrued expenses and other current liabilities	10		3,417		2,275
Total current liabilities			17,112		12,085
Reclamation and remediation liabilities	11		3,179		3,098
Other non-current liabilities	10		1,055		13
Total liabilities			21,346		15,196
Shareholders' equity:
Common stock - $0.001 par value, 200,000,000 shares authorized:
74,531,924 and 74,376,958 shares outstanding at June 30, 2021 and December 31, 2020, respectively			75		75
Additional paid-in capital			85,269		84,865
Retained earnings			14,974		12,653
Treasury stock at cost, 336,398 shares			(5,884)		(5,884)
Accumulated other comprehensive loss			(1,171)		(1,171)
Total shareholders' equity			93,263		90,538
Total liabilities and shareholders' equity		$	114,609	$	105,734

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Interim Financial Statements.

1Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌2

Table of Contents

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

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

(Unaudited)

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019

Sales, net

$
42,286

$
40,066

$
91,389

$
96,018

Mine cost of sales:

Production costs

24,027

24,611

62,554

61,169

Depreciation and amortization

7,289

6,117

19,694

13,524

Reclamation and remediation

68

20

136

77

Total mine cost of sales

31,384

30,748

82,384

74,770

Mine gross profit

10,902

9,318

9,005

21,248

Costs and expenses:

General and administrative expenses

2,665

2,194

7,136

6,913

Exploration expenses

1,799

1,129

3,505

3,210

Other (income) expense, net

(537)

600

(871)

518

Total costs and expenses

3,927

3,923

9,770

10,641

Income (loss) before income taxes

6,975

5,395

(765)

10,607

Provision (benefit) for income taxes

1,974

2,417

(833)

4,949

Net income

$
5,001

$
2,978

$
68

$
5,658

Net income per common share:

Basic

$
0.07

$
0.05

$
-

$
0.09

Diluted

$
0.07

$
0.05

$
-

$
0.09

Weighted average shares outstanding:

Basic

70,641,938

65,495,958

68,896,059

63,001,178

Diluted

71,044,528

65,796,899

69,289,349

63,336,131


		For the three months ended				For the six months ended
		June 30,				June 30,
	Note	2021		2020		2021		2020
Sales, net	4	$	30,836	$	12,521	$	58,104	$	34,670
Mine cost of sales:
Production costs			19,523		10,611		34,766		26,570
Depreciation and amortization			4,379		3,184		7,778		9,197
Reclamation and remediation			54		26		105		75
Total mine cost of sales			23,956		13,821		42,649		35,842
Mine gross profit (loss)			6,880		(1,300)		15,455		(1,172)
Costs and expenses:
General and administrative expenses			2,134		1,796		3,715		3,601
Exploration expenses			648		135		1,855		1,113
Restructuring expenses			-		-		496		-
Stock-based compensation	14		197		400		681		870
Other expense (income), net	16		867		(1,909)		553		(444)
Total costs and expenses			3,846		422		7,300		5,140
Income (loss) before income taxes			3,034		(1,722)		8,155		(6,312)
Provision for income taxes (benefit)			1,751		(1,979)		4,345		(3,351)
Net income (loss) from continuing operations			1,283		257		3,810		(2,961)
Net loss from discontinued operations, net of income taxes	3		-		(2,069)		-		(1,972)
Net income (loss)		$	1,283	$	(1,812)	$	3,810	$	(4,933)
Net income per common share:
Basic and diluted net income (loss) per common share from continuing operations	17		0.02		-		0.05		(0.04)
Basic and diluted net loss per common share from discontinued operations	17		-		(0.03)		-		(0.03)
Basic and diluted net income (loss) per common share	17	$	0.02	$	(0.03)	$	0.05	$	(0.07)

Weighted average shares outstanding:
Basic	17		74,485,672		69,985,499		74,445,058		68,011,860
Diluted	17		74,987,559		69,985,499		74,868,187		68,011,860

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Interim Financial Statements.

2Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌3

Table of Contents

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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

(Unaudited)


	Three Months Ended September 30, 2020 and 2019													For the three months ended June 30, 2021 and 2020
	Number of Common Shares	Par Value of Common Shares		Additional Paid- in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		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, June 30, 2019 (unaudited)	65,147,953	$	66	$	144,812	$	14,710	$	(5,884)	$	(1,171)	$	152,533
Balance, March 31, 2020														69,877,925	$	70	$	158,987	$	13,090	$	(5,884)	$	(1,171)	$	165,092
Stock-based compensation	-		-		367		-		-		-		367	-		-		400		-		-		-		400
Common stock issued for vested restricted stock units	106,256		-		-		-		-		-		-	35,072		-		-		-		-		-		-
Dividends declared	-		-		-		(329)		-		-		(329)	-		-		-		(708)		-		-		(708)
Issuance of stock, net of issuance costs	773,716		-		2,642		-		-		-		2,642	484,500		-		1,550		-		-		-		1,550
Net loss														-		-		-		(1,812)		-		-		(1,812)
Balance, June 30, 2020														70,397,497	$	70	$	160,937	$	10,570	$	(5,884)	$	(1,171)	$	164,522

Balance, March 31, 2021														74,775,604	$	75	$	84,966	$	14,436	$	(5,884)	$	(1,171)	$	92,422
Stock-based compensation														-		-		205		-		-		-		205
Net stock options exercised														92,718		-		98		-		-		-		98
Dividends declared														-		-		-		(745)		-		-		(745)
Net income	-		-		-		2,978		-		-		2,978	-		-		-		1,283		-		-		1,283
Balance, September 30, 2019 (unaudited)	66,027,925	$	66	$	147,821	$	17,359	$	(5,884)	$	(1,171)	$	158,191

Balance, June 30, 2020 (unaudited)	70,397,497	$	70	$	160,937	$	10,570	$	(5,884)	$	(1,171)	$	164,522
Stock-based compensation	-		-		305		-		-		-		305
Dividends declared	-		-		-		(708)		-		-		(708)
Common stock issued for vested restricted stock units	58,133		-		-		-		-		-		-
Issuance of stock, net of issuance costs	1,731,433		2		6,872		-		-		-		6,874
Net income	-		-		-		5,001		-		-		5,001
Balance, September 30, 2020 (unaudited)	72,187,063	$	72	$	168,114	$	14,863	$	(5,884)	$	(1,171)	$	175,994
Balance, June 30, 2021														74,868,322	$	75	$	85,269	$	14,974	$	(5,884)	$	(1,171)	$	93,263

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited

Table of Contents

Nine Months Ended September 30, 2020 and 2019


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

$
59

$
121,602

$
12,656

$
(5,884)

$
(1,171)

$
127,262
Stock-based compensation

-

-

1,581

-

-

-

1,581
Net stock options exercised

69,448

1

97

-

-

-

98
Common stock issued for vested restricted stock units

121,060

-

-

-

-

-

-
Dividends declared

-

-

-

(955)

-

-

(955)
Issuance of stock, net of issuance costs

6,650,588

6

24,541

-

-

-

24,547
Net income

-

-

-

5,658

-

-

5,658
Balance, September 30, 2019 (unaudited)

66,027,925

$
66

$
147,821

$
17,359

$
(5,884)

$
(1,171)

$
158,191

Balance, December 31, 2019

66,027,925

$
66

$
148,171

$
16,876

$
(5,884)

$
(1,171)

$
158,058
Stock-based compensation

-

-

1,175

-

-

-

1,175
Common stock issued for vested restricted stock units

93,205

-

-

-

-

-

-
Dividends declared

-

-

-

(2,081)

-

-

(2,081)
Issuance of stock, net of issuance costs

6,065,933

6

18,768

-

-

-

18,774
Net income

-

-

-

68

-

-

68
Balance, September 30, 2020 (unaudited)

72,187,063

$
72

$
168,114

$
14,863

$
(5,884)

$
(1,171)

$
175,994


	For the six months ended June 30, 2021 and 2020
	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, 2019	66,027,925	$	66	$	148,171	$	16,876	$	(5,884)	$	(1,171)	$	158,058
Stock-based compensation	-		-		870		-		-		-		870
Common stock issued for vested restricted stock units	35,072		-		-		-		-		-		-
Dividends declared	-		-		-		(1,373)		-		-		(1,373)
Issuance of stock, net of issuance costs	4,334,500		4		11,896		-		-		-		11,900
Net loss	-		-		-		(4,933)		-		-		(4,933)
Balance, June 30, 2020	70,397,497	$	70	$	160,937	$	10,570	$	(5,884)	$	(1,171)	$	164,522

Balance, December 31, 2020	74,713,356	$	75	$	84,865	$	12,653	$	(5,884)	$	(1,171)	$	90,538
Stock-based compensation	-		-		346		-		-		-		346
Common stock issued for vested restricted stock units	2,614		-		-		-		-		-		-
Net stock options exercised	217,718		-		263		-		-		-		263
Dividends declared	-		-		-		(1,489)		-		-		(1,489)
Surrender of stock for taxes due on vesting	(65,366)		-		(205)		-		-		-		(205)
Net income	-		-		-		3,810		-		-		3,810
Balance, June 30, 2021	74,868,322	$	75	$	85,269	$	14,974	$	(5,884)	$	(1,171)	$	93,263

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Interim Financial Statements.

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited

Table of Contents

GOLD RESOURCE CORPORATION

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,				For the six months ended June 30,
	2020		2019		2021		2020
Cash flows from operating activities:
Net income	$	68	$	5,658
Adjustments to reconcile net income to net cash from operating activities:
Net income (loss)					$	3,810	$	(4,933)
Net loss from discontinuing operations						-		(1,972)
Net income (loss) from continuing operations					$	3,810	$	(2,961)
Adjustments to reconcile net income from continuing operations to net cash from operating activities:
Deferred income taxes		(4,617)		1,091		(699)		(4,597)
Depreciation and amortization		19,953		13,881		7,855		9,315
Stock-based compensation		1,175		1,581		681		870
Other operating adjustments		(815)		314		441		(359)
Changes in operating assets and liabilities:
Accounts receivable		3,585		(6,056)		(916)		5,098
Inventories		(1,823)		(5,727)		(391)		542
Prepaid expenses and other current assets		(196)		1,505		(1,015)		(426)
Other non-current assets		(1,304)		(2,882)
Accounts payable and other accrued liabilities		60		349		3,254		(1,949)
Mining royalty and income taxes payable, net		1,610		(1,944)		3,109		159
Net cash provided by operating activities		17,696		7,770
Net cash provided by operating activities from continuing operations						16,129		5,692

Cash flows from investing activities:
Capital expenditures		(12,915)		(29,166)		(9,333)		(4,404)
Other investing activities		133		2
Net cash used in investing activities		(12,782)		(29,164)
Net cash used in investing activities from continuing operations						(9,333)		(4,404)

Cash flows from financing activities:
Proceeds from the exercise of stock options		-		98		263		-
Proceeds from issuance of stock		18,674		24,449		-		11,900
Dividends paid		(2,062)		(944)		(1,737)		(1,357)
Repayment of loans payable		(656)		(597)
Repayment of finance leases		(332)		(311)
Net cash provided by financing activities		15,624		22,695
Cash related to the Spin-off						-		(269)
Other financing activities						3		-
Net cash (used in) provided by financing activities from continuing operations						(1,471)		10,274
Effect of exchange rate changes on cash and cash equivalents from continuing operations						(195)		(155)

Effect of exchange rate changes on cash and cash equivalents		(301)		(306)
Cash flows from discontinued operations:
Net cash used in operating activities						0		(2,031)
Net cash used in investing activities						0		(6,195)

Net increase in cash and cash equivalents		20,237		995		5,130		3,181
Cash and cash equivalents at beginning of period		11,076		7,762
Cash and cash equivalents at end of period	$	31,313	$	8,757
Cash and cash equivalents of continuing operations at beginning of period						25,405		10,210
Cash and cash equivalents of continuing operations at end of period					$	30,535	$	13,391

Supplemental Cash Flow Information
Supplemental Cash Flow Information Continuing Operations
Interest expense paid	$	84	$	121	$	-	$	13
Income and mining taxes paid	$	1,915	$	3,743	$	2,233	$	1,066
Non-cash investing activities:
Change in capital expenditures in accounts payable	$	(2,207)	$	158	$	502	$	(1,602)
Change in estimate for asset retirement costs	$	1,404	$	1,476	$	7	$	-
Equipment purchased through loan payable	$	-	$	330
Equipment purchased under finance leases	$	-	$	56
Common stock issued for the acquisition of mineral property	$	100	$	-

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Interim Financial Statements.

5Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌6

Table of Contents

GOLD RESOURCE CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED INTERIMN FINANCIAL STATEMENTS

~~September~~June 30, ~~2020~~2021
(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, ~~2019~~2020 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.

Certain items in the prior period’s Condensed Consolidated Financial Statements have been reclassified to conform to the current presentation. These reclassifications were mostly related to Discontinued Operations and separate presentation of stock-based compensation.

2. Recently Adopted Accounting Standards

~~In June 2016,~~Recent accounting pronouncements issued have been evaluated and do not presently impact our financial statements and supplemental data.

3. Discontinued Operations

On December 31, 2020, the ~~Financial Accounting Standards Board issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement~~Company completed its spin-off of ~~Credit Losses on Financial Instruments”~~its wholly-owned subsidiary Fortitude Gold Corporation and its subsidiaries (“FGC” or “Nevada Mining Unit”). The standard modifies the measurement approach for credit losses on financial instruments, including trade receivables, from an incurred loss method to 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 forecast thatFGC is ~~supportable. The Company adopted the new standard on January 1, 2020. The adoption of the standard did not have any effect on~~presented as discontinued operations in the Company’s Condensed Consolidated Financial Statements.

Results of discontinued operations for the three and six months ended June 30, 2020, are as follows (in thousands):


	For the three months ended June 30,		For the six months ended June 30,
	2020		2020
	(Unaudited)		(Unaudited)
Sales, net	$	8,576	$	14,433
Mine cost of sales		8,858		15,158
Mine gross loss		(282)		(725)
Exploration expenses		416		593
Other expense, net		62		110
Loss before income taxes		(760)		(1,428)
Income tax expense		1,309		544
Net loss from discontinued operations	$	(2,069)	$	(1,972)

6Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌7

Table of Contents

Selected Statements of Cash Flows presenting depreciation and amortization, capital expenditures, sale proceeds and significant operating noncash items of FGC were as follows:


	For the three months ended June 30,		For the six months ended June 30,
	2020		2020
	(Unaudited)			(Unaudited)
Cash flows from discontinued operating activities:
Net income	$	(2,069)	$	(1,972)
Adjustments to reconcile net income to net cash from discontinued operating activities:
Deferred income taxes		1,309		544
Depreciation and amortization		1,860		3,282
Other operating adjustments		4		(7)
Changes in operating assets and liabilities:
Accounts receivable		70		(99)
Inventories		(1,030)		(2,816)
Prepaid expenses and other current assets		(93)		(11)
Other non-current assets		(1,187)		(256)
Accounts payable and other accrued liabilities		334		(696)
Net cash used in discontinued operating activities		(802)		(2,031)

Cash flows from discontinued investing activities:
Capital expenditures		(2,748)		(6,195)
Net cash used in discontinued investing activities		(2,748)		(6,195)

Cash flows from discontinued financing activities:
Cash transferred from Gold Resource Corporation prior to Spin-off		3,984		8,492
Repayment of loans payable		(219)		(435)
Repayment of finance leases		(109)		(216)
Net cash provided by discontinued financing activities		3,656		7,841


Supplemental Cash Flow Information Discontinued Operations
Non-cash investing activities:
Change in capital expenditures in accounts payable	$	(2,034)	$	(1,518)
Change in estimate for asset retirement costs	$	662	$	1,097

Effective December 31, 2020, in connection with the Spin-Off, the Company entered into an agreement with FGC that governs the relationship of the parties following the Spin-Off. The Management Services Agreement provided that the Company and its subsidiaries provide services to FGC to assist in the transition of FGC as a separate company. The agreed upon charges for services rendered were based on market rates that align with the rates that an unaffiliated service provider would charge for similar services. Due to the successful development of FGC’s own corporate, administrative, and technical capabilities, the Company terminated the Agreement effective on May 21, 2021.

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌8

Table of Contents

3.4. Revenue

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

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019

(in thousands)

(in thousands)
Doré sales, net

Gold

$
17,449

$
7,399

$
35,663

$
12,192

Silver

878

619

2,232

1,670

Less: Refining charges

(170)

(39)

(436)

(138)

Total doré sales, net

18,157

7,979

37,459

13,724

Concentrate sales

Gold

5,211

7,767

13,894

19,072

Silver

6,857

6,370

14,638

15,673

Copper

2,911

2,502

6,470

7,237

Lead

3,501

4,480

8,730

11,874

Zinc

10,894

13,875

25,110

36,998

Less: Treatment and refining charges

(5,795)

(3,691)

(14,930)

(10,709)

Total concentrate sales, net

23,579

31,303

53,912

80,145

Realized/unrealized embedded derivative, net

550

784

18

2,149

Total sales, net

$
42,286

$
40,066

$
91,389

$
96,018


	For the three months ended June 30,				For the six months ended June 30,
	2021		2020		2021		2020

	(in thousands)				(in thousands)
Doré sales, net
Gold	$	2,695	$	1,891	$	5,182	$	3,660
Silver		228		678		605		1,354
Less: Refining charges		(20)		(110)		(91)		(145)
Total doré sales, net		2,903		2,459		5,696		4,869
Concentrate sales
Gold		7,671		2,467		14,195		8,683
Silver		6,951		2,566		13,264		7,781
Copper		3,714		1,198		7,100		3,559
Lead		2,595		1,750		5,000		5,229
Zinc		9,240		5,176		18,006		14,216
Less: Treatment and refining charges		(2,907)		(3,301)		(5,791)		(9,135)
Total concentrate sales, net		27,264		9,856		51,774		30,333
Realized/unrealized gain (loss) embedded derivative, net		669		206		634		(532)
Total sales, net	$	30,836	$	12,521	$	58,104	$	34,670

45. 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~~sponsored a dividend exchange program under which shareholders may exchange their cash dividends for minted gold and silver rounds. ~~During the three~~The Company determined to discontinue its dividend exchange program effective Q3 2021 due to its costly nature and ~~nine months ended September 30, 2020, the Company sold 32 ounces of gold and 3,000 ounces of silver for proceeds of $0.1 million.~~limited shareholder participation. NaN ~~sales~~purchases of gold and silver occurred ~~in 2019.~~during the current period.

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company’s holdings and value of rounds/bullion, using quoted market prices, consisted of the following:

2020

2019


Ounces

Per Ounce

Amount

Ounces

Per Ounce

Amount

(in thousands)

(in thousands)
Gold

1,816

$
1,887

$
3,426

1,866

$
1,515

$
2,827
Silver

76,481

$
23.73

1,815

79,662

$
18.05

1,438
Total holdings

$
5,241

$
4,265


	As of June 30, 2021					As of December 31, 2020
	(Unaudited)
	Ounces	Per Ounce		Amount		Ounces	Per Ounce		Amount
				(in thousands)					(in thousands)
Gold	184	$	1,763	$	325	189	$	1,888	$	357
Silver	11,725	$	25.77		302	11,842	$	26.49		314
Total holdings				$	627				$	671

7Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌9

Table of Contents

5.6. Inventories, net

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, inventories, net, consisted of the following:


	2020		2019		As of		As of

					June 30,		December 31,
					2021		2020
					(Unaudited)
	(in thousands)				(in thousands)
Stockpiles - underground mine	$	414	$	3,968	$	651	$	648
Stockpiles - open pit mine		615		833		-		41
Leach pad		16,261		9,103
Concentrates		1,716		1,340		2,098		1,919
Doré ⁽¹⁾		1,032		1,581
Doré, net ⁽¹⁾						344		459
Subtotal - product inventories		20,038		16,825		3,093		3,067
Materials and supplies ⁽²⁾		6,939		7,306		7,392		6,928
Total	$	26,977	$	24,131	$	10,485	$	9,995

(1)	Net of reserve of NaN and $368 ~~and $478~~ at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

(2)	Net of reserve for obsolescence of ~~$1,264~~$209 both as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

In addition to the current inventory above, as of September 30, 2020 and December 31, 2019, the Company has $5.2 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.

For the three and nine months ended September 30, 2020 the Company recorded nil and $3.6 million in net realizable value (“NRV”) inventory adjustments, respectively. For the three and nine months ended September 30, 2019, the Company recorded an NRV inventory adjustment of $1.6 million.

6.7. Income Taxes

The Company recorded an income tax expense of $1.8 million and $4.3 million for the three and six months ended June 30, 2021. For the three and six months ended June 30, 2020, the Company recorded an income tax benefit of $2.0 million and $0.8 million for the three and nine months ended September 30, 2020, respectively. For the three and nine months ended September 30, 2019, the Company recorded income tax expense of $2.4 million and $4.9$3.4 million, respectively. In accordance with applicable accounting rules, the interim provision for taxes ~~was~~is calculated by using the estimated consolidated annual effective tax rate. The consolidated effective tax rate is a function of the combined effective tax rates for the jurisdictions in which the Company operates. Variations in the relative proportions of jurisdictional income could result in fluctuations to the Company’s consolidated effective tax rate. At the federal level, the Company’s income in the U.S. is taxed at 21%~~, while a 5% net proceeds of minerals tax applies to the Company’s operations in Nevada,~~ and a 5% withholding tax applies to dividends received from Mexico. The U.S. tax results are combined with the Company’s income in Mexico, taxed at 37.5% (30% income tax and 7.5% mining tax), and in Canada at 26.5%, which results in a consolidated effective tax rate above statutory U.S. Federal rates. Both the U.S. and Canada jurisdictions do not currently generate taxable income therefore there is no impact on our consolidated effective tax rate.

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 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 through 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.Mining Taxation

~~Table~~Mining entities in Mexico are subject to two mining duties, in addition to the 30% Mexico corporate income tax: a “special” mining duty of ~~Contents~~7.5% of taxable income as defined under Mexican tax law (also referred to as “mining royalty tax”) on extraction activities performed by concession holders. The mining royalty tax is generally applicable to earnings before income tax, depreciation, depletion, amortization, and interest. In calculating the mining royalty tax, there are 0 deductions related to depreciable costs from operational fixed assets. Both duties are tax deductible for income tax purposes. As a result, our effective tax rate applicable to the Company’s Mexican operations is substantially higher than the Mexico statutory rate. In addition, in Q1 2021, the Mexican Tax Authorities introduced new tax regulation wherein exploration expenses that were previously 100% deductible in the year incurred are now being deducted at a rate of 10% per year for 10 years, same as for Mexican Income Tax purposes.

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 unless otherwise provided per a tax treaty. 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 ~~2020.~~2021. The impact of the planned annual dividends for ~~2020~~2021 is reflected in the estimated annual effective tax rate.

As of ~~September~~June 30, ~~2020,~~2021, the Company believes that it has 0 liability for uncertain tax positions.

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌10

Table of Contents

The U.S. Treasury Department issued final regulations in July 2020 concerning global intangible low-taxed income, commonly referred to as GILTI tax, and introduced by the Tax Act of 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The final tax regulations allow income to be excluded from GILTI tax that is subject to an effective tax rate higher than 90% of the U.S. tax rate (18.9%). The Company completed its assessment of the new legislation during the three months ended September 30, ~~2020 and determined that due~~2020. Due to ~~this~~the high tax exception, ~~that~~no GILTI tax was ~~not~~ incurred in ~~2019. As a result of this analysis, the Company recorded a reversal of the prior year GILTI tax expense that resulted in~~ ~~$0.9 million tax benefit during the three months ended September 30, 2020.~~Q2 2021.

~~7. Prepaid Expenses and Other Current Assets~~

~~At September 30, 2020 and December 31, 2019, prepaid expenses and other current assets consisted of the following:~~

2020

2019

(in thousands)
Advances to suppliers

$
635

$
109
Prepaid insurance

1,121

1,333
IVA taxes receivable, net

140

245
Prepaid royalties

-

127
Other current assets

272

218
Total

$
2,168

$
2,032

~~Table of Contents~~

8. ~~Property, Plant~~Prepaid Expenses and ~~Mine Development, net~~Other Current Assets

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, property, plant~~2020, prepaid expenses and ~~mine development, net~~other current assets consisted of the following:

2020

2019

(in thousands)
Asset retirement costs

$
4,816

$
3,412
Construction-in-progress ⁽¹⁾

3,686

11,965
Furniture and office equipment

2,140

2,087
Leach pad and ponds

5,649

5,649
Land

242

242
Light vehicles and other mobile equipment

2,601

2,553
Machinery and equipment

45,005

43,364
Mill facilities and infrastructure

32,004

31,408
Mineral interests and mineral rights

18,878

18,228
Mine Development ⁽²⁾

106,181

90,089
Software and licenses

1,659

1,659
Subtotal ^{(3) (4)}

222,861

210,656
Accumulated depreciation and amortization

(105,452)

(85,397)
Total

$
117,409

$
125,259

~~(1)~~

Includes Nevada construction-in-progress and pre-production stripping costs of $0.2 million and $9.6 million at September 30, 2020 and December 31, 2019, respectively. Mexico construction-in-progress was $3.5 million and $2.4 million at September 30, 2020 and December 31, 2019, respectively.

~~(2)~~

~~Pearl deposit mine development of $13.3 million was put into service on April 1, 2020.~~

~~(3)~~

~~Includes $1.8 million of assets recorded under finance leases. Please see~~ ~~Note~~13 ~~for additional information.~~

~~(4)~~

~~Includes accrued capital expenditures of $1.6 million and $3.8 million at September 30, 2020 and December 31, 2019, respectively.~~

~~The Company recorded depreciation and amortization expense of $7.4 million and $20.0~~ ~~million for the three and nine months ended September 30, 2020, respectively. For the three and nine months ended September 30, 2019, the Company recorded $6.3 million and $13.9 million, respectively.~~

~~9. Accrued Expenses and Other Current Liabilities~~

~~At September 30, 2020 and December 31, 2019, accrued expenses and other current liabilities consisted of the following:~~


	2020		2019		As of		As of

	(in thousands)				June 30,		December 31,
Accrued insurance	$	653	$	452
Accrued royalty payments		2,410		2,212
Dividends payable		238		219
Other payables		453		483
					2021		2020
					(Unaudited)
					(in thousands)
Advances to suppliers					$	357	$	374
Prepaid insurance						2,156		709
IVA taxes receivable, net						129		846
Other current assets						274		647
Total	$	3,754	$	3,366	$	2,916	$	2,576

~~Table of Contents~~

10~~. Reclamation and Remediation~~

~~The following table presents the changes in reclamation and remediation obligations for the nine months ended September 30, 2020 and year ended December 31, 2019:~~

2020

2019

(in thousands)
Reclamation liabilities – balance at beginning of period

$
2,014

$
2,009
Changes in estimate

-

(82)
Foreign currency exchange (gain) loss

(325)

87
Reclamation liabilities – balance at end of period

1,689

2,014

Asset retirement obligation – balance at beginning of period

3,591

1,289
Changes in estimate

1,404

2,172
Accretion

207

102
Foreign currency exchange (gain) loss

(181)

28
Asset retirement obligation – balance at end of period

5,021

3,591
Total period end balance

$
6,710

$
5,605

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

As of September 30, 2020 and December 31, 2019, the Company had a $5.2 million and $6.7 million off-balance sheet arrangement, respectively, consisting of a $9.2 million surety bond off-set by a $4.0 million and $2.5 ~~million asset retirement obligation at September 30, 2020 and December 31, 2019, respectively, for future reclamation obligations for Isabella Pearl.~~ ~~As of September 30, 2020 and December 31, 2019, the Company’s asset retirement obligation related to the Aguila project in Mexico was $1.0 million and $1.1~~ ~~million, respectively. The Company’s asset retirement obligations were discounted using a credit adjusted risk-free rate of 8%.~~

~~11. Loans Payable~~

The Company has financed certain equipment 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 September 30, 2020, and December 31, 2019, there was an outstanding balance of $1.0 million and $1.7 million, respectively. Scheduled remaining minimum repayments are $0.2 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 of 1% of the outstanding loan balance at time of repayment. The fair value of the loans payable, based on Level 2 inputs, approximated the outstanding balance at both September 30, 2020 and December 31, 2019. See ~~Note 19~~ ~~for the definition of a Level 2 input.~~

~~12. Commitments and Contingencies~~

The Company has a Contract Mining Agreement with a mining contractor relating to mining activities at its Isabella Pearl project in Nevada. Included in this 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. As of September 30, 2020, total estimated contractual payments remaining, excluding embedded lease payments, are $0.6 million for the year ended December 31, 2020.

~~As of September 30, 2020, the Company has equipment purchase commitments aggregating approximately $0.7 million.~~

~~Table of Contents~~

~~13.~~ ~~Leases~~

~~Operating Leases~~

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 September 30, 2020 is 0.27 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 September 30, 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 contained in the Contract Mining Agreement entered into for the mining activities at 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 September 30, 2020, the Company capitalized variable lease costs of $1.8 million to Inventory. During the nine months ended September 30, 2020, the Company capitalized variable lease costs of $4.6 million to Inventory and $1.5 million to Property, plant, and mine development. During the three months ended September 30, 2019, the Company capitalized variable lease costs of $0.3 million to Inventory and $1.4 million to Property, plant, and mine development. During the nine months ended September 30, 2019, the Company capitalized variable lease costs of $1.8 million to Inventory and $3.2 ~~million to Property, plant, and mine development. On October 28, 2020, the Company extended the Contract Mining Agreement for a one-year term for its mining activities at the Isabella Pearl project.~~

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

Three months ended September 30,

Nine months ended September 30,
Lease Cost Type

Consolidated Statements of Operations Location

2020

2019

2020

2019


(in thousands)
Operating lease cost

General and administrative expenses

$
19

$
20

$
58

$
61
Operating lease cost

Production costs

18

19

54

57
Related party lease cost

General and administrative expenses

13

14

35

35
Short term lease cost

Production costs

48

77

130

381

~~Table of Contents~~

~~Maturities of operating lease liabilities as of September 30, 2020 are as follows~~ ~~(in thousands)~~:9. Property, Plant and Mine Development, net

Year Ending December 31:

2020

$
1,245
2021

175
2022

13
2023

-
Thereafter

-
Total lease payments

1,433
Less imputed interest

(11)
Present value of minimum payments

1,422
Less: current portion

(1,371)
Long-term portion of minimum payments

$
51

At June 30, 2021 and December 31, 2020, property, plant and mine development, net consisted of the following:

~~Finance Leases~~


	As of		As of
	June 30,		December 31,
	2021		2020
	(Unaudited)
	(in thousands)
Asset retirement costs	$	1,071	$	1,064
Construction-in-progress⁽¹⁾		10,494		7,158
Furniture and office equipment		1,892		1,839
Land		230		230
Light vehicles and other mobile equipment		2,104		2,192
Machinery and equipment		32,289		31,227
Mill facilities and infrastructure		24,407		24,407
Mine Development		87,842		83,859
Software and licenses		1,619		1,619
Subtotal ⁽²⁾		161,948		153,595
Accumulated depreciation and amortization		(98,080)		(91,084)
Total	$	63,868	$	62,511

(1)	Includes accrued capital expenditures of $0.8 million and $1.0 million at June 30, 2021 and December 31, 2020, respectively.

The Company ~~has finance lease agreements for certain equipment. The leases bear annual imputed interest~~recorded depreciation and amortization expense of ~~1.58% to 5.95%~~$4.4 million 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 5.75%. Scheduled remaining minimum annual payments as of September 30, 2020 are as follows ~~(in thousands)~~:

Year Ending December 31:

2020

$
122
2021

419
2022

13
2023

13
Thereafter

3
Total minimum obligations

570
Less: interest portion

(21)
Present value of minimum payments

549
Less: current portion

(465)
Long-term portion of minimum payments

$
84

~~The weighted average remaining lease term for the Company’s finance leases as of September 30, 2020 is 1.32 years.~~

~~Supplemental cash flow information related to the Company’s operating and finance leases is as follows~~$7.8 million for the three and ~~nine~~six months ended ~~September~~June 30, 2021. For the three and six months ended June 30, 2020, we recorded $3.2 million and ~~2019:~~

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019


(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$
1,866

$
355

$
4,713

$
1,987
Operating cash flows from finance leases

9

15

30

47
Investing cash flows from operating lease

-

1,374

1,452

3,162
Financing cash flows from finance leases

112

107

332

311

$9.2 million depreciation and amortization expense.

13Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌11

Table of Contents

~~14.~~ 10. Accrued Expenses and Other Liabilities

At June 30, 2021 and December 31, 2020, accrued expenses and other liabilities consisted of the following:


	As of		As of
	June 30,		December 31,
	2021		2020
	(Unaudited)
	(in thousands)
Accrued royalty payments		1,674		1,796
Dividends payable		-		247
Employee profit sharing obligation		1,187		-
Other payables		556		232
Total accrued expenses and other current liabilities	$	3,417	$	2,275

Accrued non-current labor obligation		700		-
Share based compensation liability		335		-
Other long-term liabilities		20		13
Total other non-current liabilities	$	1,055	$	13

On April 23, 2021, a decree that reforms labor outsourcing in Mexico was published in the Federation’s Official Gazette. This new decree amends the outsourcing provisions of the Federal Labor Law (FLL), the Social Security Law, the Law of the Institute of the National Housing Fund for Workers, the Federal Fiscal Code (FFC), the Income Tax Law and the Value Added Tax Law. Under this new decree, operating companies will no longer be able to source their labor resources used to carry out the core business functions from service entities or third-party providers.

Under Mexican law, employees are entitled to receive statutory profit sharing (Participacion a los Trabajadores de las Utilidades or “PTU”) payments. The required cash payment to employees is equal to 10% of their employer’s profit subject to PTU as prescribed by Mexican law, which differs from profit determined under U.S. GAAP. In the past, the Company was not subject to PTU payments, as it had been sourcing its labor resources through a third-party service provider. The recently revised legislation required us to onboard all employees from the outsourcing provider to our wholly owned subsidiary, Don David Gold Mexico, effective June 2021.

As a result of adoption of the new legislation, during Q2 2021 we recorded an accrual of $1.2 million for PTU in current liabilities and production cost, as well as an accrual for statutory employee severance benefits of $0.7 million in other long-term liabilities and other expenses.

11. Reclamation and Remediation

The following table presents the changes in reclamation and remediation obligations for the six months ended June 30, 2021 and the year ended December 31, 2020:


	2021		2020
	(Unaudited)
	(in thousands)
Reclamation liabilities – balance at beginning of period	$	1,890	$	2,003
Foreign currency exchange loss (gain)		15		(113)
Reclamation liabilities – balance at end of period		1,905		1,890

Asset retirement obligation – balance at beginning of period		1,208		1,105
Changes in estimate		7		82
Accretion		48		79
Foreign currency exchange loss (gain)		11		(58)
Asset retirement obligation – balance at end of period		1,274		1,208
Total period end balance	$	3,179	$	3,098

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌12

Table of Contents

The Company’s undiscounted reclamation liabilities of $1.9 million and $1.9 million as of June 30, 2021 and December 31, 2020, respectively, are related to the Aguila project in Mexico. These represent reclamation liabilities that were expensed through 2013 before proven and probable reserves were established and the Company was considered to be a development stage entity; therefore, most of the costs, including asset retirement costs, were not allowed to be capitalized as part of our Property, Plant & Mine Development.

The Company’s asset retirement obligations reflect the additions to the asset for reclamation and remediation costs in Property, Plant & Mine Development, post 2013 development stage status, which are discounted using a credit adjusted risk-free rate of 8%. As of June 30, 2021 and December 31, 2020, the Company’s asset retirement obligation related to the Don David Gold Mine in Mexico was $1.3 million and $1.2 million, respectively.

12. Commitments and Contingencies

Commitments

As of June 30, 2021, the Company has equipment purchase commitments of approximately $0.4 million.

Other Contingencies

The Company has certain other contingencies resulting from litigation, claims, and other commitments that are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. The Company currently has no basis to conclude that any or all of such contingencies will materially affect its financial position, results of operations or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in current accruals recorded by the Company, and there can be no assurance that their ultimate disposition will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

13. Derivatives

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 forward metal ~~forward~~ prices. Please see Note 1918 for additional information.

The following table summarizes the Company’s unsettled sales contracts ~~as of September~~at June 30, ~~2020~~2021 with the quantities of metals under contract subject to final pricing occurring through ~~November 2020:~~July 2021:


	Gold		Silver		Copper		Lead		Zinc		Gold		Silver		Copper		Lead		Zinc			Total
	(ounces)		(ounces)		(tonnes)		(tonnes)		(tonnes)		(ounces)		(ounces)		(tonnes)		(tonnes)		(tonnes)
Under contract		1,914		194,345		275		1,420		3,303		2,800		144,611		228		851		3,021
Average forward price (per ounce or tonne)	$	1,930	$	26.36	$	6,629	$	1,915	$	2,441	$	1,852	$	27.1	$	9,813	$	2,176	$	2,910
Unsettled sales contracts value (in thousands)											$	5,186	$	3,919	$	2,237	$	1,852	$	8,791	$	21,985

Other Derivatives

Derivative instruments that are not designated as hedging instruments are required to be recorded on the balance sheet at fair value. Changes in fair value will impact the Company’s earnings through mark-to-market adjustments until the physical commodity is delivered or the financial instrument is settled. The fair value does not reflect the realized or cash value of the instrument.

As of June 30, 2020, the Company’s derivatives not designated as hedges consist of zero-cost collars used to manage its near-term exposure to cash flow variability from zinc price risks in 2021. A zero-cost collar is a combination

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌13

Table of Contents

of two options: a sold call option and a purchased put option. The Company sold call options to establish the ceiling price of $2,992 per tonne of zinc that the Company will receive for the contracted zinc volume of 5,500 tonnes for June through December 2021. The purchased put establishes the floor price of $2,860 per tonne of zinc that we will receive for the same contracted tonnes and period of time.

Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. Otherwise, any fair value gains or losses are recognized in earnings in the current period. The fair value does not reflect the realized or cash value of the instrument. Mark-to-market adjustments are made until the physical commodity is delivered or the financial instrument is settled. Zinc prices remain within offsetting positions on our call and put options, which resulted in de minimis net loss associated with the zero-cost collar.

The Company manages credit risk by selecting counterparties that it believes to be financially strong, by entering into netting arrangements with counterparties and by requiring other credit risk mitigants, as appropriate. The Company actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits.

~~15.~~14. Stock-Based Compensation

The Gold Resource Corporation 2016 Equity 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, 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 ~~any~~ prior plan that is terminated, expired, forfeited, or canceled for any reason, will be available for grant under the Incentive Plan.

Effective January 1, 2021, the Company’s Board of Directors, on the recommendation of the Compensation Committee, implemented a program to issue deferred stock units (“DSUs”). DSUs are a qualifying instrument under the terms of the Company’s 2016 Equity Incentive Plan and therefore do not require additional shareholder approval. The vesting and settlement terms of the DSUs are determined by the Compensation Committee at the time the DSUs are awarded.

130,000 DSUs were granted to the Board of Directors during the period ended March 31, 2021 and are redeemable in cash or shares at the earlier of 10 years or upon the eligible directors’ termination. Termination is deemed to occur on the earliest of (1) the date of voluntary resignation or retirement of the director from the Board; (2) the date of death of the director; or (3) the date of removal of the director from the Board whether by shareholder resolution, failure to achieve re-election or otherwise; and on which date the director is not a director or employee of the Company or any of its affiliates. These awards contain a cash settlement feature and are therefore classified as a liability and are marked to fair value each reporting period. As of June 30, 2021, the Company recorded $0.3 million of other non-current liability and expense based on the fair value of the Company’s stock price.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, a total of ~~93,205~~2,614 and ~~121,060~~35,072 RSUs vested, respectively, and shares were issued with an intrinsic value of ~~$0.4 million~~$6,692 and ~~$0.4~~$0.1 million, respectively, and a fair value of ~~$0.5 million~~$6,692 and ~~$0.6 million, respectively. During the three months ended September 30, 2020 and 2019, a total of 58,133 and 106,256 RSUs vested, respectively, and shares were issued with an intrinsic value of~~ $0.2 ~~million and $0.4 million, respectively, and fair value of $0.3 million and $0.5~~ million, respectively.

~~NaN stock options were exercised during~~During the ~~three and nine~~six months ended ~~September~~June 30, ~~2020. During the nine months ended September 30, 2019,~~2021, stock options to purchase an aggregate of ~~274,750~~217,719 shares of the Company’s common stock were exercised at a weighted average exercise price of ~~$3.95~~$1.31 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.~~ NaN stock options were exercised during the ~~three~~six months ended ~~September~~June 30, ~~2019.~~2020.

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌14

Table of Contents

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


	Three months ended September 30,				Nine months ended September 30,				For the three months ended June 30,				For the six months ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020

	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Stock options	$	140	$	264	$	535	$	1,231	$	135	$	173	$	362	$	395
Restricted stock units		165		103		640		350		70		227		(16)		475
Deferred stock units										(8)		-		335		-
Total	$	305	$	367	$	1,175	$	1,581	$	197	$	400	$	681	$	870

The Company 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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, NaN has~~2020, there have been ~~accrued~~no accruals related to the STIP.

~~16.~~15. 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

~~Table of Contents~~

respect to the offer and sale ~~from time to time~~ of the Company’s common stock from time to time, having an aggregate gross sales price of up to $75.0 million (the “Shares”), which was subsequently renewed in June 2020. The ATM Agreement will remain in full force and effect until the earlier of (i) June 3, 2023 or (ii) the date that the ATM Agreement is terminated in accordance with its terms. An aggregate of ~~6,039,823~~484,500 shares and ~~6,625,588~~4,334,500 shares of the Company’s common stock were sold through the ATM Agreement during the ~~nine~~three and six months ended ~~September~~June 30, 2020, ~~and 2019,~~respectively, for net proceeds to the Company, after deducting the Agent’s commissions and other expenses, of ~~$18.7~~$1.6 million and ~~$24.4~~$11.9 million, respectively. ~~For~~NaN ATM shares were sold during the three and six months ended ~~September~~June 30, 2020 and 2019, an aggregate of 1,705,323 shares and 773,716 shares of the Company’s common stock were sold through the ATM Agreement for net proceeds to the Company, after deducting the Agent’s commissions and other expenses, of $6.8 million and $2.6 million, respectively.2021.

During the three months ended September 30, 2020, the Company issued 26,110 shares of its common stock at a price of $3.83 per share in connection with its purchase of the Golden Mile project. During the nine months ended September 30, 2019, the Company issued 25,000 shares of its common stock at a value of $3.88 per share as payment for a one-year investor relations agreement with a third-party.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company declared ~~and~~ ~~paid~~ dividends of $0.01 per common share and ~~$0.03~~$0.02 per common share,, respectively, and paid an aggregate total of $1.0 million and $1.7 million, respectively. During the three and six months ended June 30, 2020, the Company declared and paid dividends of $0.01 per common share and $0.02 per common share, respectively, for an aggregate total of $0.7 million and ~~$2.1~~$1.4 million, respectively. ~~During~~

At the ~~three months ended September 30, 2019,~~Company’s annual meeting held in June 2021, shareholders approved an amendment to the ~~Company declared and paid dividends~~Company’s articles of ~~$0.005 per~~ ~~common~~ ~~share, for an aggregate total~~incorporation to increase the number of ~~$0.3 million. During the nine months ended September 30, 2019, the Company declared and paid dividends~~authorized shares of ~~$0.015 per~~ common ~~share, for an aggregate total of $1.0~~stock from 100 million ~~declared dividends and $0.9~~to 200 million ~~paid dividends.~~shares.

~~17.~~16. Other (Income) Expense, net

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


	Three months ended September 30,				Nine months ended September 30,				For the three months ended June 30,				For the six months ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020

	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Unrealized currency exchange loss	$	163	$	406	$	221	$	294
Realized currency exchange (gain) loss		(76)		(69)		(191)		103
Unrealized gain from gold and silver rounds/bullion, net⁽¹⁾		(716)		(307)		(1,175)		(550)
Increase in reserve for inventory		-		478		-		478
Other expense		92		92		274		193
Unrealized currency exchange loss (gain)									$	75	$	(1,560)	$	316	$	58
Realized currency exchange loss (gain)										114		176		(59)		(115)
Unrealized (gain) loss from gold and silver rounds/bullion, net⁽¹⁾										(35)		(610)		31		(459)
Employee benefit obligation ⁽²⁾										700		-		700		-
Other expense (income)										13		85		(435)		72
Total	$	(537)	$	600	$	(871)	$	518	$	867	$	(1,909)	$	553	$	(444)

(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 the Company’s fair value measurements and investments, please see Note 18~~Note 19.~~.

(2)

See Footnote 10

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌15

Table of Contents

~~18.~~17. Net Income per Common Share

Basic earnings per common share isare calculated based on the weighted average number of common shares outstanding for the period. Diluted earnings per common share isare 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 RSUs and DSUs are considered to be dilutive in periods with net income.

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~~2.6 million and ~~3.9~~3.6 million shares of common stock at weighted average exercise prices of ~~$8.97~~$6.92 and ~~$9.73~~$8.97 were outstanding at ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, but were not included in the computation of diluted

~~Table of Contents~~

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,~~the reporting period, and therefore are anti-dilutive.

Basic and diluted net income per common share is calculated as follows:


	Three months ended September 30,				Nine months ended September 30,				For the three months ended				For the six months ended
	2020		2019		2020		2019		June 30,				June 30,
Net income (in thousands)	$	5,001	$	2,978	$	68	$	5,658
									2021		2020		2021		2020
Numerator:
Net income (loss) from continuing operations										1,283		257		3,810		(2,961)
Net loss from discontinued operations										-		(2,069)		-		(1,972)
Net income (loss) (in thousands)									$	1,283	$	(1,812)	$	3,810	$	(4,933)

Denominator:
Basic weighted average shares of common stock outstanding		70,641,938		65,495,958		68,896,059		63,001,178		74,485,672		69,985,499		74,445,058		68,011,860
Dilutive effect of share-based awards		402,590		300,941		393,290		334,953		501,887		-		423,129		-
Diluted weighted average common shares outstanding		71,044,528		65,796,899		69,289,349		63,336,131		74,987,559		69,985,499		74,868,187		68,011,860
Net income per share:
Basic and Diluted	$	0.07	$	0.05	$	-	$	0.09

Basic and diluted net income (loss) per common share:
Continuing operations										0.02		-		0.05		(0.04)
Discontinued operations										-		(0.03)		-		(0.03)
Basic and diluted net income (loss) per common share									$	0.02	$	(0.03)	$	0.05	$	(0.07)

~~19.~~18. 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 1

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

Level 2

Quoted 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 3

Prices 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 assetsGold Resource Corporation—Interim Condensed Consolidated Financial Statements and ~~liabilities measured at fair value by level within the fair value hierarchy as of September 30, 2020 and December 31, 2019:~~

Notes—Unaudited‌

2020

2019

Input Hierarchy Level

(in thousands)

Cash and cash equivalents

$
31,313

$
11,076

Level 1
Gold and silver rounds/bullion

$
5,241

$
4,265

Level 1
Accounts receivable, net

$
4,777

$
8,362

Level 2
Loans payable

$
1,005

$
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.~~

Accounts receivable, net 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

Table of Contents

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 measured at fair value by level within the fair value hierarchy as of June 30, 2021 and December 31, 2020:


	As of		As of
	June 30,		December 31,		Input Hierarchy Level
	2021		2020

	(in thousands)
Cash and cash equivalents	$	30,535	$	25,405	Level 1
Gold and silver rounds/bullion	$	627	$	671	Level 1
Accounts receivable, net	$	5,142	$	4,226	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 which are valued using quoted market prices. Please see Note 5for additional information.

Accounts receivable, net include amounts due to the Company for deliveries of concentrates and doré sold to customers, net of embedded derivatives mark-to-market value of $0.1 as of June 30, 2021, and $0.2 million as of December 31, 2020. 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 September 30, 2020~~date and ~~December 31, 2019, the Company had unrealized losses of $0.1 million and unrealized gains of $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 1413 ~~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 11~~for 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 September 30,				Nine months ended September 30,					For the three months ended June 30,				For the six months ended June 30,
	2020		2019		2020		2019		Statement of Operations Classification	2021		2020		2021		2020		Statement of Operations Classification

	(in thousands)									(in thousands)
Realized/unrealized derivative gain, net	$	550	$	784	$	18	$	2,149	Sales, net
Realized/unrealized gold and silver rounds/bullion gain, net	$	679	$	306	$	1,136	$	545	Other expense, net
Realized/unrealized derivative (loss) gain, net										$	669	$	206	$	634	$	(532)	Sales, net
Realized/unrealized gold and silver rounds/bullion gain (loss), net										$	34	$	608	$	(32)	$	456	Other expense, net

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 September 30, 2020
For the three months ended June 30, 2021
Realized gain	$	132	$	339	$	89	$	16	$	77	$	653	$	21	$	87	$	62	$	30	$	159	$	359
Unrealized loss		(11)		(47)		(24)		(10)		(11)		(103)
Unrealized gain (loss)														130		103		(47)		87		37		310
Total realized/unrealized derivatives, net	$	121	$	292	$	65	$	6	$	66	$	550	$	151	$	190	$	15	$	117	$	196	$	669

Gold

Silver

Copper

Lead

Zinc

Total
Three months ended September 30, 2019

Realized gain (loss)

$
23

$
33

$
52

$
(78)

$
(275)

$
(245)
Unrealized gain

181

378

18

200

252

1,029
Total realized/unrealized derivatives, net

$
204

$
411

$
70

$
122

$
(23)

$
784

Gold

Silver

Copper

Lead

Zinc

Total
Nine months ended September 30, 2020

Realized gain (loss)

$
651

$
451

$
20

$
(143)

$
(729)

$
250
Unrealized (loss) gain

(209)

(290)

(9)

41

235

(232)
Total realized/unrealized derivatives, net

$
442

$
161

$
11

$
(102)

$
(494)

$
18

Gold

Silver

Copper

Lead

Zinc

Total
Nine months ended September 30, 2019

Realized gain (loss)

$
195

$
129

$
120

$
(97)

$
1,022

$
1,369
Unrealized gain

145

318

65

123

129

780
Total realized/unrealized derivatives, net

$
340

$
447

$
185

$
26

$
1,151

$
2,149


	Gold		Silver		Copper		Lead		Zinc		Total
For the three months ended June 30, 2020
Realized gain (loss)	$	168	$	(48)	$	(74)	$	(2)	$	11	$	55
Unrealized (loss) gain		(70)		82		134		1		4		151
Total realized/unrealized derivatives, net	$	98	$	34	$	60	$	(1)	$	15	$	206

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌17

Table of Contents

~~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 nine months ended September 30, 2020 and 2019 consisted of the following:

2020

2019

(in thousands)

Unrealized gain on gold and silver rounds/bullion

$
(1,175)

$
(550)

Unrealized foreign currency exchange loss

221

294

Increase in inventory reserve

-

478

Other

139

92

Total other operating adjustments

$
(815)

$
314


	Gold		Silver		Copper		Lead		Zinc		Total
For the six months ended June 30, 2021
Realized (loss) gain	$	(23)	$	172	$	67	$	74	$	160	$	450
Unrealized gain (loss)		30		21		(8)		21		120		184
Total realized/unrealized derivatives, net	$	7	$	193	$	59	$	95	$	280	$	634


	Gold		Silver		Copper		Lead		Zinc		Total
For the six months ended June 30, 2020
Realized gain (loss)	$	519	$	112	$	(69)	$	(159)	$	(806)	$	(403)
Unrealized (loss) gain		(198)		(243)		15		51		246		(129)
Total realized/unrealized derivatives, net	$	321	$	(131)	$	(54)	$	(108)	$	(560)	$	(532)

~~21. Segment Reporting~~19. Supplementary Cash Flow Information

~~The Company has organized its~~Other operating adjustments and write-downs within the net cash provided by operations into 2 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~~Condensed Consolidated Statements of Cash Flows for ~~evaluating segment performance. The Company’s business activities that are not considered operating segments are included in Corporate~~the six months ended June 30, 2021 and ~~Other.~~2020 consisted of the following:


	For the three months ended June 30,					For the six months ended June 30,
	2021			2020		2021		2020

	(in thousands)					(in thousands)
Unrealized (gain) loss on gold and silver rounds/bullion	$	(35)		$	(610)	$	31	$	(459)
Realized loss on gold and silver rounds/bullion		1	��		2		1		3
Unrealized foreign currency exchange loss (gain)		75			(1,560)		316		58
Other		60			17		93		39
Total other operating adjustments	$	101		$	(2,151)	$	441	$	(359)

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

Mexico

Nevada

Corporate and Other

Consolidated
Three months ended September 30, 2020

Revenue

$
26,435

$
15,851

$
-

$
42,286
Exploration expense

982

780

37

1,799
Net income (loss)

4,716

3,869

(3,584)

5,001
Capital expenditures

3,066

564

4

3,634

Mexico

Nevada

Corporate and Other

Consolidated
Three months ended September 30, 2019

Revenue

$
34,086

$
5,980

$
-

$
40,066
Exploration expense

775

322

32

1,129
Net income (loss)

5,426

(480)

(1,968)

2,978
Capital expenditures

3,870

6,056

12

9,938

Mexico

Nevada

Corporate and Other

Consolidated
Nine months ended September 30, 2020

Revenue

$
61,105

$
30,284

$
-

$
91,389
Exploration expense

2,077

1,373

55

3,505
Net income (loss)

2,481

2,192

(4,605)

68
Capital expenditures ⁽¹⁾

5,826

6,341

45

12,212

Mexico

Nevada

Corporate and Other

Consolidated
Nine months ended September 30, 2019

Revenue

$
88,498

$
7,520

$
-

$
96,018
Exploration expense

2,370

770

70

3,210
Net income (loss)

12,785

(454)

(6,673)

5,658
Capital expenditures ⁽²⁾

13,205

17,969

12

31,186

~~(1)~~

~~Includes a decrease in capital expenditures in accounts payable of $2,207 and non-cash additions of $1,504; consolidated capital expenditures on a cash basis were $12,915.~~

~~(2)~~

~~Includes an increase in capital expenditures in accounts payable of $158 and non-cash additions of $1,862; consolidated capital expenditures on a cash basis were $29,166.~~

~~Table of Contents~~

~~Total asset balances, excluding intercompany balances, at September 30, 2020 and December 31, 2019 are as follows:~~

2020

2019

(in thousands)
Mexico

$
91,752

$
98,718
Nevada

90,494

84,669
Corporate and Other

21,217

9,625
Consolidated

$
203,463

$
193,012

~~22.~~20. COVID-19 Pandemic

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus. On March 11, 2020, the ~~World Health Organization declared~~WHO classified the COVID-19 outbreak ~~of a respiratory disease caused by a new novel coronavirus (“COVID-19”)~~ 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.

On March 31, 2020, the Mexican government issued a national health emergency with an immediate suspension order for 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~~we suspended ~~its~~our Mexico operations and production on April 1, 2020. The Mexican government then designated mining as an essential business in mid-May 2020 and as a result, we were given approval to restart our operations on May 27, 2020. ~~After a ramp-up period, the Company recommenced operations with appropriate safety measures in place to guard against and~~

To mitigate the ~~virus~~spread of COVID-19 and ~~its spread.~~

~~The Isabella Pearl Mine in Nevada has continued~~protect the health and safety of our employees, contractors, and communities, we have taken precautionary measures, including specialized training, social distancing, screening workers before they enter facilities, a work from home mandate where possible, and close monitoring of national and regional COVID-19 impacts and governmental guidelines. Since our non-mining workforce is able to ~~operate at full capacity during the pandemic. Precious metal mining is considered essential~~work remotely using various technology tools, we are able to ~~support critical infrastructure under guidelines from the U.S. Department of Homeland Security~~maintain our operations and ~~the State of Nevada. The Company has in place safety measures to guard against~~internal controls over financial reporting and ~~mitigate the virus and its spread.~~

disclosures.

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. However, the long-term impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of COVID-19 on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. The Company

Gold Resource Corporation—Interim Condensed Consolidated Financial Statements and Notes—Unaudited‌18

Table of Contents

is not able to estimate the duration of the pandemic and potential impact on its business if disruptions or delays in business developments and shipments of product occur. In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including a decreased ability to raise additional capital when and if needed on acceptable terms, if at all. As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly.The Company has completed various scenario planning analyses to consider potential impacts of COVID-19 on its business, including volatility in commodity prices, temporary disruptions and/or curtailments of operating activities (voluntary or involuntary). ~~To provide additional flexibility to respond to potential downside scenarios, the Company utilized the ATM program that was previously in place to raise approximately~~ $~~11.9 million through the sale of common stock during the first and second quarters of 2020 to provide additional financial flexibility.~~ The Company believes that ~~financing~~current working capital balances will be sufficient for the foreseeable future, although there is no assurance that will be the ~~case~~.

case.

~~Table of Contents~~

~~23. Subsequent Event~~

On October 5, 2020, the Company announced its intention to spin-off its Nevada Mining Unit to shareholders as a separate publicly traded company. The separation will be completed by way of a pro rata distribution of all the outstanding shares of Fortitude Gold Corporation (“Fortitude”) common stock to the Company’s shareholders. Fortitude is a Colorado corporation formed by the Company to complete the spin-off. Following completion of the spin-off, the Company would hold all of the assetsResource Corporation—Interim Condensed Consolidated Financial Statements and related liabilities of the Oaxaca Mining Unit and Fortitude would hold all of the Nevada assets and related liabilities. The spin-off does not require the approval of the Company’s shareholders, which is expected to be tax-free to the shareholders.Notes—Unaudited

The transaction is subject to certain conditions, including the final approval by the Company’s Board of Directors and the receipt of an effective date for the Form S-1 registration statement filed by Fortitude on October ‌19 ~~2020 with the Securities and Exchange Commission. The transaction is targeted to be completed by year-end 2020 or in the first quarter of 2021.~~

Table of Contents

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 and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and compares those results towith the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. It also analyzes ~~our~~the Company’s financial condition at ~~September~~June 30, ~~2020~~2021 and compares it to ~~our~~the financial condition at December 31, ~~2019.~~2020. 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, ~~2019~~2020 contained in our annual report on Form ~~10-K for the year ended December 31, 2019.~~10-K.

The discussion also presents certain non-GAAP 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 which 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 and a reconciliation to 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.

~~Highlights~~

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

●

~~On July 1, 2020, we celebrated 10 years of production, over $1 billion in revenue and $114 million in shareholder dividends;~~

●

~~Record gold production from Isabella Pearl of 7,847 gold ounces;~~

●

~~Consolidated production of 12,575 gold ounces and 333,761 silver ounces;~~

●

~~$42.3 million consolidated net sales bringing year-to-date September 30, 2020 sales to $91.4 million;~~

●

~~Net income of $5.0 million or $0.07 per share;~~

●

~~Total Oaxaca Mining Unit cash cost after by-product credits of $589 per ounce;~~

●

~~Total Nevada Mining Unit cash cost after by-product credits of $935 per ounce;~~

●

~~$31.3 million cash balance at September 30, 2020, an increase of $20.2 million from the December 31, 2019 balance of $11.1 million;~~

●

~~Cash from operating activities of $17.7 million for the nine months ended September 30, 2020, an increase of 127% from same period in 2019;~~

●

~~Working capital at September 30, 2020 of $50.0 million, an increase of 120% from December 31, 2019;~~

●

~~$0.7 million dividend distributions, or $0.01 per share for the quarter;~~

●

On August 6, 2020, we announced Ms. Kim Perry would transition from the Board of Directors to fill the Chief Financial Officer role for retiring Mr. John Labate. The Board of Directors’ nominating committee is actively recruiting for the vacant Board of Director’s seat;

●

~~Subsequent to the quarter close, we announced on October 5, 2020, the intent to spin-off the Nevada Mining Unit to its shareholders as Fortitude Gold Corporation to further create shareholder value.~~

~~Table of Contents~~

Overview

~~We are~~Gold Resource Corporation is a mining company ~~which~~that pursues gold and silver projects that are expected to ~~have~~achieve both low operating costs and high returns on capital. ~~We are presently focused on~~The Don David Gold Mine currently has six projects with the primary mineral production ~~and exploration at our mining units in Oaxaca, Mexico and Nevada, U.S.A. Our Oaxaca Mining Unit produces doré and concentrates primarily~~ from the Arista underground mine located at the Aguila project. This mine supplies ore to our processing facilities, also located at the Aguila project. We produce gold and silver doré and metal concentrates which contain precious metals of gold and silver and base metals of copper, lead, and zinc. ~~Our Nevada~~

During the first half of 2021, a completely new management team has been assembled with a directive to take a disciplined approach to unlocking the value of the Mexican assets and grow the company. While there are many initiatives underway to achieve operational excellence, the highest priority has been assigned to the safety culture and related programs, as well as the life of mine plan and related mineral reserve and mineral resource models.

Working safely continues to underpin all that we do, with our ultimate goal of bringing zero harm to our employees, environment and communities. Despite rigorous safety protocols being in place, we have had two lost time incidents this year. During the first half of the year, we initiated a Global Health and Safety Directive. This program builds on the protocols already in place and provides our operations with a common approach to achieving our safety objectives. We also recently reinforced the GRC Golden Rules, a safety handbook that outlines critical controls and mandatory actions related to higher risk activities.

With a focus on unlocking the value of the Don David Gold Mine, we are undertaking a comprehensive review of our geological data base, geological interpretation, block models and mine production models. The key objective of this initiative is to ensure reliable and accurate mine planning and forecasting. In addition, mining methods and ground control methodology are likewise being reviewed. During the first half of 2021, deliberate changes to the current mine plan were made to allow management the time necessary to evaluate and address ground support challenges in the Switchback underground mine. These efforts have resulted in changes in our mining approach to ensure stability and to reduce dilution. Mining ~~Unit produces gold~~has resumed in the Soledad vein of the Switchback which will result in improved productivity due to wider potential mining widths and ~~silver doré from~~higher ore grades in the ~~Isabella Pearl open pit mine.~~second half of the year.

‌20

Table of Contents

In our financial statements, we report the sale of precious and base metals as revenue, and we periodically review our revenue streams to ensure that this treatment remains appropriate. We consider precious metals to be the long-term primary driver of our economic decisions and believe that base metals are secondary products for non-GAAP financial measures.

Precious metal gold equivalent ~~used periodically throughout this discussion,~~ is determined by taking gold ounces produced orand sold, plus silver ounces produced orand sold converted to precious metal gold equivalent ounces using the gold to silver average realized 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.~~

~~Spin-Off~~

On October 5, 2020, we announced our intention to spin-off our Nevada Mining Unit to shareholders as a separate publicly traded company. The separation will be completed by way of a pro rata distribution of all the outstanding shares of our newly created subsidiary, Fortitude Gold Corporation (“Fortitude”), to our shareholders. The spin-off does not require the approval of our shareholders, which is expected to be tax-free to the shareholders.

~~We believe that the separation of our Oaxaca Mining Unit and the Nevada Mining Units into two independent companies will provide the following benefits:~~

●

~~Permit each company to focus on its own unique strategic business plan;~~

●

~~Allow each company flexibility to allocate resources and deploy capital in a manner consistent with its own business strategy;~~

●

~~Unlock a value premium for the Nevada Mining Unit due to its location in one of the world’s premier mining jurisdictions;~~

●

~~Allow each company to focus on streamlining each distinct operation – underground, hard rock operations in Mexico, and open-pit heap leach operations in Nevada; and~~

●

~~Provide investors with an opportunity to reap greater value through ownership of two separate companies rather than a single combined company.~~

Upon the transaction completion, we expect that our common stock will continue to trade on the NYSE American. The shares of Fortitude are expected to trade over the counter and be quoted in the OTC Market. The transaction is subject to certain conditions, including and final approval by the Company’s Board of Directors and the receipt of an

~~Table of Contents~~

effective date for the Form S-1 registration statement filed by Fortitude on October 19, 2020 with the Securities and Exchange Commission. The transaction is targeted to be completed by year-end 2020 or in the first quarter of 2021.

COVID-19 Pandemic

On January 30, 2020, the ~~World Health Organization (“WHO”)~~WHO announced a global health emergency because of a new strain of coronavirus. InOn March 11, 2020, the WHO classified the COVID-19 outbreak as a ~~pandemic~~“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 we continue to operate our mining unit while utilizing appropriate safety measures.~~ On March 31, 2020, the Mexican government issued a national health emergency with an immediate suspension order for all “non-essential” public and private sector business (which included mining). As a result, we suspended our Mexico operations and production on April 1, 2020. The Mexican government then designated mining as an essential business in mid-May 2020 and as a result, we were given approval to restart our operations on May 27, 2020.

~~In an effort to~~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, screening workers before they enter facilities, a work from home mandate where possible, and close monitoring of national and regional COVID-19 impacts and governmental guidelines. Since our non-mining workforce is able to work remotely using various technology tools, we are able to maintain our operations and internal controls over financial reporting and disclosures.

WeWhile we are not able to estimate the long-term impact of COVID-19 on our business, financial condition, results of operations, and liquidity for fiscal year ~~2020. However, we~~2021, the year to date impact for protective equipment and absenteeism have not been significant and are considered an on-going cost of operations. We believe we have sufficient liquidity available from operating cash flow and cash on hand going forward.

~~Oaxaca Mining Unit Production and Sales~~

~~Oaxaca Mining Unit Production~~

Gold and silver production for the third quarter of 2020 totaled 4,728 ounces and 324,592 ounces, respectively, compared to 7,462 and 473,810 ounces over the same period in 2019. The decrease in gold and silver production was the result of lower precious metal grades as expected based on the mine plan. In addition, while our workforce has been fully reengaged after the second quarter mandatory COVID-19 shutdown, the protocols and safety measures put in place has resulted in lost workdays of our workforce, decreasing throughput, which contributed to lower production in the third quarter.

For the nine months ended September 30, 2020, we produced 13,619 and 912,464 gold and silver ounces, respectively, as compared to 21,881 and 1,304,975 gold and silver ounces, respectively, over the same period in 2019. The decrease is primarily due to the suspension of operations for COVID-19 in the second quarter of 2020 and reduced productions in the third quarter, discussed above.

23‌21

Table of Contents

Results of Operations

Don David Gold Mine

Mine activities during the first half of 2021 included development and ore extraction from the Arista mine, while maintaining strict COVID-19 safety protocols to keep employees safe. The following~~Production Statistics~~ table summarizes certain ~~information~~production statistics about our ~~Oaxaca Mining Unit operations~~Don David Gold Mine for the periods indicated:

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

	Three months ended September 30,				Nine months ended September 30,				For the three months ended June 30,				For the six months ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Arista Mine
Milled
Tonnes Milled		136,618		163,259		373,394		469,167		126,363		78,740		253,766		236,776
Grade
Average Gold Grade (g/t)		1.25		1.76		1.35		1.72		1.91		1.73		1.80		1.41
Average Silver Grade (g/t)		76		85		78		84		79		71		78		78
Average Copper Grade (%)		0.40		0.39		0.39		0.38		0.36		0.39		0.40		0.39
Average Lead Grade (%)		1.93		1.92		1.95		1.91		1.63		1.92		1.66		1.96
Average Zinc Grade (%)		5.02		4.70		4.85		4.71		3.64		4.92		3.97		4.75
Aguila Open Pit Mine
Milled
Tonnes Milled		16,913		3,640		34,740		23,976		3,227		3,579		14,804		17,827
Grade
Average Gold Grade (g/t)		1.35		1.49		1.32		1.76		2.58		1.46		1.86		1.29
Average Silver Grade (g/t)		32		58		36		45		47		50		33		41
Mirador Mine
Milled
Tonnes Milled		-		11,690		7,450		22,540		-		5,246		-		7,450
Grade
Average Gold Grade (g/t)		-		0.76		0.91		0.95		-		0.79		-		0.91
Average Silver Grade (g/t)		-		197		130		203		-		126		-		130
Combined
Tonnes milled		153,531		178,589		415,584		515,683		129,590		87,565		268,570		262,053
Tonnes Milled per Day ⁽¹⁾		1,745		2,007		1,880		1,967		1,506		1,943		1,555		1,976
Metal production (before payable metal deductions) ⁽²⁾
Gold (ozs.)		4,728		7,462		13,619		21,881		6,555		2,441		12,652		8,891
Silver (ozs.)		324,592		473,810		912,464		1,304,975		295,979		185,330		603,589		587,872
Copper (tonnes)		428		492		1,162		1,407		368		246		809		734
Lead (tonnes)		2,157		2,459		5,811		6,916		1,654		1,140		3,391		3,654
Zinc (tonnes)		5,538		6,057		14,386		17,949		3,683		3,004		8,060		8,848

(1)	Based on actual days the mill operated during the period. Q2 2020 results reflect only 45 days for mill operations due to the suspension of mining operations due to the worldwide pandemic.

(2)

The difference between what we report as "Metal Production" and "Metal 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 related to shipping schedules, or variances in ore grades and recoveries which impact the amount of metals contained in concentrates produced and sold.

~~Oaxaca Mining Unit Sales~~For the three months ended June 30, 2021, the Don David Gold Mine production totaled 6,555 gold ounces and 295,979 silver ounces, representing an increase of 169% and 60% in gold and silver production, respectively, from the same period in 2020. The increase is a direct result of the suspension of mining operations in Q2 2020 due to the worldwide pandemic. Gold production was also higher due to a 10% increase in gold grades at the Arista mine.

~~Oaxaca Mining Unit net sales of $26.4 million~~Production Volumes

During the three months ended June 30, 2021, total tonnes milled were 48% higher for the ~~third quarter of 2020 decreased by $7.7 million, or 23%, when~~three months ended June 30, 2021, as compared to the same period in ~~2019. The decrease was primarily~~2020, as a result of the ~~decreased sales volumes~~suspension of mining operations in Q2 2020 due to ~~decreased production explained above and higher concentrate treatment charges which were slightly offset by increased average realized prices for gold, silver, copper, and zinc. For~~the worldwide pandemic. The tonnes milled per day during the three months ended ~~September~~June 30, ~~2020, metal prices increased from~~2021 were 22% lower, consistent with the ~~same period in 2019 as follows: gold by 27% to $1,887 per ounce, silver by 49% to $25.47 per ounce, copper by 19% to $6,711 per tonne, and zinc by 6% to $2,392 per tonne.~~current year mine plan.

Metal sales for the nine months ended September 30, 2020 were $61.1 million as compared to $88.5 million for the same period of 2019, representing a $27.4 million decrease. The decrease is primarily attributable to lower sales volumes due to the suspension of operations for COVID-19 in the second quarter and higher concentrate treatment charges, partially offset by higher gold and silver average realized prices.

During the three months ended September 30, 2020, we sold 3,619 gold ounces and 316,993 silver ounces at a total cash cost after by-product credits per precious metal gold equivalent ounce of $589, as compared to a cash cost

24‌22

Table of Contents

~~after by-products~~The paste fill plant continues to provide substantial efficiencies by returning processing waste to underground workings since it commenced operations in 2019. Such waste would have otherwise been placed in the tailings’ storage facility. The paste fill is an effective method of ~~$299~~reducing surface tailings and provides structural ground support that allows for more complete mining of mineral reserves. In addition, the plant reduces overall water waste by 17% due to the rheological characteristics required in paste production.

Grades & Recoveries

During the three months ended June 30, 2021, the majority of ore processed came from the Arista underground mine with an average gold grade of 1.91 g/t and silver grade of 79 g/t, compared with 1.73 g/t and 71 g/t, respectively, for the same period in ~~2019.~~2020. The ~~increased cost per ounce~~average gold grade was ~~a result of lower by-product credits from~~10% higher and silver grade 11% higher, consistent with mine sequencing and the ~~sale of~~current year mine plan.

Our base metals average grades during the three months ended June 30, 2021 were 0.36% copper, 1.63% lead, and 3.64% zinc, compared to 0.39% copper, 1.92% lead, and 4.92% zinc, for the same period in 2020. Overall base metal grades were lower ~~gold grades processed in~~during the ~~current period~~three months ended June 30, 2021, as compared to the same period in ~~2019. Please see~~ ~~Non-GAAP Measures~~ ~~below for additional information concerning~~2020, as a result of mining higher in the ~~cash cost per ounce measures.~~Switchback vein system of the Arista Mine.

Sales

The following ~~Sales Statistics~~table summarizes certain ~~information~~sales statistics about ~~our Oaxaca Mining Unit~~the Don David Gold Mine operations for the periods indicated:


	Three months ended September 30,				Nine months ended September 30,				For the three months ended June 30,				For the six months ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020

Metal sold
Gold (ozs.)		3,619		6,175		11,153		17,201		5,697		2,542		10,716		7,534
Silver (ozs.)		316,993		411,088		862,087		1,096,131		270,321		189,866		523,382		545,094
Copper (tonnes)		447		451		1,090		1,220		365		215		747		643
Lead (tonnes)		1,849		2,188		4,827		5,961		1,214		1,014		2,390		2,978
Zinc (tonnes)		4,586		6,016		11,534		14,389		3,193		2,592		6,327		6,948
Average metal prices realized ⁽¹⁾
Gold ($ per oz.)		1,887		1,490		1,766		1,391		1,822		1,784		1,806		1,709
Silver ($ per oz.)		25.47		17.08		20.09		15.94		26.88		16.83		26.83		16.96
Copper ($ per tonne)		6,711		5,659		5,954		6,027		10,375		5,229		9,595		5,424
Lead ($ per tonne)		1,902		2,018		1,779		1,976		2,162		1,723		2,123		1,702
Zinc ($ per tonne)		2,392		2,261		2,114		2,642		2,945		2,001		2,871		1,930
Precious metal gold equivalent ounces sold
Gold Ounces		3,619		6,175		11,153		17,201		5,697		2,542		10,716		7,534
Gold Equivalent Ounces from Silver		4,279		4,712		9,807		12,561		3,988		1,791		7,775		5,409
Total Precious Metal Gold Equivalent Ounces		7,898		10,887		20,960		29,762
Total cash cost before by-product credits per precious metal gold equivalent ounce sold	$	2,803	$	2,187	$	2,767	$	2,247
Total cash cost after by-product credits per precious metal gold equivalent ounce sold ⁽²⁾	$	589	$	299	$	884	$	327
Total all-in sustaining cost per precious metal gold equivalent ounce sold	$	897	$	622	$	1,174	$	723
Total AuEq oz										9,685		4,333		18,491		12,943

(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 average market ~~average~~ metal prices in most cases.

(2)	Total cash cost after ~~by-product~~co-product credits are significantly affected by base metals sales during the periods presented.

~~Nevada Mining Unit Production and Sales~~

~~Nevada Mining Unit Production~~

~~During~~For the three months ended ~~September~~June 30, ~~2020, our Isabella Pearl Mine produced a record 7,847 gold ounces and 9,169 silver ounces as~~2021, mine gross profit increased by $8.2 million, compared ~~to 3,703 and 3,487 of gold and silver ounces, respectively, for the same period of 2019. Increased gold and silver production was expected due to the mining of higher grade ore in 2020.~~

During the nine months ended September 30, 2020, our Isabella Pearl Mine produced 16,747 gold ounces and 20,154 silver ounces as compared to 5,381 and 4,459 gold and silver ounces, respectively, for the same period of 2019. The increase in 2020 is largely due to realizing a full nine months of production in 2020 as the mine commenced production in May 2019 as well as higher grade ore mined in Q3 2020 as discussed above.

~~We continued accessing the upper portion of the higher-grade Pearl deposit in the third quarter 2020. Gold grades and production are expected to continue to increase for the remainder of 2020.~~

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

~~Table of Contents~~

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019

Ore mined

Ore (tonnes) ⁽¹⁾

188,048

82,169

490,620

770,446
Gold grade (g/t)

2.02

0.75

1.60

0.70
Low-grade stockpile (tonnes)

Ore (tonnes)

51,977

83,394

70,467

472,120
Gold grade (g/t)

0.50

0.47

0.52

0.52
Pre-strip waste (tonnes)

-

1,111,259

1,346,316

2,514,809
Waste (tonnes)

1,437,428

136,632

3,597,770

432,530
Metal production (before payable metal deductions) ⁽²⁾

Gold (ozs.)

7,847

3,703

16,747

5,381
Silver (ozs.)

9,169

3,487

20,154

4,459

~~(1)~~

~~Nine months ended September 30, 2019 amount includes run-of-mine ore and initial over liner of the heap leach pad.~~

~~(2)~~

The difference between what we report as "Metal Production" and "Metal 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 related to shipping schedules, or variances in ore grades and recoveries which impact the amount of metals contained in doré produced and sold.

~~Nevada Mining Unit Sales~~

During the three months ended September 30, 2020, we sold 8,396 and 9,616 gold and silver ounces, respectively, for net sales of $15.9 million as compared to 4,044 and 3,534 gold and silver ounces, respectively, for net sales of $6.0 million forwith the same period in ~~2019.~~2020. The increase ~~in gold and silver sales is~~was primarily due to ~~the planned production ramp up as we were mining the upper portion of the higher-grade Pearl deposit in the third quarter of 2020.~~

During the nine months ended September 30, 2020, we sold 17,205 and 21,046 gold and silver ounces, respectively, for net sales of $30.3 million as compared to 5,175 and 4,146 gold and silver ounces, respectively, for net sales of $7.5 million for the same period in 2019. Thea significant increase in ~~2020 is largely due to realizing a full nine months of production in 2020 as the mine commenced production in May 2019 as well as higher grade ore mined in Q3 2020 as discussed above.~~

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

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019

Metal sold

Gold (ozs.)

8,396

4,044

17,205

5,175
Silver (ozs.)

9,616

3,534

21,046

4,146
Average metal prices realized ⁽¹⁾

Gold ($ per oz.)

1,901

1,481

1,773

1,455
Silver ($ per oz.)

24.02

17.56

19.86

17.19

Total cash cost before by-product credits per gold ounce sold

$
963

$
1,130

$
1,182

$
999
Total cash cost after by-product credits per gold ounce sold

$
935

$
1,115

$
1,158

$
985
Total all-in sustaining cost per gold ounce sold

$
945

$
1,137

$
1,191

$
1,002

~~(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.

~~Table of Contents~~

~~Consolidated Results of Operations~~

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

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019

(in thousands)
Sales, net

$
42,286

$
40,066

$
91,389

$
96,018
Mine gross profit

10,902

9,318

9,005

21,248
General and administrative expenses

2,665

2,194

7,136

6,913
Exploration expenses

1,799

1,129

3,505

3,210
Other (income) expense, net

(537)

600

(871)

518
Income (loss) before income taxes

6,975

5,395

(765)

10,607
Provision (benefit) for income taxes

1,974

2,417

(833)

4,949
Net income

$
5,001

$
2,978

$
68

$
5,658

~~Sales, net.~~

~~During the three months ended September 30, 2020, consolidated sales were $42.3 million as compared to $40.1 million for the same period in 2019.~~ ~~The increase is mainly attributable to Nevada Mining Unit metal sales volumes increasing as a result of the Isabella Pearl Mine’s increased production. In addition,~~ average realized prices ~~in the third quarter of 2020~~ for gold, silver, copper, and zinc, ~~increased from~~as well as an increase in production in the ~~same~~current period compared with the interruption due to the COVID-19 shutdown last year, which in ~~2019. Offsetting these increases were~~turn resulted in a proportionate increase ~~treatment~~in production costs and ~~refining costs~~depreciation/amortization expenses.

Don David Gold Mine net sales of $30.8 million for ~~concentrates and decreased metal sales from the Oaxaca Mining unit as a result of decreased production as discussed above. For~~ the three months ended ~~September~~June 30, 2020, consolidated sales volumes totaled 12,015 ounces and 326,609 ounces of gold and silver, respectively, as compared to 10,219 ounces and 414,622 ounces of gold and silver, respectively, for the same period in 2019.

~~During the nine months ended September 30, 2020, consolidated sales were $91.4 million as compared to $96.0 million for the same period in 2019. T~~he decrease is mainly attributable to Oaxaca Mining Unit metal sales volumes decreasing during 2020 as a result of a temporary mandatory country-wide suspension of mining operations due to COVID-19 in the second quarter and decreased average realized prices from our base metals in the first two quarters in 2020. Slightly offsetting these decreases was an increase in average realized price for gold and silver and increased gold and silver sales volumes from our Nevada Mining Unit due to a full nine months’ sales activity in 2020.

~~Please see the Oaxaca and Nevada Mining Units’ sales discussion above for more information.~~

~~Mine gross profit.~~ ~~For the three months ended September 30, 2020, mine gross profit~~2021 increased by ~~$1.6~~$18.3 million, or ~~17%~~146%, when compared to the same period in ~~2019.~~2020. The increase in our 2021 sales was primarily due to increased average realized prices for gold, silver, copper, and ~~zinc. These increases were partially offset with~~zinc, as well as increase in production due to the reasons outlined above. Additionally, contributing to the higher ~~base metal treatment and refining costs. For the nine months ended September 30, 2020, mine gross profit decreased by $12.2~~net sales was a $0.4 million or 58% due to higher base metal treatment costs and the impact of the second quarter suspension of operations due to COVID-19. In addition, during the nine months ended September 30, 2020, we recorded net realizable value inventory adjustments of $3.6 million for Isabella Pearl that reduced consolidated mine gross profit. This adjustment was primarily due to low grade ore that was placed on the leach pad during the first and second quarters.

~~General and administrative expenses.~~ ~~For the three and nine months ended September 30, 2020, general and administrative expenses totaled $2.7 million and $7.1 million as compared to $2.2 million and $6.9 million for the same periods~~12% decrease in 2019. The increase for the third quarter expense was due to increased legal and accounting fees related to strategic initiatives, including the recently announced planned spin-off of our Nevada Mining Unit.

~~Exploration expenses.~~ For the three and nine months ended September 30, 2020, exploration expenses totaled $1.8 million and $3.5 million as compared to $1.1 million and $3.2 million for the same periods in 2019. The increased exploration expense for the three months ended September 30, 2020 compared to the same period in 2019 was primarily the result of increased drilling at East Camp Douglas and other costs associated with Golden Mile property in Nevada.concentrate

27‌23

Table of Contents

treatment charges which are netted against concentrate sales (refer to Footnote 4 of the Condensed Consolidated Financial Statements).

Treatment charges for the three months ended June 30, 2021 were $2.9 million, or $609 per base metal tonne sold, compared to $3.3 million, or $864 per base metal tonne sold for the same period in 2020. This 30% decrease in the per base metal tonne sold was expected as a result of the recent negotiations of new treatment charge agreements. The decrease is largely dependent on the spot treatment charge market for zinc, which can be volatile.

Operating Costs

Total production costs of $19.5 million for the three months ended June 30, 2021 are 84% higher than the production costs of $10.6 million for the same period in 2020. The increase is partially (approximately 48%) related to the increase in production volumes. Additionally, there was a $1.2 million (approximately 11%) impact related to the Mexico Labor Reform for long-term employee obligations and profit sharing. Finally, during the three months ended June 30, 2021, we were impacted by a 13% price increase in consumable chemicals used in the processing plant and a 5% increase in the volume of diesel consumed. The increased diesel consumed relates to increased power consumption for the filtration plant and underground ventilation requirements.

2021 Capital and Exploration Investment Summary


	For the six months ended June 30,		2021 full year guidance
	(in thousands)
Capital Investments:
Gold Regrind	$	45	$	1,900
Dry Stack Completion		3,509		6,200
Underground Development		2,505		9,800
Other Sustaining Capital		1,707		4,100
Exploration Investment:
Surface Exploration Expense		1,837		3,000
Underground Drilling		740		2,600
Exploration Development		817		1,600
Total	$	11,160	$	29,200

The Company’s investment in Mexico continued in Q2 2021 with year to date investments totaling $11.2 million. One of the current initiatives taking place at DDGM is a full review and analysis of all remaining capital for 2021 to ensure the budgeted projects continue to align with the key priorities of the organization. Based on the analysis performed to date, it is unlikely that the full amount of guided underground development ($9.8 million) will be spent in 2021 as a result of the mine sequence changes made during the first half of the year.

Gold Regrind Project:Metallurgical testing, full scale design, and engineering of a tailings regrind circuit were completed, including procuring certain components and equipment for this project. The new circuit is expected to increase gold recovery by 6% to 10% by regrinding sulfide mill tailings followed by a leaching circuit to produce doré bars. Completion and commissioning are expected by the first quarter of 2022 due to the manufacturing lead time for specialized equipment, flotation cells and the regrind mill. As of June 30, 2021, $45,000 has been invested in this project with another $1.8 million expected prior to completion.

‌24

Table of Contents

Dry Stack Project:Significant construction progress was made on the filtration plant and dry stack tailings project which is on track for completion in the third quarter of 2021. The dry stacked tailings will accelerate reclamation of certain areas of the open pit mine, extend the life of current tailings storage facility, and reduce water consumption as approximately 80% of the process water will be available for reuse. As of June 30, 2021, $9.0 million has been invested in this project, $3.5 million in 2021, with another $2.7 million expected prior to completion.

In addition, the open pit is undergoing final preparation work to receive dry stack tailings material, including completion of a new access road.



Dry stack tailings filtration plant	New access road at the open pit

Underground and Exploration Development: Mine development during the quarter included ramps and accesses to different areas of the deposit and exploration development drifts. A total of 1,787 meters of underground development and exploration development, at a cost of $3.3 million, was completed during the year, including access to new exploration diamond drilling platforms on level 17. We plan to invest a total of $1.6 million in exploration development during 2021 and the total expected amount for underground mine development is currently being evaluated but expected to be less than the originally guided amount of $9.8 million as discussed above.

2021 Exploration Updates

We perform exploration activities at our portfolio of exploration properties in Oaxaca, Mexico. All the properties that make up our Don David Gold Mine are located along what is known as the San Jose structural corridor in the Sierra Madre Sur mountain range. Our properties comprise 55 kilometers of this structural corridor, which trends north 70 degrees west and spans three historic mining districts within Oaxaca. Exploration activity has focused on the Aguila project and continues to demonstrate our commitment to long-term investment in Oaxaca, Mexico.

Aguila project: During the quarter, 156 meters of underground development was completed on the northern and southern dedicated exploration drift projects. Underground drilling for exploration of new targets and further expansion of veins currently in production, for resource and reserve definition, was undertaken from various locations within the Arista mine. We completed 3,421 meters of diamond drilling in 12 drill holes. Surface drilling on the Aguila project is ongoing, with 2,069 meters of diamond drilling in two holes. Exploration activities were focused on the Switchback vein system, which extends for over a kilometer of strike length and remains open both along strike and vertically, and parallel structures to this system – notably the Sandy vein system located between the Switchback and Arista vein systems. Exploration drilling mainly targeted expansion and delineation of the principal Soledad vein to define additional resources and reserves and optimize the mine plan, as well as step-out drilling on the parallel Sandy system of veins for resource expansion. Drilling is also targeting strike extensions of the Arista system beyond current mine plan.

‌25

Table of Contents

Renewed emphasis on proximal satellite area exploration with surface geologic mapping and rock chip sampling has continued in the Cerro Colorado area, notably in the vicinity of the Aguila open pit, and the surrounding Aguila area, with additional drilling planned for these areas in the second half of 2021.

Alta Gracia project: Exploration activity focused on re-analyzing existing data, with no fieldwork undertaken. Exploration on the new La Fundición prospect is pending. No drilling is planned in this area in 2021 due to our focus on the Aguila Project.

Other Financial Measures


	For the three months ended June 30,				For the six months ended June 30,
	2021		2020		2021		2020

	(in thousands)				(in thousands)
Mine gross profit (loss)	$	6,880	$	(1,300)	$	15,455	$	(1,172)
Costs and expenses:
General and administrative expenses		2,134		1,796		3,715		3,601
Exploration expenses		648		135		1,855		1,113
Restructuring expenses		-		-		496		-
Stock-based compensation		197		400		681		870
Other (income) expense, net		867		(1,909)		553		(444)
Total costs and expenses		3,846		422		7,300		5,140
Income (loss) before income taxes		3,034		(1,722)		8,155		(6,312)
Provision for income taxes		1,751		(1,372)		4,345		(3,351)
Net income (loss) from continuing operations		1,283		(350)		3,810		(2,961)
Net loss from discontinued operations, net of income taxes		-		(2,069)		-		(1,972)
Net income (loss)	$	1,283	$	(2,419)	$	3,810	$	(4,933)

For the three months ended June 30, 2021

Mine gross profit – For the three months ended June 30, 2021, mine gross profit increased by $8.2 million compared to the same period in 2020. The increase was primarily due to increased net sales due to higher average realized prices for gold, silver, copper, and zinc and the lower base metal treatment and refining costs, as well as an increase in production and sales compared to the same period last year, which suffered an interruption due to the COVID-19 shutdown during the period. The net sales increase was offset by increased production costs discussed above.

General and administrative expenses – For the three months ended June 30, 2021, general and administrative expenses increased to $2.1 million, compared to $1.8 million for the same period of 2020, mainly due to the engagement of the Technical Advisory Committee and other qualified professionals to work on strategic initiatives and the costs associated with the change in the COO position.

Exploration expenses – For the three months ended June 30, 2021, property exploration expenses totaled $0.6 million compared to $0.1 million for the same period in 2020. The increase of $0.5 million was the result of increasing efforts to invest in exploration activities in Oaxaca, Mexico.

Stock-based compensation – Stock compensation of $0.2 million decreased for the three months ended June 30, 2021 as compared to $0.4 million during the same period in 2020, mainly due to the spin-off of Fortitude Gold Corporation and subsequent restructuring.

Other (income) expense, ~~net.~~net – ForFor the three ~~and nine~~ months ended ~~September~~June 30, ~~2020, we~~2021, $0.9 million of other expense was recorded compared to $1.9 million other income ~~of $0.5 million and $0.9 million as compared to other expense of $0.6 million and $0.5 million for~~during the same ~~periods in 2019.~~period of 2020. The $2.8 million increase ~~in the 2020 period was partially attributable~~is primarily due to the ~~increased unrealized~~same period in 2020 recognizing a $1.6 million in foreign currency gains ~~on our gold~~with $0.1 million losses in 2021 and ~~silver bullion/rounds~~the long-term employee severance benefit obligation of $0.7 million recorded in Q2 2021 as a result of ~~increasing gold and silver prices from December 31, 2019. Also in 2019, we recognized an expense related to our inventory reserve, while no such expense occurred in 2020. Please see~~ ~~Note 17 to~~Mexico Labor Reform implemented during the ~~Condensed Consolidated Financial Statements~~ ~~for additional information.~~quarter.

‌26

Table of Contents

Provision ~~(benefit)~~ for income ~~taxes.~~taxes – For the three ~~and nine~~ months ended ~~September~~June 30, ~~2020 we recorded~~2021, income tax expense ~~and income~~increased to $1.1 million from $1.4 million tax benefit ~~of $2.0 million and $0.8 million, respectively, as compared to~~from the same period in 2020. The 2021 income tax expense ~~of $2.4 and $4.9 million for~~is primarily driven by the ~~same periods~~taxable income generated in ~~2019. The change in 2020 is due to the income (loss) before income taxes.~~Q2 2021. Please seeNote ~~6 to the Condensed Consolidated Financial Statements~~7 for additional information.

Net ~~income~~Income (loss) from continuing operations. – For the three months ~~and nine~~ended June 30, 2021, we recorded $1.9 million of net income from continuing operations compared to net loss from continuing operations of $0.3 million during the same period in 2020. The change was attributable to the factors noted above.

Net loss from discontinued operations – No income or loss was recorded for the period from discontinued operations due to the completion of the spin-off as of December 31, 2020. A net loss of $2.1 million was reported for the same period in 2020.

Net income (loss) – For the three months ended ~~September~~June 30, ~~2020, we recorded~~2021, $1.9 million in net income was recorded compared to a net loss of ~~$5.0~~$1.8 million during the same period in 2021. The change was attributable to the discontinued operations and ~~$0.1~~other factors noted above.

For the six months ended June 30, 2021

Mine gross profit – For the six months ended June 30, 2021, mine gross profit increased by $16.6 million ~~respectively,~~compared to the same period in 2020. The increase was primarily due to increased net sales due to higher average realized prices for gold, silver, copper, and zinc and the lower base metal treatment and refining costs, as well as an increase in production and sales compared to the same period last year, which suffered an interruption due to the COVID-19 shutdown during the period. The net sales increase was offset by increased production costs discussed above.

General and administrative expenses – For the six months ended June 30, 2021, general and administrative expenses of $3.7 million were in line with the $3.6 million for the same period of 2020.

Restructuring expenses – Restructuring expenses of $0.5 million incurred in Q1 2021 has not changed for the six months ended June 30, 2021 and were related to legal, accounting, consulting, and employee severance compensation related to the spin-off of Fortitude Gold Corporation.

Exploration expenses – For the six months ended June 30, 2021, property exploration expenses totaled $1.9 million compared to $1.1 million for the same period in 2020. The increase of $0.8 million was the result of increasing efforts to invest in exploration activities in Oaxaca, Mexico.

Stock-based compensation – Stock compensation of $0.7 million decreased for the six months ended June 30, 2021 as compared to $0.9 million during the same period of 2020, mainly due to the spin-off of Fortitude Gold Corporation and subsequent restructuring.

Other (income) expense, net – For the six months ended June 30, 2021, $0.6 million of other expense was recorded compared to $0.5 million of other income during the same period of 2020. The $1.1 million increase is primarily due to the $0.3 million in foreign currency losses recorded in 2021 and the long-term employee severance benefit obligation of $0.7 million recorded in Q2 2021 as a result of Mexico Labor Reform implemented during the quarter.

Provision for income taxes – For the six months ended June 30, 2021, income tax expense increased to $3.7 million from $3.4 million tax benefit from the same period in 2020. The 2021 income tax expense is primarily driven by the taxable income generated in 2021. Please see Note 7 for additional information.

Net income (loss) from continuing operations – For the six months ended June 30, 2021, we recorded $4.5 million of net income from continuing operations compared to net loss from continuing operations of $3.0 million ~~and $5.7 million~~during the same period in 2021. The change was attributable to the factors noted above.

‌27

Table of Contents

Net loss from discontinued operations – No income (or loss was recorded for the ~~corresponding periods~~period from discontinued operations due to the completion of the spin-off as of December 31, 2020. A net loss of $2.0 million was reported for the same period in ~~2019. The change~~2020.

Net income (loss) – For the six months ended June 30, 2021, $4.5 million in net income ~~is due~~was recorded compared to a net loss of $4.9 million during the same period in 2021. The change was attributable to the ~~changes in our consolidated results of~~discontinued operations ~~as discussed~~and other factors noted above.

Non-GAAP Measures

Throughout this report, we have provided information prepared or calculated according to U.S. GAAP and have referenced ~~some~~certain 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~~co-product credits per ounce, total cash cost after ~~by-product~~co-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~~co-product of our gold and silver production for the purpose of calculating our total cash cost after ~~by-product~~co-product credits for our ~~Oaxaca Mining Unit.~~Don David Gold Mine. We periodically review our revenues to ensure that our reporting of primary products and ~~by-products~~co-products is appropriate. Because we consider copper, lead and zinc to be ~~by-products~~co-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 after ~~by-product~~co-product credits per precious metal gold equivalent ounce sold. Likewise, we believe the identification of copper, lead and zinc as ~~by-product~~co-product credits is appropriate because of their lower per unit economic value compared to gold and silver and ~~due to the fact that~~since 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, after ~~by-product~~co-product credits, is a measure developed by the Gold Institute ~~in an effort~~ to provide a uniform standard for industry comparison purposes. AISC is calculated based on the current guidance from the World Gold Council.

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

AISC includes total cash cost after ~~by-product~~co-product credits plus other costs related to sustaining production, including allocated sustaining general and administrative expenses, and sustaining capital expenditures. We determined sustaining

~~Table of Contents~~

capital expenditures as those capital expenditures that are necessary to maintain current production and execute the current mine plan.

Cash cost before ~~by-product~~co-product credits per ounce, total cash cost after ~~by-product~~co-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.

‌28

Table of Contents

Reconciliations to U.S. GAAP

The following table ~~provides a reconciliation of Oaxaca and Nevada Mining Units’~~summarizes Don David Gold Mine’s total ~~cash~~all-in cost after ~~by-product~~co-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 September 30,

Nine months ended September 30,


2020

2019

2020

2019

(in thousands)
Oaxaca Mining Unit

Total cash cost after by-product credits

$
4,650

$
3,251

$
18,539

$
9,735
Treatment and refining charges


(5,853)

(3,723)


(15,143)

(10,838)
By-product credits


17,488

20,556


39,458

57,154
Depreciation and amortization


4,341

4,535


13,538

11,563
Reclamation and remediation


43

18


119

49
Share-based compensation allocated to production costs

-

26

-

32
Total Oaxaca Mining Unit mine cost of sales

20,669

24,663

56,511

67,695
Nevada Mining Unit

Total cash cost after by-product credits

7,853

4,508

19,922

5,095
Treatment and refining charges

(112)

(7)

(223)

(9)
Depreciation and amortization

2,949

1,582

6,157

1,961
Reclamation and remediation

25

2

17

28
Total Nevada Mining Unit mine cost of sales

10,715

6,085

25,873

7,075

Total consolidated mine cost of sales

$
31,384

$
30,748

$
82,384

$
74,770

~~Table of Contents~~

~~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 for our Oaxaca Mining Unit:~~

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019

(in thousands, except ounces sold and cost per precious metal gold equivalent ounce sold)
Total cash cost before by-product credits ⁽¹⁾

$
22,138

$
23,807

$
57,997

$
66,889
By-product credits ⁽²⁾


(17,488)

(20,556)


(39,458)

(57,154)
Total cash cost after by-product credits

4,650

3,251

18,539

9,735
Sustaining capital expenditures

1,635

2,690

3,688

9,298
Sustaining general and administrative expenses

798

825

2,394

2,475
Total all-in sustaining cost

$
7,083

$
6,766

$
24,621

$
21,508

Precious metal gold equivalent ounces sold ⁽³⁾


7,898

10,887


20,960

29,762

Total cash cost before by-product credits per precious metal gold equivalent ounce sold

$
2,803

$
2,187

$
2,767

$
2,247
By-product credits per precious metal gold equivalent ounce sold

(2,214)

(1,888)

(1,883)

(1,920)
Total cash cost after by-product credits per precious metal gold equivalent ounce sold

589

299

884

327
Other sustaining expenditures per precious metal gold equivalent ounce sold⁽⁴⁾

308

323

290

396
Total all-in sustaining cost per precious metal gold equivalent ounce sold

$
897

$
622

$
1,174

$
723

~~(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.~~

~~(4)~~

~~Sustaining capital expenditures and sustaining general and administrative expenses divided by precious metal gold equivalent ounces sold.~~

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


	For the three months ended June 30,				For the six months ended June 30,
	2021		2020		2021		2020

	(in thousands, except per oz)
Precious metal gold equivalent ounces sold (oz)		9,685		4,333		18,491		12,943
Total Production ⁽¹⁾	$	19,523	$	10,611	$	34,766	$	26,570
Treatment and refining charges ⁽²⁾		2,927		3,421		5,882		9,290
Co-product credits ⁽²⁾		(15,549)		(8,059)		(30,106)		(21,970)
Total cash cost after co-product credits		6,901		5,973		10,542		13,890
Total cash cost after co-product credits per AuEq oz sold	$	713	$	1,378		570		1,073
Sustaining - Capital Expenditure ⁽³⁾		2,320		173		4,212		2,053
Sustaining - Exploration Expenditure ⁽³⁾		848		64		1,557		375
Sustaining - general and administrative, including stock-based compensation expenses		2,331		2,196		4,396		4,471
Subtotal of sustaining costs		5,499		2,433		10,165		6,899
Total all-in sustaining cost after co-product credits		12,400		8,406		20,707		20,789
Total all-in sustaining cost after co-product credits per AuEq oz sold	$	1,280	$	1,940		1,120		1,606
Non-Sustaining cost- Capital Expenditure ⁽³⁾		1,845		685		3,564		1,976
Non-Sustaining cost- Exploration Expenditure ⁽¹⁾		648		135		1,855		1,113
Subtotal of non-sustaining costs		2,493		820		5,419		3,089
Total all-in cost after co-product credits		14,893		9,226		26,126		23,878
Total all-in cost after co-product credits per AuEq oz sold	$	1,538	$	2,129		1,413		1,845

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019

(in thousands)
By-product credits by dollar value:





Copper sales

$
3,000

$
2,554

$
6,490

$
7,357
Lead sales


3,517

4,402


8,587

11,777
Zinc sales


10,971

13,600


24,381

38,020
Total sales from by-products ⁽¹⁾

$
17,488

$
20,556

$
39,458

$
57,154

(1)

~~Amounts include realized gain (loss) on embedded derivative. Please see~~ Refer to~~Note 19 to the~~ Item 1. Financial Statements: Condensed Consolidated ~~Financial~~Interim Statements ~~for additional information.~~ of Operations

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019
By-product credits per precious metal gold equivalent ounce sold:





Copper sales

$
380

$
235

$
310

$
247
Lead sales


445


404


410


396
Zinc sales


1,389


1,249


1,163


1,277
Total by-product credits per precious metal gold ounces sold

$
2,214

$
1,888

$
1,883

$
1,920

~~Table of Contents~~

~~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 September 30,

Nine months ended September 30,


2020

2019

2020

2019

(in thousands, except ounces sold and cost per precious metal gold equivalent ounce sold)
Total cash cost before by-product credits ⁽¹⁾

$
8,084

$
4,571

$
20,340

$
5,168
By-product credits ⁽²⁾


(231)

(63)


(418)

(73)
Total cash cost after by-product credits

$
7,853

$
4,508

$
19,922

$
5,095
Sustaining capital expenditures

47

-

236

-
Sustaining exploration expenses

38

88

324

88
Total all-in sustaining cost

$
7,900

$
88

$
20,482

$
88

Gold ounces sold


8,396

4,044


17,205

5,175

Total cash cost before by-product credits per gold ounce sold

$
963

$
1,130

$
1,182

$
999
By-product credits per gold ounce sold⁽²⁾

(28)

(15)

(24)

(14)
Total cash cost after by-product credits per gold ounce sold

935

1,115

1,158

985
Other sustaining expenditures per gold ounce sold⁽³⁾

10

22

33

17
Total all-in sustaining cost per gold ounce sold

$
945

$
1,137

$
1,191

$
1,002

~~(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.~~Refer to Item 1. Financial Statements: Footnote 4.

(3)

~~Sustaining capital expenditures and sustaining exploration expenses divided by gold ounces sold.~~Sum of, refer to Item 1. Financial Statements: Condensed Consolidated Interim Statements of Cash Flows

~~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 September 30,

Nine months ended September 30,


2020

2019

2020

2019

(in thousands)
By-product credits by dollar value:





Silver sales

$
231

$
63

$
418

$
73
Total sales from by-products

$
231

$
63

$
418

$
73

Three months ended September 30,

Nine months ended September 30,


2020

2019

2020

2019
By-product credits per gold ounce sold:





Silver sales

$
28

$
15

$
24

$
14
Total by-product credits per gold ounce sold

$
28

$
15

$
24

$
14

Liquidity and Capital Resources

We ~~had~~have a ~~$31.3~~disciplined cash allocation strategy of maintaining financial flexibility to execute our capital priorities and generate long-term value for our shareholders. Consistent with the strategy, we aim to self-fund development projects and make strategic partnerships focused on profitable growth, while returning cash to shareholders through dividends.

Of the $30.5 million cash balance as at ~~September~~June 30, ~~2020, an increase of $20.2~~2021, $28.7 million ~~from~~was held in foreign subsidiaries, primarily held in U.S. dollar denominated accounts with the ~~December 31, 2019 balance of $11.1 million.~~remainder in foreign currencies readily convertible to U.S. dollars. The ~~Oaxaca Mining Unit’s~~Don David Gold Mine’s primary source of liquidity is ~~sales~~the sale of ~~concentrates~~doré and ~~doré.~~concentrates. The ~~Oaxaca Mining Unit~~Don David Gold Mine has been self-sustaining since production commencement in 2010 and has provided excess cash for U.S. operations and ~~projects. The Nevada Mining Unit’s primary sources~~projects, including a substantial amount of liquidity during the development, construction and ramp up stages has been through cash contributions from its parent company, Gold Resource Corporation. As production and sales from the Isabella Peal Mine continue to increase, so hascapital for the Nevada Mining ~~Unit’s cash position.~~Unit that was spun-off in 2020.

As of ~~September~~June 30, ~~2020, we had~~2021, the working capital of ~~$50.0~~$32.6 million, ~~consisting~~consists of current assets of ~~$70.5~~$49.7 million and current liabilities of ~~$20.5~~$17.1 million. This represents ana 4% increase ~~of 120%~~ or ~~$27.3~~$1.1 million from the working capital

~~Table of Contents~~

balance of ~~$22.7~~$30.8 million at December 31, ~~2019.~~2020. The primary factors influencing the increase in our working capital was cash provided by operating activities of ~~$17.7~~$16.1 million, ~~and the 2020 year-to-date net proceeds of $18.7 million from the sale of our common stock under the ATM agreement,~~ offset by ~~$12.8~~$9.3 million of cash used in investing activities. Our September 30, 2020 and December 31, 2019 working capital was negatively affected by the current operating lease liability of $1.4 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.~~

~~We expect our working~~The 2021 capital investments are expected to ~~be impacted when~~total $22 million. As of June 30, 2021, capital investments totaled $9.3 million including $3.5 million for the ~~spin-off of our Nevada Mining Unit is completed. We plan to contribute $10~~dry stack plant, $4 million ~~in additional capital to Fortitude to provide sufficient operating capital upon successful completion of the spin-off, which will reduce our consolidated cash balances of $31.3~~for underground development and $1.8 million ~~as of September 30, 2020.~~for other sustaining capital.

While the suspension of Mexico operations due to COVID-19 was temporary, the impact on our business operations reduced our sales and negatively affected operations. 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 help alleviate the risk of contraction and spread of COVID-19 at our Isabella Pearl mine.

COVID-19 has not had ana significant adverse impact on ~~our~~ exploration plans, results of operations, financial position, and cash flows during the current fiscal ~~year. However,~~year, future impacts are unknown at this time; however, we believe ~~our~~there is sufficient liquidity and capital resources ~~are adequate~~ to fund ~~our~~ operations and corporate activities for the foreseeable future.

‌29

Table of Contents

Cash and cash equivalents increased ~~$20.2~~$5.1 million to ~~$31.3~~$30.5 million during the ~~first nine~~six months of ~~2020.~~2021.

Net cash provided by operating activities for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 was ~~$17.7~~$15.9 million compared ~~to $7.8~~with $5.7 million for the same period in ~~2019.~~2020. The change is primarily due to ~~timing~~net income generated during six months ended June 30, 2021, compared to the net loss of ~~receivables benefiting 2020 and in 2019 we were ramping up inventories related to Isabella Pearl. These increases were offset by a reduction in net income~~$3 million for the same period in 2020, as ~~compared to 2019.~~well as timing of payables benefiting 2021.

Net cash used in investing activities of ~~$12.8~~$9.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 decreased $16.4~~2021 increased by $4.9 million from the same period in ~~2019~~2020 mainly due to the refocus on Mexico operation and development, as ~~a result~~well as prior year suspension of ~~less Isabella Pearl mine development~~Mexico operation and ~~less~~ capital ~~expenditures in Mexico as several~~ projects ~~were completed in 2019.~~due to COVID-19 and Discontinued Operation.

Net cash ~~provided by~~used in financing activities for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 was ~~$15.6~~a net outflow of $1.5 million compared to ~~$22.7~~a net inflow of $10.3 million for same period in ~~2019.~~2020. The decrease is primarily related to ~~selling less~~discontinued operations cash outflows and no sales of ~~our~~ common shares under our ATM agreement in 2020, as well as higher dividend payments made to our shareholders in ~~2020~~2021 as compared to ~~2019.~~

~~Exploration and Development Activities~~

We perform exploration activities 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 mountain range, 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 of central Nevada which is known for its significant and high-grade gold-silver production from current and historic mines.

~~Oaxaca Mining Unit, Mexico~~

~~Aguila project~~: Mine activities during the third quarter included development and ore extraction from the Arista mine, while maintaining strict COVID-19 safety protocols to keep employees safe. During the quarter, underground drilling continued in the Arista mine with two underground diamond drill holes completed, totaling 410 meters. Underground drilling continues to target further expansion of veins currently in production for reserve definition,

~~Table of Contents~~

expansion and mine plan optimization. Two dedicated exploration drifts continued to advance during the quarter with the goal to be complete with the current planned drifting by year-end or early next year.

~~Alta Gracia project~~: Our Mirador mine remained closed after the mandatory shutdown and we are evaluating the best time to recommence operations given our current focus on the Arista mine. We plan to utilize this time for further exploration including analysis of the surface geochemical soil sampling program at the Aguacatillo prospect on the Alta Gracia project that was completed during the third quarter.

~~Nevada Mining Unit, U.S.A.~~

~~Isabella Pearl project:~~ During the third quarter, our open pit, heap leach operation at the Isabella Pearl Mine continued operations while maintaining strict COVID-19 protocols to keep employees safe. Exploration activities mainly included geological interpretation and modeling of drill results testing the extension of the Scarlet target and a new gold-bearing zone called “Silica Knob”, both located outside the current permitted mine plan. Surface geological mapping was also undertaken in the Scarlet and Silica Knob areas.2020.

~~East Camp Douglas property:~~ During the quarter, we commenced our first surface diamond drilling program on the lithocap target area of our East Camp Douglas property. Two holes totaling 422 meters were completed during the third quarter. This initial 1,830-meter program is targeting three general areas: Discovery Breccia, Gypsum Shaft and D2 Cliffs. These potentially mineralized zones are hosted in brecciated vuggy silicified volcanic rock with a high degree of oxidation.

~~Golden Mile property:~~ During the third quarter, we continued to review historical geological and exploration data along with conducting initial field investigations at our newly acquired Golden Mile property. Other activities during the quarter included 3D modeling of known mineralized areas and historic mine workings and a remote sensing study (enhanced satellite imagery) which illustrated extensive surface hydrothermal alteration across the property. We also completed an internal environmental site review and are now targeting an initial surface diamond drilling program in the potential resource area on the patented claims.

Accounting Developments

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

On October 31, 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to modernize the property disclosure requirements for mining registrants, and related guidance, which are currently set forth in Item 102 of Regulation S-K, Subpart 1300 (aka S-K 1300) under the Securities Act of 1933 and the Securities Exchange Act of 1934 (“Exchange Act”) and in Industry Guide 7. The amendments replaced Guide 7 and are intended to provide investors with a more comprehensive understanding of a registrant’s mining properties, which should help them make more informed investment decisions. The amendments also will more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards, as embodied by the Committee for Reserves International Reporting Standards (“CRIRSCO”). Registrants must comply with the new rules for the first fiscal year beginning on or after January 1, 2021. The Company is in the process of implementing the new guidance and assessing the impact on the control environment and the financial results.

Forward-Looking Statements

This report contains ~~or incorporates~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by ~~reference “forward-looking statements,~~words such as “plan,” ~~as that term is used in federal securities laws, about our financial condition, results of operations~~“target,” “anticipate,” “believe,” “estimate,” “intend”, “expect,” “may,” “should,” “will,” “likely,” and ~~business. These~~similar expressions to future periods. Such forward-looking statements include, ~~among others:~~without limitation, statements we make regarding:

●

~~statements about our~~Our strategy for significant future investment in Oaxaca, Mexico for infrastructure and exploration ~~permitting, production, development, and plans for development of our properties;~~activities;

●

~~statements concerning~~The expected completion date and estimated cost of the dry stack filtration plant and tailings project at our Don David Gold Mine and the expected 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;~~the improved infrastructure;

●

~~statements~~Expectations regarding drilling activities planned for the second half od 2021;

●

The expected completion date and estimated cost of the tailings regrind circuit and the anticipated improvements in gold recoveries as a result of the tailings regrind circuit;

●

Expectations regarding 2021 capital investment, including the uses and amounts of our capital expenditure budget;

●

Our expectations ~~beliefs,~~regarding the future ~~plans and strategies, our targets, exploration activities, anticipated developments and other matters that are not historical facts;~~payment of dividends;

●

Anticipated grades from future production; and

●

~~statements with respect~~Our ability to satisfy our obligations and other potential cash requirements over 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.~~next twelve months.

Forward-looking statements are neither historical facts nor assurances of future performance. Rather, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements

33‌30

Table of Contents

~~These statements may be made expressly in this document or may be incorporated by reference from other documents that we will file with~~relate to 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~~future, they are subject to ~~numerous assumptions,~~inherent uncertainties, risks and ~~uncertainties~~changes in circumstances that ~~may cause~~are difficult to predict and many of which are outside of our control. 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~~financial condition may differ materially from those ~~expressed or implied. We caution~~indicated in the forward-looking statements. Therefore, you should not ~~to put undue reliance~~rely on any of 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~~forward-looking statements. Important factors that could ~~prevent us~~cause our actual results and financial condition to differ materially from ~~achieving our stated goals and objectives~~those indicated in the forward-looking statements 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, 2019, and~~among others, the following:

●

~~Global pandemics such as~~The extent of the impact of the COVID-19 pandemic, including the duration, spread, severity, and ~~governmental responses designed to control~~any repeated resurgence of the ~~pandemic;~~COVID-19 pandemic, the duration and scope of related government orders and restrictions, the impact on our employees, and the extent of the impact of the COVID-19 pandemic on our mining operations;

●

Commodity price fluctuations;

●

Mine protests and work stoppages;

●

Rock formations, faults and fractures, water flow and possible CO2 gas exhalation or other unanticipated geological situations that could affect the mine plan and sequencing;

●

Unexpected changes in business and economic conditions, including the rate of inflation;

●

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

●

~~Volatility in the equities markets;~~interest rates and currency exchange rates;

●

Adverse ~~results from our exploration or production efforts;~~

●

~~Producing at rates lower than those targeted;~~

●

~~Political~~technological changes and ~~regulatory risks;~~

●

~~Weather conditions, including unusually heavy rains;~~

●

~~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~~cybersecurity threats;

●

~~Investor perception~~Unanticipated increases in our operating costs and other costs of ~~our industry or our prospects;~~doing business;

●

~~Lawsuits;~~Access to land and availability of materials, equipment, supplies, labor and supervision, power and water;

●

~~Economic impact from spread~~Results of ~~disease;~~current and future feasibility studies;

●

~~Actions~~Interpretation of drill hole results and the geology, grade and continuity of mineralization;

●

Litigation by ~~government central banks;~~private parties or regulatory action by governmental entities;

●

Acts of God such as floods, earthquakes and any other natural disasters;

●

The uncertainty of reserve and mineralized material estimates; and

●

~~General economic trends.~~Such other factors discussed below in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

Any forward-looking statement made by us in this quarterly report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no ~~responsibility or~~ obligation to publicly update ~~publicly these~~any forward-looking ~~statements but may do so in the future in~~statement, whether written or oral, ~~statements. Investors should take note~~that may be made from time to time, whether as a result of ~~any~~new information, future ~~statements made by us~~developments or ~~on our behalf.~~

otherwise.

~~Table of Contents~~

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,~~flows, 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, government fiscal and monetary policy, 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 gold and silver derivative contracts, ~~or other commodity price risk management programs,~~ although we have no intention of doing so in the near-term.

Generally, the Company historical practice for other commodity price risk management has been to remain exposed to the market prices. In Q2 2021, management elected to hedge 5,500 tonnes or approximately 43% of the Company’s

‌31

Table of Contents

expected 2021 zinc production from June through December 2021 to ensure cash flow stability. The Company entered into a zero-cost collar consisting of call and put options on the same volume to manage its near-term exposure to cash flow variability from zinc price risks. The call options were sold at $2,992 per tonne of zinc to enhance the upside retention and the put options were bought at $2,860 per tonne of zinc to offset the downside through December 31, 2021. In the future, management may continue to hedge some of the risk of base metal price fluctuations. Commodity price risk management activities may prevent us from fully benefiting from price increases and may expose us to regulatory, counterparty credit and other risks. The Company manages credit risk by selecting counterparties that it believes to be financially strong, by entering into netting arrangements with counterparties and by requiring other credit risk mitigants, as appropriate. The Company actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. See footnote 13 Derivatives for additional information.

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

Our foreign operation sells its gold, silver, copper, lead and zinc production based on U.S. dollar metal prices. Fluctuations in foreign currency exchange rates do not have a material impact on our revenue since gold, silver, copper, lead and zinc are sold throughout the world in U.S. dollars.

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. 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 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. Approximately 50% and 60% of Costs applicable to sales were paid in currencies other than the U.S. dollar during the three months ended June 30, 2021 and 2020, respectively.

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.~~shipment delivery to the customer. 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 delivery and final settlement date will result in adjustments to revenues related to the sales of concentrate previously recorded upon ~~shipment.~~shipment delivery. Please see Note 1413 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~~We consider our interest rate risk exposure to be insignificant at this ~~time.~~time, as our interest rate is related and embedded in immaterial payments for office leases.

~~Table of Contents~~

Equity Price Risk

We have in the past, and may in the future, seek to acquire additional funding bythrough 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,

‌32

Table of Contents

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 – There were no changes that occurred during the three and six months ended ~~September~~June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1: Legal Proceedings

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation.

In February 2020, a local Ejido community (who claim to be an indigenous community) filed an injunction against the Mexican federal government through which they demanded the cancellation of several concession titles. The federal government ordered a suspension to prevent work related to excavating, drilling, opening tunnels and exploiting the mineral resources on the surface and subsoil of the concessions named in the injunction. Presently, the Don David Gold Mine does not perform such works in the named concessions in lands of the indigenous community. The lawsuit filed in February 2020 has not progressed to a final ruling as courts have been closed for extended periods of time due to the worldwide pandemic.

ITEM 1A: Risk Factors

“Item 1A. Risk Factors” of our Form 10-K for the year ended December 31, 2020 includes a discussion of our known material risk factors, other than risks that could apply to any issuer or offering. There have been no material changes from the risk factors described in our Form 10-K.

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

None

ITEM 3: Defaults upon Senior Securities

None

ITEM 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.Not applicable.

36‌33

Table of Contents

ITEM 5: Other Information

None

ITEM 6: Exhibits

The following exhibits are filed or furnished 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).

~~3.2.2~~		Amendment dated April 3, 2018 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 April 3, 2018, Exhibit 3.2, File No. 001-34857).

~~10.1~~		At-The-Market Offering Agreement, dated June 3, 2020, between the Company and H.C. Wainwright & Co., LLC (incorporated by reference from our registration statement on Form S-3 filed on November 29, 2019, Exhibit 10.1, File No. 333-235312).

~~10.2~~		Executive Employment Agreement between the Company and Kimberly Perry dated August 10, 2020 (incorporated by reference from our current report on Form 8-K filed on August 10, 2020, Exhibit 10.1, File No. 001-34857).

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

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Kimberly C. Perry.

32*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for ~~Jason D. Reid~~Allen Palmiere and Kimberly C. Perry.

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 and six months ended ~~September~~June 30, ~~2020,~~2021, formatted in inline 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.

104		Cover Page Interactive Data File (embedded within the XBRL document)

~~Table of Contents~~

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.

38‌34

Table of Contents

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: ~~November 2, 2020~~July 27, 2021		/s/ ~~Jason D. Reid~~ Allen Palmiere
	By:	~~Jason D. Reid,~~Allen Palmiere,
		Chief Executive Officer, President and ~~President~~Director




Dated: ~~November 2, 2020~~July 27, 2021		/s/ Kimberly C. Perry
	By:	Kimberly C. Perry,
		Chief Financial Officer

39‌35


	September 30,		December 31,
	2020		2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	31,313	$	11,076
Gold and silver rounds/bullion		5,241		4,265
Accounts receivable, net		4,777		8,362
Inventories, net		26,977		24,131
Prepaid taxes		-		786
Prepaid expenses and other current assets		2,168		2,032
Total current assets		70,476		50,652
Property, plant and mine development, net		117,409		125,259
Operating lease assets, net		1,411		7,436
Deferred tax assets, net		8,617		4,635
Other non-current assets		5,550		5,030
Total assets	$	203,463	$	193,012
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	11,991	$	14,456
Loans payable, current		840		879
Finance lease liabilities, current		465		446
Operating lease liabilities, current		1,371		7,287
Income taxes payable, net		876		-
Mining royalty taxes payable, net		1,162		1,538
Accrued expenses and other current liabilities		3,754		3,366
Total current liabilities		20,459		27,972
Reclamation and remediation liabilities		6,710		5,605
Loans payable, long-term		165		782
Finance lease liabilities, long-term		84		435
Operating lease liabilities, long-term		51		160
Total liabilities		27,469		34,954
Shareholders' equity:
Common stock - $0.001 par value, 100,000,000 shares authorized:
71,850,665 and 65,691,527 shares outstanding at September 30, 2020 and December 31, 2019, respectively		72		66
Additional paid-in capital		168,114		148,171
Retained earnings		14,863		16,876
Treasury stock at cost, 336,398 shares		(5,884)		(5,884)
Accumulated other comprehensive loss		(1,171)		(1,171)
Total shareholders' equity		175,994		158,058
Total liabilities and shareholders' equity	$	203,463	$	193,012


		Three months ended September 30,				Nine months ended September 30,
Lease Cost Type	Consolidated Statements of Operations Location	2020		2019		2020		2019

		(in thousands)
Operating lease cost	General and administrative expenses	$	19	$	20	$	58	$	61
Operating lease cost	Production costs		18		19		54		57
Related party lease cost	General and administrative expenses		13		14		35		35
Short term lease cost	Production costs		48		77		130		381


Year Ending December 31:
2020	$	1,245
2021		175
2022		13
2023		-
Thereafter		-
Total lease payments		1,433
Less imputed interest		(11)
Present value of minimum payments		1,422
Less: current portion		(1,371)
Long-term portion of minimum payments	$	51


	Mexico		Nevada		Corporate and Other		Consolidated
Three months ended September 30, 2020
Revenue	$	26,435	$	15,851	$	-	$	42,286
Exploration expense		982		780		37		1,799
Net income (loss)		4,716		3,869		(3,584)		5,001
Capital expenditures		3,066		564		4		3,634

		Mexico		Nevada	Corporate and Other			Consolidated
Three months ended September 30, 2019
Revenue	$	34,086	$	5,980	$	-	$	40,066
Exploration expense		775		322		32		1,129
Net income (loss)		5,426		(480)		(1,968)		2,978
Capital expenditures		3,870		6,056		12		9,938