UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 30, 2020.~~MARCH 31, 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 1-13627

GOLDEN MINERALS COMPANY

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


DELAWARE		26-4413382

(STATE OR OTHER JURISDICTION OF		(I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)		IDENTIFICATION NO.)


350 INDIANA STREET, SUITE 650
GOLDEN, COLORADO		80401

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

(303) 839-5060

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)


Securities registered pursuant to Section 12(b) of the Act:
Tile of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	AUMN	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, smaller reporting company, or an emerging growth company. See the 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 the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ◻ No ⌧

At ~~November 4, 2020, 151,512,652~~May 5, 2021, 162,469,612 shares of common stock, $0.01 par value per share, were issued and outstanding.

Table of Contents

GOLDEN MINERALS COMPANY

FORM 10-Q

QUARTER ENDED ~~SEPTEMBER 30, 2020~~MARCH 31, 2021

~~INDEX~~INDEX

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars)

(Unaudited)


	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands, except share data)				(in thousands, except share data)
Assets
Current assets
Cash and cash equivalents (Note 5)	$	8,658	$	4,593
Cash and cash equivalents (Note 3)					$	7,975	$	9,704
Short-term investments (Note 3)						131		79
Lease receivables		502		448		—		72
Inventories, net (Note 8)		199		231
Derivative at fair value (Note 7)		251		254
Value added tax receivable, net (Note 9)		69		—
Prepaid expenses and other assets (Note 6)		570		669
Inventories, net (Note 5)						1,840		284
Value added tax receivable, net						805		45
Prepaid expenses and other assets (Note 4)						990		1,130
Total current assets		10,249		6,195		11,741		11,314
Property, plant and equipment, net (Note 10)		5,343		6,031
Other long term assets (Note 11)		988		1,131
Property, plant and equipment, net (Note 7)						6,106		5,520
Other long term assets (Note 8)						978		1,472
Total assets	$	16,580	$	13,357	$	18,825	$	18,306

Liabilities and Equity
Current liabilities
Accounts payable and other accrued liabilities (Note 12)	$	1,304	$	2,127
Deferred revenue, current (Note 19)		100		472
Debt - related party (Note 13)		—		—
Other current liabilities (Note 14)		230		1,824
Accounts payable and other accrued liabilities (Note 9)					$	2,290	$	1,318
Deferred revenue, current (Note 17)						396		535
Other current liabilities (Note 11)						544		667
Total current liabilities		1,634		4,423		3,230		2,520
Asset retirement and reclamation liabilities (Note 15)		3,102		2,839
Other long term liabilities (Note 14)		385		494
Asset retirement and reclamation liabilities (Note 12)						3,145		3,166
Other long term liabilities (Note 11)						512		648
Total liabilities		5,121		7,756		6,887		6,334

Commitments and contingencies (Note 22)
Commitments and contingencies (Note 20)

Equity (Note 18)
Common stock, $.01 par value, 200,000,000 shares authorized; 149,012,652 and 106,734,279 shares issued and outstanding respectively		1,490		1,067
Equity (Note 15)
Common stock, $.01 par value, 200,000,000 shares authorized; 162,469,612 and 157,512,652 shares issued and outstanding respectively						1,625		1,575
Additional paid in capital		533,694		521,314		539,357		536,263
Accumulated deficit		(523,725)		(516,780)		(529,044)		(525,866)
Shareholders' equity		11,459		5,601		11,938		11,972
Total liabilities and equity	$	16,580	$	13,357	$	18,825	$	18,306

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

Table of Contents

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in United States dollars)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Quarter Ended March 31,
	2020		2019		2020		2019		2021		2020

	(in thousands except per share data)				(in thousands, except per share data)				(in thousands, except per share data)
Revenue:
Oxide plant lease (Note 19)	$	2,146	$	1,944	$	4,566	$	5,852
Sale of metals (Note 16)									$	1,778	$	—
Oxide plant lease (Note 17)										—		1,196
Total revenue		2,146		1,944		4,566		5,852		1,778		1,196
Costs and expenses:
Oxide plant lease costs (Note 19)		(582)		(594)		(1,566)		(1,804)
Cost of metals sold (exclusive of depreciation shown below) (Note 16)										(1,536)		—
Oxide plant lease costs (Note 17)										—		(564)
Exploration expense		(1,226)		(935)		(3,681)		(3,119)		(781)		(1,631)
El Quevar project expense		(130)		(582)		(623)		(1,584)		(106)		(248)
Velardeña care and maintenance costs		(206)		(422)		(861)		(1,391)		(199)		(463)
Administrative expense		(852)		(742)		(2,782)		(2,784)		(1,548)		(1,163)
Stock based compensation		(105)		(72)		(771)		(725)		(429)		(52)
Reclamation expense		(63)		(57)		(184)		(171)		(66)		(59)
Other operating (expense) income, net		24		45		(78)		225
Other operating income, net										199		4
Depreciation and amortization		(226)		(270)		(770)		(814)		(155)		(279)
Total costs and expenses		(3,366)		(3,629)		(11,316)		(12,167)		(4,621)		(4,455)
Loss from operations		(1,220)		(1,685)		(6,750)		(6,315)		(2,843)		(3,259)
Other expense:
Interest and other expense, net (Note 20)		(12)		(42)		(85)		(182)
Loss on foreign currency		(36)		(24)		(92)		(63)
Other income (expense):
Interest and other expense, net (Note 18)										(360)		(27)
Other income										52		—
Loss on foreign currency transactions										(79)		(50)
Total other loss		(48)		(66)		(177)		(245)		(387)		(77)
Loss from operations before income taxes		(1,268)		(1,751)		(6,927)		(6,560)		(3,230)		(3,336)
Income taxes (Note 17)		(18)		(9)		(18)		(9)
Income taxes (Note 14)										52		—
Net loss	$	(1,286)	$	(1,760)	$	(6,945)	$	(6,569)	$	(3,178)	$	(3,336)
Net loss per common share — basic
Loss	$	(0.01)	$	(0.02)	$	(0.06)	$	(0.07)	$	(0.02)	$	(0.03)
Weighted average Common Stock outstanding - basic (1)		143,285,564		104,764,260		124,956,140		99,263,135		160,442,137		107,247,298

(1)Potentially dilutive shares ~~for loss periods~~ have not been included for loss periods because to do so would be anti-dilutive. Potentially dilutive shares at March 31, 2021 consist of 8,039,040 equivalent shares related to stock compensation and 14,303,846 equivalent shares related to warrants outstanding. Potentially dilutive shares at December 31, 2020 consist of 7,559,040 equivalent shares related to stock compensation and 17,403,846 equivalent shares related to warrants outstanding. See Note 15 for discussion of stock based compensation and warrants.

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

Table of Contents

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in United States dollars)

(Unaudited)


	Nine Months Ended
	September 30,				Quarter Ended March 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Cash flows from operating activities:
Net cash used in operating activities (Note 21)	$	(7,891)	$	(3,122)
Net cash used in operating activities (Note 19)					$	(3,914)	$	(3,819)
Cash flows from investing activities:
Proceeds from sale of assets		25		144		17		—
Proceeds from sale of trading securities		—		113
Acquisitions of property, plant and equipment		(101)		(28)		(546)		(1)
Net cash provided by (used in) investing activities	$	(76)	$	229
Cash flows provided by (used in) financing activities:
Net cash (used in) provided by investing activities					$	(529)	$	(1)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		12,032		2,492		2,714		439
Proceeds from related party loan (Note 13)		1,000		—
Payment of related party loan (note 13)		(1,000)		—
Proceeds from related party loan (Note 22)						—		1,000
Net cash from financing activities	$	12,032	$	2,492	$	2,714	$	1,439
Net Increase (decrease) in cash and cash equivalents		4,065		(401)
Net decrease in cash and cash equivalents						(1,729)		(2,381)
Cash and cash equivalents, beginning of period		4,593		3,293		9,704		4,593
Cash and cash equivalents, end of period	$	8,658	$	2,892	$	7,975	$	2,212

See Note 2119 for supplemental cash flow information.

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

Table of Contents

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in United States dollars)

(Unaudited)

Additional

Common Stock

Paid-in

Accumulated

Total

Shares

Amount

Capital

Deficit

Equity

(in thousands except share data)

Balance, December 31, 2018

95,620,796

$
955

$
517,806

$
(511,125)

$
7,636

Stock compensation accrued (Note 18)

—

—

337

—

337

Modification of previously awarded KELTIP Units (Note 18)

—

—

583

—

583

Shares issued under the at-the-market offering agreement, net (Note 18)

33,995

1

11

—

12

Shares issued under the Lincoln Park commitment purchase agreement, net (Note 18)

1,213,642

12

313

—

325

Net loss

—

—

—

(2,351)

(2,351)

Balance, March 31, 2019

96,868,433

$
968

$
519,050

$
(513,476)

$
6,542

Stock compensation accrued and shares issued for vested stock awards (Note 18)

312,000

3

89

—

92

Shares issued under the Lincoln Park commitment purchase agreement, net (Note 18)

900,000

9

194

—

203

Net loss

—

—

—

(2,458)

(2,458)

Balance, June 30, 2019

98,080,433

$
980

$
519,333

$
(515,934)

$
4,379

Stock compensation accrued (Note 18)

—

—

73

—

73

Registered direct offering agreement, net (Note 18)

8,653,846

87

1,860

—

1,947

Deemed dividend on warrants (Note 5)

—

—

2

(2)

—

Net loss

—

—

—

(1,760)

(1,760)

Balance, September 30, 2019

106,734,279

$
1,067

$
521,268

$
(517,696)

$
4,639

Adjustment related to correction of immaterial error (Note 2)

—

—

—

(267)

(267)

Adjusted Balance, September 30, 2019

106,734,279

$
1,067

$
521,268

$
(517,963)

$
4,372

Balance, December 31, 2019

106,734,279

$
1,067

$
521,314

$
(516,780)

$
5,601

Stock compensation accrued (Note 18)

—

—

52

—

52

Shares issued under the at-the-market offering agreement, net (Note 18)

823,452

9

214

—

223

Shares issued under the Lincoln Park commitment purchase agreement, net (Note 18)

900,000

9

207

—

216

Net loss

—

—

—

(3,336)

(3,336)

Balance, March 31, 2020

108,457,731

$
1,085

$
521,787

$
(520,116)

$
2,756

Stock compensation accrued (Note 18)

—

—

614

—

614

Subscription agreement (Note 18)

4,719,207

47

882

—

929

Offering and private placement agreement (Note 18)

15,000,000

150

2,561

—

2,711

Net loss

—

—

—

(2,323)

(2,323)

Balance, June 30, 2020

128,176,938

$
1,282

$
525,844

$
(522,439)

$
4,687

Stock compensation accrued and shares issued for vested stock awards (Note 18)

300,000

3

102

—

105

Public offering (Note 18)

20,535,714

205

7,748

—

7,953

Net loss

—

—

—

(1,286)

(1,286)

Balance, September 30, 2020

149,012,652

$
1,490

$
533,694

$
(523,725)

$
11,459




				Additional
	Common Stock			Paid-in		Accumulated		Total
	Shares	Amount		Capital		Deficit		Equity

	(in thousands except share data)
Balance, December 31, 2019	106,734,279	$	1,067	$	521,314	$	(516,780)	$	5,601
Stock compensation accrued (Note 15)	—		—		52		—		52
Shares issued under the at-the-market offering agreement, net (Note 15)	823,452		9		214		—		223
Shares issued under the Lincoln Park commitment purchase agreement, net (Note 15)	900,000		9		207		—		216
Net loss	—		—		—		(3,336)		(3,336)
Balance, March 31, 2020	108,457,731	$	1,085	$	521,787	$	(520,116)	$	2,756

Balance, December 31, 2020	157,512,652	$	1,575	$	536,263	$	(525,866)	$	11,972
Stock compensation accrued (Note 15)	—		—		429		—		429
Shares issued under the at-the-market offering agreement, net (Note 15)	1,856,960		19		1,681		—		1,700
Warrants exercised (Note 15)	3,100,000		31		984		—		1,015
Net loss	—		—		—		(3,178)		(3,178)
Balance, March 31, 2021	162,469,612	$	1,625	$	539,357	$	(529,044)	$	11,938

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

Table of Contents

GOLDEN MINERALS COMPANY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

1. Basis of Preparation of Financial Statements and Nature of Operations

Golden Minerals Company (the “Company”), a Delaware corporation, has prepared these unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements do not include all disclosures required by GAAP for annual financial statements, but in the opinion of management, include all adjustments necessary for a fair presentation. Certain prior period amounts have been reclassified to conform to current classifications. Interim results are not necessarily indicative of results for a full year; accordingly, these interim financial statements should be read in conjunction with the annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 and filed with the SEC on February ~~27, 2020.~~18, 2021.

The Company is a mining company, holding a 100% interest in the Rodeo property in Durango State, Mexico (the “Rodeo Property”), a 100% interest in the Velardeña and Chicago precious metals mining properties and associated oxide and sulfide processing plants in the state of Durango, Mexico (the “Velardeña Properties”), a 100% interest in the El Quevar advanced exploration silver property in the province of Salta, Argentina, ~~(subject~~which is subject to the terms of the April 9, 2020 earn-in agreement (the “Earn-in Agreement”) pursuant to which Barrick Gold Corporation (“Barrick”) has the option to earn a 70% interest in the El Quevar project (see ~~Notes 11 and 19)~~Note 7), and a diversified portfolio of precious metals and other mineral exploration properties located primarily in or near historical precious metals producing regions of Argentina, Nevada and Mexico. The Rodeo ~~property,~~Property, Velardeña Properties and the El Quevar advanced exploration property are the Company’s only material properties.

The Company ~~remains~~is primarily focused on ~~commencing~~ mining operations at the Rodeo ~~property~~Property as well as ~~evaluating~~further studies of a restart plan for the Velardeña mine, including use of bio-oxidation to improve the payable gold recovery. The Company is also focused on (i) advancing our El Quevar exploration property in Argentina through the Earn-in Agreement with Barrick and ~~searching~~(ii) continuing to evaluate and search for ~~other~~ mining opportunities in North America (including Mexico) with ~~near term~~near-term prospects of mining, and particularly for properties within reasonable haulage distances of our processing plants at the Velardeña Properties. The Company is also focused on advancing our El Quevar exploration property in Argentina through the Earn-in Agreement with Barrick and on advancing selected properties in our portfolio of approximately 12 properties, located in Mexico, Nevada and Argentina. The Company is also reviewing strategic opportunities, focusing primarily on development or operating properties in North America, including Mexico.

~~During November 2015 the~~The Company ~~suspended~~began mining ~~and sulfide processing~~ activities at ~~its~~the Rodeo Property during December 2020 and began processing mined material from Rodeo at the Velardeña plant in January 2021. The employees at the Rodeo and Velardeña Properties, in ~~order~~addition to ~~conserve~~those that operate the ~~asset until~~plant that processes the Company is able to develop mining and processing plans that at then current prices for silver and gold indicate a sustainable positive operating margin (defined as revenues less costs of sales) or the Company is able to locate, acquire and develop alternative mineral sources that could be economicallyRodeo mined and transported to the Velardeña Properties for processing. The Company maintains a core group of employees at the Velardeña Properties, most of whom have been assigned to operate and provide administrative support for the oxide plant, which is leased to a subsidiary of Hecla Mining Company (“Hecla”) (see Note 19). The employees at the Velardeña Properties alsomaterial, include an ~~exploration~~operations group, an administrative group and an ~~operations and administrative~~exploration group to continue to advance the Company’s plans in Mexico ~~including the start-up of mining operations at the Rodeo property,~~ and to provide oversight for corporate compliance activities as well as maintaining and safeguarding the longer-term value of the Velardeña Properties assets.

The Company is considered an exploration stage company under SEC criteria since it has not yet demonstrated the existence of proven or probable mineral reserves, as defined by SEC Industry Guide 7, at any of its properties. Until such time, if ever, that the Company demonstrates the existence of proven or probable reserves pursuant to SEC Industry Guide 7, we expect to remain as an exploration stage company.

2.	~~Correction of Immaterial Error – Income Taxes~~New Accounting Pronouncements

In ~~the third quarter~~December 2019, the ~~Company became aware that it had failed to timely file withholding tax returns and pay taxes that were due at~~FASB issued No. 2019-12, “Income Taxes (Topic 740): Simplifying the ~~end of 2017 and 2018 relating to return of capital distributions made~~Accounting for Income Taxes” (“ASU 2019-12”). The guidance removes certain exceptions to the general principles of ASC 740 and simplifies several other areas. ASU 2019-12 is effective for public business entities for annual reporting periods beginning after December 15, 2020, and interim periods within those reporting periods. The Company ~~by one~~has adopted ASU 2019-12 beginning in 2021. One of the ~~Company’s wholly-owned subsidiaries (see Note 17).~~amendments within ASU 2019-12 eliminates a limitation on the amount of income tax benefit that can be recognized in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The ~~effect~~Company has applied this guidance in the calculation of ~~correcting this error was to reduce beginning retained earnings by $267,000 with $154,000 and $113,000 accruing to 2018 and 2019, respectively. The $267,000~~the tax benefit included in “Income taxes” in the Condensed

~~adjustment to retained earnings is reflected in the accompanying Condensed~~ Table of Contents

Consolidated Statements of ~~Changes~~Operations. The adoption of this guidance did not result in ~~Equity.~~

~~The Company evaluated the materiality of the error described above from~~ a ~~qualitative and quantitative perspective. Based on such evaluation, the Company concluded that the correction would not be~~ material ~~to any individual prior period, nor did it have an effect~~impact on the ~~trend~~Company’s consolidated financial position or results of financial results, taking into account the requirements of the SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in 2019 Financial Statements (“SAB 108”).

~~3. New Accounting Pronouncements~~operations.

During the first quarter 2020, the Company adopted ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ~~As the Company’s principle credit risk is related to its Lease Receivables the~~The adoption of this update did not result in a material impact on the Company’s consolidated financial position or results of operations.

~~During~~On April 12, 2021, the ~~first quarter 2019~~SEC published a statement relating to accounting and reporting considerations for warrants issued by Special Purpose Acquisition Companies (SPACs). The SEC statement raised accounting and reporting considerations for all reporting entities that restricts the use of the exception under ASC 815-40-25-7 thru 8 that allows for equity treatment, under certain conditions, for warrants that allow cash settlement in certain change of control transactions. The restriction put forth by the SEC would prevent equity treatment in cases where cash is received disproportionately between shareholders and warrant holders in such transactions. All of the outstanding warrants granted by the Company ~~adopted ASU 2016-02, “Leases” (“ASU 2016-02”)~~are recorded in equity at March 31, 2021 and ~~ASU No. 2018-11 “Leases (Topic 842)” (“ASU 2018-11”), which require lessees to recognize~~December 31, 2020 following the guidance established by ASC Topic 815-40. The Company’s warrants allow for the potential settlement in cash if certain extraordinary events are effected by the Company, including a ~~right-of-use asset and a lease liability for all leases with terms~~50% or greater ~~than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern~~change of ~~expense recognition~~control in the ~~income statement. For a lessor,~~Company’s common stock. Since those events have been deemed to be within the ~~accounting applied is largely unchanged from previous guidance. The~~Company’s control, the Company currently leases administrative offices in the U.S. and in several foreign locations under lease agreements that typically exceed one year. The Company has elected the modified retrospective method of adopting ASU 2016-02 (see Note 4). continues to apply equity treatment for these warrants.

~~4. Change in Accounting Principle~~

~~Leases~~

Effective January 1, 2019 the Company adopted ASU 2016-02 and ASU 2018-11, which requires lessees to recognize a right-of-use asset and a lease liability for all leases with terms greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For a lessor, the accounting applied is largely unchanged from previous guidance. The Company currently leases administrative offices in the U.S. and in several foreign locations under lease agreements that typically exceed one year. The Company has elected the modified retrospective method of adopting ASU 2016-02 per Topic 842. The Company has elected to apply several practical expedients available under the application of ASU 2016-02 and ASU 2018-11, which allowed the Company to forego reassessing the classification of existing or expiring leases, evaluating whether any existing or expiring contracts contain leases or reassessing previously recorded indirect costs. The Company did not elect the practical expedient permitting the combination of lease and non-lease components of the contract. The adoption of ASU 2016-02 and ASU 2018-11 at January 1, 2019 resulted in only a negligible difference to amounts already recorded by the Company in its Consolidated Balance Sheets as of December 31, 2018, and as a result the Company did not record an adjustment to the beginning balance of retained earnings at January 1, 2019, as required under the modified retrospective method.

The Company took possession of new office space and began a new long-term lease for its principal headquarters office with an effective commencement date of June 1, 2019. The new office lease will expire five years and eight full calendar months following the commencement date. There are no options to extend the lease beyond the stated term. The Company recorded a right of use asset of approximately $465,000 and a lease liability of approximately $450,000 in the second quarter of 2019 based on the net present value of the future lease payments discounted at 9.5%, which represents the Company’s incremental borrowing rate for purposes of applying the guidance of Topic 842. As required, the Company will recognize a single lease cost on a straight-line basis.

The Company also has long-term office leases in Mexico and Argentina that expired in 2019 and recorded a combined lease liability of approximately $45,000 and combined right of use asset of approximately $45,000 relating to both of those leases at January 1, 2019. In November 2019, the Company renewed its Mexican office lease for four years and recorded a right of use asset and lease liability of approximately $174,000. In December 2019, the Company also

~~renewed its Argentina office lease for two years and recorded a right of use asset and lease liability of approximately $18,000.~~

~~The Company has included its right of use assets for the office leases described above in “~~~~Other long-term assets~~~~” (Note 11) and its office lease liabilities in “~~~~Other liabilities~~~~”, short term and long term (Note 14), in the Company’s Consolidated Balance Sheets for the periods ended September 30, 2020 and December 31, 2019.~~

5.3. Cash and Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Short-term investments include investments with maturities greater than three months, but not exceeding 12 months, or highly liquid investments with maturities greater than 12 months that the Company intends to liquidate during the next 12 months for working capital needs.

The following tables summarize the Company's short-term investments at March 31, 2021 and December 31, 2020:


			Estimated		Carrying
March 31, 2021	Cost		Fair Value		Value

		(in thousands)
Investments:
Short-term:
Trading securities	$	59	$	131	$	131
Total trading securities		59		131		131
Total short term	$	59	$	131	$	131

December 31, 2020
Investments:
Short-term:
Trading securities	$	59	$	79	$	79
Total trading securities		59		79		79
Total short term	$	59	$	79	$	79

The short-term investments at March 31, 2021 and December 31, 2020 consist of 1,000,000 common shares of Fabled Silver Gold Corp., formerly known as Fabled Copper Corp. (“Fabled”), a junior mining company that entered into an option agreement with the Company to acquire the Company’s option to earn a 100% interest in the Santa Maria mining claims located in Chihuahua, Mexico (see Note 7). The 1,000,000 common shares were issued to the Company as partial consideration per the terms of the option agreement.

Credit Risk

The Company invests substantially all of its excess cash with high credit-quality financial institutions or in U.S. government or debt securities. Credit risk is the risk that a third party might fail to fulfill its performance obligations under

Table of Contents

the terms of a financial instrument. For cash and equivalents and investments, credit risk represents the carrying amount on the balance sheet. The Company mitigates credit risk for cash and equivalents and investments by placing its funds and investments with high credit-quality financial institutions, limiting the amount of exposure to each of the financial institutions, monitoring the financial condition of the financial institutions and investing only in government and corporate securities rated “investment grade” or better. The Company invests with financial institutions that maintain a net worth of not less than $1 billion and are members in good standing ofwith the Securities Investor Protection Corporation.

6.4. Prepaid Expenses and Other Assets

Prepaid expenses and other current assets at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consist of the following:


	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Prepaid insurance	$	198	$	494	$	563	$	571
Recoupable deposits and other		372		175		427		559
	$	570	$	669	$	990	$	1,130

The ~~September 30, 2020~~March 31, 2021 recoupable deposits and other includes a receivable from Barrick for reimbursement of costs of approximately ~~$0.2~~$0.1 million related to the Earn-in Agreement (see Note ~~10)~~7) and a deferred tax asset of $0.1 million (see Note 14).

7~~. Derivative at Fair Value~~

On December 3, 2019 the Company entered into an amendment to the plant lease agreement with Hecla, reducing the variable per tonne fee contained in the lease agreement from $22.00 to $11.00. Under certain silver price and delivered ore head grade limits, as fully discussed in Note 19, the variable per tonne fee could be increased back to the previous $22.00 per tonne. Pursuant to ASC Topics 815-Derivatives and Hedging (“ASC 815”) and 842-Leases (“ASC 842”), arrangements with variable lease payments must be evaluated to assess whether they contain embedded derivatives. If embedded derivatives are not “clearly and closely related” to the lease contract, they must be bifurcated and accounted for separately from the host contract. The Company determined that the potential for the Company to receive an additional $11.00 variable per tonne fee if certain conditions relating to the silver price and delivered ore head grades are met does not qualify for the “clearly and closely related” exception, and as a result, the potential additional $11.00 variable per tonne fee constitutes a derivative that must be valued and accounted for apart from the host lease contract. Per the guidance of ASC 842, the Company has determined that the amendment to the lease agreement constituted a modification that must be accounted for as a new lease commencing on December 2, 2019, the date the amendment was agreed upon by both parties and expiring on December 31, 2020. The Company is treating the fair value of the derivative received at the time of the modification to the lease agreement as an upfront lease payment that will be amortized over the remaining life of the lease on a straight line basis (see Note 16 for a discussion of the valuation method used to compute the fair value of the derivative). At September 30, 2020 and December 31, 2019, the Company had recorded a “~~Derivative~~~~at fair value”~~ ~~asset of approximately $251,000 and $254,000, respectively. At September 30, 2020 and December 31, 2019, the~~

~~Company had also recorded “~~~~Deferred Revenue”~~ ~~of approximately $45,000 and $180,000, related to the amended lease agreement. At September 30, 2020 the Company recognized a reduction to~~ ~~“Revenue - plant lease”~~ on the Company’s Condensed Consolidated Statements of Operations and a decrease to the derivative of approximately $3,000 related to the change in the fair value of the derivative between December 31, 2019 and September 30, 2020. During the first nine months of 2020, the Company also recognized approximately $135,000 ~~“Revenue - plant lease”~~ ~~on the Company’s Condensed Consolidated Statements of Operations related to the amortization of deferred revenue.~~

8.5. Inventories, net

Inventories at the ~~Velardeña Properties~~Rodeo operation at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consist of the following:


	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Doré inventory					$	832	$	0
In-process inventory						516		0
Material and supplies	$	199	$	231	$	492	$	284
	$	199	$	231	$	1,840	$	284

The Company records its doré and in-process inventories at the lower of cost or net realizable value. At March 31, 2021, the Company had written down its doré inventory to net realizable value including a charge to the cost of metals sold of approximately $17,000. Doré and in-process inventories also include $58,000 of capitalized depreciation and amortization.

The ~~material~~materials and supplies ~~inventory~~inventories at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019 is~~2020 are primarily related to the Rodeo operation and are reduced by a ~~$0.2~~$0.3 million obsolescence ~~allowance.~~reserve.

9.	6.Value added tax receivable, net

The Company has recorded a net value added tax (“VAT”) paid in Mexico ~~and~~of $0.8 million, related to the Velardeña Properties and the Rodeo operation, as a recoverable ~~asset.~~asset, which appears in “Value added tax receivable, net” on the Condensed Consolidated Balance Sheets. Mexico law allows for certain VAT payments to be recovered through ongoing applications for refunds. The Company expects that the current amounts will be recovered within a one-year period. At ~~September 30, 2020,~~March 31, 2021, the Company has also recorded approximately ~~$37,000~~$133,000 of VAT ~~receivable~~payable as a reduction to the VAT ~~payable~~receivable in ~~Mexico, which appears in “~~~~Accounts payable and other accrued liabilities”~~ ~~on the Condensed Consolidated Balance Sheets.~~Mexico.

The Company has also paid VAT in Mexico as well as other countries, primarily related to exploration projects, which has been charged to expense as incurred because of the uncertainty of recoverability.

Table of Contents

~~10.~~7. Property, Plant and Equipment, Net

The components of property, plant and equipment are as follows:


	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Mineral properties	$	9,353	$	9,353	$	9,353	$	9,353
Exploration properties		2,418		2,518		2,418		2,418
Royalty properties		200		200		200		200
Buildings		3,755		3,755		3,780		3,755
Mining equipment and machinery		16,027		16,049		16,272		16,135
Other furniture and equipment		887		884		915		890
Construction in progress						877		259
Asset retirement cost		948		866		894		948
		33,588		33,625		34,709		33,958
Less: Accumulated depreciation and amortization		(28,245)		(27,594)		(28,603)		(28,438)
	$	5,343	$	6,031	$	6,106	$	5,520

El Quevar Earn-In Agreement

On April 9, 2020, the Company and several of its directly and indirectly wholly-owned subsidiaries entered into the ~~Earn In~~Earn-in Agreement with Barrick, pursuant to which Barrick has acquired an option (the “Option”) to earn a 70% interest in the Company’s El Quevar project located in the Salta Province of Argentina. Pursuant to the terms of the ~~Earn-In~~Earn-in Agreement, in order to earn an undivided 70% interest in the El Quevar project, Barrick must: (A) incur a total of $10 million in work expenditures over a total of eight years ($0.5 million per year in years one and two, $1 million per year in years three, four and five, and $2 million per year in years six, seven and eight); (B) deliver to the Company a National

Instrument 43-101 compliant pre-feasibility study pursuant to the parameters set forth in the ~~Earn-In~~Earn-in Agreement; and (C) deliver a written notice to exercise the Option to the Company within the term of the ~~Earn-In~~Earn-in Agreement. Barrick may withdraw from the ~~Earn-In~~Earn-in Agreement at any time after spending a minimum of $1 million in work expenditures and upon providing 30 days’ notice to the Company. The Company will form a new entity (“NewCo”) that will hold the El Quevar properties. Upon satisfaction of the ~~earn-in~~Earn-in conditions and exercise of the Option, NewCo will be 70% owned by Barrick and 30% owned by the Company. Funding of NewCo will be based on Barrick’s and the Company’s respective ownership and industry standard dilution mechanisms will apply in the case of funding shortfalls by either shareholder.

In connection with the ~~Earn-In~~Earn-in Agreement, the Company and Barrick also entered into a Subscription Agreement (the “Subscription Agreement”) dated as of April 9, 2020 pursuant to which Barrick purchased 4,719,207 shares of the Company’s common stock at a purchase price of $0.2119 per share in a private placement transaction (see Note ~~18)~~15).

Sale of Santa Maria Property

On July 14, 2020, the Company entered into a binding letter of intent (“Letter of Intent”) with Fabled ~~Copper Corp. (“Fabled”)~~ for a potential transaction pursuant to which Fabled would acquire the Company’s option to earn a 100% interest in the Santa Maria mining claims located in Chihuahua, Mexico (the “Option”). ~~The Letter of Intent provides that entry~~On December 4, 2020, the Company entered into a definitive option agreement ~~regarding~~(“Option Agreement”) to sell its option to Fabled. The period to exercise the Option is subject to, among other contingencies, (i) a 10 business-day period, which has since expired, during which Fabled conducted its due diligence, (ii) the ability of Fabled to secure financing of not less than CAD$4,000,000, and (iii) acceptance(the “Exercise Period”) expires on December 4, 2022, unless extended by the ~~TSX Venture Exchange~~parties under the terms of the ~~proposed transaction.~~

Option Agreement. As consideration for the Option, Fabled ~~will~~ (i) ~~pay~~paid $500,000 in cash to the Company ~~upon closing~~ and ~~will issue~~issued to the Company 1,000,000 shares of Fabled’s common ~~stock;~~stock (the “Closing Consideration”); (ii) will pay $1,500,000 in cash to the Company on the ~~one-year~~one year anniversary date following the ~~closing;~~closing of the Option Agreement; (iii) will pay $2,000,000 in cash to the Company on the ~~two-year~~two year anniversary date following the ~~closing;~~closing of the Option Agreement; and (iv) upon exercise of the Option, will grant the Company a 1% net smelter return royalty on the Maria, Martia III, Maria II Frac. I, Santa Maria and Punto Com ~~concessions.~~

~~The Letter of Intent contains standard representations, warranties, covenants, and other terms customary in similar transactions. The Company and~~concessions (the “Concessions”). Pursuant to the Option Agreement, during the Exercise Period, Fabled ~~agreed~~is obligated to ~~use their commercially reasonable best efforts~~pay to enter into the definitive agreement on or before August 12, 2020 and prepare all necessary documentation and apply for and obtain TSX Venture Exchange approval and all other consents, orders or approvals as required or desirable to complete the potential transaction regarding the Option. The time limit for completing the definitive option agreement was subsequently extended to December 15, 2020. Noneeach of the ~~consideration described above is payable until~~owners of the ~~definitive agreement is executed The Company had previously expensed all costs associated with the two properties and will record income from the agreement as cash is received.~~

~~Property Abandonment~~

~~During the second quarter 2020, the Company allowed certain concessions related~~Concessions any remaining required payments due to the ~~Company’s immaterial Abalena exploration project in Mexico~~owners pursuant to ~~expire. The concessions had a carrying value of $0.1 million~~the various underlying option agreements between the owners and the Company, ~~recorded a $0.1 million loss included~~and to make all payments and perform all other requirements needed to maintain the Concessions in ~~Other operating (expense) income, net~~ ~~on the accompanying Condensed Consolidated Statement~~good standing. As of ~~Operations.~~

~~Equipment Related to the Oxide Plant Lease~~

~~Certain assets of the Company are related to the lease of the Velardeña oxide plant to Hecla (see Note 19). The net book value of the equipment involved in the lease~~March 31, 2021, there was approximately ~~$0.5~~$0.3 million ~~at both September 30, 2020 and December 31, 2019.~~

of payments remaining to be paid over the next approximately one year. Should Fabled not complete its obligations

1110

Table of Contents

described above, the Santa Maria mining claims will revert to the Company and the Company will be entitled to keep any payments made by Fabled under the terms of the Option Agreement.

~~11.~~8.Other Long-Term Assets

Other long-term assets at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consist of the following:


	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Deferred offering costs	$	479	$	511	$	70	$	479
Right of use assets		509		620		908		993
	$	988	$	1,131	$	978	$	1,472

The deferred offering costs at March 31, 2021 are associated with ~~the LPC Program and~~ the ATM Agreement (see Note ~~18)~~15). The deferred offering costs at December 31, 2020 were associated with the ATM Agreement and the Commitment Purchase Agreement (see Note 15). With the Commitment Purchase Agreement set to expire during May 2021, the Company wrote off the remaining balance of $353,000 of deferred LPC Program costs to “Interest and Other Expense” on the Condensed Consolidated Statement of Operations during the period ended March 31, 2021.

The right of use assets ~~are~~at March 31, 2021 include approximately $0.4 million related to certain office leases ~~(see Note 4).~~and $0.4 million related to a mining equipment lease at our Rodeo Property. The right of use assets at December 31, 2020 include approximately $0.5 million related to certain office leases and $0.5 million related to a mining equipment lease at our Rodeo Property.

In December 2020, the Company’s wholly-owned subsidiary, Minera de Cordilleras S. de R.L. de C.V., entered into an agreement with Triturados del Guadiana, S.A de C.V. (“Trigusa”), whereby Trigusa will carry out mining activities at the Rodeo Property. Per the terms of the mining agreement, Trigusa will provide services for the 27-month period ending March 31, 2023, with the potential for an extension of time upon mutual agreement of both parties. The Company has determined that the mining agreement contains an embedded lease, relating to the mining equipment provided by Trigusa, per the guidance of ASU 2016-02 and Topic 842. The Company did not elect the practical expedient permitting the combination of lease and non-lease components of the mining agreement. The Company recorded a right of use asset and a lease liability of approximately $420,000 based on the net present value of the future lease payments discounted at 7.0%, which represents the Company’s incremental borrowing rate.

The lease liabilities noted above have been included in “Other liabilities”, short term and long term (Note 11), in the Company’s Consolidated Balance Sheets at March 31, 2021 and December 31, 2020.

Table of Contents

~~12.~~9. Accounts Payable and Other Accrued Liabilities

The Company’s accounts payable and other accrued liabilities consist of the following:


	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Accounts payable and accruals	$	583	$	710	$	1,380	$	472
Accrued employee compensation and benefits		721		724		910		846
Value added tax payable		—		401
Income taxes payable		—		292
	$	1,304	$	2,127	$	2,290	$	1,318

~~September 30, 2020~~March 31, 2021

Accounts payable and accruals at ~~September 30, 2020~~March 31, 2021 are primarily related to amounts due to contractors and suppliers, denominated in US dollars, in the amounts of ~~$0.2~~$1.2 million related to the Company’s Velardeña Properties and ~~$0.4~~Rodeo operation and $0.2 million related to exploration and corporate administrative activities.

Accrued employee compensation and benefits at ~~September 30, 2020~~March 31, 2021 consist of $0.3 million of accrued vacation payable and ~~$0.4~~$0.6 million related to withholding taxes and benefits payable. Included in the ~~$0.7~~$0.9 million of accrued employee compensation and benefits is ~~$0.5~~$0.7 million related to activities at the Velardeña Properties.

December 31, ~~2019~~2020

Accounts payable and accruals at December 31, ~~2019~~2020 are primarily related to amounts due to contractors and suppliers, denominated in US Dollars, in the amounts of $0.3 million related to the Company’s Velardeña ~~Properties~~ and ~~$0.3~~Rodeo properties and $0.2 million related to corporate administrative and exploration activities.

Accrued employee compensation and benefits at December 31, ~~2019~~2020 consist of ~~$0.2~~$0.3 million of accrued vacation payable and $0.5 million related to withholding taxes and benefits payable. Included in the ~~$0.7~~$0.8 million of accrued employee compensation and benefits is ~~$0.5~~$0.6 million related to activities at the Velardeña and Rodeo Properties.

The VAT payable is primarily related to VAT collected on the sale of the Mogotes and Pistachon properties in Mexico in December 2019, with such amount being remitted to the Mexican government in January 2020. The Company has recorded VAT paid in Mexico and related to the Velardeña Properties as a recoverable asset. At December 31, 2019, the Company recorded approximately $73,000 of VAT receivable as a reduction to VAT payable presented in the table above. The VAT was paid during the first quarter 2020.

~~The income taxes payable are related to certain Canadian taxes due on capital distributions the Company received from its Canadian subsidiary (see Note 17). The taxes were paid in February 2020.~~

1310. Debt – Related Party

On March 30, 2020, in response to potential economic and market uncertainties caused by the COVID-19 pandemic, the Company entered into a Short-Term Loan Agreement (the “Loan Agreement”) with Sentient Global Resources Fund IV , L.P., a Cayman Islands exempted limited partnership (“Sentient”), pursuant to which Sentient granted to the Company an unsecured loan in an amount equal to $1,000,000 (the “Sentient Loan”). Sentient is a private equity fund, and together with certain other Sentient equity funds, Sentient is the Company’s largest stockholder, holding in the aggregate approximately 32% of the Company’s outstanding common stock at the date of the Loan Agreement. The Sentient Loan had an interest rate of 10% per annum and was due in full, together with accrued interest and any other amount outstanding under the Loan Agreement, on December 31, 2020. On August 12, 2020 the Company repaid the Sentient Loan in full in the amount of approximately $1,037,159 (including all accrued interest), with no prepayment penalty, and terminated the Loan Agreement. No amounts were due under this loan at March 31, 2021.

~~14.~~11. Other Liabilities

Other Current Liabilities

The following table sets forth the Company’s other current liabilities at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Autlán refundable deposit	$	—	$	1,251
Premium financing		108		455	$	205	$	390
Office lease liability		122		118		143		138
Mining equipment lease liability						196		139
	$	230	$	1,824	$	544	$	667

~~The Autlán refundable deposit is the remaining principal plus interest liability related to the deposit received for the proposed sale~~Table of the Company’s Velardeña Properties and other mineral concessions to Autlán in 2019. On September 11, 2019, the Company announced that Autlán exercised its right to terminate the agreement for the purchase of the properties. As a result of termination of the agreement, the Company was required to repay the original $1.5 million deposit amount by making monthly payments of $257,000, commencing on December 9, 2019, until the deposit amount is repaid with interest at approximately 11% per annum. On April 7, 2020, the Company and Autlán agreed to reduce the monthly payments to $81,000 and the interest rate applicable to the unpaid repayment amount was increased from 11% per annum to 12% per annum, effective on April 9, 2020, with the remaining balance due in full by December 2020. At September 30, 2020 the Company had repaid Autlán the full $1.5 million deposit, plus approximately $66,000 of interest and no amounts remained due. The Company recorded approximately $55,000 of interest expense for the nine months ended September 30, 2020 related to the Autlán refundable deposit.Contents

The premium financing at March 31, 2021 consists of the remaining balance, plus accrued interest, related to premiums payable for the Company’s directors and officers insurance and general liability insurance. In June ~~2019,~~2020, the Company financed ~~$151,000~~$110,000 of its premium for general liability insurance. The premium was payable in twelve equal payments at an interest rate of 5.74% per annum. At ~~September 30, 2020, there was no~~March 31, 2021, the remaining ~~balance.~~balance, plus accrued interest, had been paid in full. In December ~~2019~~2020, the Company financed ~~$482,000~~$406,000 of its premium for directors and officers insurance. The premium is payable in twelve equal payments at an interest rate of 5.74% per annum. At ~~September 30, 2020~~March 31, 2021 the remaining balance, plus accrued interest, was approximately ~~$108,000.~~$205,000.

The premium financing at December 31, 2020 consists of the remaining balance, plus accrued interest, related to premiums payable for the Company’s directors and officers insurance of $367,000 and general liability insurance of $23,000.

The office lease liability is related to lease liabilities for office space at the Company’s principal headquarters in Golden, Colorado and in Mexico and ~~Argentina~~Argentina.

The mining equipment lease liability is related to equipment used by the contract miner at our Rodeo property (see Note 4)8).

Other Long-Term Liabilities

Other long-term liabilities of ~~$0.4 million and~~ $0.5 million for the ~~periods~~period ended ~~September 30, 2020 and December~~March 31, ~~2019, respectively, are primarily~~2021 consist of approximately $0.2 million related to athe mining equipment lease liability at our Rodeo Property and $0.3 million related to lease liabilities for office space at the Company’s principal headquarters in Golden Colorado and in Mexico and Argentina (see Note 4)8).

13Other long-term liabilities of $0.6 million for the period ended December 31, 2020 consist of $0.3 million related to a mining equipment lease liability at our Rodeo Property and $0.3 million related to lease liabilities for office space at the Company’s principal headquarters in Golden Colorado and in Mexico and Argentina (see Note 8).

~~15.~~12. Asset Retirement Obligation and Reclamation Liabilities

The Company retained the services of a mining engineering firm to prepare a detailed closure plan for the Velardeña Properties. The plan was completed during the second quarter 2012 and indicated that the Company had an ARO and offsetting ARC of approximately $1.9 million at that time.

The Company will continue to accrue additional estimated ARO amounts based on an asset retirement plan as activities requiring future reclamation and remediation occur. During the first ~~nine~~three months of ~~2020,~~2021, the Company recognized approximately ~~$184,000~~$66,000 of accretion expense.

The following table summarizes activity in the Velardeña Properties ARO:


	Nine Months Ended				Quarter Ended
	September 30,				March 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Beginning balance	$	2,825	$	2,660	$	3,156	$	2,825

Changes in estimates, and other		82		(60)		(86)		82
Accretion expense		184		167		66		59
Ending balance	$	3,091	$	2,767	$	3,136	$	2,966

The change in estimates of the ARO recorded during ~~2020~~2021 and ~~2019~~2020 are primarily the result of changes in assumptions related to inflation factors used in the determination of future cash flows.

The ~~ARO~~asset retirement obligation and reclamation liability set forth on the accompanying Condensed Consolidated Balance Sheets at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 also includes a nominal amount of reclamation liability related to activities at the El Quevar project in Argentina. Environmental costs at the Rodeo Property will be expensed as incurred.

Table of Contents

There were no environmental costs incurred at the Rodeo Property for the three month periods ended March 31, 2021 or March 31, 2020.

~~16.~~13. Fair Value Measurements

Financial assets and liabilities and nonfinancial assets and liabilities are measured at fair value under a framework of a fair value hierarchy which prioritizes the inputs into valuation techniques used to measure fair value into three broad levels. This hierarchy gives the highest priority to quoted prices (unadjusted) in active markets and the lowest priority to unobservable inputs. Further, financial assets and liabilities should be classified by level in their entirety based upon the lowest level of input that was significant to the fair value measurement. The three levels of the fair value hierarchy per ASC 820 are as follows:

Level 1: Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2: Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable inputs either directly related to the asset or liability or derived principally from corroborated observable market data.

Level 3: Unobservable inputs due to the fact that there is little or no market activity. This entails using assumptions in models which estimate what market participants would use in pricing the asset or liability.

The following table summarizes the Company’s financial assets and liabilities at fair value on a recurring basis at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, by respective level of the fair value hierarchy:


	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

	(in thousands)								(in thousands)
At September 30, 2020
At March 31, 2021
Assets:
Cash and cash equivalents	$	8,658	$	—	$	—	$	8,658	$	7,975	$	—	$	—	$	7,975
Derivative at fair value		—		—		251		251
Short-term investments										131		—		—		131
	$	8,658	$	—	$	251	$	8,909	$	8,106	$	—	$	—	$	8,106

At December 31, 2019
At December 31, 2020
Assets:
Cash and cash equivalents	$	4,593	$	—	$	—	$	4,593	$	9,704	$	—	$	—	$	9,704
Derivative at fair value		—		—		254		254
Short-term investments										79		—		—		79
	$	4,593	$	—	$	254	$	4,847	$	9,783	$	—	$	—	$	9,783

The Company’s cash equivalents, comprised principally of U.S. treasury securities, are classified within Level 1 of the fair value hierarchy.

The ~~“Derivative at Fair Value”~~ ~~asset on the Consolidated Balance Sheets is related to the amendment to the Hecla plant lease agreement (see Note 19). The Company has determined that the portion~~Company’s short-term investments consist of the ~~variable lease payment that is based on the average price of silver~~common stock in Fabled and the average grade of material processed during a given month represents an embedded derivative (see Note 7). The Company assesses the fair value of the derivative at the end of each reporting period, with changes in the value recorded as an increase or decrease to “~~Oxide Plant Revenue”~~ on the Company’s Consolidated Statements of Operations. The derivative asset was recorded at fair value as of December 2, 2019, the effective date of the lease amendment, and at December 31, 2019, based primarily on a valuation performed by a third-party expert using a Monte Carlo simulation and an option pricing model to calculate the potential discounted cash flow from the derivative based on the probability that the price of silver will have an average price for any given month during 2020 that equals or exceeds $20.00 per ounce or a grade processed equal to or exceeding 1,000 grams per tonne combined with a risk adjusted estimate of material to be processed. The Company performed its own valuation of the derivative asset at September 30, 2020 based on an assumed average 95 percent probability that the silver price would remain above $20.00 per ounce for the remainder of the lease term. The valuations fallare classified within Level 31 of the fair value hierarchy. The valuation policies are approved by the Chief Financial Officer who reviews and approves the inputs used in the fair value calculations and the changes in fair value measurements from period to period for reasonableness. Fair value measurements are discussed with the Company’s Chief Executive Officer, as deemed appropriate. The valuation model primarily takes into consideration the potential discounted cash flow from the derivative based on the probability that the price of silver will have an average price for any given month during 2020 that equals or exceeds $20.00 per ounce or a grade processed equal to or exceeding 1,000 grams per tonne combined with a risk adjusted estimate of material to be processed.hierarchy (see Note 3).

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company did not have any financial assets or liabilities classified within Level 2 or Level 3 of the fair value hierarchy.

Non-recurring Fair Value Measurements

There were no non-recurring fair value measurements at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020.

~~17.~~14. Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC 740, “Income Taxes” (“ASC 740”), on a tax jurisdictional basis. ~~For~~In accordance with ASC 740, the ~~nine months ended September 30, 2020~~interim provision for taxes was calculated by using the estimated worldwide annual effective tax rate applied to the year-to-date losses. Although the Company ~~recognized $18,000 of income tax expense. For the nine months ended September 30, 2019 the Company recognized income tax expense of $9,000. The Company operates in jurisdictions that have~~has generated ordinary losses on a year-to-date ~~basis. However,~~basis, the Company ~~is unable to recognize a benefit~~ has projected taxable income by yearend in certain tax jurisdictions,

Table of Contents

for ~~those losses, except as described in this paragraph, thus~~which an ~~estimated~~annual effective tax rate has been calculated. For the three months ended March 31, 2021, the Company recognized $52,000 of income tax benefit. For the three months ended March 31, 2020 the Company did not ~~been used to report the year-to-date results.~~recognize an income tax expense or benefit.

In accordance with ASC 740, the Company presents deferred tax assets net of its deferred tax liabilities on a tax jurisdictional basis on its Condensed Consolidated Balance Sheets. As of ~~September 30, 2020~~March 31, 2021, the Company had $52,000 of net deferred tax assets, included in “Prepaid expenses and other assets” on the Condensed Consolidated Balance Sheets, and as of December 31, ~~2019,~~2020, the Company had no net deferred tax assets or net deferred tax liabilities reported on its balance sheet.

InOn April 23, 2021, a new labor law was made official in Mexico that will impact companies that utilize subcontractor structures, effective beginning August 1, 2021. The Company utilizes subcontractor structures in Mexico, as is common practice among companies in the ~~third quarter 2019,~~mining and other industries in Mexico. Enacted to prevent the ~~Company became aware that it had failed to timely file withholding tax returns and pay~~avoidance of employee profit sharing in Mexico, the law will disallow a deduction in computing income taxes ~~that were due relating to return of capital distributions made to~~for labor outsourcing costs, unless the ~~Company by ECU Silver Mining Inc. (the Company’s wholly-owned Canadian subsidiary) at the end of 2017 and 2018.~~arrangement falls within certain narrowly defined exceptions. The ~~capital distributions constituted dividends under Canadian tax~~new law ~~subject to a 5% withholding tax. The Canadian withholding taxes, which constituted taxes on income~~does provide for ~~the months of December 2017 and December 2018, totaled approximately $284,000, including an estimate of interest due of approximately $20,000~~annual caps on the ~~late filing.~~amount of employee profit sharing a company would be required to pay, which is designed to even out the profit sharing tax over several years. The Company ~~has treated~~is still evaluating the ~~income~~new law, but it anticipates its tax ~~expense related to this~~and profit sharing liability in Mexico will likely increase as a result of the correction of an accounting error and has adjusted the beginning balance of retained earnings (Note 2). In February 2020 the Company applied to enter into the Canadian Revenue Agency’s Voluntary Disclosure Program, whereby the Company paid the taxes and the estimated interest due and requested abatement of any penalties or additional interest that may apply. If the Canada Revenue Agency denies the Company’s request for abatement, additional interest and penalties could be assessed.new law.

The Company, a Delaware corporation, and its subsidiaries file tax returns in the United States and in various foreign jurisdictions. The tax rules and regulations in these countries are highly complex and subject to interpretation. The Company’s income tax returns are subject to examination by the relevant taxing authorities and in connection with such examinations, disputes can arise with the taxing authorities over the interpretation or application of certain tax rules within the country involved. In accordance with ASC 740, the Company identifies and evaluates uncertain tax positions, and recognizes the impact of uncertain tax positions for which there is less than a more-likely-than-not probability of the position being upheld upon review by the relevant taxing authority. Such positions are deemed to be “unrecognized tax benefits” which require additional disclosure and recognition of a liability within the financial statements. The Company had no unrecognized tax benefits at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020.

~~18.~~15. Equity

Public offering

On July 21, 2020, the Company entered into an Amended and Restated Underwriting Agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC as representative of the underwriters named ~~in Schedule I thereto~~therein (the “Underwriters”), providing for the issuance and sale by the Company in a firm commitment offering (the “Offering”) of 17,857,143 shares of common stock at a price to the public of $0.42 per share (the “Offering Shares”). In addition, the Company granted the Underwriters an option to purchase, at the public offering price per share of common stock, up to an additional 2,678,571 shares of common stock, exercisable for 30 days from the date of the Underwriting Agreement (the “Option Shares”). The Offering Shares and Option Shares were registered pursuant to the Company’s registration statement on Form S-3 (File No. 333-220461), and a prospectus supplement thereto filed with the Securities and Exchange Commission. On July 24, 2020, the Underwriters acquired the Offering Shares and the full amount of the Option Shares from the Company. After the underwriting discount of 6% and total offering expenses of approximately $155,000 the ~~company~~Company received net proceeds of approximately $8.0 million from the sale of the Offering Shares and the Option Shares.

Subscription agreement

In connection with the ~~Earn-In~~Earn-in Agreement (see Note ~~11)~~7), the Company and Barrick entered into the Subscription Agreement dated as of April 9, 2020 pursuant to which Barrick purchased 4,719,207 shares of the Company’s common stock at a purchase price of $0.2119 per share in a private placement transaction. The ~~Shares~~shares were offered and sold without registration under the Securities Act of 1933, as amended (the “Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Act and/or Regulation D promulgated thereunder. The net proceeds of the Subscription Agreement of approximately $0.9 million were recorded in ~~equity and appear as a separate line item in the Condensed Consolidated Statements~~equity.

Table of ~~Changes in Equity.~~Contents

Offering and private placement

On April 20, 2020, the Company entered into a securities purchase agreement with certain institutional investors providing for the issuance and sale of 15,000,000 shares of the Company’s common stock at a price of $0.20 per share, and in a concurrent private placement transaction, the issuance of an aggregate of 11,250,000 warrants, ultimately

consisting of 7,500,000 series A warrants and 3,750,000 series B warrants (collectively, the “Warrants”), to purchase up to 11,250,000 shares of our common stock at an exercise price of $0.30 per share, for aggregate gross proceeds of $3.0 million (the “Offering”). Each Warrant is exercisable six months from the date of issuance on April 22, 2020 and has a term expiring five years after such initial exercise date. The Warrants contain so-called full-ratchet anti-dilution provisions which may be triggered upon any future issuance by the Company of shares of its common stock or common stock equivalents at a per share price below the then-exercise price of the Warrant, subject to certain exceptions; provided, however, that with respect to the Series B warrants, the adjusted exercise price will not be less than $0.26.

The net proceeds of the Offering were recorded in ~~equity and appear as a separate line item in the Condensed Consolidated Statements of Changes in Equity.~~equity. Total costs for the Offering were approximately $334,000, including listing fees, legal and other costs, and the placement agent fee of six percent of aggregate gross ~~proceeds,~~proceeds; however, a reduced fee was accepted with respect to one investor. All such costs were recorded as a reduction to “Additional paid in capital” on the Condensed Consolidated Balance Sheets. Using the Black Scholes model, and assuming no triggering events take place to reduce the exercise price of the ~~warrants,~~Warrants, the fair value of the combined Series A and Series B warrants issued was approximately $1.9 million on April 22, 2020, the date of issuance of the ~~warrants.~~Warrants. The Black Scholes inputs included the closing stock price on April 22, 2020 (the date of issuance of the ~~warrants)~~Warrants) of $0.24, the exercise price and exercise period of the ~~warrants,~~Warrants, the Company’s applicable volatility rate for the period of the Warrants of 95%, and the applicable risk-free rate of 0.41%.

~~Registered direct offering~~

On July 17, 2019, the Company entered into an agreement with certain institutional investors providing for the issuance and sale of 8,653,846 shares of the Company’s common stock at a price of $0.26 per share, and in a concurrent private placement transaction, the issuance of 8,653,846 Series A warrants to purchase up to 8,653,846 shares of the Company’s common stock at an exercise price of $0.35 per share, for aggregate gross proceeds of $2.25 million (the “Offering”). Each Series A warrant became exercisable on January 17, 2020 and will expire on January 17, 2025, five years from the initial exercise date. Each of the investors in the Offering held warrants that were issued by the Company in May 2016 and were exercisable until November 2021 at an exercise price of $0.75 per share. In connection with the Offering, the Company also agreed to exchange, on a one-for-one basis, the May 2016 warrants for Series B warrants to purchase 4,500,000 shares of common stock at an exercise price of $0.35 per share. Each Series B warrant became exercisable on January 17, 2020 and will expire on May 20, 2022 but are otherwise subject to the same terms and conditions as the Series A warrants.

The net proceeds of the Offering were recorded in equity and appear as a separate line item in the Condensed Consolidated Statements of Changes in Equity. Total costs for the Offering were approximately $0.3 million, including the placement agent fee of six percent of aggregate gross proceeds, listing fees and legal and other costs. Such costs were recorded as a reduction to “~~Additional paid in capital”~~ on the Condensed Consolidated Balance Sheets. Using the Black Scholes model, the fair value of the Series A warrants issued was approximately $2.1 million and the incremental fair value of the Series B warrants, when compared to the warrants that they replaced, was approximately $0.3 million. The Black Scholes inputs for the Series A warrants included the closing stock price on July 16, 2019 (the day preceding the date the Company entered into the agreement to issue the shares) of $0.33, the exercise price and exercise period of the warrants, the Company’s applicable volatility rate for the period of the Series A warrants of 95%, and the applicable risk-free rate of 1.9%. The Black Scholes inputs for the Series B warrants included the closing stock price on July 16, 2019 of $0.33, the exercise price and exercise period of the warrants, the Company’s applicable volatility rate for the period of the Series B warrants of 88%, and the applicable risk-free rate of 1.9%.

Commitment purchase agreement

On May 9, 2018, the Company entered into a commitment purchase agreement (the “Commitment Purchase Agreement”) with LPC, pursuant to which the Company, at its sole discretion, has the right to sell up to $10.0 million of the Company’s common stock to LPC, subject to certain limitations and conditions contained in the Commitment Purchase Agreement (the “LPC Program”). The Company closed on the Commitment Purchase Agreement in July 2018, which is currently set to expire in May 2021.

Subject to the terms of the Commitment Purchase Agreement, the Company will control the timing and amount of any future sale of the Company’s common stock to LPC. LPC has no right to require any sales by the Company under the

Commitment Purchase Agreement but is obligated to make purchases at the Company’s sole direction, as governed by such agreement. There are no upper limits to the price LPC may be obligated to pay to purchase common stock from the Company, and the purchase price of the shares will be based on the prevailing market prices of the Company’s shares at the time of each sale to LPC. LPC has agreed not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares of common stock. The Company has the right to terminate the Commitment Purchase Agreement at any time, at its discretion, without any cost or penalty.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021 the Company did not sell any shares of common stock to LPC under the Commitment Purchase Agreement. With the Commitment Purchase Agreement set to expire during May 2021, the Company wrote off the remaining balance of $353,000 of deferred LPC Program costs to “Interest and Other Expense” on the Condensed Consolidated Statement of Operations during the period ended March 31, 2021.

During the three months ended March 31, 2020 the Company sold 900,000 shares of common stock to LPC under the Commitment Purchase Agreement at an average sales price per share of approximately $0.27, resulting in net proceeds of approximately $216,000. In addition, approximately $24,000 of Commitment Purchase Agreement costs were amortized, resulting in a remaining balance of $353,000 of deferred LPC Program costs, recorded in “Other long-term assets” on the Condensed Consolidated Balance Sheets as of ~~September 30,~~March 31, 2020.

During the nine months ended September 30, 2019 the Company sold 2,113,642 shares of common stock to LPC under the Commitment Purchase Agreement at an average sales price per share of approximately $0.28, resulting in net proceeds of approximately $590,000. In addition, approximately $58,000 of Commitment Purchase Agreement costs were amortized.

~~There are currently12.2 million shares remaining available for issuance under the LPC Program.~~

At the Market Offering Agreement

In December 2016, the Company entered into an at-the-market offering agreement (as amended from time to time, the “ATM Agreement”) with H. C. Wainwright & Co., LLC (“Wainwright”), under which the Company may, from time to time, issue and sell shares of the Company’s common stock through Wainwright as sales manager in an at-the-market

Table of Contents

offering under a prospectus supplement for aggregate sales proceeds of up to $5.0 million (the “ATM Program”) or a maximum of 10 million shares. On November 23, 2018, the Company entered into a second amendment of the ATM Agreement, extending the agreement until the earlier of December 20, 2020, or the date that the ATM Agreement is terminated in accordance with the terms therein. On December 11, 2020 the Company entered into a third amendment of the ATM Agreement further extending the agreement so that it will remain in full force and effect until such time as the ATM Agreement is terminated in accordance with certain other terms therein or upon mutual agreement by the parties, and to reflect a new registration statement on Form S-3 (No. 333-249218).

The common stock will be distributed at the market prices prevailing at the time of sale. As a result, prices of the common stock sold under the ATM Program may vary as between purchasers and during the period of distribution. The ATM Agreement provides that Wainwright will be entitled to compensation for its services at a commission rate of 2.0% of the gross sales price per share of common stock sold.

During the first ~~nine~~three months of 2021, the Company sold an aggregate of 1,856,960 shares of common stock under the ATM Agreement at an average price of $0.97 per share of common stock for net proceeds of approximately $1.8 million. In addition, approximately $57,000 of deferred ATM Program costs were amortized, resulting in a remaining balance of $71,000 of deferred ATM Program costs, recorded in “Prepaid expenses and other assets” on the Condensed Consolidated Balance Sheets as of March 31, 2021.

During the first three months of 2020, the Company sold an aggregate of 823,452 shares of common stock under the ATM Agreement at an average price of $0.28 per share of common stock for net proceeds of approximately $223,000. In addition, approximately $8,000 of deferred ATM Program costs were amortized, resulting in a remaining balance of $129,000 of deferred ATM Program costs, recorded in ~~“Prepaid~~“Prepaid expenses and other ~~assets”~~assets” on the Condensed Consolidated Balance Sheets as of ~~September 30,~~March 31, 2020.

During the first nine months of 2019, the Company sold an aggregate of 33,995 shares of common stock under the ATM Agreement at an average price of $0.34 per share of common stock for total proceeds ofThere is currently approximately ~~$11,000.~~

~~There are currently 8.1~~$2.2 million ~~shares~~ remaining available for issuance under the ATM ~~Program. However, as of October 31, 2020, the Company does not have availability under its shelf registration statement due to limitations imposed under~~Program based on a prospectus supplement filed with SEC rules for public companies with a public float of less than $75 million. As such, we do not currently have the ability to issue shares under the ATM Program until such time as the calculation of our shelf registration capacity changes.on December 11, 2020.

Equity Incentive Plans

Under the Company’s Amended and Restated 2009 Equity Incentive Plan (the “Equity Plan”), awards of the Company’s common stock may be made to officers, directors, employees, consultants and agents of the Company and its subsidiaries. The Company recognizes stock-based compensation costs using a graded vesting attribution method whereby costs are recognized over the requisite service period for each separately vesting portion of the award.

The following table summarizes the status of the Company’s restricted stock grants issued under the Equity Plan at ~~September 30, 2020~~March 31, 2021 and the changes during the ~~nine~~three months then ended:


		Weighted			Weighted
		Average Grant			Average Grant
		Date Fair			Date Fair
	Number of	Value Per		Number of	Value Per
Restricted Stock Grants	Shares	Share		Shares	Share
Outstanding at December 31, 2019	318,003	$	0.45
Outstanding at December 31, 2020				224,002	$	0.36
Granted during the period	300,000		0.42	—		—
Restrictions lifted during the period	(297,333)		0.35	—		—
Forfeited during the period	—		—	—		—
Outstanding September 30, 2020	320,670	$	0.37
Outstanding March 31, 2021				224,002	$	0.36

For the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 the Company recognized approximately ~~$90,000~~$13,000 of stock compensation expense related to the restricted stock grants. The Company expects to recognize additional stock compensation expense related to these awards of approximately ~~$98,000~~$45,000 over the next 2216 months. The grants made during the period were to 7 current employees, with one third of the grants vesting immediately on the grant date and one third vesting on each of the first and second anniversaries of the grant date. The restrictions lifted during the period include the 100,000 shares of current period grants that vested on the grant date. The remaining restrictions lifted during the period are related to grants made to the same 7 employees in prior years.

~~The following table summarizes the status of the Company’s stock option grants issued under the Equity Plan at September 30, 2020 and the changes during the nine months then ended:~~

Weighted

Average

Exercise

Number of

Price Per

Equity Plan Options

Shares

Share

Outstanding at December 31, 2019

30,310

$
8.06

Granted during the period

—

—

Forfeited or expired during period

(30,310)

$
8.06

Exercised during period

—

—

Outstanding September 30, 2020

—

$
—

Exercisable at end of period

—

$
—

Granted and vested

—

$
—

~~As of September 30, 2020, all of the prior stock options granted had expired.~~

Also, pursuant to the Equity Plan, the Company’s Board of Directors adopted the Non-Employee Director’s Deferred Compensation and Equity Award Plan (the “Deferred Compensation Plan”). Pursuant to the Deferred Compensation Plan, ~~the~~ non-employee directors receive a portion of their compensation in the form of Restricted Stock Units (“RSUs”) issued under the Equity Plan. The RSUs generally vest on the first anniversary of the grant and each vested RSU entitles the director to receive one unrestricted share of common stock upon ~~the~~ termination of the director’s board service.

1917

Table of Contents

The following table summarizes the status of the RSU grants issued under the Deferred Compensation Plan at ~~September 30, 2020~~March 31, 2021 and the changes during the ~~nine~~three months then ended:


		Weighted			Weighted
		Average Grant			Average Grant
		Date Fair			Date Fair
	Number of	Value Per		Number of	Value Per
Restricted Stock Units	Shares	Share		Shares	Share
Outstanding at December 31, 2019	2,830,038	$	0.78
Outstanding at December 31, 2020				3,610,038	$	0.70
Granted during the period	780,000		0.40	—		—
Restrictions lifted during the period	—		—	—		—
Forfeited during the period	—		—	—		—
Outstanding September 30, 2020	3,610,038	$	0.70
Outstanding March 31, 2021				3,610,038	$	0.70

For the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, the Company recognized approximately ~~$233,000~~$47,000 of stock compensation expense related to the RSU grants. The Company expects to recognize additional stock compensation expense related to the RSU grants of approximately ~~$135,000~~$41,000 over the next 93 months. Included in the RSUs granted during the period were 300,000 RSUs awarded to the directors in lieu of the annual cash retainer. Such RSUs vested upon grant and the Company recorded $120,000 of compensation expense related to the grant.

Key Employee Long-Term Incentive Plan

The Company’s 2013 Key Employee Long-Term Incentive Plan (the “KELTIP”) provides for the grant of units (“KELTIP Units”) to certain officers and key employees of the Company, which units will, once vested, entitle such officers and employees to receive an amount, in cash or in Company common stock (such method of settlement at the sole discretion of the Board of Directors) issued pursuant to the Company’s Equity Plan, measured generally by the price of the Company’s common stock on the settlement date. KELTIP Units are not an actual equity interest in the Company and are solely unfunded and unsecured obligations of the Company that are not transferable and do not provide the holder with any stockholder rights. Payment of the settlement amount of vested KELTIP Units is deferred generally until the earlier of a change of control of the Company or the date the grantee ceases to serve as an officer or employee of the Company.

On February 26, 2019, the Company awarded a total of 705,000 KELTIP Units to two officers of the Company. Due to the Company’s desire to preserve its limited current cash reserves for funding expenditures related to its portfolio of exploration projects, the Company determined it no longer had the current intent to settle any of its outstanding KELTIP Units in cash. The Company ~~now~~ intends to settle all of the KELTIP Units ~~including those previously issued,~~ in common stock of the Company, an option that the Board of Directors holds in its sole discretion so long as sufficient shares remain available under the Equity Plan. As a result, ~~the Company recorded $254,000 of compensation expense, included in “~~~~Stock based compensation~~~~” in the Condensed Consolidated Statement of Operations for the~~all outstanding KELTIP Units ~~awarded on February 26, 2019 with a similar amount recorded as~~ ~~“Additional Paid-in Capital”~~ in the Condensed Consolidated Statements of Changes in Equity. The Company has treated the previously awarded KELTIP Units as effectively modified at February 26, 2019. The Company marked-to-market the prior KELTIP Units as of that date and recorded approximately $227,000 of additional compensation expense, included in “~~Stock based compensation~~~~” in the Condensed Consolidated Statement of Operations and recorded approximately $583,000 as~~ ~~“Additional Paid-in Capital”~~ in the Condensed Consolidated Statements of Changes in Equity, an amount representing the sum of the compensation expense recorded on February 26, 2019 and the liability for the KELTIP Units recorded at December 31, 2018. All KELTIP Units wereare recorded in equity at ~~September 30, 2019.~~March 31, 2021 and December 31, 2020.

~~On May 21, 2020,~~During the three-month period ended March 31, 2021 the Company ~~awarded a total of 1,400,000~~granted 480,000 KELTIP ~~Units to two officers of the Company~~ and recognized approximately $0.4 million of stock compensation expense ~~of approximately $448,000.~~related to the grants. There were ~~3,725,000~~no KELTIP awards granted during the three-month period ended March 31, 2020. There were 4,205,000 and ~~2,325,000~~3,725,000 KELTIP Units outstanding at ~~September 30, 2020~~March 31, 2021 and December ~~31,2019,~~31, 2020, respectively.

2018

Table of Contents

Common stock warrants

The following table summarizes the status of the Company’s common stock warrants at ~~September 30,~~December 31, 2020 and March 31, 2021, and the changes during the ~~nine~~twelve and three months then ~~ended:~~ended, respectively:


		Weighted			Weighted
	Number of	Average Exercise		Number of	Average Exercise
	Underlying	Price Per		Underlying	Price Per
Common Stock Warrants	Shares	Share		Shares	Share
Outstanding at December 31, 2019	14,653,846	$	0.39	14,653,846	$	0.39
Granted during the period	—		—
Series A warrants	7,500,000		0.30
Series B warrants	3,750,000		0.30
Dilution adjustment	—		—
Expired during period	—		—
Granted during the period:
April 2020 Series A warrants				7,500,000		0.30
April 2020 Series B warrants				3,750,000		0.30
Exercised during period	—		—
Outstanding September 30, 2020	25,903,846	$	0.35
April 2020 Series A warrants				(5,000,000)		0.30
April 2020 Series B warrants				(3,500,000)		0.30
Outstanding at December 31, 2020				17,403,846		0.38
Exercised during period
July 2019 Series A warrants				(200,000)		0.35
July 2019 Series B warrants				(1,500,000)		0.35
April 2020 Series A warrants				(1,400,000)		0.30
Outstanding March 31, 2021				14,303,846	$	0.39

The warrants relate to prior ~~and current~~ registered offerings and private placements of the Company’s stock.

As discussed above under “Equity – Offering and private placement”, on April 20, 2020, the Company entered into a securities purchase agreement with certain institutional investors providing for the issuance and sale of 15,000,000 shares of the Company’s common stock and in a concurrent private placement transaction, the issuance of an aggregate of 11,250,000 warrants, ultimately consisting of 7,500,000 series A warrants and 3,750,000 series B warrants. During the year ended December 31, 2020 and the quarter ended March 31, 2021, 6,400,000 series A warrants and 3,500,000 series B warrants were exercised leaving a balance of 1,100,000 and 250,000 series A and series B warrants outstanding, respectively as of March 31, 2021.

~~Also as discussed above under “Equity – Registered direct offering”, on~~On July 17, 2019, the Company issued 8,653,846 registered shares of common stock in a registered direct offering. In connection with the offering, each investor received an unregistered Series A warrant to purchase a share of common stock for each share of common stock purchased. Each Series A warrant is exercisable six months from the date of issuance and has a term expiring in January 2025. During the quarter ended March 31, 2021, 200,000 series A warrants were exercised, leaving a balance of 8,453,846 series A warrants outstanding.

In May 2016, the Company issued 8.0 million registered shares of common stock at a purchase price of $0.50 per share in a registered direct offering resulting in gross proceeds of $4.0 million. In connection with the offering, each investor received an unregistered warrant to purchase three-quarters of a share of common stock for each share of common stock purchased. The resulting 6,000,000 warrant shares have an exercise price of $0.75 per share, became exercisable on November 7, 2016 and were exercisable until November 6, 2021, five years from the initial exercise date. In connection with ~~the~~a July 2019 registered direct offering, ~~discussed above,~~ the Company agreed to exchange, on a one-for-one basis, 4,500,000 of the May 2016 warrants for Series B warrants to purchase 4,500,000 shares of common stock at an exercise price of $0.35 per share. Each Series B warrant is exercisable six months from the date of issuance and has a term expiring in May 2022. During the quarter ended March 31, 2021, 1,500,000 series B warrants were exercised leaving a balance of 3,000,000 series B warrants and 1,500,000 of the original July 2016 warrants outstanding, respectively.

All outstanding warrants are recorded in equity at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020 following the guidance established by ASC Topic 815-40. The Company’s warrants allow for the potential settlement in cash if certain extraordinary events are effected by the Company, including a 50% or greater change of control in the Company’s common stock. Since those events have been deemed to be within the Company’s control, the Company continues to apply equity treatment for these warrants.

Table of Contents

16. Sale of Metals and Related Costs

During the three months ended March 31, 2021 the Company sold the gold and silver contained in doré bars related to the Rodeo operation to one customer, a metals refinery located in the United States. Under the terms of the Company’s agreement with its customer, title passes and revenue is recognized by the Company when the contractual performance obligations of the parties are completed, generally at the time a provisional or final payment is made. A provisional payment for approximately 95% of the contained gold and silver is made generally occurs within 7-10 days after the product is shipped and customary sales documents are completed. A final payment is made within approximately 30 days following the date of shipment when final assays and refinery charges are agreed upon by the parties. A price for the gold and silver sold is set, based on current market prices, at the time a provisional or final payment is made. Refining and transport costs, deducted from the final payments made, are treated as third party agent costs incurred by the Company in performing its obligations under the agreement with its customer after the transfer of control on provisional sales, and are therefore netted against revenue on an accrual basis.

Costs related to the sale of metals products include direct and indirect costs incurred to mine, process and market the products. At March 31, 2021, the Company had written down its doré inventory to net realizable value, including a charge to the cost of metals sold of approximately $17,000.

During the three months ended March 31, 2020 the Company did not sell any doré products or incur any related costs.

~~19. Revenue, Deferred~~17. Oxide Plant Lease Revenue and Related ~~Costs Oxide Plant Lease and Oxide Plant Lease~~ Costs

For the ~~nine~~three months ended ~~September 30,~~March 31, 2020, the Company recorded revenue of approximately ~~$4.6~~$1.2 million and related costs of approximately ~~$1.6~~$0.6 million associated with the lease of the Velardeña Properties oxide plant. The Company recognizes oxide plant lease fees and reimbursements for labor, utility and other costs as ~~“Revenue:~~“Revenue: Oxide plant ~~lease”~~lease” in the Condensed Consolidated Statements of Operations following the guidance of ASC 842. ASC 842 supports recording as gross revenue the reimbursement of expenses incurred directly by the Company in performing its obligations under the lease in situations where the entity has control over the specific goods or services transferred to a customer as a principal versus as an agent. The actual costs incurred for reimbursed direct labor and utility costs are reported as ~~“Oxide~~“Oxide plant lease ~~costs”~~costs” in the Condensed Consolidated Statements of Operations. The Company recognizes lease fees during the period the fees are earned per the terms of the lease.

On August 2, 2017, the Company granted Hecla an option to extend the oxide plant lease for an additional period of up to two years ending no later than December 31, 2020 (the “Extension Period”) in exchange for a $1.0 million upfront cash payment and the purchase of $1.0 million, or approximately 1.8 million shares, of the Company’s common stock, issued at par at a price of $0.55 per share, based on an undiscounted 30-day volume weighted average stock price. The option and lease extension were memorialized in (i) an Option Agreement dated August 2, 2017 among the Company and Hecla Mining Company (the “Option Agreement”), and (ii) a Second Amendment to Master Agreement and Lease Agreement dated August 2, 2017 among Minera William S.A. de C.V., an indirect subsidiary of the Company, and Minera Hecla S.A. de C.V., an indirect subsidiary of Hecla Mining Company (the “Second Amendment”). Under the Second Amendment, Hecla had an option to extend the lease to December 31, 2020 by exercising the option no later than October 3, 2018. On October 1, 2018 Hecla exercised the Second Amendment option and extended the lease to December 31, 2020. All of the fixed fees and throughput related charges remain the same as under the original lease. Similar volume limitations apply to any required future tailings expansions, which Hecla will fund, leaving unused at the end of the lease term an agreed amount of capacity in the expanded tailings facility. Pursuant to the Second Amendment, Hecla had the right to terminate the lease during the Extension Period for any reason with 120 days’ notice.

The Company will recognize the $1.0 million of income from granting the option over the expected life of the lease from beginning from the date of the Second Amendment dated August 2, 2017 through November 30, 2020 on a straight-line basis, including such income in “Revenue: Oxide plant lease” in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2020 the Company recognized approximately $0.2 million of amortized income related to the upfront cash payment. As of September 30, 2020, the unamortized portion of the lease option totaled approximately $0.1 million, recorded as short term “Deferred revenue” on the Condensed Consolidated Balance Sheets.

On December 2, 2019 the Company and Hecla entered into a Third Amendment to the Master Agreement and Lease Agreement dated August 2, 2017. Under the terms of the Third Amendment, the Company has agreed to reduce the per tonne fee payable by Hecla for the duration of the lease term, commencing on January 1, 2020 from $22.00 per tonne to $11.00 per tonne. However, the Company will receive $22.00 per tonne processed during any month in which one of the following conditions occur: (1) the Comex daily silver spot closing average price for such month is equal to or greater than $20.00 per ounce, or (2) the mill head grade average from the metallurgical balance for such month is equal to or greater than 1,000 grams per ton equivalent silver head grade. If either of the conditions are met in any month, Hecla will pay the $22.00 fee on all amounts processed in the oxide plant during such month. The reduced fee only applies to the tonnage-based payments under the Lease Agreement; the monthly lease payment of $125,000 per month is not affected by the Third Amendment. During each of the three months ended September 30, 2020, the Comex daily silver spot closing average price exceeded $20.00 per ounce. As a result, the Company received the higher $22.00 per tonne for material processed during those months. Under the terms of the Lease Agreement, Hecla had the right to terminate the Lease Agreement at any time upon 120 days written notice. The Third Amendment extended the advance notice required to 150 days.

On July 7, 2020, the Company received notification from Hecla terminating the Lease Agreement pursuant to the Third Amendment, effective November 30, 2020. ~~Pursuant to~~Therefore, during the ~~terms of the Lease Agreement, Hecla had a one-time right of first refusal to continue to lease the plant following a termination notice through December~~three months ended March 31, ~~2020 if~~2021 the Company decided to use the oxide plant for its own purposes before December 31, 2020. The Company provided written notice to Hecla of its intent to use the oxide plant for its own purposes and Hecla provided written confirmation to the Company that it woulddid not ~~exercise its right of first refusal pursuant to the Lease Agreement.~~

The Company has determined that the ability to receive the higher $22.00 per tonne fee, as described above, creates a derivative asset. The Company treated the derivative asset as an upfront lease payment that will be amortized over the remaining life of the lease and also recorded deferred revenue equal to the value of the derivative asset, as more fully described in Note 7. The amortization of the upfront lease payment and the increase in the derivative asset at December 31, 2019 were recorded as an increase of approximately $74,000 to “Revenue: Oxide plant lease” in the Consolidated Statements of Operations for the period ended December 31, 2019. For the nine-month period ended September 30, 2020 the amortization of the upfront lease payment and the decrease in the derivative asset (Note 7) were recorded as an increase of approximately $132,000 to “Revenue: Oxide plant lease” in the Consolidated Statements of Operations.

~~For the nine months ended September 30, 2019 the Company recorded revenue of approximately $5.9 million and related~~record any income or costs ~~of approximately $1.8 million~~ associated with the lease of the ~~Velardeña Properties~~ oxide ~~plant. During the nine months ended September 30, 2019 the Company also recognized approximately $0.2 million of amortized income related~~plant to ~~the upfront cash payment from Hecla, as discussed above.~~Hecla.

~~20.~~18. Interest and Other Expense, Net

For the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, the Company recognized approximately ~~$0.1 million~~ ~~Interest and Other Expense~~ ~~primarily related to amounts payable to Sentient and Autlán (see Notes 13 and 14).~~

~~For the nine months ended September 30, 2019 the Company recognized approximately $0.2~~$0.3 million of Interest and Other Expense primarily related to the ~~sale~~write off of ~~Golden Tag shares held by~~deferred costs related to the ~~Company at that time. All the Golden Tag shares were sold during the third quarter 2019.~~LPC Program (see Note 15).

Table of Contents

~~21.~~19. Supplemental Cash Flow Information

��

The following table reconciles net loss for the period to cash used in operations:


	Nine Months Ended September 30,				Quarter Ended March 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Cash flows from operating activities:
Net loss	$	(6,945)	$	(6,569)	$	(3,178)	$	(3,336)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		770		814		155		279
Accretion of asset retirement obligation		184		167		66		59
Decrease in derivative at fair value, net		3		—
Loss on trading securities		—		217
Decrease (increase) in derivative at fair value, net						—		215
Gain on trading securities						(52)		—
Asset write off		100		19		54		—
Gain on sale of assets		(25)		(144)		(17)		—
Stock compensation		771		725		429		52
Changes in operating assets and liabilities from continuing operations:
(Increase) decrease in lease receivable		(54)		21
Decrease in prepaid expenses and other assets		30		244
Decrease in inventories		33		3
Decrease in value added tax recoverable, net		—		2
Decrease (increase) in other long term assets		143		(396)
Decrease in lease receivable						72		138
(Increase) decrease in prepaid expenses and other assets						(478)		43
(Increase) decrease in inventories						(1,500)		53
Decrease in other long-term assets						352		96
Decrease in reclamation liability		(3)		(68)		(87)		(1)
(Decrease) increase in accounts payable and accrued liabilities		(823)		135
(Decrease) increase in other current liabilities		(1,594)		1,500
Increase (decrease) in accounts payable and accrued liabilities						669		(568)
Decrease in other current liabilities						(124)		(675)
Decrease in deferred revenue		(372)		(219)		(140)		(118)
(Decrease) increase in other long term liabilities		(109)		427
Decrease in other long-term liabilities						(135)		(56)
Net cash used in operating activities	$	(7,891)	$	(3,122)	$	(3,914)	$	(3,819)

The following table sets forth supplemental cash flow information and non-cash transactions:


	Nine Months Ended September 30,				Quarter Ended March 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Supplemental disclosure:
Interest paid	$	95	$	—	$	5	$	26
Income taxes paid	$	284	$	—	$	—	$	284

Supplemental disclosure of non-cash transactions:
Deferred equity offering costs amortized	$	32	$	58	$	57	$	32
Deferred equity offering costs written off					$	352	$	—
Capital expenditures accrued					$	304	$	—

~~22.~~20. Commitments and Contingencies

During April 2021, the Company became aware of a potential lawsuit in Mexico against one of the Company’s Mexico subsidiaries, Minera William S.A. de C.V. (“Minera William”). The plaintiff in the matter is Unifin Financiera, S.A.B de C.V. or one of its affiliates (“Unifin”). Although there is evidence that the lawsuit was filed in the Fifth Specialized Commercial District Court by Unifin and subsequently dismissed by the court for procedural reasons, the Company has not been served with the complaint and therefore has limited knowledge of the basis for the alleged claim. The Company understands that Unifin has challenged through a federal appeal the dismissal of the proceedings, and there is a possibility that Unifin may seek to refile the complaint in another venue or overturn the dismissal on appeal. Based on the information that the Company has obtained through informal channels; the Company understands that Unifin is alleging that a representative of Minera William signed certain documents in July 2011 purporting to bind Minera William as a guarantor of payment obligations owed by a third party to Unifin in connection with that third party’s acquisition of certain drilling equipment. At the time the documentation was allegedly signed, Minera Williams was a subsidiary of ECU Silver Mining

Table of Contents

prior to the Company’s acquisition of ECU in September ~~30, 2020~~2011. In connection with this dispute, Unifin has obtained a preliminary court order freezing Minera William’s bank accounts in Mexico, which has limited the Company’s ability to access approximately US$153,000. Notwithstanding this action, the restrictions imposed on Minera Williams’ bank accounts do not impact the Company’s ability to operate the Rodeo mine, which is held through a different Mexico subsidiary, or continue with the Company’s evaluation plans for a potential Velardena mine restart or move forward with any of the Company’s other exploration programs in Mexico. Since the Company has not been served in this action, the Company is not able to determine the amount of relief sought by Unifin. However, informal indications suggest that Unifin is seeking recovery for as much as US$12.5 million. The Company believes there is no basis for this claim and will defend itself if and when the Company is formally served with notice of the proceedings. As such, the Company has not accrued an amount for this matter in its Condensed Consolidated Balance Sheets or Statements of Operations as of March 31, 2021.

At December 31, ~~2019,~~2020, the Company had no gain or loss contingencies. The Company has certain purchase and lease commitments as set forth in the Company’s Form 10-K for the year ended December 31, ~~2019.~~2020.

~~23.~~21. Segment Information

The Company’s sole activity is the mining, construction and exploration of mineral properties containing precious metals. The Company’s reportable segments are based upon the Company’s revenue producing activities and cash consuming activities. The Company reports two segments, one for its revenue producing activities in Mexico, which includes both the Velardeña Properties ~~in Mexico~~and the Rodeo Property, and the other comprised of non-revenue producing activities, including exploration, construction and general and administrative activities. Intercompany revenue and expense amounts have been eliminated within each segment in order to report on the basis that management uses internally for evaluating segment performance.

The financial information relating to the Company’s segments is as follows:



							Exploration, El														Exploration, El
			Costs		Depreciation,		Quevar, Velardeña										Costs		Depreciation,		Quevar, Velardeña
Three Months Ended			Applicable		Depletion and		and Administrative		Pre-Tax (gain)				Capital				Applicable		Depletion and		and Administrative		Pre-Tax (gain)				Capital
September 30, 2020	Revenue		to Sales		Amortization		Expense		loss		Total Assets		Expenditures
March 31, 2021															Revenue		to Sales		Amortization		Expense		loss		Total Assets		Expenditures
Mexico Operations															$	1,778	$	1,536	$	109	$	659	$	452	$	7,917	$	541
Corporate, Exploration and Other																—		—		46		1,975		2,778		10,908		5
															$	1,778	$	1,536	$	155	$	2,634	$	3,230	$	18,825	$	546
Three Months Ended
March 31, 2020
Velardeña Properties	$	2,146	$	582	$	162	$	358	$	(959)			$	65	$	1,196	$	564	$	204	$	657	$	371	$	4,663	$	1
Corporate, Exploration and Other		—		—		64		2,056		2,227				35		—		—		75		2,848		2,965		5,572		—
	$	2,146	$	582	$	226	$	2,414	$	1,268			$	100	$	1,196	$	564	$	279	$	3,505	$	3,336	$	10,235	$	1

Nine Months Ended
September 30, 2020
Velardeña Properties	$	4,566	$	1,566	$	562	$	1,339	$	(820)	$	4,912	$	66
Corporate, Exploration and Other		—		—		208		6,608		7,747		11,668		35
	$	4,566	$	1,566	$	770	$	7,947	$	6,927	$	16,580	$	101

Three Months Ended
September 30, 2019
Velardeña Properties	$	1,944	$	594	$	195	$	686	$	(276)			$	—
Corporate, Exploration and Other		—		—		75		1,995		2,027				1
	$	1,944	$	594	$	270	$	2,681	$	1,751			$	1

Nine Months Ended
September 30, 2019
Velardeña Properties	$	5,852	$	1,804	$	587	$	1,962	$	(959)	$	4,502	$	1
Corporate, Exploration and Other		—		—		227		6,916		7,519		6,731		27
	$	5,852	$	1,804	$	814	$	8,878	$	6,560	$	11,233	$	28

~~24.~~22. Related Party Transactions

The following sets forth information regarding transactions between the Company (and its subsidiaries) and its officers, directors and significant stockholders.

Administrative Services, Lease of Equipment:

Beginning in August 2016, the Company began providing limited accounting and other administrative services to Minera Indé, an indirect subsidiary of Sentient. At ~~September 30, 2020,~~March 31, 2021, Sentient, through the Sentient executive funds, holds approximately ~~28%~~23% of the Company’s ~~149.0~~162.5 million shares of issued and outstanding common stock. The services are provided locally in Mexico by the administrative staff in the Company’s Mexico office. The Company charges Minera Indé $15,000 per month for the services, which provides reimbursement to the Company for its costs incurred plus a small profit margin. Amounts received under the arrangement reduce costs incurred for exploration. The Company’s Board of Directors and Audit Committee approved the agreement. For the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019~~ the Company charged Minera Indé approximately ~~$135,000~~$45,000 for services, offsetting costs that are recorded in “Exploration expense” in the Condensed Consolidated Statements of Operations.

Beginning in July 2020, the Company has agreed to lease certain nonessential mining equipment to Minera Indé over a three-month period for $20,000. The lease could be extended beyond three months for $3,000 per month. The Audit Committee approved the agreement.

Debt – Related Party

~~As previously discussed, on~~22

Table of Contents

On March 30, 2020, the Company entered into a short-term loan agreement with Sentient whereby the Company received an unsecured loan in the amount of $1,000,000. The Sentient Loan had an interest rate of 10% per annum and was due in full, together with accrued interest and any other amount outstanding under the loan agreement, on December 31, 2020. During August 2020, the Company paid in full the principal amount of the loan plus accrued interest. See Note 1310 for a full description of the loan.

~~25.~~23. Subsequent Events

~~Exercise of Warrants~~

On October 20, 2020, 2.5 million Series A warrants issued in the April 2020 Offering were exercised according to the terms of the warrant agreement and 2.5 million shares of the Company’s common stock were issued at a price of $0.30 per share. The Company received approximately $0.8 million in cash proceeds from the exercise.

COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of the respiratory disease caused by the new coronavirus as “pandemic”. As of the date of issuance of the condensed consolidated financial statements, the Company’s financial condition has not been significantly ~~impacted,~~impacted; however, the Company continues to monitor the situation. No impairments were recorded as of the condensed consolidated balance sheet ~~date,~~date; however, due to uncertainty surrounding the situation, management’s judgment regarding this could change in the future. In addition, while the Company’s results of operation, cash flows, and financial condition could be negatively impacted, the extent of the impact cannot be reasonably estimated at this time.

On April 23, 2021, a new labor law was made official in Mexico that will impact companies that utilize subcontractor structures, effective beginning August 1, 2021. The Company utilizes subcontractor structures in Mexico, as is common practice among companies in the mining and other industries in Mexico. Enacted to prevent the avoidance of employee profit sharing in Mexico, the law will disallow a deduction in computing income taxes for labor outsourcing costs, unless the arrangement falls within certain narrowly defined exceptions. The new law does provide for annual caps on the amount of employee profit sharing a company would be required to pay, which is designed to even out the profit sharing tax over several years. The Company is still evaluating the new law, but it anticipates its tax and profit sharing liability in Mexico will likely increase as a result of the new law.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Company

We were incorporated in Delaware in March 2009 under the Delaware General Corporation Law. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, our principal source of revenue was from the ~~lease~~sale of gold and silver from our ~~oxide plant located near Velardeña,~~Rodeo Property in Durango, Mexico. We incurred net operating losses for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

We remain focused on ~~commencing~~ mining operations at the Rodeo ~~property~~Property as well as further studies of a restart plan for Velardeña including use of bio-oxidation to improve the payable gold recovery. We also continue to evaluate and search for mining opportunities in North America (including Mexico) with ~~near term~~near-term prospects of mining, and particularly for properties within reasonable haulage distances of our Velardeña Properties. We are also focused on advancing our El Quevar exploration property in Argentina through the Earn-In Agreement with Barrick and on advancing selected properties in our portfolio of approximately 12 properties, located in Mexico, Nevada and Argentina. We are reviewing strategic opportunities, focusing primarily on development or operating properties in North America, including Mexico.

This discussion should be read in conjunction with Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, filed with the SEC on February ~~27, 2020.~~18, 2021.

~~2020~~2021 Highlights

COVID-19 uncertainties

We ~~have undertaken~~undertook several initiatives and installed multiple safety practices in response to the COVID-19 ~~related economic~~pandemic and ~~financial market uncertainties.~~

have continued to carry out these initiatives and practices in 2021. We ~~are following~~will continue to follow World Health Organization protocols and local government rules and recommendations at all of our projects and corporate offices. Office employees ~~are working~~continue to work remotely wherever possible. ~~In compliance with a directive of~~Activities at the Mexican Federal Government to suspend all non-essential activities, including mining, in response to the COVID-19 pandemic, we suspended mining activities at our Velardeña Properties (Durango State, Mexico) during portions of AprilRodeo Property and May 2020. Work was conducted jointly with Hecla to shut down the oxide mill that Hecla presently leases from us. Per the terms of the existing lease agreement, Hecla continued to pay the fixed monthly fee of $125,000 during the temporary shutdown, as well as pay for certain shutdown-related costs. We did not, however, receive the variable component of revenue that is tied to tonnes of ore milled per month during the temporary shutdown. Activities at the Velardeña Properties, including mining and processing, ~~of Hecla material at the oxide mill, have continued uninterrupted since the temporary shutdown.~~

~~To provide greater financial flexibility at the onset~~were not interrupted as a result of the ~~COVID-19~~ pandemic ~~on March 30, 2020, we entered into~~during the ~~Sentient Loan, whereby Sentient granted us an unsecured loan in an amount equal to $1,000,000. The Sentient Loan had an interest rate~~first three months of 10% per annum and was due in full, together with accrued interest and any other amount outstanding under the loan agreement, on December 31, 2020. During August 2020, we repaid the loan and accrued interest in full. See Note 13 for a full description of the Sentient Loan.

In addition to the Sentient Loan, we also reached an agreement in April 2020 with Autlán to extend the time to repay, through December 2020, the remaining $0.8 million related to the $1.5 million refundable deposit. The deposit was related to the proposed sale of our Velardeña Properties and other assets in June 2019, which was subsequently terminated. During August 2020, we paid the remaining refundable deposit plus accrued interest in full. See Note 14 for a full description of the refundable deposit.2021.

Rodeo Property

As a result of our decision to seek to commence mining operations at our Rodeo project, we now consider the Rodeo property to be one of our material properties, along with the Velardeña Properties and the El Quevar project. Further information about our Rodeo project is set forth below.

2623

~~Location, Access and Facilities~~Table of Contents

Our Rodeo project is located approximately 2 kilometers east of the town of Rodeo in Durango State, Mexico. The city of Torreón is located 189 kilometers by road to the east of the project and the city of Durango is located 157 kilometers by road to the south. The property can be reached via gravel roads from the town of Rodeo. Basic amenities are available in the town of Rodeo. Facilities onsiteWe began mining activities at the Rodeo project will include fuel storage, a maintenance area, portable warehouses, mobile offices and other essential services and support units. No processing facilities will be located on site. We have obtained rights to extract water from the Nazas River which is within a few kilometers of the project. There is a power line that crosses the property and services the nearby villages however, we anticipate relying on generators to provide power for the minimal infrastructure required at the mine site.

Our proposed mine plan for the Rodeo project contemplates the processing of mined material at our Velardeña oxide mill, which is located approximately 115 kilometers via road from the Rodeo project. We plan to truck mined material to the plantProperty, using a ~~commercial trucking contractor. Our Velardeña oxide plant is a typical agitated leach plant that is rated~~contract miner, in December 2020. In November 2020 we received the final necessary permits for us to handle up to 550 tonnes per day of throughput. The plant is equipped with a modern doré refinery, and the attached tailings facility recently underwent an expansion which is expected to be sufficient for the tailings that would be produced from operations at Rodeo. We have begun preparing for the installation of a new regrind mill circuit at the plant specifically to process the harder mined material coming from the Rodeo property (as discussed more fully below). The circuit, which will allow for the maximum recovery of gold, is expected to be operational in January of 2021 at a total cost of approximately $600,000. Power for the plant is provided through substations connected to the national grid.

~~The following map shows the location of the Rodeo project.~~

~~Property History~~

~~Exploration and informal~~commence mining of the Rodeo property dates back over 25 years. Prior to 1994, two prospects, called the “Los Murcielagos” gold-silver-lead-copper and “Francisco Marquez” gold-copper prospects, were documented in the vicinity of the Los Murcielagos arroyo on the Rodeo property. Little information is available on these historic prospects other than gold- and silver-bearing mineralization was apparently extracted from short adits that are visible from surface. In the early 1990’s, exploration work, including geological mapping and drilling, on the property was carried out by La Cuesta International Inc. and Monarch Resources de Mexico, S.A. de C.V. The property was acquired by Canplats Resource Corporation in 2003, and it conducted a geochemical sampling program and multiple drilling programs during the mid-2000s. Canplats was acquired by Goldcorp Inc. in 2010 and the rights to the Rodeo concessions came to be held

in Camino Minerals Corporation (“Camino”), a wholly owned subsidiary of Goldcorp. In 2010, Camino issued a technical report on the property. In 2011, Camino conducted a 6,238-meter drilling program to investigate the extension of the known mineralization to the north and south of the main mineralized zone of the property, as well as its depth. In 2014, Camino relinquished its right to acquire the Rodeo concessions and the property reverted to La Cuesta. We acquired the Rodeo concessions from La Cuesta International Inc. in 2015.

~~Title and Ownership Rights~~

The Rodeo project consists of two mineral concessions totaling approximately 1,866 hectares. The “Rodeo” concession, totaling 521 hectares, is held under a lease agreement dated May 18, 2015 pursuant to which we are required to make advance payments of $40,000 per year to La Cuesta International, S.A. de C.V., a wholly-owned subsidiary of La Cuesta International Inc (“La Cuesta”). Upon commencement of commercial production, we will be required to pay a 2% net smelter return royalty from production to La Cuesta. After $5 million has been paid to La Cuesta under the royalty agreement, the royalty payment will reduce to a 1% net smelter return. The mineralized material that has been identified to date and which forms the basis for the Preliminary Economic Assessment described below is located on the Rodeo concession.

The “Rodeo 2” concession, totaling approximately 1,345 hectares, was purchased from Rojo Resources, S.A. de C.V. under a purchase agreement dated July 22, 2015. Royalty payments of 2% of net smelter returns on material produced from Rodeo 2 will also be due to La Cuesta.

~~We are also required to pay a 0.5% net smelter return royalty to the Mexican federal government from all production~~ at the Rodeo ~~property.~~

~~The following Rodeo property mine concessions are identified below by name and file number in the Federal government Public Registry of Mining.~~


~~Name of Mine Concession~~		~~Concession File Number~~
~~Rodeo~~		~~30748~~
~~Rodeo 2~~		~~31305~~

Similar to our Velardeña Properties, the Rodeo property is subject to the Mexican ejido system requiring us to contract with the local communities, or ejidos, surrounding the property to access mineral claims needed in connection with our mining and exploration activities. We have an agreement with the local ejidos to allow access to the property that we believe will be sufficient to conduct our proposed mining activities. The local ejidos do not have a direct interest in the mineral claims and payments under the agreement are expected to be less than $5,000 per year. We also have a separate surface rights agreement in place with a local private landowner that allows us to conduct mining operations on the two concessions. The agreement requires us to make annual payments of $60,000.

~~Geology and Mineralization~~

The Rodeo concession lies on the eastern boundary of the Sierra Madre Occidental. The Rodeo fault system consists of three major parallel shear zones and wall-rock fracture systems that are the principal feeder conduits for a high-level, gold-silver epithermal mineral system. These major vein-filled structures appear to be feeder conduits responsible for the 1 kilometer by 4 kilometer area of silicified, clay-altered and gold-anomalous rocks forming resistant north northwest-trending ridges. All three of the structures are wide, laterally persistent, well-developed feeder vein swarms with high-level, locally banded agate to chalcedonic quartz veins, stockworks and silicified breccias. In the area of principal interest, the structures are strongly veined, silicified, brecciated, and mineralized for over 4 kilometers, and the shear zones and hydrothermal system can be traced for 8 kilometers on the property. Individual feeder vein and breccia systems are up to 60 meters thick. Flexures in the vein swarms and/or structural intersections provide brecciation and open conduits for intense, episodic fluid flow and silica deposition with the potential for ore-grade concentrations of precious metals, especially gold.

The immediate Rodeo deposit area is approximately 300 meters along strike and 200 meters wide and extends to a depth of 200 meters below surface. The deposit strikes at 330° and dips to the east northeast with various vein phases dippingProperty from subvertical to 30°. The deposit is entirely hosted within Tertiary Rodeo volcanics that are strongly silicified and brecciated. The deposit is bound to the east by the Rodeo fault, however drilling to date has not demonstrated that the deposit reaches or is truncated by the fault. Along strike to the north and south, the mineralization is offset slightly by near vertical faulting; mineralization does not terminate at these faults but the intensity of the trend is either diminished or has yet to be located.

~~2017 Mineralized Material Estimate~~

During January 2017, Tetra Tech, Inc. completed an estimate of mineralized material at the Rodeo deposit, prepared pursuant to Canada National Instrument 43-101. The estimate was prepared using a block model rotated to fit the deposit strike. Two different estimates were prepared based on alternative operating scenarios. The first operating scenario, which contemplates transportation of the mined material to the Velardeña oxide mill, is shown below. The alternative operating scenario would require the construction of a processing facility on-site, which we do not currently believe is attractive.

~~The following table shows the estimated mineralized material.~~

Cutoff AuEq g/t
Tonnes (M)
Au g/t
Ag g/t
0.83
0.4
3.3
11

~~__________~~

~~(1)~~

~~Cutoff grade and Au equivalent calculated using metal prices of $1,220 and $17 per troy ounce of Au and Ag, recoveries of 77% and 90% Au and Ag.~~

~~(2)~~

The mineralized material estimate has been pit shell constrained using the Lerch Grossman algorithm with inputs of $7.50 mining, $10 trucking, and $20 processing costs per tonne. A breakeven cutoff including trucking and processing costs per block was applied to a block model within the optimized shell.

~~See~~ ~~“Cautionary Statement Regarding Mineralized Material”~~ ~~below.~~

~~Mine Plan and Metallurgy~~

In April 2020 we announced the completion of a Preliminary Economic Assessment (“PEA”) for the project. The PEA calls for an open pit mining operation with material transported to our Velardeña oxide plant. In August 2020, we completed a 35-hole 1400 meter drilling program to further verify the continuity of the high-grade core of the deposit. The results of this program have enabled us to finalize the initial start-up mine plan and have also provided further metallurgical data in order to confirm recovery assumptions and enable the appropriate setup of the oxide plant. Results from the drilling program were slightly better than the assumptions that were used in the PEA.

The PEA utilized metallurgical results from initial test work conducted in 2017, which confirmed good gold and silver metallurgical recoveries for milled material. Bottle roll cyanide leach testing of the high-grade samples conducted in 2017 resulted in gold extractions of 80 to 86 percent. Silver extractions ranged from 72 to 76 percent for all tests. Initial test work also indicated that the material is not suitable for gold and silver recovery by heap leaching. The results of metallurgical testing conducted during 2020 using samples obtained in the recently completed drilling program revealed the need for an additional regrind circuit in the oxide plant and a finer grind size to attain recoveries projected in the PEA. In the 2020 metallurgical testing, gold extractions averaged approximately 85 percent assuming a grind size of 80 percent passing 325 mesh. The potential need for a regrind circuit due to the harder characteristics of the Rodeo mined material was anticipated in the PEA and the estimated $600,000 capital cost of the regrind circuit was already included in the total estimated $1.5 million of capital, pre-production drilling and other assessment activities, mining costs, working capital and other start-up related costs reflected in the PEA.

~~Certain Laws Affecting Mining in Mexico~~

~~Our current and proposed operations at the Rodeo project are subject to a variety of laws affecting mining operations in Mexico. For a discussion of these laws, see “~~~~Business and Properties – Velardeña Properties -~~~~Certain Laws Affecting Mining in Mexico~~~~” in our Form 10-K for the fiscal year ended December 31, 2019.~~

~~Taxes~~

~~For a discussion of the taxes that apply generally to mining projects in Mexico, see “~~~~Business and Properties – Velardeña Properties –~~~~Taxes in Mexico~~~~” in our Form 10-K for the fiscal year ended December 31, 2019~~

~~Recent Activities and Operating Plans~~

We continue to advance our plans to begin mining operations at the Rodeo property with processing of mined material in our oxide plant beginning in the first quarter of 2021. We have submitted applications to SEMARNAT, the environmental protection agency in ~~Mexico,~~Mexico. We began hauling the mined material, also using a contractor, for ~~the necessary permits to allow us to commence mining~~processing at ~~the project. We currently expect to receive the required permits near the end of 2020; however, there can be no assurance that the permits will be issued on this timeline.~~

~~Hiring of additional key mine and plant supervision is also underway to support the plant operating workforce already in place under the~~our Velardeña oxide plant ~~lease with Hecla. Following~~beginning in January 2021. We provide the termination of the Hecla lease on November 30, 2020, our existing oxide plant workforce is expected to transition to and begin preparing the plant to receive mined material from Rodeo. We plan to enter into a contract mining agreement with a regional contractor to perform mine excavation work, while we will provide overall mine management and engineering, which includes in-pit technicians who ~~will~~ determine whether material is suitable for process or placement on the waste dump. We also ~~plan to enter into an agreement with another regional contractor~~employ and supervise the workforce responsible for ~~haulage of mined material to the~~processing activities at our oxide plant. Our assay lab, located in Velardeña, Durango, ~~will be~~Mexico is used for the project’s assaying requirements. We poured our first doré bar at the end of January 2021 and completed our first shipment of doré to a refinery located in the United States in March 2021.

We ~~anticipate that mining~~installed a new regrind mill circuit at the plant specifically designed to process the harder mined material coming from the Rodeo ~~project can commence promptly following receipt~~Property, which was completed in April at a total cost of ~~necessary government approvals,~~approximately $1.0 million. The new circuit, which ~~are currently anticipated near~~was fully operational at the end of ~~2020. If necessary, we may elect to stockpile mined material if the oxide plant is not yet prepared to accept mined material from the Rodeo project. Following a 2-3 month start-up period,~~April, will allow for improved recovery of gold while increasing daily throughput of Rodeo material in the oxide plant ~~is now estimated~~ to ~~be approximately~~at least 450 tonnes per ~~day, slightly lower than~~day. At that throughput level, the ~~480 tonnes per day in~~current life of the ~~PEA due to the added regrind circuit, as discussed above. The~~Rodeo mine ~~life at the lower throughput level~~ is estimated to ~~be approximately ten quarters (2.5~~run through the middle of 2023 (approximately 2.5 years).

~~We currently anticipate that~~Assays from early processing at the oxide plant ~~would be prepared to commence milling and processing operations to produce doré in the first quarter of 2021. As outlined in the PEA,~~indicate the doré produced ~~is expected to be~~are comprised of approximately 2515 to 20 percent gold and 65 to 7075 percent silver and ~~to be~~are of a quality that is readily marketable and saleable to refineries located either in Mexico or internationally, consistent with standard commercial terms. We entered into a refining agreement with a third party in February 2021 and have completed four shipments of doré as of May 5, 2021.

~~As described in~~24

Table of Contents

The table below sets forth the ~~PEA, we estimate that we will spend approximately $1.5 million on capital, working capital~~key processing and ~~other pre-production costs prior to the receipt of revenue from~~sales statistics for the Rodeo ~~mine, which we currently anticipate may be in~~operation for the first quarter ended March 31, 2021:


		Three Months Ended
		March 31,
Payable gold produced in doré (ounces)		1,390
Payable silver produced in doré (ounces)		11,289
Payable gold equivalent produced in doré (ounces) (1)		1,559

Gold sold in doré (ounces)		909
Silver sold in doré (ounces)		9,698
Gold equivalent sold in doré (ounces) (1)		1,054

Total tonnes mined (2)		171,905
Total tonnes in stockpiles awaiting processing (3)		6,746
Total tonnes in low grade stockpiles (4)		26,410
Tonnes processed		18,791
Tonnes per day processed		209

Gold grade processed (grams per tonne)		3.0
Silver grade processed (grams per tonne)		14.3

Plant recovery - gold (%)		84.3
Plant recovery - silver (%)		86.6

Realized price, before refining and selling costs
Gold sold in doré (dollar per ounce)		$1,721
Silver sold in doré (dollar per ounce)		$25.76

(1) Gold equivalent based on realized gold and silver price
(2) Includes all mined material transported to the plant, stockpiled or designated as waste
(3) Includes mined material stockpiled at the mine or transported to the plant awaiting processing in the plant
(4) Material grading between 2 g/t (current cut off grade) and 1 g/t Au held for possible future processing

Table of ~~2021.~~ Contents

The following table highlights additional non GAAP cost and revenue statistics related to the Rodeo operations:


	Three Months Ended March 31, 2021
	(in thousands except per unit amounts)

Total cash operating costs	$	2,826
Treatment and refining costs		30
Silver by-product credits		(250)
Total cash costs, net of by-product credits	$	2,606

Total cash cost per unit
Payable gold ounces produced in doré		1,390
Total cash operating costs	$	2,034
Treatment and refining charges		22
Silver by-product credits		(180)
Total cash costs, net of by-product credits, per payable gold ounce (1)	$	1,876

Tonnes Processed in plant		18,791
Total cash operating costs per tonne processed	$	150

(1) Total cash costs, net of by-product credits, per payable gold ounce is a non-GAAP financial measure and includes the total costs of production from mining, milling and administrative activities related to the Rodeo operation. For a further explanation and a reconciliation to GAAP measures, see “Non-GAAP Financial Measures” below.

~~If we are successful~~Total cash operating costs for the first quarter ended March 31, 2021, as depicted in ~~commencing processing~~the table above, include all production costs during the period, including mining, milling and general and administrative costs related to the initial start-up of operations and associated build-up of mined material ~~from Rodeo in~~stockpiles as well as in-solution inventories at the ~~first quarter of 2021,~~plant. As production continues to ramp up, we expect unit costs to decrease significantly.

We anticipate total ~~payable production from Rodeo~~tonnes processed for the full year 2021 will be approximately ~~as shown below:~~

Year
Tonnes Produced
Ag (oz)
Au (oz)
2021
148,000
43,700
13,200
2022
162,000
47,800
14,400
2023
104,000
30,600
9,200

125,000 to 135,000, resulting in payable production of approximately 12,000 to 14,000 ounces of gold and 25,000 to 30,000 ounces of silver, consistent with prior guidance reported in our Form 10-K for the period ended December 31, 2020. Using an assumed gold price of ~~$1,887/~~$1,800/oz and an assumed silver price of ~~$23.73/~~$25.00/oz ~~(which were the~~(the approximate average London Fix PM prices ~~on September 30, 2020,~~during the first quarter 2021, as reported by ~~Kitco)~~Kitco, were $1,798 and $26.29 for gold and silver, respectively), estimated operating margin for the full year 2021 from the Rodeo Property (defined as revenue from the sale of metals less the cost of metals sold) is estimated at approximately $10.5 million to $12.0 million with after-tax cash flow ~~from production~~for the full year, net of capital expenditures and working capital, estimated at approximately $9.0 million to $10.5 million, consistent with prior guidance reported in our Form 10-K for the ~~Rodeo project is shown below:~~period ended December 31, 2020.


~~Year~~	~~Estimated After-tax Cash Flow~~
~~2020~~	~~-$1.3 million~~
~~2021~~	~~$12.6 million~~
~~2022~~	~~$14.5 million~~
~~2023~~	~~$9.5 million~~

The estimates shown above are preliminary in nature and are based ~~primarily~~partly on the actual results of operations for the first quarter 2021 and partly on assumptions described in the ~~PEA adjusted slightly to reflect the results of the recently completed drilling program and metallurgical testing and the proposed contract mining and hauling contracts (as noted above).~~PEA. Actual results from production at Rodeo may vary significantly based upon, among other things, unanticipated variations in grade, unexpected challenges associated with our proposed mining plan, volatility in commodity prices, variations in expected recoveries, increases in projected operating costs, working capital or capital costs or delays in commencement of or interruptions in production. See “Risk Factors – Risk Factors related to our Mining and Processing Activities” as described in our Form 10-K for the period ended December 31, 2020.

~~Cautionary Statement Regarding Mineralized Material Estimates and Estimated Production at Rodeo~~

We have not established proven or probable reserves, as defined by the SEC under Industry Guide 7 or Canadian securities regulators, at the Rodeo project. In order to establish proven reserves under SEC Industry Guide 7, we would be required to prepare a final, “bankable” feasibility study. Due to the size of the Rodeo deposit and the relatively short anticipated mine life, we do not believe it is necessary to incur the expense and delay involved in preparing a bankable feasibility study in order to bring the Rodeo project into production. As a result, despite the fact that we have undertaken confirmatory drilling to provide additional certainty regarding the Rodeo deposit, there is an increased uncertainty and risk that may result in economic and technical failure which may adversely impact our future profitability. The production and after-tax cash flow estimates provided above are based in part on the mineralized material estimate. Therefore, because the estimate does not constitute proven reserves under SEC Industry Guide 7, the production and after-tax cash flow estimates which are derived therefrom are inherently more uncertain than would otherwise be the case if the Rodeo project were supported by a bankable feasibility study and estimate of proven reserves established in accordance with Industry Guide 7.

“Mineralized material” as used above, although permissible under the United States Securities and Exchange Commission’s (“SEC”) Industry Guide 7, does not indicate “reserves” by SEC standards. In addition, in the above disclosure we modify our estimates made in compliance with National Instrument 43-101 to conform to SEC Industry Guide 7 for reporting in the United States. Mineralized material is substantially equivalent to measured and indicated mineral resources as disclosed for reporting purposes in Canada, except that the SEC only permits issuers to report “mineralized material” in tonnage and average grade without reference to contained ounces.

3126

Table of Contents

~~Velardeña Oxide Plant Lease Agreement~~Non-GAAP Financial Measures

~~During~~Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles. These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

“Total cash costs, net of by-product credits, per payable gold ounce”, and “All-in sustainable costs, net of by-product credits, per payable gold ounce”, are non-GAAP financial measures calculated by the ~~nine months ended September 30, 2020, Hecla processed approximately 95,000 tonnes~~Company as set forth below and may not be comparable to similar measures reported by other companies.

“Total cash costs, net of ~~material through~~by-product credits, per payable gold ounce,” includes all direct and indirect operating cash costs associated with the ~~oxide plant, resulting in total revenues~~physical activities that would generate doré products for sale to uscustomers, including mining to gain access to mineralized materials, mining of ~~approximately $4.6 million, comprised of approximately $3.0 million for direct plant charges~~mineralized materials and ~~fixed fees~~waste, milling, third-party related treatment, refining and ~~approximately $1.6 million for other net reimbursable~~transportation costs, on-site administrative costs and royalties. Total cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the ~~services we provide under~~Rodeo project. By-product credits include revenues from silver contained in the ~~lease. Hecla is responsible~~products sold to customers during the period. “Total cash costs, net of by-product credits”, are divided by the number of payable gold ounces generated by the plant for the ~~ongoing operation~~period to arrive at “Total cash costs, net of by-product credits, per payable gold ounce.”

“All-in sustainable costs per payable gold ounce, net of by-product credits” begins with “Total cash costs, net of by-product credits, per payable gold ounce”, and ~~maintenance~~includes capital and sustaining capital.

“Cost of ~~the oxide plant. The $1.6 million of reimbursable costs are also~~metals sold”, reported as ~~plant lease costs, resulting~~a separate line item in ~~net operating margin~~our Condensed Consolidated Statements of ~~approximately $3.0 million~~Operations for the ~~nine~~period ended March 31, 2021, is the most comparable financial measure, calculated in accordance with GAAP, to “Total cash costs, net of by-product credits”. “Cost of metals sold” includes adjustments for changes in inventory and excludes third-party related treatment and refining costs, which are reported as part of revenue in accordance with GAAP. The following table presents a reconciliation for the three months ended ~~September 30, 2020.~~March 31, 2021 between the non-GAAP measure of “Total cash cost, net of by-product credits” to the most directly comparable GAAP measure, “Cost of metals sold”.

~~On October 1, 2018, Hecla exercised its option, pursuant~~Reconciliation of Cash Costs to ~~an agreement entered into with us in August 2017, to extend the lease~~Cost of our Velardeña oxide plant until December 31, 2020. On December 2, 2019 we entered into an additional amendment of the lease agreement with Hecla to reduce the per tonne fee payable by Hecla for the duration of the lease term, commencing on January 1, 2020, from $22.00 per tonne to $11.00 per tonne, however, the per tonne fee reverts back to $22 per tonne for any month in which either of the following conditions are met: (1) the Comex daily silver spot closing average price for such month is $20.00 per ounce or greater, or (2) the mill head grade average from the metallurgical balance for such month is 1,000 grams per ton equivalent silver head grade or greater. If either condition is met in any month, Hecla will pay the higher fee of $22.00 per tonne on all amounts processed in the oxide plant during such month. The reduced fee only applies to the tonnage-based payments under the lease agreement; the monthly lease payment of $125,000 per month is not affected by the amendment. The Comex daily silver spot closing average price exceeded $20.00 in each of July, August and September 2020, therefore, we received the higher $22.00 per tonne fee for those months.Metals Sold

On July 7, 2020 the Company received notification from Hecla terminating the lease agreement effective November 30, 2020. We expect Hecla to continue to process material at approximately 400 tonnes per day during the remainder of the agreement through November 30, 2020, which would generate a net operating margin to us, net of reimbursable costs, of approximately $3.4 million for the year ended December 31, 2020, assuming the Comex daily silver spot closing average price remains above $20.00 through the end of the lease. The actual net operating margin received from the oxide plant may be negatively impacted if further interruptions due to COVID-19 occur. See Note 7 and Note 19 for a full description of the lease agreement with Hecla.

~~El Quevar~~

On April 9, 2020, we entered into the Earn-In Agreement with Barrick, pursuant to which Barrick has acquired an option to earn a 70% interest in the Company’s El Quevar project located in the Salta Province of Argentina.

Pursuant to the terms of the Earn-In Agreement, in order to earn an undivided 70% interest in the El Quevar project, Barrick must: (A) incur a total of $10 million in work expenditures over a total of eight years ($0.5 million per year in years one and two, $1.0 million per year in years three, four and five, and $2.0 million per year in years six, seven and eight); (B) deliver to the Company a National Instrument 43-101 compliant pre-feasibility study pursuant to the parameters set forth in the Earn-In Agreement; and (C) deliver a written notice to exercise the Option to us within the term of the Earn-In Agreement. Barrick may withdraw from the Earn-In Agreement at any time after spending a minimum of $1.0 million in work expenditures and upon providing us with 30 days’ notice.

We will form a new entity (“NewCo”) that will hold the El Quevar properties. Upon satisfaction of the earn-in conditions and exercise of the Option, NewCo will be 70% owned by Barrick and 30% owned by us. Funding of NewCo will be based on Barrick’s and our respective ownership, and industry standard dilution mechanisms will apply in the case of funding shortfalls by either shareholder.

During the earn-in period, in addition to the exploration spending, Barrick will fund the holding costs of the property, which will qualify as work expenditures. Barrick will reimburse us for expenses related to maintaining the exploration camp which will initially be run by us under a service agreement, which will also qualify as work expenditures. Through September 30, 2020, we have determined that approximately $0.2 million of expenses incurred by us are reimbursable under the Earn-In Agreement.


		Reconciliation of Costs of Metals Sold (GAAP) to Total Cash Costs, net of By-product Credits (Non-GAAP)
	(in thousands)
Three Months Ended March 31, 2021
Total cash costs, net of by-product credits	$	2,606

Reconciliation to GAAP measure:
Treatment and refining costs		(30)
Silver by-product credits		250
Write down of inventories to net realizable value		17
Change in inventory (excluding depreciation, depletion and amortization)		(1,307)
Cost of metals sold	$	1,536

3227

Table of Contents

Rodeo Exploration

In March 2021, we began an exploration drilling program at Rodeo aimed at expanding the resource. The program will encompass approximately 2,000 meters of exploration drilling at selected near-surface targets located immediately adjacent to the current pit. The program has the potential to extend the life of the Rodeo mine beyond the currently estimated life of around 2.5 years. Results will begin to be available within the next several months and any newly-added resources will be incorporated into the Company’s production plans.

Velardeña PEA

The Velardeña Properties contain two underground mines that were last operated in late 2015, at which point mining activities were suspended when a combination of low metals prices, mining dilution and metallurgical challenges rendered operations unprofitable. We elected to preserve the asset for future use, and since that time we have evaluated and tested various mining methods and processing alternatives that could enable sustainable profitable operations.

The recent rise in precious metals prices, the advancement of alternative processing technologies in the industry, and the results of our testing activities prompted us to pursue the preparation of an updated preliminary economic assessment (PEA)~~. On~~ based partly on projected increased gold recoveries from a proposed bio-oxidation circuit to treat gold- bearing pyrite concentrates. In April 2, 2020, we announced positive results from the updated PEA.~~The updated PEA was prepared to~~ incorporate new and updated elements of the project database, mine plan and processing plan, most notably the inclusion of bio-oxidation treatment of gold concentrates. In late 2019, we obtained successful results from testing Velardeña gold concentrate material using Finnish firm Outotec’s “BIOX” process, a unique and sustainable technology that was developed to pre-treat refractory ores and concentrates ahead of conventional cyanide leaching. The gold in these types of mineralized materials, such as those found at Velardeña, is encapsulated in pyrite and arsenopyrite which prevents the gold from being successfully cyanide leached. BIOX utilizes bacteria to oxidize these sulfide minerals, thereby exposing the gold for subsequent cyanide leaching and increasing overall gold recoveries. The 2019 BIOX testing of Velardeña material achieved gold recoveries of 92% from the pyrite-arsenopyrite concentrate, compared to sub-30% gold recoveries realized when the Velardeña Properties last operated in 2015. In the coming months, we plan to continue to optimize the mine plan and processing details in preparation for future test-mining and processing in advance of establishing a definite schedule for restarting commercial production at the Velardeña mines and the installation of the bio-oxidation circuit. No development decision has been made regarding a potential restart of the Velardeña mines.

Yoquivo

In September 2020, we began a 3,400-meter, 15-hole drill program to test the most promising portions of certain veins in the Yoquivo property in Chihuahua, Mexico. We completed the drill program in December 2020 and identified four separate vein systems in which surface sampling has returned grades up to 4,050 g/t silver and 27.7 g/t gold from surface. Complete results from the drill program were announced in our press release dated January 27, 2021. Of substantial interest is the discovery of a new vein parallel to and east of the Pertenencia vein. While the other principal veins have been partially mined from surface to the water table (up to 130 meters) in the case of San Francisco and Pertenencia, and over a much less extensive vertical interval in the case of El Dolar and Esperanza, the new vein is unmined from surface. We are planning a second phase drill program, which could start in the second quarter 2021.

El Quevar

On April 2020, we entered into the Earn-in Agreement with Barrick, pursuant to which Barrick has acquired an option to earn a 70% interest in the Company’s El Quevar project located in the Salta Province of Argentina (the “Option”). For a description of the Earn-In Agreement, see our Annual Report Form 10-K for the year ended December 31, 2020. During the earn-in period, in addition to the exploration spending, Barrick will fund the holding costs of the property, which will qualify as work expenditures. Barrick will reimburse us for expenses related to maintaining the exploration camp, which will initially be run by us under a service agreement and which will also qualify as work expenditures. Through March 31, 2021, approximately $0.5 million of expenses incurred by us have been or are expected to be reimbursable under the Earn-in Agreement.

Santa Maria

~~On July 14,~~In December 2020, we entered into ~~a binding letter of intent (“Letter of Intent”)~~an Option Agreement with Fabled, ~~Copper Corp. (“Fabled”) for a potential transaction~~ pursuant to which Fabled ~~would~~will have the right to acquire our ~~option to earn a 100%~~ interest in the Santa Maria mining claims ~~located~~ in Chihuahua, ~~Mexico (the “Option”). The Letter of Intent provides that entry into a definitive agreement regarding~~Mexico. Fabled is engaged in an 8,000 meter drill program on the ~~Option (the “Definitive Agreement”) is subject~~property to ~~among other contingencies, (i) a 10 business-day period during which~~expand the resource and test additional exploration targets. To acquire the property Fabled will ~~conduct its due diligence, (ii) the ability of Fabled to secure financing of not less than CAD$4,000,000, and (iii) acceptance by the TSX Venture Exchange of the proposed transaction.~~

As consideration for the Option, Fabled will (i) pay us $500,000 in cash upon closing and will issue us 1,000,000 shares of Fabled’s common stock; (ii) pay us $1,500,000 in cash on the one year anniversary date following the closing; (iii) pay us $2,000,000 in cash on the two year anniversary date following the closing; and (iv) upon exercise of the Option, grant us a 1% net smelter return royalty on the Santa Maria and Punto Com concessions.

The Letter of Intent contains standard representations, warranties, covenants, and other terms customary in similar transactions. We and Fabled agreed to use our commercially reasonable best efforts to enter into the Definitive Agreement on or before August 12, 2020 and prepare all necessary documentation and apply for and obtain TSX Venture Exchange approval and all other consents, orders or approvals as required or desirableneed to complete ~~the potential transaction regarding the Option. The time limit for completing the definitive option agreement was subsequently extended~~cash payments to Golden of $3.5 million by December 15, 2020. None of the consideration described above is payable until the definitive agreement is executed None of the consideration described above is payable until the definitive agreement is executed and the TSX Venture Exchange has approved the proposed transaction on behalf of Fabled.2022.

Sand Canyon

~~During the second quarter 2019 we entered into~~We have an earn-in agreement with Golden Gryphon Explorations for the Sand Canyon project located in northwestern ~~Nevada, where surface work has identified a large system of epithermal veins with potential for gold and silver deposits.~~ We hold an option to earn a 60% interest in the Sand Canyon project by spending $2.5 million in exploration expenses over four years, with guaranteed minimum expenditures of $0.5 million in year one. To continue to earn interest in the project, we must spend at least $0.75 million in each of years two and three and $0.5 million in year four, and drill at least 5,000 feet of core or 10,000 feet of reverse circulation or a combination of the two, by the end of the second year. We paid $25,000 cash and $50,000 in reimbursed exploration expenditures to acquire the option and will make staged payments of a total additional $135,000 ($35,000 in 2020, $50,000 in 2021 and $50,000 in 2022) over the next three anniversaries of the agreement.

Nevada. We completed surface exploration activities ~~on the project~~ in late 2019 ~~including mapping~~ and ~~geochemical sampling to identify drill targets. Based on this work and after securing drill permits, we initiated a drill program in the first quarter 2020. In March we~~ completed ~~the~~an initial drill program of

Table of Contents

approximately ~~1800~~1,800 meters in 4 diamond drill holes. The drill holes were placed to target surface geochemical and geophysical anomalies associated with epithermal veining observed in outcrops. Drill holes tested the two principal epithermal vein target areas on the property, the DeLong Canyon target and the Sand Canyon target. The drill hole collared to test the DeLong Canyon target did not encounter any veins or significant anomalous geochemical values. Interpretation shows that a fault offset likely caused the drill hole to miss the vein system as projected from surface. The three drill holes collared to test the veins and anomalies in the Sand Canyon target area all intersected narrow vein and breccia structures with low anomalous values of Ag, As, Sb, and Mo. March 2020. No potentially economic concentrations of precious metals were encountered in any of the four drill holes. Plans for further testing of the mineralized system are being considered. In the first year of exploration at Sand Canyon and through December 31, 2020, we spent ~~$1.6~~$1.8 million toward the $2.5 million earn-in requirement, fulfilling the first and second year minimum expenditures and the minimum drill commitment.

~~Yoquivo~~

The Yoquivo property was acquired in 2017 and with the recent additional acquisition of a claim internal to the exterior boundary, the project consists of 1,975 hectares in 7 claims that cover an epithermal vein district hosted in Tertiary andesitic volcanic rocks that is exposed in an erosional window through Oligocene rhyolite on the eastern margin of the Sierra Madre Occidental of northern Mexico. The property is 200 km SW of Chihuahua city in the state of Chihuahua, Mexico. Recent surface rock sampling has demonstrated gold and silver values of potential economic interest in several of the veins in the district. We have an option to purchase the six concessions that comprise the Yoquivo property for payments totaling $0.75 million over four years subject to a 2% to 3% NSR royalty on production, capped at $2.8 million.

In October 2018 we announced high-grade silver-gold assays from the Yoquivo project. Multiple silver-gold bearing epithermal veins were mapped and sampled, with the two most important veins being the San Francisco and Pertenencia veins. A new vein, the La Niña vein, was discovered in the northwest of the property where it splits off from the main San Francisco vein. Two other veins, the Esperanza and El Dolar veins have been identified and sampled. Based on sampling and mapping we have identified the most attractive targets on the property and have permits in hand to initiate the drill program. In September 2020 we began a drill program to test the most promising portions of the veins.

~~Public offering~~

On July 21, 2020, we entered into an Amended and Restated Underwriting Agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC as representative of the underwriters named in Schedule I thereto (the “Underwriters”), providing for the issuance and sale by us in a firm commitment offering (the “Offering”) of 17,857,143 shares of common stock at a price to the public of $0.42 per share (the “Offering Shares”). In addition, we granted the Underwriters an option to purchase, at the public offering price per share of common stock, up to an additional 2,678,571 shares of common stock, exercisable for 30 days from the date of the Underwriting Agreement (the “Option Shares”). The Offering Shares and Option Shares were registered pursuant to our registration statement on Form S-3 (File No. 333-220461), and a prospectus supplement thereto filed with the Securities and Exchange Commission. On July 24, 2020, the Underwriters acquired the Offering Shares and the full amount of the Option Shares from us. After the underwriting discount of 6% and total offering expenses of approximately $155,000 we received net proceeds of approximately $8.0 million from the sale of the Offering Shares and the Option Shares. We intend to use the proceeds from the Offering for working capital requirements and general corporate purposes.

In connection with the Offering, the Company, its directors, executive officers, and certain stockholders, subject to certain exceptions, agreed to not sell or transfer any shares of common stock or securities convertible into, or exchangeable or exercisable for, the Company’s shares of common stock during a period ending 90 days after the closing of the Offering. This includes the Company’s use of the LPC Program and the ATM Program.

~~Offering and private placement transaction~~

On April 20, 2020, we entered into a securities purchase agreement with certain institutional investors providing for the issuance and sale of 15,000,000 shares of our common stock at a price of $0.20 per share, and in a concurrent private placement transaction, the issuance of 11,250,000 warrants, ultimately consisting of 7,500,000 series A warrants and

3,750,000 series B warrants, to purchase up to 11,250,000 shares of our common stock at an exercise price of $0.30 per share, for aggregate gross proceeds of $3.0 million. The securities purchase agreement contains customary representations, warranties and covenants, in addition to granting the investors the right to collectively participate in up to 50% of any future offerings of securities by the Company on the same terms as other investors, other than certain “exempt issuances” and “permitted sales” as defined therein, until the first anniversary of the closing date of the offering.

Each Warrant is exercisable six months from April 22, 2020, the date of issuance, and has a term expiring five years after such initial exercise date. The Warrants contain so-called full-ratchet anti-dilution provisions which may be triggered upon any future issuance by the Company of shares of its common stock or common stock equivalents at a per share price below the then-exercise price of the Warrant, subject to certain exceptions; provided, however, that with respect to the Series B warrants, the adjusted exercise price will not be less than $0.26.

Total costs for the offering were approximately $290,000, including the placement agent fee of six percent of the aggregate gross proceeds, except, however, that a reduced fee was accepted with respect to one investor.

Financial Results of Operations

For the results of continuing operations discussed below, we compare the results from operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 to the results from operations for the three ~~and nine~~ months ended ~~September 30, 2019.~~March 31, 2020.

Three Months Ended ~~September 30, 2020~~March 31, 2021

Revenue from the sale of metals. We recorded $1.8 million in revenue for the three months ended March 31, 2021, all from the sale of gold and silver bearing doré from the Rodeo Operation in Mexico. We did not record any revenue from doré sales for the three months ended March 31, 2020.

Costs of metals sold. For the three months ended March 31, 2021 we recorded $1.5 million of costs of metals sold, including a $17,000 write down of the doré inventory to net realizable value. We did not record any cost of metals sold during the three months ended March 31, 2020.

Revenue from oxide plant lease. We recorded revenue of ~~$2.1 million and $1.9~~$1.2 million during three-month ~~periods~~period ended ~~September 30,~~March 31, 2020, ~~and 2019, respectively,~~ related to the lease of our Velardeña oxide plant to a third party. The ~~increase~~Velardeña oxide plant lease was terminated in November 2020. We did not record any revenue during ~~2020 is primarily related to an increase in throughput during~~ the ~~period.~~three-month period ended March 31, 2021.

Oxide plant lease costs. We recorded $0.6 million of costs related to the oxide plant lease during ~~each of~~ the three-month ~~periods~~period ended ~~September 30, 2020 and 2019.~~March 31, 2020. The costs consist primarily of reimbursable labor and utility costs which for accounting purposes are also included in revenue from the oxide plant lease. The Velardeña oxide plant lease was terminated in November 2020. We did not record any costs related to the oxide plant lease during the three-month period ended March 31, 2021.

Exploration expense. Our exploration expense, including ~~work at Sand Canyon, Rodeo and other properties,~~ property holding costs and allocated administrative expenses, totaled ~~$1.2~~$0.8 million and ~~$0.9~~$1.6 million for the three months ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and September 30, 2019,~~ respectively. The higher exploration expense for 2020 is primarily related to increased exploration at our Rodeo project in Mexico during the period.

Velardeña care and maintenance costs. We recorded $0.2 million and ~~$0.4~~$0.5 million for the three-month periods ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and 2019,~~ respectively, for expenses related to care and maintenance at our Velardeña Properties as the result of the suspension of mining and processing activities in November 2015. The reduced costs for ~~2020~~2021 are primarily the result of ~~cost reduction initiatives and the allocation of a portion of personnel~~ costs associated with activities at the Velardeña Properties ~~in support of activities at~~being allocated to the Rodeo ~~project.~~operation.

El Quevar project expense. We incurred $0.1 million and ~~$0.6~~$0.2 million for the three-month periods ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and September 30, 2019,~~ respectively related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During the three months ended ~~September 30, 2020,~~March 31, 2021, approximately $0.1 million of costs actually incurred are anticipated to be reimbursed by Barrick, as discussed above. ~~In addition, the 2019 costs are greater due to a drilling program which began in March 2019.~~

Administrative expense. Administrative expenses totaled ~~$0.9~~$1.5 million for the three months ended ~~September 30, 2020.~~March 31, 2021. Administrative expenses, including costs associated with being a public company, are incurred primarily by our corporate activities in support of the Rodeo Property, Velardeña Properties, El Quevar project and our exploration portfolio. The ~~$0.9~~$1.5 million of administrative expenses we incurred during the first three months of ~~2020~~2021 is comprised of ~~$0.2~~$0.8 million of employee compensation and directors’ fees, $0.4 million of professional fees and $0.3 million of insurance, rents, travel expenses, utilities and other office costs. Administrative expenses totaled ~~$0.7~~$1.2 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~$0.7~~$1.2 million of administrative expenses we incurred during the three months of ~~2019~~2020 is comprised of $0.3 million of employee compensation and directors’ fees, ~~$0.3~~$0.5 million of professional fees and ~~$0.1~~$0.4 million of insurance,

rents, travel expenses, utilities and other office costs. ~~Expenses~~Administrative expenses for employee compensation and director’s fees were higher in the ~~2020~~2021 period due primarily to ~~increased legal fees~~cash bonuses paid to executives and ~~information technology costs associated with server and software upgrades.~~staff.

Table of Contents

Stock based compensation. During ~~each of~~ the three months ended ~~September 30, 2020 and September 30, 2019~~March 31, 2021 we incurred approximately ~~$0.1~~$0.4 million of expense related to stock-based compensation. Stock based compensation varies from period to period depending on the number and timing of shares granted, the type of grant, the market value of the shares on the date of grant and other variables. During the three months ended March 31, 2020 we incurred approximately $0.1 million of expense related to stock-based compensation. Stock based compensation was higher in the 2021 period due primarily to stock awards granted to executives.

Reclamation and accretion expense. During each of the three months ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~ we incurred approximately $0.1 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña ~~Properties.~~Properties and environmental liabilities associated with the Rodeo operation.

Other operating (expense) income, net. We recorded ~~a nominal amount~~$0.2 million of other operating ~~expense~~income for the three months ended ~~September 30, 2020,~~March 31, 2021, primarily related to the amortization of deferred income related to the option agreement for the sale of ~~equipment in Argentina.~~the Santa Maria property, as discussed above. We recorded a nominal amount of other operating income for the three months ended ~~September 30, 2019,~~March 31, 2020, related ~~primarily~~to the sale of ~~property~~an asset in ~~Peru.~~Mexico.

Depreciation, depletion and amortization. During ~~both~~the three-month periods ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~ we incurred depreciation, depletion and amortization expense of approximately $0.2 million and $0.3 million, respectively. For the period ended March 31, 2021, approximately $0.1 million of depreciation was allocated to finished goods and work in process inventories associated with the Rodeo operation.

Interest and other expense, net. We recorded approximately $0.3 million of interest and other expense, net for the three-month period ended March 31, 2021, primarily related to write off of deferred costs related to the Lincoln Park Capital program. We recorded a nominal amount of interest and other expense, net for ~~both~~ the ~~three-month periods~~three months ended ~~September 30,~~March 31, 2020, ~~and September 30, 2019,~~ primarily related to ~~interest accrued during the period on the~~a refundable deposit due to Autlá~~n refundable deposit.~~n.

Gain (Loss) on foreign ~~currency.~~currency losses. We recorded a nominal foreign currency loss for both the three months ended ~~September 30, 2020~~March 31, 2021 and ~~September 30, 2019.~~March 31, 2020. Foreign currency gains and losses are primarily related to the effect of currency fluctuations on monetary assets net of liabilities held by our foreign subsidiaries that are denominated in currencies other than US dollars.

~~Income taxes.~~Other income. We recorded ~~a nominal amount~~approximately $0.1 million of other income ~~tax expense~~ for ~~each of~~ the three months ended ~~September 30, 2020 and September 30, 2019.~~

~~Nine Months Ended September 30, 2020~~

~~Revenue from oxide plant lease.~~ ~~We recorded revenue of $4.6 million and $5.9 million during the nine-month periods ended September 30, 2020 and 2019, respectively,~~March 31, 2021 related to the ~~lease~~mark-to-market of our Velardeña oxide plant to a third party. The decrease in revenue during 2020 is primarily related to a reduction in the per tonne processing fees during the first six months of 2020 relating to the Third Amendment to the Hecla lease as discussed in Note 19 in the accompanying financial statements. In addition, during 2020 we experienced a temporary shutdown of operations during portions of April and May 2020 related to COVID-19 restrictions mandated by the Mexican government.

~~Oxide plant lease costs.~~short-term investments. We recorded $1.6 million and $1.8 million of costs related to the oxide plant lease during the nine-month periods ended September 30, 2020 and 2019, respectively. The costs consist primarily of reimbursable labor and utility costs which for accounting purposes are also included in revenue from the oxide plant lease.

~~Exploration expense.~~ ~~Our exploration expense, including work at Sand Canyon, Rodeo and~~did not record any other properties, property holding costs and allocated administrative expenses, totaled $3.7 million and $3.1 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. The increase in exploration expense for 2020 is primarily related to a drilling program at our Sand Canyon project in Nevada during the first quarter 2020 and an increase in exploration at our Rodeo project during the third quarter 2020.

~~El Quevar project expense.~~ For the nine months ended September 30, 2020 and September 30, 2019, we incurred $0.6 million and $1.6 million, respectively related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. During the nine months ended September 30, 2020 approximately $0.2 million of costs actually incurred are expected to be reimbursed by Barrick, as discussed above. The 2019 costs are also greater due to a drilling program at the El Quevar project during 2019.

~~Velardeña care and maintenance costs~~. We recorded $0.9 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively, for expenses related to shut down and care and maintenance at our Velardeña Properties as the result of the suspension of mining and processing activities in November 2015. The reduced costs for 2020 are primarily related to the temporary shutdown of operations during a portion of April and May 2020 related to COVID-19, cost reduction initiatives and the allocation of a portion of personnel costs at the Velardeña Properties in support of activities at the Rodeo project.

~~Administrative expense.~~ Administrative expenses totaled $2.8 million for each of the nine months ended September 30, 2020 and September 30, 2019. Administrative expenses, including costs associated with being a public company, are incurred primarily by our corporate activities in support of the Velardeña Properties, El Quevar project and our exploration portfolio. The $2.8 million of administrative expenses we incurred during the nine months of 2020 is comprised of $0.9 million of employee compensation and directors’ fees, $1.0 million of professional fees and $0.9 million of insurance, rents, travel expenses, utilities and other office costs. The $2.8 million of administrative expenses we incurred during the first nine months of 2019 is comprised of $1.1 million of employee compensation and directors’ fees, $1.0 million of professional fees and $0.7 million of insurance, rents, travel expenses, utilities and other office costs.

~~Stock based compensation.~~ During the nine months ended September 30, 2020 and 2019 we incurred approximately $0.8 million and $0.7 million, respectively of expense related to stock-based compensation. Stock based compensation varies from period to period depending on the number and timing of shares granted, the type of grant, the market value of the shares on the date of grant and other variables.

~~Reclamation and accretion expense.~~ During each of the nine-month periods ended September 30, 2020 and 2019 we incurred approximately $0.2 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña Properties.

~~Other operating (expense) income, net.~~ We recorded $0.1 million of other operating expense for the nine months ended September 30, 2020, related to the write off of a non-strategic exploration property in Mexico. We recorded $0.2 million of other operating income for the ~~nine~~three months ended ~~September 30, 2019, related primarily to the sale of surplus equipment in Argentina and property in Peru.~~

~~Depreciation, depletion and amortization.~~ ~~During both the nine months ended September 30, 2020 and September 30, 2019 we incurred depreciation, depletion and amortization expense of $0.8 million.~~

~~Interest and other expense, net.~~ We recorded $0.1 million of interest and other expense, net for the nine months ended September 30, 2020, primarily related to interest accrued during the period on the Sentient loan and Autlán deposit. We recorded $0.2 million of interest and other expense, net for the nine months ended September 30, 2019, primarily related to the sale of common stock we owned in a junior mining company.

~~Gain (Loss) on foreign currency.~~ We recorded a $0.1 million and $0.1 million foreign currency loss for the nine months ended September 30, 2020 and September 30, 2019, respectively. Foreign currency gains and losses are primarily related to the effect of currency fluctuations on monetary assets net of liabilities held by our foreign subsidiaries that are denominated in currencies other than US dollars.March 31, 2020.

Income taxes. We recorded a ~~nominal amount of~~$0.1 million tax benefit for the three months ended March 31, 2021 and no income tax expense or benefit for ~~each of~~ the ~~nine~~three months ended ~~September 30, 2020 and September 30, 2019.~~March 31, 2020.

Liquidity, Capital Resources and Going Concern

At ~~September 30, 2020,~~March 31, 2021, our aggregate cash and cash equivalents totaled ~~$8.7~~$8.0 million, compared to the ~~$4.6~~$9.7 million in similar assets held at December 31, ~~2019.~~2020. The ~~September 30, 2020~~March 31, 2021 balance is due in part from the following expenditures and cash inflows for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Expenditures totaled ~~$10.9~~$4.7 million from the following:

●

$~~0.6~~0.8 million ~~in pre-production drilling and other assessment activities, capital~~for exploration expenditures ~~and other start-up related costs to advance our plans to begin mining operations~~ at the Rodeo, ~~property,~~Yoquivo and other properties;

●

$~~3.1~~0.5 million for ~~other exploration~~capital expenditures ~~including work at Sand Canyon, Yoquivo and other properties;~~primarily related to construction of the new regrind mill circuit related to the Rodeo operation;

●

$~~0.9~~0.2 million in care and maintenance costs at the Velardeña Properties;

●

$~~0.6~~0.1 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar ~~project;~~project, net of reimbursements from Barrick;

●

$~~2.8~~1.5 million in general and administrative expenses; and

Table of Contents

●

$~~1.3 million related to repayment of the Autlán deposit, including interest; and~~

●

~~$0.3 million in Canadian income tax payments (Note 17), $0.4 million related to the remittance of value added taxes in Mexico collected previously in the fourth quarter 2019, and $0.9~~1.6 million related to a net working capital increase due primarily ~~from a reduction of~~to an increase in inventories and value added tax receivables associated with the Rodeo operation, partially offset by an increase in accounts payable and other accrued ~~liabilities.~~liabilities, also related to the Rodeo operation.

The foregoing expenditures were offset by cash inflows of ~~$15.0~~$3.0 million from the following:

●

$~~8.0~~1.8 million, net of ~~transaction costs, related to a public offering in July 2020~~fees from the ATM Program (as further described above in Note ~~18),~~15);

●

$~~2.7~~1.0 million ~~net~~from the exercise of ~~transaction costs, related to an equity offering and private placement~~warrants issued in ~~April 2020~~prior offerings (as further described above in Note ~~18),~~

●

~~$0.9 million, net of transaction costs, related to a private placement transaction involving Barrick (as further described in Note 18),~~

●

~~$3.0 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs)~~15); and

●

$~~0.4~~0.2 million of net ~~of commitment fees and other offering related costs,~~operating margin from the ~~LPC Program and~~Rodeo operation (defined as revenue from the ~~ATM Program (both as described in Note 18)~~sale of metals less the cost of metals sold).

~~Our budgeted expenditures, totaling~~In addition to the $8.0 million cash balance at March 31, 2021, we expect to receive approximately ~~$8.1~~$13.0 million to $15.0 million in net operating margin from the Rodeo Property (defined as revenue from the sale of metals less the cost of metals sold) during the twelve months ending ~~September 30,~~March 31, 2022, assuming an average gold and silver price during that period of $1,800 and $25.00 oz respectively (the approximate average London Fix PM prices during the first quarter 2021, as reported by Kitco, were $1,798 and $26.29 for gold and silver, respectively). Our forecasted cash inflows during the twelve months ending March 31, 2022 do not include the anticipated second installment of $1.5 million from the sale of the Santa Maria property to Fabled, scheduled to be paid in December 2021, as discussed above. At this time, given the uncertainties associated with the eventual outcome of exploration activities at Santa Maria initiated by Fabled, and the associated timing of the start-up of operations at Santa Maria, we are not currently including the additional installment in our liquidity analysis.

Our forecasted expenditures during the twelve months ending March 31, 2022, apart from Rodeo cost of metals sold, which is already included in our forecast of net operating margin, total approximately $8.5 million as follows:

●

Approximately ~~$0.9~~$3.2 million on ~~pre-production~~exploration activities capital expenditures, working capital and other start-up related activities ahead of the projected receipt of revenues from the processing of mined material from the Rodeo property in the first quarter of 2021,

●

~~Approximately $2.5 million on evaluation activities, exploration~~ and property holding costs related to our portfolio of exploration properties located in Mexico, Argentina and Nevada, including project assessment and ~~Argentina, including El Quevar,~~evaluation costs relating to additional exploration at Rodeo, Yoquivo, and other properties;

●

Approximately ~~$0.8~~$0.5 million on capital expenditures related to the Rodeo operation;

●

Approximately $0.6 million at the Velardeña Properties for care and maintenance;

●

Approximately ~~$3.2~~$0.5 million at the El Quevar project to fund care and maintenance and property holding costs, net of reimbursement from Barrick;

●

Approximately $3.5 million on general and administrative costs; and

●

Approximately ~~$0.7~~$0.2 million related to ~~a net~~an increase in working capital primarily ~~for~~related to increased inventories and value added tax receivables ~~associated with~~at the Rodeo ~~property following the projected start-up of the processing of mined material in our oxide plant beginning in the first quarter of 2021.~~operation.

~~In addition~~Our forecasted cash resources of approximately $21.0 to $23.0 million, which includes cash on hand at March 31, 2021 and the ~~$8.7 million cash balance at September 30, 2020, we project cash inflows to total $11.6 million over~~forecasted net operating margin from the ~~next twelve months ending September 30, 2021 as follows:~~

●

Approximately $9.5 million in net operating margin from the Rodeo property (defined as revenues less costs of sales) from production beginning in the first quarter 2021, assuming an average gold and silver price during that period of $1,887 and $23.73, respectively,

●

~~Approximately $0.8 million in October 2020 from the exercise of 2.5 million Series A warrants issued in the April 2020 Offering;~~

●

~~Approximately $0.8 million in net operating margin from the Hecla lease prior to termination of the lease on November 30, 2020; and~~

●

~~$0.5 million in the fourth quarter 2020 relating to the sale of the Santa Maria project to Fabled Copper, as further described above.~~

Rodeo Property, are greater than our forecasted expenditures of approximately $8.5 million. The actual net operating margin received from the ~~Hecla lease or operations at the~~ Rodeo ~~property~~Property could be negatively impacted if further interruptions due to COVID-19 occur in Mexico. ~~Our currently projected inflows~~The actual amount of cash ~~through~~receipts that we receive during the period ~~ended September 30, 2021, as noted~~from the Rodeo operation may also vary significantly from the amounts specified above ~~of approximately $11.6 million together~~due to, among other things: (i) unanticipated variations in grade, (ii) unexpected challenges associated with our proposed mining plan, (iii) decreases in commodity prices below those used in calculating the ~~$8.7 million cash balance~~estimates shown above, (iv) variations in expected recoveries, (v) increases in operating costs above those used in calculating the estimates shown above, or (vi) interruptions in production at ~~September 30, 2020, are greater than our budgeted expenditures of approximately $8.1 million during the period.~~Rodeo. The actual amount of cash expenditures that we incur during the twelve-month period ending ~~September 30, 2021~~March 31, 2022 may vary significantly from the amounts specified above and will depend on a number of factors, including variations in the anticipated ~~development costs and the timing of start-up of processing activities at our Rodeo project, variations from anticipated~~ care and maintenance costs at the Velardeña Properties or at El Quevar, and costs for continued exploration, project assessment, and development at our other exploration properties. Likewise, the actual amount of cash receipts that we receive during the period may vary from the amounts specified above due to, among other things (i) unanticipated variations in grade, unexpected challenges associated with our proposed mining plan, decreases in commodity prices below those used in calculating the estimates shown above, variations in expected recoveries, or delays in commencement of or interruptions in production at Rodeo, (ii) decreases in gold and silver prices affecting net operating margins for the Hecla lease, (ii) a decrease in the quantity of material processed under the oxide plant lease, or (iv) the failure to receive the proceeds from the sale of the Santa Maria project. Ifif cash expenditures are greater than anticipated or if cash receipts are less than anticipated, we may need to take certain actions to maintain

Table of Contents

sufficient cash balances over the next twelve months, including ~~drawing down current cash balances,~~ additional asset dispositions or raising additional equity capital through sales under the ATM Program ~~the LPC Program~~ or otherwise. Our ability to use our ATM Program is currently limited due to a lack of availability under our shelf registration statement due to limitations imposed under SEC rules for public companies with a public float of less than $75 million. Therefore, there can be no assurance that the ATM Program will be available for use if we desire to access it.

The condensed consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business. However, our continuing long-term operations are dependent upon our ability to secure sufficient funding and to generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in our condensed consolidated financial statements are dependent on our ability to generate positive cash flows from operations and to continue to fund exploration and development activities that would lead to profitable mining and processing activities or to generate proceeds from the disposition of property, plant and equipment.

There can be no assurance that we will be successful in generating future profitable mining and processing activities or securing additional funding in the future on terms acceptable to us or at all. We believe the cash on hand, anticipated positive net operating margins from the Rodeo ~~property, the continuing cash flow from the lease of the oxide plant through November 30, 2020, sale of the Santa Maria property, and~~operation, the potential use of the ATM ~~Program and the LPC~~ Program, and the potential for additional asset dispositions make it probable that we will have sufficient cash to meet our financial obligations and continue our business strategy beyond one year from the filing of our condensed consolidated financial statements for the period ended ~~September 30, 2020.~~March 31, 2021.

Recent Accounting Pronouncements

In December 2019, the FASB issued No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The guidance removes certain exceptions to the general principles of ASC 740 and simplifies several other areas. ASU 2019-12 is effective for public business entities for annual reporting periods beginning after December 15, 2020, and interim periods within those reporting periods. The Company has adopted ASU 2019-12 beginning in 2021. One of the amendments within ASU 2019-12 eliminates a limitation on the amount of income tax benefit that can be recognized in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The Company has applied this guidance in the calculation of the tax benefit included in “Income taxes” in the Condensed Consolidated Statements of Operations. The adoption of this guidance did not result in a material impact on our consolidated financial position or results of operations.

During the first quarter 2020, we adopted ASU No. ~~2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”).~~2016-13. ASU 2016-13 modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the ~~more timely~~timelier recognition of losses. As our principle credit risk is related to its ~~Lease Receivables~~lease receivables, the adoption of this update did not result in a material impact on our consolidated financial position or results of operations.

~~During~~On April 12, 2021, the ~~first quarter 2019 we adopted ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”)~~SEC published a statement relating to accounting and ~~ASU No. 2018-11 “Leases (Topic 842)” (“ASU 2018-11”), which will require lessees to recognize a right-of-use asset~~reporting considerations for warrants issued by Special Purpose Acquisition Companies (SPACs). The SEC statement raised accounting and ~~a lease liability~~reporting considerations for all ~~leases with terms~~reporting entities that restricts the use of the exception noted above under ASC 815-40-25-7 thru 8 that allows for equity treatment, under certain conditions, for warrants that allow cash settlement in certain change of control transactions. The restriction put forth by the SEC would prevent equity treatment in cases where cash is received disproportionately between shareholders and warrant holders in such transactions. All of the outstanding warrants granted by us are recorded in equity at March 31, 2021 and December 31, 2020 following the guidance established by ASC Topic 815-40. Our warrants allow for the potential settlement in cash if certain extraordinary events are effected by us, including a 50% or greater ~~than twelve months. Leases will~~change of control in our common stock. Since those events have been deemed to be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For a lessor, the accounting applied is largely unchanged from previous guidance. We currently lease administrative offices in the U.S. and in several foreign locations under lease agreements that typically exceed one year.within our control, we continue to apply equity treatment for these warrants.

Forward-Looking Statements

Some information contained in or incorporated by reference into this Quarterly Report on Form 10-Q may contain forward-looking statements. These statements include comments relating to: (i) the Rodeo project, including anticipated timing and impact of future mining activities, ~~the timing of government approvals,~~ anticipated capital requirements, the expected composition of doré produced at the site, the projected future payable production and the projected future cash flow from ~~production,~~production; (ii) our plans, expectations and assumptions concerning the Velardeña oxide plant lease, including the expected term and anticipated ~~revenues,~~revenues; (iii) our plans regarding further advancement of the El Quevar ~~project,~~project; (iv) our plans for further evaluation of the Velardeña Properties and potential use of the BIOX processing ~~method,~~method; (v) the proposed transaction involving the Santa Maria ~~property,~~property; (vi) potential future work at Sand Canyon and ~~Yoquivo,~~Yoquivo; (vii) budgeted expenditures during the twelve months ending ~~September 30, 2021~~March 31, 2022 and anticipated cash inflows, , including the amount of cash received as a result of

Table of Contents

production at Rodeo, the potential for future asset dispositions or sales of equity ~~securities, and the expected need for external financing,~~securities; and (viii) statements concerning our financial condition, business strategies and business and legal risks.

The use of any of the words “anticipate,” “continues,” “likely,” “estimate,” “expect,” “may,” “will,” “project,” “should,” “could,” “believe” and similar expressions are intended to identify uncertainties. We believe the expectations reflected in those forward-looking statements are reasonable. However, we cannot assure that these expectations will prove to be correct. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors set forth below and other factors set forth in, or incorporated by reference into this report:

●

Timing duration and overall impact of the COVID-19 pandemic, including potential future suspension of activities at Rodeo or the Velardeña Properties (including operations at the oxide plant lease) in the event of future orders of the Mexican Federal Government;

●

Deviations from the projected timing, ~~and~~ amount of estimated production and project costs at Rodeo due to unanticipated variations in grade, unexpected challenges associated with our proposed mining plan, volatility in commodity prices, variations in expected recoveries, increases in projected operating or capital costs or delays in commencement of or interruptions in production;

●

Lower revenue than anticipated from the oxide lease, which could result from delays or problems at the third party’s mine or at the oxide plant (including but not limited to the temporary shutdown of mining activities in Mexico), permitting problems at the third party’s mine or the oxide plant, delays in constructing additional tailings capacity at the oxide plant, earlier than expected termination of the lease or other causes;

●

Higher than anticipated care and maintenance costs at the Velardeña Properties in Mexico or at El Quevar in Argentina;

●

Risks related to the El Quevar project in Argentina, including unfavorable results from our evaluation activities and whether the option with respect to the El Quevar project is exercised pursuant to the terms of the ~~Earn-In~~Earn-in Agreement;

●

Decreases or insufficient increases in silver and gold prices;

●

Whether we are able to raise the necessary capital required to continue our business on terms acceptable to us or at all, and the likely negative effect of continued low silver and gold prices or unfavorable exploration results;

●

Unfavorable results from exploration at the Santa Maria, Yoquivo, Sand Canyon or other exploration properties and whether we will be able to advance these or other exploration properties;

●

The Rodeo project, including assumptions and projections contained in the Rodeo PEA (including life of mine and production expectations), and our plans ~~regarding~~for further ~~advancement of the project;~~exploration drilling;

●

Variations in the nature, quality and quantity of any mineral deposits that are or may be located at the Velardeña Properties or our exploration properties, changes in interpretations of geological information, ~~and~~ unfavorable results of metallurgical and other ~~tests;~~

●

~~Whether we will be able to mine~~tests, and ~~sell minerals successfully or profitably at any~~the timing and scope of our ~~current properties~~further evaluation activities at ~~current or future silver and gold prices and achieve our objective of becoming~~ the Velardeña ~~mid-tier mining company;~~ Properties;

●

Potential delays in our exploration activities or other activities to advance properties towards mining resulting from environmental consents or permitting delays or problems, accidents, problems with contractors, disputes under agreements related to exploration properties, unanticipated costs and other unexpected events;

●

Our ability to retain key management and mining personnel necessary to successfully operate and grow our business;

●

Economic and political events affecting the market prices for gold, silver, zinc, lead and other minerals that may be found on our exploration properties;

●

Political and economic instability in Mexico, Argentina, and other countries in which we conduct our business and future actions of any of these governments with respect to nationalization of natural resources or other changes in mining or taxation policies;

●

Volatility in the market price of our common stock; and

●

The factors discussed under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Many of these factors are beyond our ability to control or predict. You should not unduly rely on these forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or developments.

Table of Contents

Cautionary Statement Regarding Mineralized Material

“Mineralized material” as used in this Quarterly Report on Form 10-Q, although permissible under the SEC Industry Guide 7, does not indicate “reserves” by SEC standards. We cannot be certain that any deposits at the El Quevar, the Velardeña Properties, the Santa Maria properties or the Rodeo property or any deposits at our other exploration properties, will ever be confirmed or converted into SEC Industry Guide 7 compliant “reserves”. Investors are cautioned not to assume that all or any part of the disclosed mineralized material estimates will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted. In addition, in this quarterly report on Form 10-Q we also modify our estimates made in compliance with National Instrument 43-101 to conform to SEC Industry Guide 7 for reporting in the United States. Mineralized material is substantially equivalent to measured and indicated mineral resources (exclusive of reserves) as disclosed for reporting purposes in Canada, except that the SEC only permits issuers to report “mineralized material” in tonnage and average grade without reference to contained ounces.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We invest substantially all of our excess cash in U.S. government and debt securities rated “investment grade” or better. The rates received on such investments may fluctuate with changes in economic conditions. Based on the average cash and investment balances outstanding during the first ~~nine~~three months of ~~2020,~~2021, a 1% decrease in interest rates would have resulted in only a nominal reduction in interest income for the period.

Foreign Currency Exchange Risk

Although most of our expenditures are in U.S. dollars, certain purchases of labor, supplies and capital assets are denominated in other currencies, primarily in Mexico. As a result, currency exchange fluctuations may impact the costs of our exploration and mining activities. To reduce this risk, we maintain minimum cash balances in foreign currencies and complete most of our purchases in U.S. dollars.

Commodity Price Risk

We are primarily engaged in the exploration and mining of properties containing gold, silver, zinc, lead and other minerals. As a result, decreases in the price of any of these metals have the potential to negatively impact our ability to establish reserves and mine on our properties. We currently hold no commodity derivative positions.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2020,~~March 31, 2021, (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4234

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~None.~~During April 2021, we became aware of a potential lawsuit in Mexico against one of the Company’s Mexico subsidiaries, Minera William S.A. de C.V. (“Minera William”). The plaintiff in the matter is Unifin Financiera, S.A.B. de C.V. or one of its affiliates (“Unifin”). Although there is evidence that the lawsuit was filed in the Fifth Specialized Commercial District Court by Unifin and subsequently dismissed by the court for procedural reasons, we have not been served with the complaint and therefore have limited knowledge of the basis for the alleged claim. The Company understands that Unifin has challenged through a federal appeal the dismissal of the proceedings, and there is a possibility that Unifin may seek to refile the complaint in another venue or overturn the dismissal on appeal. Based on the information that we have obtained through informal channels, we understand that Unifin is alleging that a representative of Minera William signed certain documents in July 2011 purporting to bind Minera William as a guarantor of payment obligations owed by a third party to Unifin in connection with that third party’s acquisition of certain drilling equipment. At the time the documentation was allegedly signed, Minera Williams was a subsidiary of ECU Silver Mining prior to the Company’s acquisition of ECU in September 2011. In connection with this dispute, Unifin has obtained a preliminary court order freezing Minera William’s bank accounts in Mexico, which has limited our ability to access approximately US$153,000. Notwithstanding this action, the restrictions imposed on Minera Williams’ bank accounts do not impact our ability to operate the Rodeo mine, which is held through a different Mexico subsidiary, or continue with our evaluation plans for a potential Velardena mine restart or move forward with any of our other exploration programs in Mexico. Since we have not been served in this action, we are not able to determine the amount of relief sought by Unifin. However, informal indications suggest that Unifin is seeking recovery for as much as US$12.5 million. We believe there is no basis for this claim and will defend ourselves if and when we are formally served with notice of the proceedings. As such, the Company has not accrued an amount for this matter in its Condensed Consolidated Balance Sheets or Statements of Operations as of March 31, 2021.

Item 1A. Risk Factors

The risk factors for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 are substantially the same as those set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

4335

Table of Contents

Item 6. Exhibits


31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.*
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.*
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act).**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Definition Document*
101.LAB	XBRL Taxonomy Label Linkbase Document*
101.PRE	XBRL Taxonomy Presentation Linkbase Document*
* Filed herewith ** Furnished herewith

4436

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GOLDEN MINERALS COMPANY


Date:	~~November 5, 2020~~May 6, 2021	By:	/s/ Warren M. Rehn
			Warren M. Rehn
			President and Chief Executive Officer


Date:	~~November 5, 2020~~May 6, 2021	By:	/s/ Robert P. Vogels
			Robert P. Vogels
			Senior Vice President and Chief Financial Officer

4537


		PAGE

PART I – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	3

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2623

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4134

ITEM 4.	CONTROLS AND PROCEDURES	4234

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	4335

ITEM 1A.	RISK FACTORS	4335

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4335

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	4335

ITEM 4.	MINE SAFETY DISCLOSURES	4335

ITEM 5.	OTHER INFORMATION.	4335

ITEM 6.	EXHIBITS	4436


SIGNATURES		4537


		Weighted
		Average
		Exercise
	Number of	Price Per
Equity Plan Options	Shares	Share
Outstanding at December 31, 2019	30,310	$	8.06
Granted during the period	—		—
Forfeited or expired during period	(30,310)	$	8.06
Exercised during period	—		—
Outstanding September 30, 2020	—	$	—
Exercisable at end of period	—	$	—
Granted and vested	—	$	—


Cutoff AuEq g/t	Tonnes (M)	Au g/t	Ag g/t
0.83	0.4	3.3	11


Year	Tonnes Produced	Ag (oz)	Au (oz)
2021	148,000	43,700	13,200
2022	162,000	47,800	14,400
2023	104,000	30,600	9,200