Gold Resource Corporation (NYSEMKT:GORO) Q3 2018 Results Earnings Conference Call October 31, 2018 11:00 AM ET
Jason Reid - President and CEO
Thank you for joining Gold Resource Corporation’s Third Quarter Call. Mr. Jason Reid, President and Chief Executive Officer, will be hosting today’s call. Following Mr. Reid’s opening remarks, there will be a question-and-answer period. As a reminder, today’s call is being recorded. Please go ahead, Mr. Reid.
Thank you. Good morning, everyone. Thank you for joining Gold Resource Corporation’s 2018 third quarter conference call. I expect my comments to run approximately five minutes, followed by a question-and-answer period. Joining me on the call today for the Q&A portion will be Mr. John Labate, our Chief Financial Officer.
Let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our Annual Report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments.
Forward-looking statements in this earning release that we issued yesterday, along with the comments on this call, are made only as of today, October 31, 2018, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in our Form 10-K filed with the SEC for the year-ended December 31, 2017.
As I noted in prior calls, in an effort to streamline quarterly conference calls while still being available to take shareholder calls, I’m still taking a different approach to conference calls. I’m not going to just regurgitate the quarterly numbers that anyone can read in the 10-K or quarterly reports, I’m going to cover the highlights, give color to updates and address problems or issues that may need to be addressed and then turn the call over for questions. This, hopefully, will benefit everyone attending the calls by making them much shorter and far more efficient.
The third quarter of 2018 was a good quarter operationally and saw production levels in line with our targets and within striking distance of our annual production outlook. Metal price volatility coupled with our CapEx expenditures impacted our financial performance, resulting in a slight earnings loss for the quarter of $781,000, which I will walk you through in a moment. Construction at our Nevada mining unit, Isabella Pearl Project continues. As I mentioned last call, mine construction is one of the most thrilling aspects of this industry. We are fortunate to be able to create and build a mine to produce gold and silver which is real money and a long-term store of value. We continue to be engulfed in this exciting build and growth phase of Gold Resource Corporation.
Third quarter net sales totaled $24.3 million. We finished the quarter with cash and cash equivalents of $16.6 million and $3.4 million in gold and silver bullion. We had mine gross profit of $3.3 million but took a net loss for the quarter of $0.01 per share. This slightly lowered our net income per share for the year to $0.15. The primary driver of the $0.01 loss was the impact of lower overall metal prices as well as a $3.2 million negative adjustment on final settlements during the quarter of provisionally priced concentrate sales. This price adjustment took what would have been a profitable quarter to a small loss.
Going forward and assuming metal prices do not continue to fall dramatically but rather stabilize, we believe we have worked through most of the negative exposure from these embedded derivative losses on provisional price sales. If metal prices dramatically rise, the opposite can take place whereby the derivative could move in our favor.
Our current sales agreement with the settlement period of month of delivery plus three months leaves us open to fluctuations in metal markets until our final settlement. We look forward to reduce settlement timeframe in the future, if possible.
We produced 6,411 gold ounces and 321,590 silver ounces before payable metal deductions. Our precious metal gold equivalent ounces sold totaled 9,466 at the Gold Institute cash cost, calculating $582 per ounce sold, after base metal byproduct credits. The increase in our all-in sustaining cost per ounce for the quarter was driven by over $10 million in CapEx spend at Oaxaca mining unit during the quarter. These CapEx projects included the power line, Paceville system and the raise of the tailings facility. All the power line costs are now nearly complete. And I am pleased to report that over 43% of the 1,190 concrete and wooden power poles have been installed with power cable streaming scheduled to begin shortly.
As I have stated previously, having worked to get this power line project approval for over five years now, I am not going to give a target date of completion in large part due to the fact it’s not under our control. However, we look forward to someday issuing a press release announcing the power line has been completed, energized and is speeding the site. Until that time, we continue to monitor the power line progress and look forward to its completion and expected lowering of our energy cost and cost per ounce.
The Paceville program and construction continue and the tailings dam is nearly completed, having sustained a few recent days of delays due to heavy rains. With the bulk of these project CapEx costs now behind us, we look forward to reaping the future benefit of more efficient and safer operations from the Paceville plant and cost savings from the power grid. We can now also deploy more capital to our Nevada mining unit, with the bulk of these spends at Oaxaca mining unit behind us.
Oaxaca mining unit’s mill throughput on a combined flotation and agitated leach basis totaled 158,075 tons for the quarter or 1,796 mill tons per day. This is another increase over the previous quarter by approximately 8,000 tons and demonstrates continued success in our efforts to further optimize both processing circuits. This and future additional throughput could have positive impacts on milling operations and production as we mine upwards and latterly at Switchback into higher grade areas and ore shoots over time. Remember that we entered the Switchback in a deep base metal rich area and have been developing the mine upwards. Exploration drilling indicates increased precious metal grades at higher elevations than where we are currently mining. Our mine plan at Switchback takes a long-term view as opposed to cherry picking high-grade areas.
Turning to our Nevada mining unit. All the earthworks for the project’s process are now complete as is the liner under the ADR plant, the pregnant/barren solution pond and the entire heap leach. While we were 80% complete with the liner at quarter end, we’re now 100% complete. Infrastructure construction, including electrical and water lines and heap pad piping continue. We are currently pouring the concrete for the ADR facility and the ADR plant is being prepared to be shipped to site for installation. Mining is commenced at the open pit, first ore stockpiles are at the crusher, and first ore for the project has been placed on the heap leach pad. The office building is operational and the lab building has been installed. We still target June 2019 for the first gold pour for the project. It’s a very exciting and active mine site. Construction photo presentation can be seen on our website and watch for continued photo updates going forward.
To wrap up the call, third quarter production keeps us within striking distance of our annual production goals. The large CapEx project costs at Oaxaca mining unit are mostly behind us which allows us to now focus our capital on our Nevada mining unit’s Isabella Pearl construction going forward.
With that, I would like to thank everyone for their time today on this conference call. Let’s move to the question-and-answer portion of the call. In an effort to efficiently address the Q&A portion of the call without wasting anyone’s time and since we don’t screen filter or limit who can call in, any distracting or antagonistic calls will be terminated and we’ll simply move on to the next productive caller’s question. Operator, please open up the lines for the Q&A and take our first question if there is one.
Okay. Well, with that, we’ll conclude the conference call, and we’ll talk to everybody next quarter. Thank you.
This concludes today’s call. Thank you for your participation. You may now disconnect.