Back Forty Owner Is Awash in Red Ink

Gold Resource Corp. (GORO) lost $56.5 million in 2024, the company disclosed in an April 8 annual report filed with the Securities and Exchange Commission. That’s more than twice its 2023 loss of $24.1 million.

Cash on hand has dropped from $6.3 million in 2023 to $1.6 million, according to the company’s Form 10-K annual report.

Gold Resource owns the proposed Back Forty mine in Menominee County, Michigan. It spent $400,000 on the proposed mine in 2024, down from $1.6 million in 2023. That money was spent on “maintaining the project,” according to the SEC filing.

Depletion of Mexican ore deposit is key factor in downturn

Declining ore quality and operational problems combined in 2024 to drive production down and losses up at GORO’s mine in the Mexican state of Oaxaca, the company reported. (The 2024 gold grade, for example, was down 35% from 2023).

Increased downtime due to the age and condition of mining equipment, mechanical issues at the mill, and wet weather also contributed to the 22% year-over-year drop in ore production at the mine, the company said.

Three Sisters is “path forward” to profitability, CEO says

GORO is staking its future on the “Three Sisters” project, located not far from its existing mine site.

The Three Sisters vein system contains significant deposits of gold, silver and other minerals that are a “path forward” to future profitability for Gold Resource Corp., CEO Allen Palmiere said in an April 9 conference call with investors. But more exploration and mine construction would be needed to bring the Three Sisters online.

That means Gold Resource would need a major infusion of capital to get back in the black: $7 million for mining equipment and mill upgrades, and $8 million for initial development of the Three Sisters project, according to the SEC filing.

If GORO doesn’t raise more capital and develop new ore deposits, it may have to shut down its money-losing Mexican operation as early as this summer, according to the SEC filing.

Back Forty mine is a significant financial liability

Financial commitments related to the Back Forty mine were a drag on GORO’s 2024 financial performance.

Osisko Bermuda Limited, an investment firm, put $37.2 million into the Back Forty before Gold Resource Corp. bought it from Aquila Resources, Inc., in the form of a prepayment on future gold and silver production. Aquila agreed to repay the investment by giving Osisko a discount on gold and silver deliveries once the Back Forty went into operation. These contracts for future production are known as “streaming agreements”

GORO estimates its total liabilities to Osisko under the streaming agreements at $74.4 million.

GORO recently acknowledged an accounting error that substantially underestimated its financial liability to Osisko under the streaming agreements.

The error correction added $8.1 million to GORO’s 2023 losses, and at least $3.1 million to its 2024 losses. GORO does not clearly state the 2024 correction-related loss in its annual report, so the exact impact is difficult to assess.

The Back Forty is collateral under the streaming agreements and could be seized by Osisko if GORO defaults on its obligations.

Gold Resource Corp. was given an opportunity to comment on this report.