ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) which we refer to in this report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are not historical facts, they reflect our current expectations, estimates and projections regarding future results and events, including matters related to our mining business, including resource estimates, exploration efforts, results and expenditures, development initiatives at the SJG mine, estimated production and capacity, costs, capital expenditures, expenses, recoveries, gold prices, sufficiency of assets, ability to discharge liabilities, liquidity management, financing needs, environmental compliance expenditures, environmental, social and governance (“ESG”) and human capital management initiatives, risk management strategies, capital resources and use, cash flow maximization, mine life and other strategic initiatives. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “will”, “should,” “plan,” “projected,” “contemplates,” “anticipates” or similar words and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking information in this report includes, but is not limited to, statements regarding the beliefs, plans, expectations or intentions of management, as of the date of report, regarding: (i) DynaResource, Inc.’s (the “Company”) ability to develop its exploration assets via operational cash flow from gold concentrate production; and (ii) the Company’s plans and expectations regarding its proposed 2024 exploration program for its SJG mine. Although the Company believes that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that these expectations will be realized. Such forward-looking statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements including, without limitation, risks related to: (1) fluctuations in commodity price, particularly gold and silver; (2) the Company’s ability to retain or engage qualified employees or contractors necessary to conduct operations at the SJG mine; (3) a decreased demand for gold, silver and other minerals; (4) unexpected difficulties with the milling and the extraction of minerals from the Company’s projects; (5) unexpected interruptions and problems encountered in the operation of the SJG mine; (6) factors that delay or cause difficulties in timing of shipments of concentrates by the Company; (7) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges; (8) the possibility that the Company may not have sufficient capital to operate its SJG mine or facilitate the further exploration of the SJG district; (9) inflationary pressures; (10) continued access to financing sources; (11) government orders that may require temporary suspension of operations or effects on our suppliers (12) the effects of environmental and other governmental regulations and government shut-downs; (13) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries; (14) our ability to raise additional financing necessary to conduct our business, make payments or refinance our debt; and (15) other factors beyond the Company’s control. Additional risks are discussed in our Annual Report on Form 10K for the year ended December 31, 2024, and other filings with the SEC.
There is a significant risk that such forward-looking statements will not prove to be accurate. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Given current economic volatility and commodity fluctuations, any forward-looking statements or projections may be impacted significantly. Consequently, there is no representation by the Company that actual results achieved will be the same as those forecast. You are cautioned not to place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future results. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Recent Developments
On May 20, 2025, the Company filed a Technical Report Summary (“TRS”) for the SJG mine, which was prepared in accordance with S-K 1300. The TRS includes the Company’s first declaration of mineral reserves and supports the transition from an Exploration Stage issuer to a Production Stage issuer. The TRS was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 20, 2025, and is incorporated herein by reference as Exhibit 96.1 to this Quarterly Report on Form 10-Q.
This transition to Production Stage has resulted in certain changes in accounting treatment, including the prospective capitalization of development expenditures and the commencement of depreciation on applicable assets, as further described in Note 2 to the unaudited condensed consolidated financial statements. Management anticipates that these changes will result in increased capitalized costs and higher depreciation expense in future periods.
Company
The Company is a minerals investment, production, and exploration company, currently advancing its high-grade SJG gold mine in Mexico through its operating subsidiary, DynaMéxico. Activities are focused on exploration, technical evaluation, and project development aimed at expanding the mineral resource base.
The Company conducts operations in Mexico through its wholly-owned subsidiary, DynaMéxico. As of the date of this report, the Company owns 100% of the outstanding shares of DynaMéxico, which in turn holds 100% ownership of the mining concessions, equipment, camp, and related facilities which comprise the SJG mine.
In addition to advancing the SJG mine, the Company has also focused on strengthening its corporate governance practices, with the objective of meeting the listing requirements of additional stock exchanges in the United States and/or Canada.
Project Improvements, Expansion and Increased Output
Since 2015, the Company has carried out limited site-scale processing and operational activities at the SJG mine to support its exploration and evaluation programs. These activities have been directed toward enhancing the technical understanding of the deposit, optimizing on-site infrastructure, and advancing project development. In 2022, the Company expanded its exploration efforts at the SJG mine with the objective of increasing the project’s mineral resource base, primarily targeting gold mineralization.
From initial small-scale operations averaging 100 tons per 24-hour operating day in 2015, throughput has steadily increased, reaching an average of approximately 700 tons per day in 2024. In 2023 alone, daily processing volumes rose by 30%, from 550 tons to 700 tons per day.
For 2025, the Company expects to increase average daily throughput to approximately 800 tons, with installed capacity now in place to support up to approximately 1,000 tons per day.
Summary of Mining and Mill Operations
Annual Results from 2018 to 2024:
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Year |
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Total Tons Mined & Processed |
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Reported Mill Feed Grade (g/t Au) |
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Reported Recovery % |
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Gross Gold Concentrates Recovered (Au oz.) |
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Net Gold (1) Concentrates Sold (Au oz.) |
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2018 |
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52,038 |
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9.82 |
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86.11 |
% |
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14,147 |
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13,418 |
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2019 |
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66,031 |
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5.81 |
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86.86 |
% |
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10,646 |
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9,713 |
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2020 |
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44,218 |
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5.65 |
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87.31 |
% |
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7,001 |
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5,828 |
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2021 |
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97,088 |
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9.67 |
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88.79 |
% |
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26,728 |
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22,566 |
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2022 |
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137,740 |
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8.18 |
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80.00 |
% |
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28,988 |
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25,554 |
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2023 |
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198,518 |
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5.58 |
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76.50 |
% |
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27,252 |
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24,829 |
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2024 |
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257,676 |
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4.07 |
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76.24 |
% |
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25,677 |
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22,003 |
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In 2024, on-site operational activities at SJG mine resulted in the processing of approximately 257,676 tons of material and the production of approximately 25,677 gross ounces of gold (“Au Oz”). After applying dry weight adjustments pursuant to settlement terms with the buyer, approximately 22,003 Au Oz were sold.
Quarterly Results for the Three Months Ended March 31, 2025 and 2024:
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Three Months Ended |
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Key Operating Information |
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Unit |
March 31, 2025 |
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March 31, 2024 |
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Operating Data |
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Ore mined |
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ton |
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64,032 |
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56,931 |
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Mining rate |
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tpd |
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711 |
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626 |
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Ore Milled |
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ton |
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67,374 |
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61,601 |
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Mill Throughput |
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tpd |
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749 |
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677 |
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Grade |
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g/t |
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3.63 |
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4.46 |
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Recovery Au |
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% |
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73.80 |
% |
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79.25 |
% |
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Gold Ounces Produced |
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oz |
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5,781 |
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6,994 |
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Gold Ounces Sold |
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oz |
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5,609 |
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4,730 |
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(1)Gold concentrate sold during the period does not equal gold concentrate recovered during the period due to timing of shipments to the buyer, the buyer’s payability discounts on gold concentrate purchases, and adjustments based on dry weight and final assay results under provisional settlement terms.
Mill feed grades and recovery rates are based on internal estimates derived from assay data and estimated weights of material processed.
The decrease in feed grade at the processing facility resulted from a planned reduction in the mining of certain high-grade zones in accordance with the mine plan, as well as higher dilution encountered in the processed material. Increased throughput at the SJG mine also contributed to a greater volume of lower-grade ore being treated. To support throughput, the Company opened a new development area at San Pablo during the fourth quarter of 2023, and an additional target zone, La Mochomera, in May 2024, which is expected to yield higher-grade material at depth.
San Jose de Gracia Gold Project S-K 1300 Technical Report Summary
The Company released its S-K 1300 Technical Report Summary (the “Report”) for the San Jose de Gracia mine in Sinaloa Mexico. The Report includes the Company’s Initial Mineral Reserve Estimate, which outlines a high-grade Proven and Probable Mineral Reserve of 250,000 gold ozs for the San Jose de Gracia mine. This initial Mineral Reserve Estimate and Report was prepared by the independent firm P&E Mining Consultants Inc (“P&E”), with metallurgical test work completed by Sepro Systems Inc (“Sepro”) laboratories in Vancouver, B.C, and process plant review and operations aspects by D.E.N.M. Engineering Ltd. These independent groups of Qualified Persons have reviewed and approved the contents of this news release. The Report was filed by the Company with the Security and Exchange Commission on EDGAR, on May 20, 2025.
Highlights Include:
•Proven & Probable Mineral Reserves of 1,607 k tonnes at 4.91 g/t gold, totaling 253,000 gold ounces (see Table 1).
•Indicated Mineral Resource of 286 k tonnes at 6.74 g/t gold and Inferred Mineral Resource of 97 k tonnes at 4.37 g/t gold. (see Table 2).
•Life of Mine of 7-years based on current Mineral Reserves with excellent potential to extend along strike and adjacent to the existing underground mine infrastructure and in the wider San Jose de Gracia mine property.
•After-tax NPV of the Project is estimated at $84.4 M ($110.0 M pre-tax) under baseline scenarios of 5% discount rate and $2,500/oz Au. At a $3,000/oz gold price the after-tax NPV is estimated at $133.3 M ($183.6 M pre-tax).
•An Operating Cash Cost of $1,327 (US$/oz Au Eq) and an All-in Sustaining Cost of $1,720 (US$/oz Au Eq).
•Significant Upside - Gold price sensitivity with conservative pricing assumption ($2,500 oz Au ~25% below current spot gold price) used in the Report.
•Growth Potential – Mineral Reserves / Mineral Resources defined for only three of the mineralized structures in the San Jose de Gracia mine property, which historically hosted mining on a total of 20 discrete mineralized structures.
Mineral Reserves
The Mineral Reserves and Mineral Resource are as follows;
Table 1: Mineral Reserves for the San José de Gracia Project
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Mineral Reserve Estimate (1-9)
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Reserve Class |
Tonnes (k) |
Grade (g/t Au) |
Contained Metal (koz Au) |
Proven |
1,114 |
5.23 |
187.2 |
Probable |
493 |
4.18 |
66.3 |
Proven & Probable9 |
1,607 |
4.91 |
253.5 |
Notes:
1.Mineral Reserves are based on Measured and Indicated Mineral Resource Classifications only.
2.Mineral Reserves are reported using the 2014 CIM Definition Standards and 2019 Best Practices Guidelines and have an effective date of March 24, 2025.
3.Mineral Reserves are defined within mine plans and incorporate mining dilution and ore losses.
4.Underground Mineral Reserves are based on metal price of US$2,500/oz Au and are constrained within a mine design, and use process plant recoveries varying between 76-80% for Au
5.An Underground economic cut-off value of US$140/t is estimated to differentiate ore from waste and is based on cost assumptions of US$99/t for mining US$23/t processing, US$18/t site general and administrative. Mineralized material above a cut-off of $90/t that is planned to be mined adjacent to economic material is identified as Marginal ore, as the revenue it generates exceeds the additional costs associated with haulage, processing and backfilling the material versus leaving it in the stope as backfill.
6.Smelter terms result in an average value paid per ounce of gold of 90.53% of the value of the gold in concentrate, after accounting for all contract terms.
7.The provided LOM block models do not track deleterious elements noted in the smelter terms, which could reduce the payable value of the concentrate. However, DynaResource asserts that no penalties of this nature have historically been assessed on any payment invoice from the existing concentrate buyer.
8.Totals may not sum due to rounding.
9.Mineral Reserves derived from marginal material total 312 kt at 2.03 g/t Au for a total contained metal content of 20.3 koz.
Mineral Resources
Table 2: Mineral Resources for the San José de Gracia Project
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Mineral Resource Estimate at 2.0 g/t Au Cut-off (1-6) |
Zone |
Classification |
Tonnes (k) |
Au (g/t) |
Au (koz) |
Metallurgical Recovery |
San Pablo/Mochomera |
Indicated |
286 |
6.74 |
62 |
80 % |
Inferred |
51 |
4.29 |
7 |
Tres Amigos |
Inferred |
46 |
4.45 |
7 |
Total |
Indicated |
286 |
6.74 |
62 |
Inferred |
97 |
4.37 |
14 |
Notes:
1.The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.
2.The Inferred Mineral Resource in this estimate has a lower level of confidence than that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It can be reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.
3.The Mineral Resource is estimated using Subpart 229.1300 – Disclosure by Registrants Engaged in Mining Operations.
4.Mined areas as of December 31, 2024, were depleted from the block models.
5.Mineral Resources are exclusive of Mineral Reserves.
6.All numbers are rounded.
Economic Analysis
For the current 7 year mine life exploiting the Tres Amigos, San Pablo and Mochomera orebodies the following was the key economic results from the study.
Table 3: Key Economic Parameters
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KEY ECONOMIC PARAMETERS |
Parameter |
Amount |
Production mine life (years) |
7 |
Production rate (tpd) |
630 |
Production rate (ktpa) |
230 |
Total production (kt) |
1,607 |
Gold grade (g/t) |
4.91 |
Gold process recovery (%) |
79.9 |
Gold smelting/refining (%) |
94 |
Gold payable (koz) |
190 |
Gold Equivalent payable (koz) |
190 |
Net Revenue ($M) |
463.6 |
Sustaining Capital Costs ($M) |
81.6 |
Operating Cost ($/t processed) |
155.85 |
Operating Cost ($M) |
250.4 |
Operating Cash Cost (US$/oz AuEq) |
1,327 |
All-in Sustaining Cost (US$/oz AuEq) |
1,720 |
Pre-Tax Cash Flow ($M) |
131.6 |
Pre-Tax NPV (5% discount) ($M) |
110.0 |
Income Taxes ($M) |
32.1 |
After-Tax Cash Flow ($M) |
99.5 |
After-Tax NPV (5% discount) ($M) |
84.4 |
Sensitivity Analysis
The after-tax NPV sensitivities to ±20% changes in gold metal price, gold head grade, gold metallurgical recoveries, OPEX and CAPEX are presented in Figure 1 and Table 4 below. The after-tax base case NPV’s is most sensitive to the gold metal price followed by gold metallurgical recoveries and gold head grades followed by OPEX, and then CAPEX.
Figure 1: After-Tax NPV @ 5% Sensitivity Parameter Values
Table 4: After-Tax NPV @5% Sensitivity Graph
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EXTENDED GOLD PRICE AFTER-TAX NPV SENSITIVITY ANALYSIS |
Gold Price (US$/oz) |
2,000 (80%) |
2,250 (90%) |
2,500 (100%) |
2,750 (110%) |
3,000 (120%) |
After-Tax Project NPV @5% |
27.5 |
58.3 |
84.4 |
110.4 |
133.3 |
The San Jose de Gracia mine exhibits strong leverage to gold prices, especially with long-term gold price expectations exceeding the base case assumptions made in this report. At current spot prices above $3,200 per gold ounce, after tax NPV would be expected to materially exceed $133.3M.
2025 FIRST QUARTER HIGHLIGHTS
Operational Performance
During the first quarter of 2025, the Company continued to advance the optimization program at the SJG mine. This program is focused on increasing process plant throughput and recoveries, improving maintenance and equipment utilization, and ultimately enhancing operational efficiencies and profit margins at the SJG mine.
Operational results for Q1 2025 demonstrated significantly improved performance across several critical operational metrics due to the ongoing optimization program. The average underground capital development was 1,160 meters per month in Q1 2025, compared to 380 meters per month in Q1 2024. This increase allowed the mine to access over 20 production stopes. Expanded development work also led to the discovery of three new mineralized veins – two at the Tres Amigos mine and one at La Mochomera – which are currently being evaluated as potential additional high-grade ore sources. Process plant reliability also improved. Electrical refurbishment and preventative maintenance programs resulted in ball mill availability exceeding 90% for the quarter. Additionally, the flotation circuit underwent an optimization and refurbishment program, which required staged shutdowns of individual flotation cells for repair.
Milled ore for Q1 2025 was 67,374 tons (approximately 749 tons per day), consistent with Q4 2024 production of 67,670 tons. With the current high ball mill availability, the Company is evaluating cost-effective strategies to utilize additional processing capacity of approximately 100 tons per day. Gold metal recoveries for the quarter averaged 74%, slightly lower than the 75% achieved in Q4 2024. This decrease is primarily due to the downtime associated with the planned refurbishment of the flotation circuit and lower head grades.
Metallurgical test work was undertaken during the quarter to support capital improvement initiatives aimed at increasing overall gold recovery (currently in the low to mid-70% range) at the SJG mine. This work program includes the re-establishment of a primary gravity gold circuit through the installation of three new Falcon gravity concentrators. These Falcon gravity concentrators will be installed during Q2 2025 following the ball mills to recover the significant portion of free gold available in the San Pablo, San Pablo Sur and La Mochomera deposits. The metallurgical test work results from three fresh rock composite samples from the active exploration areas of San Pablo, San Pablo Sur and La Mochomera demonstrated excellent total gold recoveries exceeding 95% using a combination of gravity and flotation methods with standard reagents. Included in the total recoveries, gravity gold recoveries reached up to 33.8%, confirming that a significant portion of the gold mineralization is amenable to conventional gravity gold processing methods, such as Falcon concentrators. A summary of the metallurgical test work is provided in the table below.
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Deposit |
Head Assay Grade (g/t Au) |
Gravity Gold Recovery (%) |
Rougher Flotation Recovery (%) |
Total Gold Recovery (%) |
Gravimetric Concentrate Grade (g/t Au) |
Rougher Concentrate Grade (g/t Au) |
Final Concentrate Grade (g/t Au) |
Mochomera |
5.22 |
32.7 |
63.9 |
96.6 |
902.0 |
26.57 |
39.57 |
San Pablo |
12.12 |
23.8 |
71.4 |
95.2 |
2019.1 |
44.41 |
58.77 |
San Pablo Sur |
15.89 |
33.8 |
62.6 |
96.4 |
1792.8 |
40.38 |
61.41 |
Table 1.0: Results from the metallurgical test work (gravity followed flotation) completed from the three active mining areas. Note the grind size for the samples tested was 80%, passing 80 microns using standard industry reagents.
During Q1 2025, metal production totaled 2,086 ounces of gold in January, 1,806 ounces in February, and 1,890 ounces in March. Total metal production for Q1 2025 was 5,781 ounces of gold, compared to 6,776 ounces in Q4 2024. The decrease was primarily attributable to lower recoveries associated with the refurbishment of the flotation circuit and lower gold grades resulting from a higher proportion of lower-grade development ore and delayed access to planned high-grade zones, caused by adverse geotechnical conditions. The average gold feed grade for the quarter was 3.63 g/t compared to 4.12 g/t in Q4 2024.
Mine development for Q1 2025 was on budget with 3,490 meters of development completed, compared to 1,056 meters in Q4 2024. The completion of new development drifts enabled the Company to bring more than 20 stopes into production by the end of the quarter (up from 10 stopes at the end of Q4 2024). This additional mining flexibility is expected to positively impact ore tonnage and grades in the coming months. The Company has also completed a capital works program to enhance mine ventilation across all three mines. Improved ventilation time has resulted in an improvement in working conditions and faster re-entry times following blasting activities.
Detailed Activities by Deposit:
Tres Amigos
Original mine planning at Tres Amigos anticipated closure by end the of Q1 2025. However, geological reinterpretations and targeted short exploration drifts identified two additional mineralized structures – the Victoria and Alexa veins – located within 40 meters of existing underground infrastructure. The Company is evaluating the potential for these structures to contribute to 2025 production feed.
A new ore drive was completed on the upper levels of the Tres Amigos North Zone, providing access to a high-grade ore face. Mining from this face contributed to Q1 2025 production and is expected to continue throughout 2025. This new access will also enable future diamond drilling to test the north and south extensions of the deposit, with the goal of increasing inventory.
San Pablo Viejo and San Pablo Sur
Throughout Q1 2025, the Company continued mining multiple faces at the San Pablo deposit while advancing development toward the deeper southern extensions.
San Pablo Viejo and San Pablo Sur are expected to remain the primary sources of gold production through 2025 and 2026, with additional upside potential beyond that horizon. Particularly promising is the South Extension at the 500 level, which could yield high-grade (“Bonanza”-style) gold mineralization in the short to mid-term. Ongoing development efforts are positioning the mine for continued growth, including expansion deeper into the La Mochomera vein system.
La Mochomera
The La Mochomera vein is also expected to be a significant source of gold production in 2025 and 2026, with especially promising high-grade potential at depth. During Q1 2025, development activities intersected a previously unrecognized high-grade mineralized structure, now designated as the “532 Vein”. The significance and potential of this new discovery are currently being evaluated.
OUTLOOK (SJG MINE)
With the development progress achieved in Q1 2025 and the increase in mining faces available to the Company, management believes that the SJG mine is well-positioned for the remainder of 2025, with increased grade forecasted as underground development drives are well ahead of schedule. A steady increased rate of production is forecasted for the remainder of the year to meet guidance.
While the Company made significant headway in the first quarter of 2025, optimization efforts will continue to focus on improving gold ore grades to the mill, throughput rates, and recoveries. San Pablo Sur, San Pablo, La Mochomera and the Tres Amigos ore bodies are expected to remain the main contributors to production in the year ahead. Further development in these areas will also be a key focus to access additional high-grade zones and mining faces.
The capital works program to add a primary gravity gold circuit to the processing plant remains on schedule for completion and commissioning in early Q3 2025. The program involves the installation of three new Falcon gravity concentrators. These concentrators will be installed downstream of the ball mills to recover the significant portion of the free gold present in the San Pablo, San Pablo Sur, and La Mochomera deposits.
As a result of the capital investments made to the mine and mill, exploration expenditure in Q1 2025 remained minimal, focused primarily on geological reinterpretation and short exploration development drives adjacent to the existing infrastructure. In the near term, drilling will target areas expected to expand the existing high-grade ore resources and increase mineable inventory.
The Company continues to invest in exploration spending on near-mine extensions as well as geological studies and reinterpretations. The Company completed an S-K 1300 Mineral Resource Estimate in Q2 2025 covering San Pablo Sur, San Pablo, La Mochomera and the Tres Amigos ore bodies which includes development proposals for additional exploration of ore veins in the short and mid-term.
The Company expects to start near-mine extension drilling in Q3 2025 and expand exploration to surrounding areas by year-end. Exploration will focus on growing the known resources at the SJG mine.
The Company will prioritize exploration of high-grade underground targets that can be readily incorporated into the mine plan, as well continue the regional program to better understand the broader potential of the SJG land package. Additionally, planning for deeper and lateral drilling between the San Pablo and Tres Amigos veins has highlighted the potential to extend high-grade underground resources at the SJG mine, especially in areas previously considered discontinuous due to faulting. The Company has identified opportunities to develop San Pablo, San Pablo Sur, La Mochomera, and Tres Amigos exploration potential. At the La Mochomera deposit, the Company plans to explore southward toward the historic Palos Chinos and Purisima mines, which operated over 100 years ago as high-grade producers. Of note is the Palos Chinos exploration target, located within 40 meters of the existing La Mochomera mine infrastructure.
A new tailings dam was completed during Q3 2024, with an estimated storage capacity of 670,751 cubic meters, distributed over two stages to accommodate three years of additional tailings. The third-stage facility is currently in use, and planning for construction of the fourth stage is underway. The Company has also begun evaluating a potential location for a third tailings storage facility at the SJG mine. These studies include environmental and geotechnical surveys to identify a preferred site.
Results for the Three Months Ended March 31, 2025 and 2024
REVENUE: Revenue for the three months ended March 31, 2025 and 2024 was $13,696,401 and $9,428,856, respectively. The increase was primarily due to higher tonnage mined and processed, as well as higher realized gold prices.
MINE PRODUCTION COSTS: Mine production costs for the three months ended March 31, 2025 and 2024 were $6,188,248 and $6,214,574, respectively. These costs were directly related to the extraction of ore, including the costs of removing waste material to access mineralized ore for processing at the mill. During the three months ended March 31, 2025, the Company mined 64,032 tons of material compared to 56,931 tons in the three months ended March 31, 2024.
MILL PRODUCTION COSTS APPLICABLE TO SALES: Mill production costs applicable to sales for the three months ended March 31, 2025 and 2024 were $1,100,852 and $1,478,662, respectively. These expenses relate to milling, packaging, and shipping gold and other precious metal products. The decrease was attributable to improved efficiency in ore processing at the mill.
CAMP, WAREHOUSE AND FACILITIES: These represent the costs of supporting the mining facilities including housing, food, security and warehouse operations. Camp, warehouse and support facility costs for the three months ended March 31, 2025 and 2024 were $1,414,675 and $1,445,225, respectively. The increase in costs recorded for the three months ended March 31, 2025 was primarily driven by higher personnel counts associated with expanded operations.
TRANSPORTATION: Transportation costs for the three months ended March 31, 2025 and 2024 were $1,323,877 and $1,412,962, respectively. These were the costs of transporting material between the mine and the mill, and delivery of the concentrate to the customer for treatment and sale.
PROPERTY HOLDING COSTS: Property holding costs for the three months ended March 31, 2025 and 2024 were $36,136 and $44,047, respectively. These costs primarily consist of taxes on mining concessions, land leases, and other direct costs of associated with maintaining the SJG mine. These costs remain relatively consistent year over year.
FACILITIES EXPANSION COSTS: Facilities expansion costs for the three months ended March 31, 2025 and 2024 were $Nil and $787,809, respectively. The expenses reported for the three months ended March 31, 2024 reflected significant expenditures reported for the second phase expansion of the milling facility and mining infrastructure to additional mining areas at SJG.
EXPLORATION DRILLING: Exploration expenditures for the three months ended March 31, 2025 and 2024 were $107,850 and $920,485, respectively. The Company continues exploration drilling program for the purpose of updating the Company’s Mineral Reserve and Resource Estimate.
GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expenses for the three months ended March 31, 2025 and 2024 were $1,250,244 and $1,168,849, respectively. These represent corporate overhead not directly attributable to site operations, including management, accounting, and legal expenses.
STOCK-BASED COMPENSATION EXPENSE: Stock-based compensation expense was $251,707 and $Nil for the three months ended March 31, 2025 and 2024 respectively, and was related to the vesting of restricted stock awards issued in 2024.
DEPRECIATION AND DEPLETION: Depreciation and Depletion expense for the three months ended March 31, 2025 and 2024 were $162,566 and $7,343, respectively. With the Company’s transition from Exploration Stage to Production Stage under S-K 1300, the Company began capitalizing mine development costs and commenced depreciation and depletion charges on a units-of- production basis.
ACCRETION EXPENSE. Accretion expense for the three months ended March 31, 2025 and 2024 was $4,986 and $4,565, respectively. The Company began accreting its asset retirement obligation on January 1, 2024, related to estimated costs to decommission the milling plant and tailings pond at the estimated life of the mines in operation at the establishment of the ARO in 2023 as a result of the expansion of the milling operation.
OTHER INCOME (EXPENSE): Other income (expense) for the three months ended March 31, 2025 and 2024 was $(309,476) and $(319,514), respectively. Included in other income in 2025 was interest expense of $(376,834), change in derivative of $71,373, currency exchange loss of $(15,155) and miscellaneous income of $11,140. The decrease in the derivative liability was primarily due to the decrease in the Company’s common stock value. Included in other income in 2024 was interest expense of $(427,888), change in derivative of $80,141, currency exchange gain of $28,077 and miscellaneous income of $156.
OTHER COMPREHENSIVE INCOME: Other comprehensive income includes the Company’s net income (loss) plus the unrealized currency exchange gain for the period. The Company’s other comprehensive income for the three months ended March 31, 2025 and 2024 consisted of unrealized currency gains (loss) of $(37,992) and $203,229, respectively, resulting from fluctuations.
Liquidity and Capital Resources
As of March 31, 2025, the Company had negative working capital of $18,663,754 comprised of current assets of $10,841,396 and current liabilities of $29,505,150. This represented an increase of $3,384,974 from the Company’s negative working capital of $15,278,780 as of December 31, 2024, primarily due to increased cash used in investing activities during the first quarter of 2025, and higher accounts payable and accrued liabilities as of March 31, 2025.
Net cash provided by operating activities for the three months ended March 31, 2025 was $1,825,105 compared to a use of $3,357,647 during the three months ended March 31, 2024. The improvement in the cash flow from operations was primarily attributable to the Company’s income generated in the first quarter of 2025, driven by increased revenue and lower mine operating costs.
Cash used in investing activities for the three months ended March 31, 2025 totaled $2,657,884 compared to $Nil during the three months ended March 31, 2024. The increase reflected $2.1 million in capitalized mine development costs incurred beginning January
2025 following the issuance of the Company’s Maiden Mineral Reserve Estimate under Reg. S-K 1300 and the resulting change to the Company’s capitalization policies. See Note 2 of the unaudited condensed interim consolidated financial statements. Expenditures reported for the expansion of mining facilities, which totaled $787,809 during the three months ended March 31, 2024, would typically have been capitalized but were expensed because the SJG mine lacked proven and probable reserves prior to January 2025.
Cash used in financing activities for the three months ended March 31, 2025 and 2024 was $1,029,108 and $532,866, respectively. The net cash used in financing activities during the three months ended March 31, 2025 included $975,000 in payments on the Revolving Credit Line (“RCL”) and $54,108 in operating lease payments. Comparable amounts for the three months ended March 31, 2024 were $487,500 and $45,366, respectively.
Through March 31, 2025, the Company’s available liquidity and operations have been financed primarily through its operations and the revenue generated from the sale of product.
Although the Company has incurred positive net income and net cash inflows from operating activities for the three months ended March 31, 2025, there were many expenditures associated with investing activities which were made that were not expended for the production of revenue during the current period, such as underground development and mine expansion costs. If these expenses had not been made, the Company’s net decrease in cash would have been minimized. The Company believes its cash and cash receipts from its revenue arrangement, proceeds from the sale of equity and proceeds from borrowing will be sufficient to meet its working capital and capital expenditure needs for at least the next 12 months from the date these financial statements were available for issuance. Future capital requirements will depend on many factors, including the Company’s rate of mining, milling, and exploration activities and growth. To the extent that existing capital and revenue growth are not sufficient to fund future activities, the Company may need to raise capital through additional equity or debt financings. Additional funds may not be available on terms favorable to the Company or at all. Failure to raise additional capital, if needed, could have a material adverse effect on the Company’s financial position, results of operations and cash flows.
Off-Balance Sheet Arrangements
As of March 31, 2025, the Company had no off-balance sheet arrangements that would have a material adverse effect on its financial condition, results of operations, or liquidity.
Plan of Operation
The plan of operation for 2025 includes the continued enhancement of site infrastructure and processing capabilities, along with expanded exploration drilling at the SJG mine.
During 2024, the Company processed an average of approximately 700 tons of material per day. For 2025, the Company anticipates increasing daily processing throughput to an average of 800 tons per 24-hour operating day in support of its ongoing exploration and project evaluation activities at the SJG mine. The Company now has processing capacity up to a 1,000 tons per day, with a target rate of 850 tons per day. The Company initiated development in additional target zones within the project area, which are anticipated to yield higher-grade material for processing as part of its ongoing exploration activities.
The Company expects that a combination of higher-grade feed material, increased processing throughput, and higher gold prices will produce a significant increase in revenue in 2025, as part of its ongoing exploration and project advancement efforts.
The Company plans to continue its exploration drilling program from underground and commence drilling from surface in the second half of 2025. Management and geologists will make decisions based on drill results, corporate strategies, market conditions, surface mapping, sampling, and target generation. The Company has contracted with a “Qualified Person,” within the meaning of S-K 1300, to interpret the collected data and compile a formal Mineral Resource Estimate update which was filed on May 20, 2025.
Capital Expenditures
Primary capital expenditures in 2025 have been directed toward increasing underground infrastructure development and enhancing processing capacity at the SJG mine. Average underground development in Q1 2025 was 1,160 meters per month, compared to 380 meters per month in 2024. Processing systems have been upgraded through the installation of new concentrators and the repurposing of the original grinding mill. Additional equipment acquisitions and infrastructure improvements have also enhanced site access and operational capacity. Effective January 1, 2025, capital expenditures are capitalized in accordance with S-K 1300. See Note 2 of the unaudited condensed interim consolidated financial statements.
Production Stage
The Company is currently classified as a Production Stage issuer under S-K 1300. Prior to January 1, 2025, the Company was considered an Exploration Stage issuer, having engaged in mining, milling, and extraction activities without having established proven and probable mineral reserves.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2025. This evaluation was conducted under the supervision and with the participation of our principal executive officer and principal financial officer, who concluded that our disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q. For purposes of this section, the term “disclosure controls and procedures” refers to controls and other procedures designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers (or persons performing similar functions), as appropriate, to allow timely decisions regarding required disclosure.
We recognize the importance of having effective controls in place to manage risks and ensure the integrity of our financial reporting. We are committed to continuously improving our control environment through ongoing monitoring, testing, and remediation of control deficiencies. Our management team is actively involved in overseeing the effectiveness of our controls, and we have established a culture of accountability and transparency to ensure that all employees understand their roles and responsibilities in maintaining a strong control environment. We are also investing in technology to streamline our control processes and reduce the risk of errors and fraud. We believe that these efforts will enhance our level of control effectiveness.
Changes in Internal Control over Financial Reporting
The Company did not make any changes in its internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.