Gold Resource (GORO) Q2 Sales Drop 57%

Gold Resource (GORO -9.29%), a precious metals producer focused on the Don David Gold Mine in Mexico and the Back Forty Project in Michigan, released its second quarter results on August 5, 2025. The company posted a net loss of $11.5 million, or $0.09 per share (GAAP), as operational difficulties sharply reduced sales volume and production, while costs escalated to unsustainable levels. No Wall Street earnings estimates were available for comparison, and the release did not disclose revenue figures, which is unusual for an earnings report. Overall, the period was marked by continued operational struggles, explicit warnings about future viability, and ongoing efforts to stabilize production through equipment replacement and mine development.

Gold Resource: Business Snapshot and Key Success Drivers

Gold Resource produces gold, silver, and base metals and has two main assets: the Don David Gold Mine (DDGM) in Oaxaca, Mexico, which is currently in production, and the Back Forty Project in Michigan, which is in the permitting and early development phase. The Mexican mine accounts for all current production and revenue and faces significant operational hurdles, while the Back Forty Project is still in the permitting and early development phase.

The company’s recent efforts have concentrated on stabilizing production at DDGM by addressing equipment shortages, optimizing existing mining methods, and advancing underground development to access new ore zones. Success at these activities is crucial because the mine’s low output and high costs have driven net losses, and further progress is needed for Gold Resource to return to sustainable operations.

Operational and Financial Developments in the Quarter

Production volumes continued to drop during the period. Gold equivalent ounces sold were down 56.9% compared to Q2 2024, reflecting both a sharp decrease in ore tonnes processed and lower gold grades. The amount of ore milled dropped by almost one third, from 98,889 tonnes in Q1 2024 to 56,906 tonnes in Q1 2025, and the average gold grade fell from 1.27 g/t in Q2 2024 to 0.56 g/t.

Production at DDGM suffered from two main issues: an aging equipment fleet, which frequently reduced mine availability, and a lack of alternative mining faces (different underground areas from which to extract ore). With only one productive area accessible at a time, the mine could not mitigate interruptions, causing ongoing material shortfalls in output. As a result, the positive impact from much higher gold and silver prices did little to offset lost sales volume.

Management responded with several actions during the quarter. The company ordered new and used mining equipment to replace the oldest machines and brought in an external contractor, Cominvi Servicios, which supplied new equipment and personnel to speed up underground development. Since May, over 1,350 meters of ramps and tunnels were completed, designed to enable access to higher-grade ore bodies, specifically the Three Sisters vein system. Gold Resource also introduced a cut-and-fill mining technique, a method aimed at reducing dilution and increasing the quality and value of material sent to the processing plant.

One-time items and strategic actions also played a role. The company raised $21.3 million year-to-date for the six months ended June 30, 2025, from equity, debt, and a Mexican tax refund, including a $6.28 million loan, a $5.6 million equity raise through an at-the-market program, and a $4.0 million Mexican tax refund. Despite these inflows, management disclosed that continued operational losses and underperformance cast substantial doubt on Gold Resource’s ability to continue as a going concern. Without successful development of new mining areas—especially the Three Sisters and Splay 31 vein systems—the mine could be placed on care and maintenance as soon as Q3 2026, which would effectively halt most operations and trigger significant severance and other costs.

Progress at the Back Forty Project in Michigan was limited to ongoing optimization and permitting activities. Investment in the project for the first half of 2025 was $371,000, just slightly more than in the first half of 2024. No new regulatory or development milestones were announced in this release, as the bulk of 2025’s focus and spending remained on stabilizing DDGM.

There were notable personnel changes. The company appointed a new board member, Peter Gianulis, and hired Armando Alexandri—bringing four decades of mine management experience—as Chief Operating Officer.

Outlook and What to Watch Ahead

Management did not provide formal quantitative guidance for the rest of the year or beyond. However, it cautioned that about $8.0 million in additional working capital will be needed over the next 12 months to fund mine development required to stabilize production and unlock new ore zones. The filing included clear warnings about uncertain future operating ability, indicating that success in these efforts is essential for continued operations.

In the next few quarters, investors should monitor the pace of mine development, particularly the opening of additional production faces and equipment replacement. The outcome of productivity improvements, cost reductions, and permitting progress at the Back Forty Project will also be key focus areas. Exploration activity will likely remain essentially halted until liquidity improves.

GORO does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.