Gold Resource Corp  (NYSEMKT:GORO)
Q4 2018 Earnings Conference Call
Feb. 27, 2019, 11:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Thank you for joining Gold Resource Corporation's Fourth Quarter and Year-End 2018 Conference 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.

Jason Reid -- Chief Executive Officer, President & Director

Thank you. Good morning, everyone, and thank you for joining Gold Resource Corporation's 2018 fourth quarter and year-end conference call. I expect my comments to run approximately 10 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 the earnings release that we issued yesterday, along with the comments on this call, are made only as of today February 27th 2019 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 31st 2018.

2018 was another great year for Gold Resource Corporation. We fired on all cylinders, executing on our business plans, positioned the Company for substantial production growth and increased future monthly dividends. I'm very proud that the Company delivered its eighth consecutive year of profitability. An eight-year stretch of profitability in any industry is respectable, but to accomplish eight years of profitability in the mining industry is a special accomplishment.

In addition to being profitable, we succeeded on numerous fronts including the following, we achieved our 2018 annual gold and silver production outlook range coupled with substantial base metal production. We had net sales of $115.3 million. We remained a low cost producer. We expanded our Oaxaca Mining Unit proven and probable reserves not only replacing all tonnes that we mined in 2018, but we also increased total tonnage, increased gold ounces and increased silver ounces.

In addition, we increased our Nevada Mining Unit's Isabella Pearl Project's proven and probable reserve tonnage, we increased gold ounces, and we increased the gold grade. We obtained the necessary permits to construct and operate our Isabella Pearl Project. We deployed $15.4 million of our cash and cash flow to construct and build our Isabella Pearl Project. We raised $15 million through an ATM equity sales program with our sales agent H.C. Wainwright & Company, who did an excellent job executing the ATM. The equity raise was needed to bridge the estimated funding gap to complete construction. We sustained just 6.3% dilution for our targeted 100% increase in global annual gold production. We are now finalizing Isabella Pearl construction of which we'll update you on shortly. We are not only on target to reach our production by June of 2019, but we may be selling gold sooner.

In 2018, we posted annual net sales of $115.3 million, mine gross profit of $33.7 million, and increased annual net income to $9.3 million or $0.16 per share, a boost to net income of 124% over the prior year.

We also remain committed to the dividend with our monthly dividend distributions.

The Company produced 26,838 gold ounces, 1.67 million silver ounces, 1,652 tonnes of copper, 7,280 tonnes of lead, and 19,808 tonnes of zinc. We successfully reached our production outlook target from our Oaxaca Mining Unit for 2018.

For 2019, we target a similar Oaxaca Mining Unit outlook of 27,000 ounces of gold and 1.7 million ounces of silver with a plus or minus range of 10%.

In addition to our precious metal production targets from Oaxaca, we expect to produce significant base metals again in 2019, especially from the deeper areas in the Arista Mine targeted for production for additional and substantial revenue.

We have not yet included our Nevada Mining Unit's Isabella Pearl production in the 2019 production outlook. We plan to include that estimate after declaring commercial production at Isabella Pearl in the near term. On an annualized basis, we target 29,000 gold ounces plus or minus 10% from Isabella Pearl during year one, ramping up to over 40,000 ounces a year for years two through four.

We were pleased and excited to see our modest 2018 exploration drill program around the margins of the known Isabella Pearl pit boundary added gold ounces and extended the mine life beyond the current four years into the beginning of a fifth year of production. We also had several initial mining benches in the pit that were modeled as waste proved to be ore that are now on the pad. Many of those ounces were not captured in the updated reserve report numbers. We remain optimistic, we will continue to add ounces to this deposit as well as find the expansion or neighboring deposits on trend.

Looking at our 2018 production costs, we had $84 total cash cost after by-product credits and a $655 total all-in sustaining cost per precious metal ounce. We continue to position Gold Resource among the industry's low cost peer group.

In addition to achieving our production goals at our Oaxaca Mining Unit, we expanded the strike length of both the Arista and Switchback vein systems in the Arista Mine leading to our 2018 proven and probable reserve increase that was just announced.

Our exploration team had a great year delivering significant increases to reserve tonnes and gold and silver ounces at both the Oaxaca and Nevada Mining units. With gold ounce increases of 26.6% and 11.5% at our Oaxaca and Nevada mining units respectively coupled with substantial silver ounce and base metal tonne additions underscore this reserve as being one of the best reserves in the Company's history.

This latest report also marks the sixth consecutive annual reserve report where the Company has increased the proven and probable reserve tonnes in each consecutive quarter. We have said for over a decade now that the Arista Mine is part of a very powerful epithermal vein system with tremendous potential. This is exciting as the Isabella Pearl mine's 2.9 million tonnes now grading 2.28 grams per tonne gold adding additional critical mass to the Company's production and growth profile. Please see the recent reserve press release just issued for more details and watch for the full report to be posted on the website in the near future.

During '18, we also initiated construction of three large and important CapEx projects in Oaxaca above and beyond our typical operating CapEx. These included the tailings dam Phase III lift, the paste fill plant for the Arista Mine, and the power grid program. All three of these 2018 projects required a tremendous amount of planning, engineering, construction time and cash.

I'm pleased to report the Phase III tailings dam lift is now complete. The paste fill plant construction continues with targeted operation around mid-2019. The paste fill plant will move a portion of our surface tailings material back underground to fill open stopes previously mined adding to the longevity of the surface tailing dam capacity and adding to the project's overall tailing storage capacity. Additionally, the paste fill was targeted to increase mine safety and enable 100% extraction of valuable stope pillars in many areas of the Arista Mine.

I'm also pleased to report the power grid program is nearing completion. This project has taken over five years in the making, four of those years were consumed with state and federal regulatory approvals, engineering, reengineering several proposed routes and seeking local and community support and approval. 2018 marked the commencement of power line construction. The line construction as of a few days ago is now complete. We are now being told by the Federal Power Commission that the line testing and final line commissioning is under way. While the Company does not control this timeline, again, this has taken over five years to get to this point. We look forward to being connected to the power grid and all the benefits of additional power that we will need as we expand the ever-growing Arista Mine as well as lower our unit power costs. It is a testament to our Oaxaca Mining Unit team who have worked tirelessly and diligently to overcome numerous challenges on this project. It is also important to note that over 25,000 families along the route can have first time access to electricity, not to mention the future additional available power to communities farther down the route, as the line construction continues past our operation. Watch for our future press release with the power grid project, when the power grid project is complete and the line is energized to the mine.

Turning to our Nevada Mining Unit. In May of 2018, we acquired all the necessary permits to construct and operate the Isabella Pearl Project. This was no small feat in and of itself. We broke ground in June of 2018 and are currently closing in on first gold production. We have accomplished a great deal since June, including mine site preparation, the office and laboratory were installed and commissioned, water and power infrastructure were installed, the heap leach pad and ponds were constructed and lined, mining both ore and waste on the deposit was initiated and continues to ramp up, the crushing facility was installed and commissioned, all the crush rock overliner on the heap pad is now complete and the first run of mine ore lift or ROM lift was started.

The radial stacker and [Grasshopper conveyor belts from the crushing plant to the heap leach pad are being installed as I speak in preparation for the first crushed ore lift. Concrete foundations were poured for the absorption, desorption and refining plant or ADR plant for short, the carbon tanks and other equipment have been set with plumbing and wiring of the ADR under way.

We are excited to begin circulating solution on the pad and beginning the leaching process. We target this important milestone in the very near term. The goal is to achieve first gold sales as soon as possible. With the permits in hand and the estimated funding for the project construction in place, we have eliminated two of the three primary gating factors for the project with construction timelines being the third.

Our gold production timeline from Isabella Pearl is primarily subject to remaining construction of the ADR plant. As we near construction completion and production of this open pit heap leach mine, we are not only on track to reach our June 29th production goal, but it is possible, we may be selling gold before then.

We accomplished our business plan in 2018, making it another great year. Among the better achievements for the year was our eighth consecutive year of profitability, a notable and respectable milestone. Looking forward into 2019 and beyond, we have continued to position the Company as a profitable, low-cost producer that advances and improves its operations. We've also positioned the Company with a substantial production growth profile and near-term market rerating for a potential 100% plus increase in gold production. This production growth profile coupled with becoming a multi-jurisdictional metal producer targeting higher monthly dividends is our plan to increase shareholder value, a plan we have remained committed to for some time now and we are excited as we see it coming to fruition.

With that, I would like to thank everyone for their time on the call today. 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 onto the next productive caller's question. Operator, please open the lines for the Q&A and take our first question, if there is one.

Questions and Answers:

Operator

Thank you. (Operator Instructions)

We will now take our first question. Please go ahead caller. Your line is open.

Vijay Marolia -- Regal Point Capital -- Analyst

Hi, this is Vijay Marolia of Regal Point Capital. Congrats on a great year, Jason.

Jason Reid -- Chief Executive Officer, President & Director

Hey, Vijay, thank you.

Vijay Marolia -- Regal Point Capital -- Analyst

I got to tell you, very impressed with what you guys are doing at Isabella Pearl and very impressed that you might be able to start pulling gold before June. Does that mean that we could maybe in the fourth quarter or possibly in the third through some sales from -- from that show up on the P&L?

Jason Reid -- Chief Executive Officer, President & Director

Yeah, we remain committed that June is our public target, but I just put everybody on notice that we could be producing and selling gold sooner. I can't give you a month Vijay, because we're trying as hard as we can to get into production as soon as we can. And if we can sell gold, we will. But obviously, I can't give you an exact time. But we are close. We are very close. And as soon as we can start making sales, we will and we'll tell the market about that, but if we can beat our June target, more power to us.

Vijay Marolia -- Regal Point Capital -- Analyst

Just a quick follow-up question. The energy savings, which as you mentioned, you have been working on that for years now and it looks like we're almost at the finish line, what percentage of your costs do you think are energy related?

Jason Reid -- Chief Executive Officer, President & Director

Energy is one of our largest costs, the top one of our costs for sure.

Vijay Marolia -- Regal Point Capital -- Analyst

Would it be about a third?

Jason Reid -- Chief Executive Officer, President & Director

Yeah, I don't know that I can give you that percentage and say it's a third, but what's happened in Mexico over the last couple of years is they gave a diesel credit. And that credit has helped us out the last couple of years for the price of diesel. There is speculation that credit goes away with the new government that's come in. If it goes away, the order of magnitude we could be saving being hooked to the line is millions, 4 million to 5 million potentially. If the credit does not go away, we're still looking at millions, but let's wait and see, but the long and short of it is the Arista Mine continues to grow, you guys are seeing that just as we are with the proven and probable increase, these veins like going -- on more veins.

It's getting bigger and that takes more energy. So obviously, we hook to the grid is very important, so that we have that energy, but to be hooked to the grid and get that energy at less cost is even more important. But for five years, we've been -- you've been hearing me talk about this plan and we are right there. We were informed, like I said, a couple of days ago, the line is 100% complete construction, they're just starting to test the line, and we don't have time frames. It could be a week, it could be three weeks, it could be a month, I don't know, but it's close, really close. And once that's energized, we'll let everybody know and we will have additional power and additional cost savings. But Vijay, coming back to your original question, I don't want to give you percentage of that yet. Let's see what that -- let's see how it all shakes out.

Vijay Marolia -- Regal Point Capital -- Analyst

Sure. Fair enough Jason. Congrats again. I'm going to back out, but I do have a couple more follow-ups. So I'll let somebody else ask.

Jason Reid -- Chief Executive Officer, President & Director

Okay, thanks. Thanks, Vijay.

Vijay Marolia -- Regal Point Capital -- Analyst

Absolutely.

Operator

We will now take our next question. Please go ahead. Your line is open.

Mark Smith -- Individual Investor -- Analyst

Hi, Jason. Mark Smith, a Private Investor. Hey, I've been with you for all these years where you guys have been -- and we have been profitable and this is indeed a really great year and you do have a lot of accomplishments to herald. I have one question though and that is regarding these grades. Your throughput in the mill has been increased and that's great, but boy, those grades down on the Aguila project mill, they just continue to kind of waver and come downward. I wonder if -- and I know you do have mine plans. Are those grades going to come up any time or I know as you go higher in the deposits you mine up, for example, at Switchback, that you're going to get into more gold and silver. But is that in your mine plan for 2019?

Jason Reid -- Chief Executive Officer, President & Director

Great question. Good to talk with you again, Mark. Just to reiterate, for anybody who might be listening that doesn't understand the history here, we've been mining down on the Arista vein system now since 2010 and in an epithermal system, there's a gradation to it, as the ore bearing fluids move up, they boil and drop out the metals and the precious metals often drop out higher up in the system, there are still precious metals deep, but really high-grade base metals deep. So, over the years, we've seen a degradation in our precious metal grade and you've seen base metals go through the roof. That's why we're -- our costs go lower because we use the base metal as a by-product credit. But we have been struggling to keep our precious metals production where it is, and to counter that, we have increased throughput and you're seeing that. And so, to your question, where do grades go from here? We discovered the Switchback vein system 500 meters away from the Arista Vein System. We drifted over to the deepest area in the Switchback. So again, we're in these high base metal, a still good precious metal, but not as high as higher up in the elevations. So that's where we entered the vein system, we're now going to be developing and mining over time up, so on the long term, you're going to see a reversal in the grades where you're going to see precious metals go up, base metals to come down, there'll be a push-pull there. We won't have quite as lower costs, so to speak, right, because we don't have the base metal credits. We are going to have more precious metals, but it's all good -- isn't an ideal situation, if we could just come into this epithermal system and say, hey, let's mine it from wherever we want, we want to mine from the bottom of it and that's what we're doing.

To specifically answer your question on 2019, the grades will be more or less similar because what we did in 2018 is we developed, well, first of all, in 2017, we took the whole year to develop numerous levels. What we wanted to do is get off the treadmill of hand to mouth. So we took our capital and just developed multiple levels, and then in 2018, we planned to stope a lot of those, we didn't stope as many as we wanted to. Why? because these veins widened out to 20 meters, 30 meters, almost 40 meters wide. So we were able to pull the tonnes in all the development. So we did stope last year, absolutely, but not as much as we thought we are going to, because we could feed the mill easily with development. So we have a tremendous amount of development in front of us.

We are going to stope it all, not all, but that mostly predominantly stoping this year. So all those levels and those grades that were associated with those levels in 2018, now we're going to be stoping in between those levels. So should be a similar grade. So I don't expect to see a big pop in grade. Over time, we fully expect the grade to increase and that'll be a function of us starting to mine more upwards into the higher grade that we've drilled that we know we've lived through in the Arista gradation. And now we're going to be reversing it. So it's going to take some time, but the way I see this is, we are completely happy with where we are, with all the base metals, because it's tremendous amount of revenue too and in the end of the day, this is what it's about is making money. And as far as the market's concerned, our growth premium is going to be coming from Isabella Pearl and we will turn it back into a gold company, so to speak, for any critics who say, oh, you are a base metal company. Okay, we'll be that for last year, but this year, we're going to be gold company when Isabella Pearl comes online and that's our predominant.

So it's just the evolution of mining this whole deposit. We have a long way to go, I mean, this deposit keeps growing and hopefully, we're just at the tip of the iceberg in Mexico. So hopefully, I've answered your question specifically and generally.

Mark Smith -- Individual Investor -- Analyst

Yeah. I appreciate that, run down on that summary that goes back for people who don't go back as far as many people who listen to this do and it's that slow and steady, smart management, why I'm still around with this company as far as being an owner in part with you. One other quick question then on Mirador over there. Is that going to be a slow and steady increase on the tonnage out of there as well?

Jason Reid -- Chief Executive Officer, President & Director

Yes, Mirador, for those who are listening and may not know, is the second -- another mine we put into production with cash flow along our trend at our Alta Gracia Project and we bootstrapped that. We started up very small just pushing 150 -- pushing 200 tonnes occasionally a day. Not really impressive so to speak for the industry, but we wanted to do a cash flow and we did and we're in there developing it, we are not yet really into some of the higher grade areas. There will be some news coming out shortly regarding this area -- the Mirador, but it's going to be slow and steady, to your point.

Mark Smith -- Individual Investor -- Analyst

Okay,

Jason Reid -- Chief Executive Officer, President & Director

Don't -- we're not expecting big things from that, in large part, because we're are doing over there own cash trying to bootstrap it. So it takes a little longer, but even today, we think it's the best approach.

Mark Smith -- Individual Investor -- Analyst

Well, it's better than taking on debt, in my estimation as well. And then lastly, down there in the Oaxaca unit, what is the next property that would be, and I realize that will probably be down the road quite a little ways, but what will be the next property that you'll be really starting to dig into down there?

Jason Reid -- Chief Executive Officer, President & Director

That's a good question. What comes to mind is the Arista Mine. We have tremendous potential to expand that and so actually we are focused -- actually we are focused --

Mark Smith -- Individual Investor -- Analyst

Okay. Yes, it's all developed underground and so forth and you'll be able to go get some of those splays and so forth that are going out all over the place down there. Okay.

Jason Reid -- Chief Executive Officer, President & Director

Right, so we just don't want to get too distracted, so to speak.

Mark Smith -- Individual Investor -- Analyst

Yeah, yeah.

Jason Reid -- Chief Executive Officer, President & Director

You know that's the heart of the company right now and that will change over time, because we have good things coming from Nevada but that -- great -- last year, that was --

Mark Smith -- Individual Investor -- Analyst

Okay, all right, Jason -- it's -- it's really good to talk to you. I really appreciate the ability to actually access you and I know that you're good email-wise as well with your guy that attends those and I appreciate that. I appreciate your management, you've learned well from --

Jason Reid -- Chief Executive Officer, President & Director

Thank you, Mark, and you -- anybody has my number and I don't have a secretary. So if you call, you're going to get me. So if you call the office and just for me, anybody can call me anytime --

Mark Smith -- Individual Investor -- Analyst

Well thanks, for those --

Jason Reid -- Chief Executive Officer, President & Director

All right, thank you, Mark.

Operator

Thank you. (Operator Instructions)

We'll now take our next question. Please go ahead. Your line is open.

Harvey Roland -- -- Analyst

Jason, it's Harvey Roland(ph).

Jason Reid -- Chief Executive Officer, President & Director

Hey, Harvey, how are you?

Harvey Roland -- -- Analyst

I'm good. Yeah, the numbers and the description of the year and the anticipation of 2019, all sounds great. I have a couple of questions. The deal with Wainwright, you said that you raised $15 million which is obviously going toward the development of Isabella Pearl and that resulted in 3,668,885, to be exact, shares -- additional shares outstanding. Is that the end of it or will you be going for more sales?

Jason Reid -- Chief Executive Officer, President & Director

Right, great question. I want -- I also want to add to that, it's only 6.3% dilution. I said that earlier. I'll say it again. Very proud of the fact that we gave it a shot to build this with cash flow, we've built about half of it and it was just the market was too volatile and like I've said in every conference call all options were on the table. We looked at this option inside is the best one. And hence we only have 6.3% dilution and we believe we've raised all the money necessary for the construction of the Isabella Pearl. Now we said it in the K , it's open, it remains open, we will use it if we need to, but we believe we have raised all the money necessary for the construction of the Isabella Pearl.

Harvey Roland -- -- Analyst

So, possibly the rest of that money could be used for other development of some of the other Nevada properties. Is that what you're saying parenthetically?

Jason Reid -- Chief Executive Officer, President & Director

No, we're not going to change our stripes as a company, look, we've fought tooth and nail to have one of the tightest capital structures for producers in the space. This in -- and we've grown organically for eight years. This is our first raise in eight years. We take it very seriously. We're not just going to go continue to dilute to grow, it's just when this particular project, we told everybody in advance, we're going to give it a shot, doing with cash flow, it's going to be tight, and believe me, looking at spreadsheets, this week or that week, or this month and that month, you have weeks where you like, yeah, we can make it, well, it's going to be tight and we just couldn't. But I'm proud of the fact that we did half. So no, don't see that it's still in place, meaning, we're just going to continually to go hit that over and over again like everybody else in our industry does. We are not like everybody else. And I put my track record against that. So --

Harvey Roland -- -- Analyst

I appreciate you saying that, and I appreciate hearing it.

Jason Reid -- Chief Executive Officer, President & Director

Yeah, no, I just want to be as transparent as possible, remains active, but I will say it a third time, we believe we have raised all the money necessary to construct the Isabella Pearl Project.

Harvey Roland -- -- Analyst

Okay, sounds good. Let me ask you about the contract mining agreement. Can you talk about that as far as Isabella Pearl is concerned?

Jason Reid -- Chief Executive Officer, President & Director

In what way?

Harvey Roland -- -- Analyst

I see it as a $30 million for 24 months, a contract miner what is that -- what does that entail? What is that contract for exactly?

Jason Reid -- Chief Executive Officer, President & Director

Okay. We contracted with Ledcor for our contract mining of the deposit and that entails them blasting and mining the waste and ore pulling the ore down to the crushing facility or if it's ROM straight on the pad and hauling waste to the waste locations. That's what it entails. So does that answer your question?

Harvey Roland -- -- Analyst

Well, $30 million over two years, that digs pretty deeply into what you expect to get out of Isabella Pearl. So, what other costs are involved in the production from Isabella Pearl besides the mining agreement?

Jason Reid -- Chief Executive Officer, President & Director

Yeah. We have employee costs. We're trying to run with the real tight ship of about 40 people. So it's going to be really tight, but we're pretty confident we can do that. And then we obviously have all the costs associated with the process with crushing, with loading the heap, with processing through the ADR, but coming back to the Ledcor contract, let me put this in context of Mexico, we use many different contractors in Mexico and you guys who many of which are on this call have been with us a long time, in years where we faltered, you know, in large part, it was the contractor, who just didn't deliver, and so we basically brought all mining in-house. And we are delivering because, for years now, it's all in-house in Mexico. So let me apply that here to Nevada. I can -- at any point in time, basically, after 24 months, I can walk away from this Ledcor contract if they don't perform or if it makes sense to go somewhere else.

So yes, I know you're looking and focusing on that number, but we're going to be looking at this economics of this, the whole way through and I have optionality. If I want to bring the mining in-house. One of the approaches we looked at early on is, should we buy all of the mining fleet and just do it ourselves? Because that is ultimately one of the better ways to go about it. But I didn't want to dilute, none of us wanted to dilute that much to go buy the whole mining fleet right now. But believe me, when we're in production and we're spending an awful lot of cash, like we expect to, especially when we get deep in the Pearl, we will have that option to afford that equipment and bring it in-house.

So I know what you're kind of digging at on -- on what are these total costs and it looks like a big number and viola they're going to take all the money, no, they're not. I mean, we're -- I fully expect to make a lot of money here and perhaps even keep more of it than I do in Mexico. So we'll be watching costs, but Ledcor is a good group. Like any project, there's been a few hiccups along the way. And -- but we're getting over through them and we're doing fine. So we'll see where it goes.

Harvey Roland -- -- Analyst

Okay. I appreciate your answer. One more question if I might. Dividend policy. Historically, the company has always talked about a third, a third, a third, you know what I'm talking about. And you put that on the back burner for the last several years for obvious reasons, it made much more sense to use all the cash flow you could to build out Nevada and to make other operations more efficient. So now once Nevada goes into production and starts to contribute cash to the company's coffers, will the dividend policy go back to a third, a third, a third, where it's applied to mine gross profit?

Jason Reid -- Chief Executive Officer, President & Director

Now it's a great question. I got answer to that is, if it was to go back to a third, third, third, we need to see little bit increase in the gold price. But for the time -- for the foreseeable future, we're going to stand with what we state now and that is return as much back to the shareholders as soon as possible. For anybody who is listening who doesn't understand what we're talking about, we had a policy early on, back in the last bull market where we stated that a third of the revenue would go to taxes, a third for growth being put back into the project and a third for dividends. And for years we nailed it. And believe me, we got calls from you guys if we were off by just a teeny little bit, but we did it, a third, third, third. Now the bear market hit us and that you just can't do that. The margins got too tight, and you couldn't do it there, we couldn't do it, in the bear market. If we go back into a bull market, we've done in the past, it's possible. I will say that. But I'd like to see that bull market in full effect before I start talking about going back to the third, third, third. But coming back to just dividends, in general, I fully want this dividend to start going up. There's nothing better than cash and dividend checks. Nothing. And we all -- for those who are in this company during the last bull market, those were great years. And we all want to go back to that. So hence why we build half of this with our cash, even though it was very difficult, not the easy route. Because we want to keep a capital structure. So, yeah, I mean, just to clarify, I can't give you the answer that we're going to go back to a third, third, third without a real strong bull market.

Harvey Roland -- -- Analyst

Got it, OK. I accept that. Jason, again, congratulations. I appreciate your conservative management style. I think you've done very, very well in the face of, well, the status of the gold price market and all of the other challenges that the company has had to face. So, congratulations and thanks for taking my call.

Jason Reid -- Chief Executive Officer, President & Director

Yeah. I appreciate it and I hope as time goes on these calls get a lot more fun when we're talking about additional production and you're asking me, OK, it went up by this much and where is it going next? That's what I look forward to, Harvey. I hope you call when we're increasing the dividend to ask those questions.

Harvey Roland -- -- Analyst

I will and I look forward to it as well. Thanks again.

Jason Reid -- Chief Executive Officer, President & Director

Perfect. Thank you, Harvey.

Operator

We will now take our next question. Please go ahead. Your line is open.

Vijay Marolia -- Regal Point Capital -- Analyst

Hey Jason, just a couple of last questions on the side note --

Jason Reid -- Chief Executive Officer, President & Director

Who is this?

Vijay Marolia -- Regal Point Capital -- Analyst

This is Vijay Marolia of Regal Point Capital. Sorry about that.

Jason Reid -- Chief Executive Officer, President & Director

Hi Vijay.

Vijay Marolia -- Regal Point Capital -- Analyst

So, the long-term debt that's on the P&L, that's just like equipment financing. Is that correct?

Jason Reid -- Chief Executive Officer, President & Director

Yeah. We have no long-term debt from my perspective, meaning --

Vijay Marolia -- Regal Point Capital -- Analyst

Right.

Jason Reid -- Chief Executive Officer, President & Director

-- the only thing that we have is equipment financing. Yes. We don't -- I don't view it as long term.

Vijay Marolia -- Regal Point Capital -- Analyst

Perfect. And I think you already talked about dilution, in terms of CapEx, it seems like there should be drastic reduction in CapEx for this year and next or is that -- am I looking at it wrong?

Jason Reid -- Chief Executive Officer, President & Director

No, I wanted to be and obviously this is we're still finishing everything. But last year, and I noted -- I referenced it in my remarks earlier, those three programs were a huge cash drain on us.

Vijay Marolia -- Regal Point Capital -- Analyst

Right.

Jason Reid -- Chief Executive Officer, President & Director

All the while, we're trying to build the Isabella Pearl and it was over $10 million and that was a lot of money, when you're trying to build some, that would have gone a long way. Having said that, the tailings again is done, so that CapEx is done. The paste was a little bit less, because we're still finishing it, but then the electric line's done. So I mean -- yes, we fully expect less CapEx. So, yes, that's an accurate statement at this point in time.

Vijay Marolia -- Regal Point Capital -- Analyst

And then I guess last question would be on, in terms of Las Margaritas, do we have expected development date on that?

Jason Reid -- Chief Executive Officer, President & Director

On Las Margaritas?

Vijay Marolia -- Regal Point Capital -- Analyst

Yeah.

Jason Reid -- Chief Executive Officer, President & Director

No, we're still exploring Las Margaritas.

Vijay Marolia -- Regal Point Capital -- Analyst

Okay. Jason, I'm very excited, and congrats again. And looking forward going over the future results.

Jason Reid -- Chief Executive Officer, President & Director

Hey, well, we appreciate you following us, Vijay. You've been around a while and good to see that you are hopefully back and I think we have some exciting things ahead. So, good to hear from you.

Vijay Marolia -- Regal Point Capital -- Analyst

Looks that way. Yes. Likewise about here, have a good one.

Jason Reid -- Chief Executive Officer, President & Director

Okay.

Operator

Thank you. We will next take our next --

Jason Reid -- Chief Executive Officer, President & Director

Operator, with that, I think we've gone over time. So, let's go ahead and close the call out and for anybody who may have been in the queue, feel free to just pick up the phone and call. I have a few things right after this, so I know I said I'm always available, but my associate Greg will be right after this, but anyway, we're around all day. So thank you very much. And we'll talk to you next quarter.

Operator

This concludes today's call. Thank you for your participation. You may now disconnect.

Duration: 37

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minutes

Call participants:

Jason Reid -- Chief Executive Officer, President & Director

Vijay Marolia -- Regal Point Capital -- Analyst

Mark Smith -- Individual Investor -- Analyst

Harvey Roland -- -- Analyst

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