Allen Palmiere: Let me answer the question a couple of different ways. One, in my prepared remarks, I talked about our exploration results. When we got involved risk management of this company almost three years ago, we recognized that there had been very, very little drilling done and that in the absence of drilling, we are facing a depleting resource. The residual resources that had been identified were lower grade. However, we have spent, over the last 2.5 years, over $25 million on drilling. The result of that is we’ve identified areas that I talked about, the Three Sisters, Gloria, Splay 31, Marena. All of these are new discoveries, and all of those have higher grades than the historic resource. So in answer to your question, my anticipation is that you will see next year higher grades than you saw this year.
Profitability is – that’s a double-edged sword. You tell me what commodity prices are going to be. You tell me what the exchange rate is going to be for the peso, and I will tell you whether or not it will be profitable. But the objective at a bare minimum is to generate free cash flow for the corporation such that we will be rebuilding our cash balances. And that, I think, is something that I can state that we will be able to achieve. Profitability, I don’t know.
Unidentified Analyst: Look, if a company has free cash flow, that’s great. We can continue working at the current situation, that’s okay. Of course, not everything is dependent on something that’s uncontrollable. Okay, I just want to get that clear. So you think the grade is going to be higher. In what quarter do you think this is going to happen, Q1, Q2?
Allen Palmiere: You’ll start seeing it a little bit in Q4 of this year. You’ll see some more and a continuation of that in Q2 – Q1, Q2, Q3 next year, you should see again an increase in grade.
Unidentified Analyst: Okay. My next question is I just want to get a broader understanding of the entire company. As I understand right now, Gold Resource only mines two of its properties out of six. So there’s four properties which aren’t – haven’t been mined at all, right?
Allen Palmiere: We have a number of concession. Yes, properties, concessions in Mexico, most of which have never had any work done on them.
Unidentified Analyst: Yes, yes. So my question is, if, let’s say, the company decides to start mining the other four properties, does the company need to build a new facility to mine those properties? Or is it close enough to the current facility and only needs to be – I don’t know exactly how it works. My question is like how much would the company have to invest to utilize all the other four properties?
Allen Palmiere: That’s a really difficult question to answer. The way I’m going to address it is two or three of the concessions are close enough to our existing infrastructure that it would enable us to truck or mine from those locations to our existing plant. The furthest concession away and a straight line is not that far. It’s only about 40 miles. But by road, it’s twice that. In fact, it’s closer to 100 miles. The road through that area is very twisty, windy and slow. So it would depend on what kind of grade was discovered, whether or not we would have the ability to upgrade the ore at the mine portal. It’s very, very difficult for me to answer that. Certainly, two or three of the concessions, should we find economic ore on them, would be close enough to truck the ore to the existing infrastructure. I’m not trying to hedge but there’s too many variables there for me to give you a specific answer.
Unidentified Analyst: Yes, I understand. Okay, okay. The Back Forty Project is a totally new project from which means everything in new infrastructure and everything. Just wanted to know if the other four properties are exactly like the Back Forty or it’s something like not exactly. That’s what I wanted to know.
Allen Palmiere: It’s not exactly – it’s not the same thing.
Unidentified Analyst: Not the same thing, okay. Another question I had about the Maritime and the GreenLight mines. Is there any news about the mines? Putting aside the company’s interest in those mines, is there any actual news about the mine themselves, like have they found something not about what Gold Resource has in those mines? Is there any actual news about the mines themselves?
Allen Palmiere: GreenLight Metals has got a number of properties in Wisconsin and they had a property in Nevada. Their inability to raise any significant amount of capital has not allowed them to do any drilling. So the answer there is no. Maritime Resources, I don’t know if you’re familiar with Maritime. It has a property in Newfoundland on Peninsula. In our opinion, they needed to do additional drilling to increase the identified – the resource amenable to mining before they move forward. They have done some drilling but they still need to do more. They recently, and by recently, it was within the past three or four months, they acquired a mill and some property from a company known as Century, not Century, losing the name.
It’s another mining company that had a mill tailings facility and several potential resources about 100 kilometers north of where the Maritime property is located. Maritime’s feasibility had contemplated trucking ore 140 kilometers. Their acquisition of this new mill reduces the haul from 140 down to 100. But more importantly, the 100-kilometer segment is on very good highway as opposed to the last 40 kilometers, which was a gravel road that was subject to a lot of potholes and beat up equipment immersively. So they’re making some progress, but again, they’re struggling raising money like everybody in the sector is. So it’s going quite slowly.
Unidentified Analyst: Okay. I have a general question. I’ll try to break it up and I’d like a few pieces about it. I’m trying to understand the company’s path forward, let’s say, for the next year. I understood from the report on the last that the company believes it has enough cash flow for the next 12 months. And so if you could just try to explain to me like how you see the next year panning out. From the cash flow perspective, from what – is there any plans about the rest of the mines and the rest of the properties in the DDGM? Or just a general plan for the next year from the company’s perspective?
Allen Palmiere: Well, I’m going to qualify my answer by saying we have – we’re in the budgeting process now so we do not have definitive plans that I didn’t articulate at this point. But really, what we’re looking at doing, cash is tight, the equity markets are not supporting us. We need to generate cash internally to support all of our activities. So as a result of that, our primary focus next year has to be on the Don David Mine in Mexico. So we need to provide sufficient capital to allow the mine to maintain its productivity. We need to do additional infill and near-mine exploration to continue to develop these new resources that we’ve identified, higher grade resources. And we have to manage our cost. So really, our primary focus is going to be on Don David in Mexico to ensure that we can rebuild our cash balances.
Once we do that, and this is going to – this is – in today’s environment, you manage for your bank account. If you don’t, you’re doing it the wrong thing. We’re not going to commit to spending a bunch of money on exploration on those other concessions we have. We will not spend a lot of money on Back Forty next year. There are a couple of things that we could potentially do that we’re evaluating. But the real focus is ensuring that Don David is operating to the best of its ability to reestablish our bank accounts. And that is our focus for next year.
Unidentified Analyst: Okay. I know in the last report, you didn’t want to comment too much on the Back Forty Project. But I have a few questions if you can help me try to figure out. That’s the first technical question. Did you start the work on the process of getting a permit to the Back Forty Project?
