2. Liquidity

At March 31, 2020, the Company’s aggregate cash and cash equivalents totaled $2.2 million, compared to the $4.6 million in similar assets held at December 31, 2019. The March 31, 2020 balance is due in part from the following expenditures and cash inflows for the three months ended March 31, 2020. Expenditures totaled $4.4 million from the following:

$1.6 million in exploration expenditures, including work at Rodeo, Sand Canyon and other properties;

$0.5 million in care and maintenance costs at the Velardeña Properties;

$0.2 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project;

$1.2 million in general and administrative expenses; and

$0.3 million in Canadian income tax payments (Note 18), $0.4 million related to the remittance of value added taxes in Mexico collected in the fourth quarter 2019, and $0.2 million related to a working capital increase primarily from a reduction of accounts payable and other accrued liabilities.

The foregoing expenditures were offset by cash inflows of $2.0 million from the following:

$1.0 million in an unsecured loan received from a related party (Note 14);

$0.6 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs); and

$0.4 million, net of commitment fees and other offering related costs, from the LPC Program and the ATM Program (both as described in Note 19).

In addition to the $2.2 million cash balance at March 31, 2020, in April 2020, the Company entered into the Earn-In Agreement with Barrick and received $0.9 million, net of transaction costs, related to a private placement transaction whereby Barrick received approximately 4.7 million shares of the Company’s common stock (as further described in Note 26). Also in April 2020, the Company closed on an equity offering and private placement (as further described in Note 26), which resulted in the receipt of approximately $2.8 million in proceeds, net of transaction costs. The Company also expects to receive an additional approximately $2.1 million in net operating margin from the lease of the oxide plant through the end of 2020, although the actual net operating margin received from the oxide plant may be negatively impacted if interruptions due to COVID-19 persist longer than currently anticipated. The Company’s budgeted expenditures, totaling approximately $9.0 million, during the next twelve months ending March 31, 2021 are as follows:

Approximately $2.2 million on evaluation activities, exploration and property holding costs related to the Company’s portfolio of exploration properties located in Mexico, Nevada and Argentina, including costs at Rodeo, El Quevar, Sand Canyon, Yoquivo and other properties;

Approximately $1.5 million at the Velardeña Properties for care and maintenance;

$1.0 million related to the repayment of a related party loan (Note 14);

Approximately $0.7 million for repayment of the Autlán deposit according to the terms of the Agreement (as described in Note 15);

Approximately $3.1 million on general and administrative costs; and

Approximately $0.5 million related to a decrease in accounts payable and other accrued liabilities.

The Company’s currently budgeted expenditures of approximately $9.0 million are greater than the cash resources of approximately $8.0 million that are expected to be available during the period. Therefore, during the remainder of 2020 and through March 31, 2021, the Company will take appropriate actions, which may include sales of certain of the Company’s exploration assets, reductions to the Company’s currently budgeted level of spending, and/or raising additional equity capital through sales under the ATM Program, the LPC Program or otherwise. There are currently 8.1 million shares and 12.2 million shares remaining available for issuance under the ATM Program and LPC Program, respectively.

The actual amount of cash expenditures that the Company incurs during the twelve-month period ending March 31, 2021 may vary significantly from the amounts specified above and will depend on a number of factors, including variations from anticipated care and maintenance costs at the Velardeña Properties and costs for continued exploration, project assessment, and development at the Company’s other exploration properties. Likewise, the actual amount of cash receipts that the Company receives during the period may vary significantly from the amounts specified above due to, among other things, a decrease in the quantity of material processed under the oxide plant lease or an unexpected early termination of the oxide plant lease by the lessee. If cash expenditures are greater than anticipated or if cash receipts are less than anticipated, the Company would need to take more aggressive actions to maintain sufficient cash balances over the next twelve months.

The condensed consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business. However, the Company’s continuing long-term operations are dependent upon its ability to secure sufficient funding and to generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in the Company’s condensed consolidated financial statements are dependent on its ability to generate positive cash flows from operations and to continue to fund exploration and development activities that would lead to profitable mining activities or to generate proceeds from the disposition of property, plant and equipment.

There can be no assurance that the Company will be successful in generating future profitable operations or securing additional funding in the future on terms acceptable to the Company or at all. The Company believes the cash on hand, the continuing cash flow from the lease of the oxide plant, use of the ATM Program and the LPC Program, and the potential for additional asset dispositions make it probable that the Company will have sufficient cash to meet its financial obligations and continue its business strategy beyond one year from the filing of its condensed consolidated financial statements for the period ended March 31, 2020.