Liquidity, Capital Resources and Going Concern

3 Months Ended

Mar. 31, 2024

Liquidity, Capital Resources and Going Concern

Liquidity, Capital Resources and Going Concern

2. Liquidity, Capital Resources and Going Concern

We do not currently have sufficient resources to meet our expected cash needs during the twelve months ended March 31, 2025. At March 31, 2024, we had current assets of approximately $5.3 million, including cash and cash equivalents of approximately $2.4 million. On the same date, we had accounts payable and other current liabilities of approximately $6.5 million. Because we have ceased mining at the Velardeña mine, our only near-term opportunities to generate cash flow are from the sale of assets and from equity financing.

We will require further sources of capital. In order to satisfy the Company’s projected general, administrative, exploration and other expenses through March 31, 2025, we will need approximately $6.0 to $8.0 million in capital inflows. These capital inflows may take the form of asset sales, equity financing activities, collection of our outstanding accounts receivable, or otherwise.

We have previously announced the execution of asset purchase and sale agreements to sell certain mining concessions, equipment, land parcels and other assets in exchange for an aggregate purchase price of $5.5 million in an SEC filing on form 8-K. The assets being sold include the Velardeña and Chicago mines, both oxide and sulfide processing plants and related equipment. Pursuant to the terms of the sales agreements (i) on April 29, 2024, the buyer paid a non-refundable advance payment of $1.0 million in cash to the Company; (ii) on May 20, 2024, the buyer shall pay $2.0 million in cash, plus value added tax (“VAT”) (including VAT on the advance payment), to the Company and (iii) on July 1, 2024, the buyer shall pay $2.5 million in cash, plus VAT, to the Company (see Note 19).

As of March 31, 2024, we had VAT receivable in Mexico of approximately $1.1 million. Although we believe it is likely we will receive some material portion of this receivable in the second and third quarters of 2024, there is no certainty as to the timing and amount of such payment.

The interim 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, as noted above, our continuing long-term operations will be dependent upon our ability to secure sufficient funding to support future operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in our interim condensed consolidated financial statements are dependent on our ability to sell certain asset of the Company and receive future equity financings to continue to fund general administrative, and exploration activities that would lead to additional profitable mining and processing activities or to generate proceeds from the disposition of mineral exploration properties.

The ability of the Company to maintain a positive cash balance for a period of twelve months beyond the filing date of this Quarterly Report on Form 10-Q is dependent upon its ability to generate sufficient cash flow from the sale of assets, to collect VAT accounts receivable from the Mexican government, to reduce expenses, and to raise sufficient funds through equity financings or other external sources. These material uncertainties cast significant doubt on the Company’s ability to continue as a going concern. Therefore, the Company cannot conclude that substantial doubt does not exist as to the Company’s ability to continue as a going concern for the twelve months following the filing date of this Quarterly Report on Form 10-Q. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or liabilities, which might be necessary should the Company not continue as a going concern.