Operator: Thank you for joining Gold Resource Corporation's Second Quarter Earnings 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: Thank you. Good morning, everyone.

Thank you for joining Gold Resource Corporation's 2019 second quarter conference call. I expect my comments to run just a few 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 my 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, August 7, 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 31, 2018. The second quarter of 2019 was another good quarter for Gold Resource Corporation. But most importantly, it marked a major milestone, and that we produced first gold from our Nevada Mining Unit.

Our global production for the quarter totaled 9,559 ounces of gold and 467,484 ounces of silver, which along with substantial base metals generated $29.4 million in net revenue or $0.03 per share in net income for the quarter. Significant announcements during the quarter included Ms. Kimberly Perry joining our Board of Directors in April. Kim's mining industry and Board-level experience adds to and strengthens our Board. On behalf of the Board of Directors, I would like to thank Mr.

Gary Huber, a Gold Resource Corporation Director for 6 years, who retired at the end of June. On April 29 of the quarter, we announced our Nevada Mining Unit's first gold production at our Isabella Pearl mine. We achieved this major milestone in just 10 months from groundbreaking and a few months ahead of schedule. In May at our Oaxaca Mining Unit, we announced the expansion of our Arista Mine's Switchback vein system by 175 meters on strike and 200 meters up-dip with intercepts including 11.95 meters of 1.04 grams per tonne gold and 494 grams per tonne silver. In June, we announced the expansion of the Isabella Pearl deposit with, to the east with step-out drill hole intercepts including 22.86 meters of 1.03 grams per tonne gold, including 4.57 meters of 2.02 grams per tonne gold.

It was a busy and solid quarter for Gold Resource Corporation. We are not only on track to reach our annual production outlook but are closing in on commercial production in Isabella Pearl and are positioned to increase our 2019 annual gold production outlook. Our Oaxaca Mining Unit delivered another solid operating quarter. During the second quarter, we milled a record 171,456 tonnes, an increase of almost 14% compared to the second quarter of 2018. Oaxaca also produced record amount of copper, lead and zinc during the quarter, a welcome addition to our margin and low-cost operating status.

Our team in Oaxaca has done a great job increasing mining rates and additional mill throughput at the Aguila mill. In Nevada, we continue to process our gold-infused carbon off-site from which we then sell our dore. While this is a viable long-term business approach and it allowed us to reach production and cash flow sooner than anticipated, we are finalizing the construction of our ADR plant from which to process our own carbon on site. We've had issues with the contractor building the ADR plant, which have caused some minor delays to the ADR plant completion. We now target third quarter for the remaining portion of the ADR construction completion.

A future commercial production announcement is not predicated on the ADR plant completion time frame. It is rather a project production levels, which can be achieved under the current off-site carbon processing arrangement. We look forward to announcing commercial production soon. We continue to mine ore at Isabella Pearl, place more ore on the heap leach pad and place more panels under leach. We expect that a second water well we recently added to the project will add to the ramp-up in gold production currently underway.

As noted in our March 26 PR, we increased the Isabella Pearl reserves by approximately 22,000 gold ounces with a modest 2018 drill program, pushing our Isabella Pearl mine life out from 4 to 4.5 years. Second quarter step-out drilling included 22.86 meters of 1.03 grams per tonne gold, which added ounces to the east. We are also currently testing the pit's expansion potential to the north and are optimistic we could see additional ounces and mine life. Positive drill results like those to the east are expected to add ounces and mine life to Isabella Pearl when they are updated into our year-end reserve report. Once we finished the Isabella Pearl deposit expansion drill program, we plan to target the Scarlet area located to the northeast, which could represent another potential open pit, given the high-grade surface samples and old historic mineralized drill holes in the area.

We have consolidated over 6 miles of this mineralized trend to the northwest and look to discover numerous open pits along this mineralized trend. We plan to be a long-term producer from Nevada's Walker Lane mineral belt. We had a great second quarter, which marked the milestone of becoming a dual jurisdictional precious metal producer. We now approach 2 near-term catalysts to increase

shareholder value: the first being our targeted 100% increase to the company's gold production profile from our Nevada Mining Unit once it's fully operational; and the second being our targeted future monthly dividend increases. Neither of these 2 catalysts depend on the gold price going up for a potentially substantial market rerating of the company, but the current strength in the gold price this year could provide a third catalyst and additional leverage for the first 2.

The team has worked hard for many years to position the company for this, and I am pleased and excited to see it coming to fruition. With that, I would like to thank everyone for their time today on the conference call. Let me 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 I will simply move on to the next productive caller's question. Operator, please open up the lines for the Q&A and take our first question if there is one.

Operator: [Operator Instructions] And we'll go to our first questioner.

Heiko Ihle: It's Heiko Ihle from H.C. Wainwright. And frankly, major congratulations for everything you guys have achieved so far this year, well done.

Jason Reid: Thank you, Heiko.

Heiko Ihle: Going through your balance sheet. I mean a lot of money was added to inventories. I mean you added $12.2 million to inventories year-to-date and another $3.9 million to accounts receivable year-to-date. Accounts receivables mostly, are obviously offset by accounts payables, so it's a small net figure. But on the inventory base, I mean it's no surprise, it's gone up, given that you just built another mine.

And obviously, you've done a phenomenal job with that. But my question is more related to modeling baselines. I mean any idea if we should expect inventories to rise a bit more as this thing ramps up? Or should we just sort of take like a $22 million or $28 million baseline figure and just sort of model that out longer term? Any ideas?

Jason Reid: Yes. I'll let John weigh in here, but I expect inventories to continue to build a bit. Look, this is early days, as you fully are aware.

And until we get a little further down the road, announce commercial production, get more of a steady state, I think then we'll have some clarity as to where that inventory may hold. But we've had this question from many shareholders. And I think a lot of shareholders in our stock are just used to us being an underground miner and accounting for as such. It's a normal course that we have this inventory build, et cetera. The accounts receivable piece, though, obviously we had a larger accounts receivable.

That was just a function of timing. We had a lot of concentrates built up that didn't get shipped right before the quarter, same with dore. So that will hit the next quarter. John, do you want to add to anything in that regard?

John Labate: Right. I think you've summed it up well.

I would expect some additional increases to our pad inventory. And obviously, that will kind of get more steady as we start taking off at a higher rate. And that means when our production increases to higher levels.

Heiko Ihle: Got it. But you wouldn't...

Jason Reid: Heiko, it's hard to give you an exact answer on that because, again, it's such early days. Another factor that's coming soon is we drilled the second water well. It's being developed now and will be operational hopefully very soon. That's really going to change things with the ramp-up, have an additional solution on the pad, panels under leach, et cetera, too. So that would change things.

Even if we could say it was a steady state from here on and try to model that out, that new well is going to change things dramatically. And so we would want to see that be online too to give clarity to fully give an answer to your question there.

Heiko Ihle: Got it. Okay. Moving on to Isabella Pearl, I mean you put out some pretty impressive drilling there.

As of the last release, which I think was in June, you've drilled 27 RC holes at the site. And you mentioned a variety of targets drilling from the north, other targets at site. I mean given that we're at $1,500 gold right now, and I know earlier, you mentioned that may not necessarily affect the dividend payment, but regardless, just thinking out loud here, given we're at $1,500 gold, can you sort of just walk us through drilling plans for the remainder of the year, maybe even for both assets?

Jason Reid: Sure. Let's start out with Oaxaca. Our primary focus is the expansion of the Arista deposit.

I mean it's always good to drill where, a, you know there's gold and b, where you can mine from it. So that's been and continue to be our primary focus, and that has paid off in some of the results that I have just announced in the quarter. So that will be the primary focus as the Arista Mine. We are drilling over the Mirador Mine, which is a part of our production profile to a much lesser extent, but there is some drilling over there as well to expand that mine. Coming to the U.S.

in our Nevada Mining Unit, we are currently drilling to the north of the deposit, and this would be an attempt to expand the deposit north. As I mentioned, we expanded into the east with that great hole, step-out hole. We're trying to expand it to the north. There's reasons to think it will expand to the north, but until we get the results back, we won't know. But what would be terrific is if we obviously add additional ounces and mine life just to the Isabella Pearl proper.

But I mentioned Scarlet. Scarlet is several stone throws away to the northwest. And Scarlet has a tremendous amount of high-grade silver samples. And it's in an elevation similar to the Pearl, which is deep in the Isabella Pearl pit. So there's potentially a situation where we could find another open pit without a bunch of overburden to remove.

Now we know the mineralization goes deep because we have some historic drill results which we need to go confirm, they weren't our drill holes, that tell us the mineralization is deep. But we know the high-grade is right at surface. So that is obviously our second focus after the Isabella Pearl mine. Scarlet will be the second focus. But then we have the 6 miles of trend with a lot of targets, and it will take years to explore them all.

Another thing we don't talk about much that I'll bring it up here is East Camp Douglas. Many of you heard, have heard me say over and over, this is home run potential for us. We'd spent a lot of time over there while we're waiting for our drill permit, and while we didn't want to allocate money to drill over there because we're piling cash into the project to build it, we spent a lot of time taking silver samples on a grid pattern. We have vectored in on numerous targets. It's a very big area, and this is home run potential.

We're going to swing for the fences. And maybe by the end of this year, but for sure next year, we're going to drill that, too. So, and that could be, in my opinion, a game changer. Just like Arista was in Mexico, East Camp can be the game changer for us in Nevada. So very exciting as far as our exploration potential.

I think we did really good picking up 4 properties during the bear market, and it looks like, knock on wood, it looks like we're entering a bull market. And if that's the case, we did grow, really well on timing. So hopefully, that gives you a sense of our focus on drilling.

Operator: We'll now take our next questioner. Unidentified Analyst : Jason, Mark Smith, Private Investor.

I'm looking at some, looks like silver and gold, up today. Silver, up $0.61, as I'm looking; and gold, up $32. So this is good. I'm talking about the Nevada Mining Unit a little bit. On the placement of the ore and the actual mining of it then, is the grade that you're taking out of that pit, is that, how close to your plan was it? Are you hitting the plan? Was your drilling adequate? And do you find that help, well, characterize that for me, could you?

Jason Reid: Sure.

We went into this with a model. And as we start, with the drill results. And as we started mining it, we found more ore. So that's a positive, it's a huge positive. Most of the grade that you're seeing or much of it, is from the ROM panels.

So when you're seeing the 0.6 gram, that's run-of-mine. Where the sweet spot is on this is obviously the crushed rock, and that's, we have a few panels under leach of crushed, which is helping out, and we're putting more and more of crushed. The long and short of it is this deposit has not disappointed. In fact, there has been upside in additional ore, which is a great thing. There are some deposits where you drilled that you think you know what you have, you go and mine it, and it's not there.

It's not what you think. Ours is the opposite in which we drilled it, we looked at the model. We thought we had action. It turns out we had more. Well, so then we're drilling it additionally, which you heard me say, to the east, and we hit additional ounces that way.

And now we're drilling to the north. So it may be a situation where we could push on mine life maybe out to 5 years, hopefully even farther than that. But we did push it out from 4 to 4.5, now we're to 5. So I think that speaks volumes for this deposit has been every bit what we thought and more.

Unidentified Analyst: Okay.

Then could you characterize how you guys decide to crush it or to just run-of-mine it and throw it out?

Jason Reid: Well, it's a function of grade. That's typically where the line is drawn. And so we have cut-off grades to decide whether it goes to ROM or to our low-grade stockpile, which is like a 0.5. I mean most mines are 0.5. I think, that low-grade stockpile that we're not even mining right now, we're just putting it aside for a future date.

So let's say, we go back into a bull market and gold spikes, all of a sudden that 0.5, which we weren't going to touch to begin with, now becomes into play. So that could be additional upside. But don't count on that because there could be additional upside if well takes off. So it's just a function of grade and where we are in the deposit. Most of the deposit and the ounces are in the Pearl.

So when we get down to the Pearl, it's all going to be crushed, and it's all going to be the highest grade in the deposit. That will take a little bit of time.

Operator: [Operator Instructions] We'll take our next questioner.

Unidentified Analyst: Jason, it's Harvey Volin. Your comments were very optimistic today, and over the last several calls, it sounds like things are going according to plan, if not more so.

And yet, the stock is under this tremendous pressure. And I'm trying to figure out why. I know in the past, you established a relationship with an investment banking firm that supposedly was going to help with marketing or at least a profile to Wall Street. Here, we have gold at, approaching $1,500. Most of the gold stocks that I look at are zooming and yet GORO just can't seem to get out of the seller.

Do you have any explanation for this?

Jason Reid: Let me give you my opinion. It's just that, it's my opinion. If you were to go back and look at our last 4 to 5 quarters, the day after we filed, and we usually file in the afternoon, so that next trading day, if you go back and look, I mean we've done the analysis, somebody out there loves to manipulate Gold Resource in the short-term right after the quarter. And they pummel us with massive volumes and knock our share price down 5%, 10%, 15%, in one quarter even 20%. I think it was the second quarter of 2018 was a stellar quarter, and we still got hit.

And so some group is able to do this. I don't get to bent out of shape about and here is why. You mentioned that gold is hitting almost new highs. If you look at it in other currencies, sterling, yuan, it's hitting new highs. So gold is potentially in another, in the next bull market.

You've seen Gold Resource have another profitable quarter. You've seen Gold Resource operationally have another stellar quarter. You've seen us produce our first gold in Nevada. You've seen us become a second jurisdictional producer. We're ramping up toward commercial production.

We're looking at near-term catalysts of increasing our 2019 production outlook, a 100% increase to our gold production profile and increase dividends. Does that sound like a risk that warrants a down day in a market where gold is pushing new highs? No, it doesn't. So this is a repeat pattern. Somebody is pushing our stock around. It's okay because it's not going to last forever, but that provides an opportunity for buyers.

And so go back and look at the quarters, see what's they, what's happened. See what they've done because they have to go back and buy it. Let's assume it's short. It has to be because who's in our stock that waits around for all this time, all of these quarters, and we have this kind of news, and they're blasting out 1 million shares in the first hour. That is totally anomalous for our stock.

So clearly, there are some groups out there that can push us around after quarters, and they use the quarter as the pivot point to do it. But as long-term shareholders, see it as an opportunity. I don't care if they're going to do this on the short-term, because in the long-term, we're doing well. And if they are short, they're going to have to buy it back. So I mean it is what it is.

I feel your pain. I understand it, but there's clearly some group that can push us around on the short-term basis. But it's going to be harder and harder as we start increasing our dividend, as our margins go up. And on top of that, if we're going into the next bull market, good luck. They may have to be paying some more dividends.

So that's where I stand on it. Again, I feel your pain, but this is nothing different than the last 4 or 5 quarters. Give this a couple of days, and it will be a bounce back. So again, see it as an opportunity or, I feel bad for the people who get shaken out of a situation like this.

Unidentified Analyst: Yes.

Well, I'm not shaken out for sure. It's just an anomaly that's very hard to explain. I hear you about the timing of this. And of course, today, it's already 1.5 million shares than what the market's opened less than 2 hours. So we may have something in your theory.

But even before today, this stock has just kind of hung between this roughly $3 to $3.70, $3.60 area for a very long time. It has not moved as other gold stocks have as the price of gold has reacted. And not only gold, silver as well. So, and of course, you guys are mostly at this stage a silver producer. So it's puzzling why this is happening.

And that's the thrust of my question. Obviously, the fundamentals matter a way, way more than the action in the stock market. Hopefully, over time, the fundamentals will push the market in the direction that the fundamentals suggest.

Jason Reid: Yes, let me add to this. There's a thing called the lesion curve.

You can Google it, and you'll see in the mining evolution where a discovery is being made and this, our share price will rise. A production decision is made and the share price falls. That share price continues to fall and then plateaus, and it won't rise again until it's, the commercial production has been stabilized. We're about there. So we are, if you apply our case study to this curve, which is a known curve, and it happens with mining companies that put projects into production, we fall in line with that.

Now to give additional color. I was on a great road show in London several months ago. And there were a few groups that basically totally look we've been burned on production before. We want to see stable commercial production, and we're coming in. So that fits right with that curve, too.

So it's also where we are. I don't expect it to always be like this. All we, I focused on execution. We execute, the rest will take care of itself. Yes, there'll be times when we're beaten up more than others.

But at the end of the day, we do what we set out to do, which we have thus far, and I fully intend to continue to do so. Everything will work out, and we'll get the premium. I expect to go back into the next bull market and outrun all my peers, like I did last time by paying a substantial dividend. And at that point, nobody, everybody will forget this phase, and they'll go focus on wow, wow, you guys are so overvalued. Okay, let's go into that phase.

So again, that's just an additional color, Harvey, that we are in this known evolution curve from an exploration, a discovery, a production decision to actual commercial production.

Operator: We'll go now to our next question.

Unidentified Analyst: This is Chris Maloney, I'm an Investor. So I have a couple of questions. In terms of the earnings per share, you've been diluting the stock with the, I don't have my notes here, but the shelf distribution, and you...

Jason Reid: The ATM?

Unidentified Analyst: Yes, the ATM. And you brought in more, you did more of that this quarter. I saw it. I don't have the information in front me. But is that included in the, are those new shares included in the earnings per share for the quarter?

Jason Reid: I believe they are, but I'll refer that to John.

John Labate: Yes. I mean we calculate earnings per share on a weighted average basis, but yes, they're all considered as additional shares, yes.

Unidentified Analyst: So in terms of comparisons to previous quarters, it's a diluted, compared to where you are or there have been since the last, the fourth quarter of last year and the first 2 quarters, you are there, in terms of comparing earnings, it is a higher share count.

Jason Reid: Yes, it is a higher share count. And yes, there is some dilution quarter-over-quarter.

But again, that's compared over the last 3 quarters.

Unidentified Analyst: Right. And so that's one fact, so it's hard, in terms of comparisons, just harder to, or the more shares, it's just harder to get there. I saw like on Seeking Alpha, you missed by $0.01 and whatnot. But I don't know if they had figured in the additional shares.

Jason Reid: Yes. I don't know Chris on that. But let me put some in perspective, which is very important. And I don't want to assume you know this, I want to say this to you. We currently are about 13% dilution all-in, that's construction dilution, that's working capital dilution.

That's where we are. And we are at the cusp of commercial production. So effectively, we've put a mine into production for 13% dilution. That is phenomenal for the industry. So the dilution, yes, you're trying to compare earnings versus whatever.

The bigger picture in my mind is we've done really well for the shareholders of Gold Resource to basically put ourselves in a position to have a 100% increase in our gold production for 13% dilution. That just doesn't happen in our industry. So that's more important to me than earnings per share.

Unidentified Analyst: No, I see it as a, just in terms of people's reaction to the earnings per share. They have to remember that it is a diluted share count.

But yes, I'm not complaining, I see it as a great use of, a way of raising money to build the mine. So I'm impressed, frankly. But I just wanted to know whether those additional shares have been incorporated to this quarter's earnings per share.

Jason Reid: Yes, they have been.

Unidentified Analyst: Okay.

The second question is, I know back, I mean I've just been a shareholder for a year or so. But, and I know, I went through your history. And so that back in the former bull, whenever those years were, when your stock price went up, you tried to get to the dividend. And I think the dividend could be attracted by the East Camp Douglas and those Nevada properties with gold maybe in a bull market here again. I just wonder if the obsession with dividends would be as wise this time around because it also seems that you're getting Isabella into production so fast.

If you can get some of these other properties drilled out and into production, that may be a better use of capital this time around than a huge dividend. I mean some dividend, yes. But I mean what, do you see that? I just don't, I'm not sure if the working of the past applies to current circumstances when you got so much of that gold.

Jason Reid: Chris, sorry, I thought you're done. Go ahead.

Unidentified Analyst: Well, just in the past, it was more silver. But now with the gold, it's just sort of the opportunity to bring more gold online faster. It just seems like it might be a better use of capital than the dividend.

Jason Reid: Yes. And it may be.

That's a conversation we have at every Board meeting. And it may be different this next bull market, in that we may allocate more of the cash flow to putting a mine into production. Everybody has witnessed our dividend just go on hold so that we could allocate that capital to putting this into production because that ultimately is a large driver. If we find something over the East Camp that warrants to do the same, we may do that again. So it's a valid point.

But I'd also, we've walked this path where we outran our peers last time by paying a substantial dividend. And it's my job, the management's job to maximize shareholder value. And if I can outrun my peers by paying a huge dividend and that's the best way to do it, we'll do that, too. So or it might be somewhere, like you said, in the middle, where we're still paying a really solid big dividend, where you are also allocating capital to put Scarlet or something else into production? Absolutely. So yes, I'm not saying there's something today that it is, this is all a hypothetical going forward based on looking at our past and what we've done.

It's not, there's not a, only one way forward, so to speak.

Unidentified Analyst: Right, great. Well I'm glad you're debating it. Take your time and [indiscernible] shareholder.

Jason Reid: Well thank you, I appreciate it and hopefully we'll talk you in next quarter.

Jason Reid: We have run over on our allotted time, so I'll close the call there. If you are in the queue to ask a question, please feel free to call me. I'm in the office, or you can call me on my cell. You'll get to meet directly to me, and I'm happy to field any additional questions you may have. With that, thanks for everybody's time on the call, and we'll talk to you next quarter.

Thank you.

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