2. Liquidity

At September 30, 2019, the Company’s aggregate cash and cash equivalents totaled $2.9 million, compared to the $3.3 million in similar assets held at December 31, 2018. The September 30, 2019 balance is due in part from the following expenditures and cash inflows for the nine months ended September 30, 2019. Expenditures totaled $8.8 million from the following:

$3.1 million in exploration expenditures, including work at the Yoquivo, Sand Canyon, Santa Maria and other properties;

$1.3 million in care and maintenance costs at the Velardeña Properties;

$1.6 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project; and

$2.8 million in general and administrative expenses.

The foregoing expenditures were offset by cash inflows of $8.4 million from the following:

$4.0 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs);

$1.9 million of net proceeds from the sale of the Company’s common stock in a registered direct offering (as described in Note 17);

$1.5 million received as a deposit related to the proposed sale of the Velardeña Properties and other mineral concessions to Autlán (as described in Notes 1 and 13);

$0.6 million, net of commitment fees and other offering related costs, from the LPC Program (as described in Note 17);

$0.1 million from the sale of miscellaneous assets and $0.1 million from the sale of an investment in a junior mining company (Note 6); and

$0.2 million from a decrease in working capital primarily related to increased accounts payables for general and administrative expenses.

In addition to the $2.9 million cash balance at September 30, 2019, in October 2019 the Company entered into an option to purchase agreement for the sale of its interest in the Santa Maria property and expects to receive an initial cash payment of $1.0 million in connection with the transaction by the end of the first quarter 2020 (Note 24). The Company also expects to receive an additional approximately $4.8 million in net operating margin from the lease of the oxide plant through the end of the third quarter 2020. The Company’s budgeted expenditures, totaling $9.8 million, during the next twelve months ending September 30, 2020 are as follows:

Approximately $2.5 million on exploration activities and property holding costs related to the Company’s portfolio of exploration properties located in Mexico, Nevada and Argentina, including project assessment and evaluation costs relating to Yoquivo, Sand Canyon and other properties;

Approximately $1.6 million at the Velardeña Properties for care and maintenance;

Approximately $1.5 million for repayment of the Autlán deposit according to the terms of the Agreement (as described in Note 1);

Approximately $0.8 million at the El Quevar project to fund ongoing exploration and evaluation activities, care and maintenance and property holding costs;

Approximately $3.1 million on general and administrative costs; and

Approximately $0.3 million for income tax payments due in Canada.

The Company’s currently budgeted expenditures of $9.8 million are slightly greater than the cash resources of $8.7 million that are expected to be available during the period. Therefore, during the remainder of 2019 and through September 30, 2020, 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 (as defined in Note 17 below), the LPC Program or otherwise.

The actual amount of cash expenditures that the Company incurs during the twelve-month period ending September 30, 2020 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, including El Quevar. 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, an unexpected early termination of the oxide plant lease by the lessee, or the election by the purchaser of the Santa Maria property to terminate the proposed acquisition prior to payment of the initial $1.0 million portion of the purchase price. 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 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 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 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 the Company’s consolidated financial statements for the period ended September 30, 2019.