Liquidity, Capital Resources and Going Concern

12 Months Ended

Dec. 31, 2023

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 December 31, 2024. At December 31, 2023, we had current assets of approximately $8.7 million, including cash and cash equivalents of approximately $3.8 million. On the same date, we had accounts payable and other current liabilities of approximately $5.7 million. Because we have ceased mining at the Rodeo mine, and have stopped our mining operations at the Velardeña properties, we will need to raise capital through asset sales, equity financing or collection of outstanding VAT receivables. The forecasted net operating margin from the Velardeña Property through the twelve months ended December 31, 2024 is expected to range between negative $2.0 million and negative $2.5 million assuming average gold and silver prices of $1,948 and $24.34 respectively during the 12 month period ending December 31, 2024. The Company also forecasts expenditures during the 12 months ending December 31, 2024 for administrative expenses, exploration expenses and shutdown expense in Mexico and Argentina along with general corporate administrative expenses to total approximately $9.0 million.

We will require further sources of capital. In order to satisfy the Company’s projected general, administrative, exploration and other expenses through December 31, 2024, we will need approximately $7.6 to $8.6 million in additional capital inflows. These additional capital inflows may take the form of asset sales, equity financing activities, and collection of our outstanding VAT receivable or otherwise.

There is no assurance that we will be successful in raising sufficient capital. At March 11, 2024, our available shares authorized but not yet outstanding which could be offered to raise equity was approximately 1.9 million shares out of our 28 million shares authorized. We plan to ask our shareholders to approve an increase in our authorized capital at this years Annual Shareholder’s Meeting, but there can be no assurance this will be approved. In the absence of sufficient asset sales, equity financing or other external funding the Company’s cash balance is expected to be depleted during the second quarter of 2024.

The Company’s 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 generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in our interim consolidated financial statements are dependent on our ability to continue to generate positive

cash flows from operations and 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 property, plant and equipment.

The ability of the Company to maintain a positive cash balance for a period of twelve months beyond the filing date of this 2023 Annual Report on Form 10-K is dependent upon its ability to generate sufficient cash flow from selling assets, collecting VAT accounts receivable from the Mexican government, reduce expenses, and raise sufficient funds through equity or 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 Annual Report for the year ended December 31, 2023 on Form 10-K. 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.