XML 42 R19.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2024
Commitments and Contingencies.  
Commitments and Contingencies

12. Commitments and Contingencies

Commitments

As of June 30, 2024 and December 31, 2023, the Company has equipment purchase commitments of $0.9 million and $0.8 million, respectively.

Contingent Consideration

With the Aquila acquisition, the Company assumed a contingent consideration. On December 30, 2013, Aquila’s shareholders approved the acquisition of 100% of the shares of HudBay Michigan Inc. (“HMI”), a subsidiary of HudBay Minerals Inc. (“HudBay”), effectively giving Aquila 100% ownership in the Back Forty Project (the “HMI Acquisition”). Pursuant to the HMI Acquisition, HudBay’s 51% interest in the Back Forty Project was acquired in consideration for the issuance of common shares of Aquila, future milestone payments tied to the development of the Back Forty Project and a 1% net smelter return royalty on production from certain land parcels in the project. The issuance of shares and 1% net smelter obligations were settled before the Company acquired Aquila.

The contingent consideration is composed of the following:

The value of future installments is based on C$9 million tied to the development of the Back Forty project as follows:

a.C$3 million payable on completion of any form of financing for purposes including the commencement of construction of Back Forty, up to 50% of the C$3 million can be paid, at the Company’s option in Gold Resource Corporation shares with the balance payable in cash;
b.C$2 million payable in cash 90 days after the commencement of commercial production;
c.C$2 million payable in cash 270 days after the commencement of commercial production, and;
a.C$2 million payable in cash 450 days after the commencement of commercial production.

Initially, the Company intended to pay the first C$3 million in 2023 to prevent HudBay’s 51% buy-back option in the Back Forty Project. Management later decided that it was more likely than not that HudBay would not exercise its buy-back option, and consequently, this amount was not paid. Additionally, since financing of the project is not expected in 2024, this liability was reclassified to long-term. As of the end of January 2024, by the contractual deadline, HudBay did not exercise its buy-back option, and thus, it is forfeited.

The total value of the contingent consideration as of June 30, 2024 and December 31, 2023 was $3.4 million and $3.5 million, respectively. The contingent consideration is adjusted for the time value of money and the likelihood of the milestone payments. Any future change in the value of the contingent consideration is recognized in other expense, net, in the Condensed Consolidated Interim Statements of Operations.

The following table shows the change in the balance of the contingent consideration for the six months ended June 30, 2024 and for the year ended December 31, 2023:

2024

2023

(in thousands)

Beginning Balance of contingent consideration:

Current contingent consideration

$

-

$

2,211

Non-current contingent consideration

3,548

2,179

$

3,548

$

4,390

Change in value of contingent consideration - Current

$

-

$

(2,211)

Change in value of contingent consideration - Non-current

(156)

1,369

Ending Balance of contingent consideration:

Current contingent consideration

$

-

$

-

Non-current contingent consideration

3,392

3,548

$

3,392

$

3,548

Other Contingencies

The Company has certain other contingencies resulting from litigation, claims, and other commitments and is subject to various environmental and safety laws and regulations incident to the ordinary course of business. The Company currently has no basis to conclude that any or all of such contingencies will materially affect its financial position, results of operations, or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in current accruals recorded by the Company. There can be no assurance that the ultimate disposition of contingencies will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

With the acquisition of Aquila Resources Inc. on December 10, 2021, the Company assumed substantial liabilities that relate to the gold and silver stream agreements with OBL. Under the agreements, OBL deposited a total of $37.2 million upfront in exchange for a portion of the future gold and silver production from the Back Forty Project. The stream agreements contain customary provisions regarding default and security. In the event that our subsidiary defaults under the stream agreements, including failing to achieve commercial production at a future date, it may be required to repay the deposit plus accumulated interest at a rate agreed with OBL. If it fails to do so, OBL may be entitled to enforce its remedies as a secured party and take possession of the assets that comprise the Back Forty Project.