Jason Reid
CEO, President and Director
Gold Resource Corporation
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View from the Top

Mining is Essential During and After Crises

By Cas Biekmann | Thu, 04/30/2020 - 14:37

Q: How do you view the government’s decree to stop all non-essential activities in the face of COVID-19?

A: I appreciate their proactive approach. When I look at other countries, lockdowns and work stoppages are the norm. The president had taken a relaxed stance toward the pandemic early on. However, health officials took charge and initiated suspensions. This is not good for business, but these are crucial steps to fight the pandemic. If all countries and local groups ceased activity for two weeks and up to a month, it would give us the best chance to get through the pandemic. Otherwise, we risk struggling with it for a year or more.

Q: How are your operations in Oaxaca functioning at the moment?

A: We have stopped operating and sent people home. We have a small crew at the site that helps with security and safety issues, as well as the environmental aspect. My biggest concern when we go back to work is individuals coming from other places who might be COVID-19 carriers. That is going to be the biggest risk for any company that may have sent away its workers. We are trying different approaches to see if we can possibly get people quarantined before coming on site. It would be ideal to test every person who enters the premises, but that would be difficult to accomplish if the tests are not available. We will take other available precautions. However, sometimes symptoms do not show until later on if they show at all. If the ability to test is not there for companies, we are all at risk. Other than that, we will focus on preventative measures and fast-response mechanisms. For the month of April, we are paying everyone their full salary. The company is taking that cost on.

Q: What is your outlook for gold and silver prices?

A: Gold took an initial downturn when the markets crashed in the 2008 crisis. None of the problems that existed in the US back in 2008 have been fixed. They are actually worse now than they have been. Couple that with the virus, work stoppages and massive unemployment and the outlook is not too bright for the global economy. The US government has chosen to try to print its way out of the problem, issuing trillions of dollars and bailing out certain businesses it deems fit for bailouts. I believe this will become the catalyst for the next bull market in gold. I believe gold will take off in response to the unprecedented money creation by governments around the world. Silver will follow that pattern eventually, although it is more volatile than gold. Silver might, therefore, do better than gold on a percentage basis during the next gold bull market. COVID-19 is a very sad and unfortunate situation we would not have wanted to have happened. Nonetheless, the virus, global shutdown, massive global job losses and unprecedented money creation will all culminate to become the new catalyst for the near-term bull market in gold and silver.

We recently opened a new mine in Nevada. This is primarily a gold project with a little bit of silver. It means we are well-positioned for the coming bull market, exposing our shareholders to more gold. Currently, the biggest issue for the Company during the COVID-19 pandemic is how long will it take for us to restart our mine in Oaxaca once the mandated business suspension is lifted and whether Nevada will eventually shut down due to a government mandate or COVID-19 exposure. Regardless, once we get through this difficult time, we are in a good position. We had record gold production last year in part because we brought Nevada online.

Q: What are the plans for 2020?

A: 2020 will be a much more difficult year, for obvious reasons. Last year was great because we had positive outcomes from our projects in Mexico and commissioned Nevada. However, it is a challenge not knowing for how long we will be out of work in Mexico. I am optimistic that by the end of April we will be able to return to work. In other countries, most areas closed for at least two months. There is a good chance that this will be the same in Mexico. Therefore, I have no way of knowing what this means for an actual restart date and for the 2020 production outlook or guidance. It is too early for outlook projections. It is interesting that Mexico does not consider mining as an essential business. Everything we use in life is either grown or mined. If you cannot identify it as the former, it came from a mine. This includes medical equipment, cell phones and cars. To me, mining and agriculture are both essential businesses as these two industries provide the basis for everything else that we use in life. But Mexico does not see mining as essential which I believe is a huge oversight.

When the Mexican government evaluates who can restart their business first, I hope they look at mining. Operations are often located in rural areas as well. This means that once everyone is on-site and they have not brought the virus with them, mines become one of the safest areas to be. This is why mining should be at the top of the list for restarting first regardless of the government not viewing mining as an essential business.

Authorities should also take into account the value chain around the mines. Producing minerals is one thing, but if we cannot get it to market it is of no use. The ability to truck our concentrates and deliver them to our buyers is absolutely critical, for example. If we are allowed to go back to work, I hope that the trucking companies and metal buyers can do so as well. That will be key because if that does not happen, it will not matter if we go back to work or not if we cannot sell our products.

Gold Resource Corporation is a gold and silver-producing, mid-tier junior operator with operations in Nevada and Oaxaca. It focuses on high-grade ore, with the goal to establish cash flow.

Cas Biekmann Cas Biekmann Journalist and Industry Analyst