Thank you for standing by. This is the conference operator. Welcome to the Gold Resource Corporation's Year-end 2020 Conference Call. [Operator Instructions] I would now like to turn the conference call over to Ann Wilkinson, Vice President, Investor Relations and Corporate Affairs. Please go ahead.

Thank you, Kaye, and good morning, everyone. On behalf of the Gold Resource team, I would like to welcome everyone to our year-end 2020 results conference call. Before we begin the call, there are certain housekeeping matters I would like to cover. Please note that certain statements to be made today by the management team are forward-looking in nature, and as such, are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings. On the call today, we have Allen Palmiere, President and Chief Executive Officer; as well as Kim Perry, Chief Financial Officer. Following their prepared remarks, they will be available to answer your questions. This conference call is being webcast. For those of you joining us on the webcast, you can download a PDF copy of the conference call slides from the Materials tab under the Ask A Question tab. The event will also be available for replay on our website later today. Yesterday's news released following the close of the market and the accompanying financial statement and MD&A contained in our 10-K have been filed with the SEC on EDGAR. Also, please note that all amounts mentioned in this call are in U.S. dollars unless otherwise stated. I will now turn the call over to Allen.

Thank you, Ann, and good morning, everyone. I want to thank all of the listeners for taking the time to join us. I look forward to outlining some of the results of the company from 2020. Following my opening remarks, Kim Perry, our CFO, will describe our financial results. I will then provide you with a high-level view of our plans for 2021 and a few closing remarks, and then we will take your questions. On December 31, 2020, Gold Resource Corp. completed its spin-off of the Nevada Mining Unit to Fortitude Gold Corporation, a separate public company. The separation was completed by a way of a pro rata distribution of the outstanding shares of the newly created subsidiary to our shareholders on December 31, 2020. I took over as CEO following Jason Reid's departure to run Fortitude. And early in the new year, we added 3 new Independent Directors, Ms. Lila Manassa Murphy, Mr. Joe Driscoll and Mr. Ron Little, to the Board of Directors. These additions to the company's leadership add the expertise necessary to focus on unlocking the value of our Mexican assets while implementing best-in-class governance. Turning to our Mexican operations. I'm pleased to report that Gold Resource produced approximately 20,500 ounces of gold, 1.2 million ounces of silver, about 1,600 tonnes of copper, 7,700 tonnes of lead and 19,700 tonnes of zinc despite the 2-month mandatory shutdown in 2020 of the Don David Gold Mine in response to the COVID-19 pandemic. 2020 marked 2 milestones, 10 years of production and over $1 billion in revenues to date. During the fourth quarter, we processed ore at an average rate of 1,700 tonnes per day compared to 2,000 tonnes per day in 2019, largely because of lost workdays related to COVID-19 protocols and safety measures to keep…

Thank you, Allen, and good morning, everyone. The financial performance from the Don David Gold Mine ensured we closed the year with a strong balance sheet, consisting of just over $25 million cash and no debt. This increase of $15 million from 2019 is after providing the Nevada Mining Unit with over $20 million in cash during the year, including the $10 million as part of the spin-off capitalization. Cash from operating activities was just over $21 million. And working capital from continuing operations was nearly $31 million at December 31, 2020, a year-over-year increase of 22%. For the year, we reported net income of $4.4 million. Our revenue from the Mexican operations was approximately $91 million, resulting in a mining gross profit of $12.5 million. Net sales decreased by $29.6 million for the year as compared to 2019. This decrease is primarily related to 2 factors: first, production volumes were impacted by the government-mandated suspension of operations related to the global pandemic; and second, a 34% decrease in total concentrate treatment charges which are netted against concentrate sales within revenues. Lower average realized prices for zinc and lead were slightly offset by higher average realized prices for gold, silver and copper. Total production cost of $60.6 million for 2020 were 16% lower than the production cost for 2019. The decrease is directly related to the lower sales volumes. The production cost per tonne milled were $107 or 3% higher than 2019 production cost per tonne milled of $104. This increase reflects the impact of inflation on labor rates and transportation costs. Treatment charges for the 12 months ended December 31, 2020, were $21.1 million as compared to $13.8 million for the same period in 2019. This equates to $729 per tonne of concentrate produced in 2020 versus $403 per tonne in 2019, an approximate 80% increase for each tonne of concentrate produced. The treatment charges for 2021 are expected to decrease by about 30% to between $525 and $550 per tonne of concentrate produced. This expected decline in concentrate treatment charges is a result of recent negotiations, but is also dependent on the spot treatment market for zinc, which can be volatile. Don David Gold Mine's total cash cost after by-product credits was $784 per gold equivalent ounce sold. In total, all-in sustaining costs were $1,365 per gold equivalent ounce sold. We expect these costs to decline in 2021, especially with the expected decrease in treatment charges for zinc concentrates, and Allen will provide a few more details shortly. During the year, we also returned dividends of $2.8 million to shareholders, which, since 2010, have totaled over $115 million. With that, I will turn the call back over to Allen.

Thank you, Kim. Turning to 2021. Our focus is on unlocking the value of the mine, existing infrastructure and large property position. Accordingly, we plan to invest approximately $29 million in infrastructure and exploration in the Don David Gold Mine in 2021. Of the $29 million, approximately 75% of the total will be focused on capital initiatives to sustain the operation and improve recoveries within -- with the balance focused on exploration. Gold and silver production will remain in line with 2020 as we focus on operational excellence and improved margins, which we expect to be reflected in lower cash cost per ounce after by-product credits in the range of $210 to $225. We anticipate our all-in sustaining cost, after by-product credit per gold equivalent ounce, to be in the range of $800 to $900. In closing, our Don David Gold Mine located in Oaxaca, Mexico delivered solid production results during a demanding 2020 amid the COVID-19 global pandemic. While COVID-19 is expected to remain a challenge in the short to medium term, our team has done a truly excellent job of managing the situation, and I would like to take this opportunity to thank all of our employees and contractors for their hard work and resilience. I recently had the opportunity to visit the Don David Gold Mine and see first-hand the operations, including the projects I covered in my opening remarks. Notwithstanding the operation has accomplished a lot, there is a lot more to do. We intend to take a holistic approach to understanding and capitalizing on the foundations laid in the areas of safety, community relations, environmental stewardship, operational excellence and organic growth in order to unlock the value in our highly prospective ground package. I want to repeat Kim's comment that the company finished the year with a strong balance sheet, which provides us with the flexibility as we move forward to reinvest capital in Mexico to increase the mine's productivity and the life of the operations. Thank you for taking your time to listen in. This concludes our prepared remarks. And I will now turn the call back over to the operator for questions.

[Operator Instructions]

Allen, while Kate is pooling for questions, I have a question that's come in on the webcast, and it's from Richard, a private investor. And he asked, after so many years of mining at Arista, have you gone deep enough to determine whether or not there is skarn potential at the Arista site. This has been referenced previously, and he's interested in the potential if such a skarn was determined to exist.

Richard, that skarn potential is certainly there. We're currently in the process of developing 2 exploration drifts underground, one to the Northwest, one to the Southeast. Part of the drilling objective, once we complete the drift to the Northwest, is to test for the, number 1, existence of and location of that skarn. Will we hit it? I don't know. It's exploration. But that is part of the current drilling program for this year.

And I have a second question coming in on the website. Will the company consider listing on the Venture Exchange in Canada or the senior listing Board? And what about attendance at trade shows like the PDAC?

Listing on the Venture or the TSX is something that is a possibility. At this stage, it would be a secondary listing, and it would only be to enable us to access research and investors that trade primarily on Toronto. It's something that we're thinking about. However, one of the things that often occurs is that a secondary listing does not necessarily engender much in the way of trading volume. So it's not an automatic conclusion. It's a good exchange for mining companies, but it's not necessarily an automatic. In terms of attending conferences, this year obviously is a unique year, much like a good portion of last year. We are going to be in attendance at a number of conferences virtually this year. I can't give you all of them, but there are already about half a dozen on the schedule. PDAC, specifically, I'm not going to be attending this year. We have got a conflict with another conference. But certainly, it is our intent to be out presenting the story to as many people as possible.

Again, from the webcast, James from In The Ruff Research asks -- he says if we examine the 2021 guidance, it appears that while gold production is expected to remain below pre-pandemic levels, you are expecting higher levels for silver and the other base metals. Is that based on reduced grades of gold or specific stope targeting? Can you elaborate further?

Absolutely. James, the nature of the mineralization that we're dealing with is what's termed as epithermal. And epithermal deposits are somewhat interesting. The higher you get -- or the further away you get from the original heat source, the higher the precious metals are. The closer to the original heat source, the higher the base metals are. Right now, where we're operating in Switchback, we're in an area that is lower down on the system and base metals have picked up. Now I will point out that we issued a press release a few weeks ago about drilling from our exploration development that resulted in very high gold grades and very high silver grades. Those drill holes were located in what we believe to be the upward extension of Switchback, and should that continue to prove out, you will see, in the future, gold and silver grades increasing because we'll be mining higher in the system. I think that answers your question.

A follow-up question from James. The assumptions used for estimating the by-product credits assume base metal prices that are significantly below current prices ranging from 17% to 32%. If those rates continue to hold, is it fair to expect significantly lower all-in sustaining costs?

Quick answer is, yes. On our budgeted numbers, we're looking at all-in sustaining, as I indicated earlier in the presentation, of $800 to $900. Obviously, if the base metal prices or by-products increase in value, our all-in sustaining cost would decrease proportionately. So that's absolutely a fair assumption.

From the webcast again, a gentleman named [ Greg Marino ]. Do you have plans to reduce head count, operations and staff? On the other hand, are there any investing plans outside of Oaxaca?

In terms of head count, I was down there. I spent 10 days down in Mexico in January, and I'll be going back down in the near future. What we have in Mexico is a very, very high-quality workforce. The technical team is as good as you are going to find anywhere. The underground workforce are very, very competent. Is the workforce higher than you would typically expect to see in North America? Yes. Is it unusually high for Mexico and Latin America? No. I'm not particularly concerned about our level of workforce. If you look at our total labor cost as a percentage of total operating cost, it runs 32% to 35%. And the rule of thumb is, it's 1/3 labor, 1/3 consumables and 1/3 power or energy. And that holds pretty much anywhere in the world. So our labor cost as a percentage of production are in line. Are we looking at investing outside of Oaxaca? I will say that in the mining industry, you're always looking. You have to. Do we have a focused corporate development program? No. And I will tell you that my philosophy on corporate development is that it is, by definition, opportunistic. If something is presented to you and it looks as though it has merit, you follow it out. Just by virtue of being in the industry, there are opportunities presented on a continual basis, and 99% of those are not something that we would choose to follow up, but you never know. Something may come along that we're extremely interested in and then we would look at investing outside a block. Currently, our focus is on the Don David and the very, very highly prospective land position that Gold Resource has already put together.

Next question, can you describe the service agreement with Fortitude? And will you still be going -- how is that going to be treated going forward? That's from Trickle Research?

Well, as part of the spin-off of Fortitude, Gold Resource and Fortitude entered into a service agreement whereby Gold Resource agreed to provide certain services and support to Fortitude. That was -- that only made sense because it's the Gold Resource team that was providing all of that while Fortitude was a wholly-owned subsidiary. The underlying intent of the service agreement is to provide Fortitude with sufficient time to build up their own team. And while we never really talked about finite limit to the service agreement, I do know that Fortitude is moving quickly to establish their own team. And at some point, I would expect the service agreement will fall away. I can't tell you timing. I need to talk to Jason Reid at some stage about that. But I do know that he has been quite successful in building his own management team.

So related question, and this is from back to James, In the Ruff Research. The guidance for the 2021 G&A was between $6 million and $6.5 million versus $8.5 million in 2020. Can you clarify what drove the reduction?

Kim, do you want to take that one?

Sure, Allen, happy to. Thank you for the question. So there were several opportunities to reduce G&A, just part of the spin-off. So there were certain rents, there were some salaries that came through that moved over to Fortitude. So a lot of it related to the Fortitude spin-off. But then by nature of us being a bit of a smaller company this year, we're able to realize some benefits through some of our service arrangements.

I think it's also important to note that the $6 million to $6.5 million excludes the share-based compensation.

Yes, that's correct.

So on the capital investments 2021 guidance, can you clarify which items are already embedded in all-in sustaining costs and which would be incremental?

Some of the -- we've got a number of different projects underway, some of which will go into all-in sustaining and some go into growth capital. Specifically, our exploration-related expenditures, not in-mine, but external and around mine exploration, all go into growth capital. The regrind circuit that we are putting in into the plant is not a modification to the circuit, it's additive to the circuit. And it will potentially increase recovery by 6% to 10% -- gold recovery by 6% to 10%. That is not in all-in sustaining, that is in growth. The 2 other major projects -- well, there's 1 other major project underway that I would address, and that is the filtration and dry stack initiative. That's analogous to building a completely new tailings facility which would be growth capital, not sustaining. As we move forward, there will be additional costs associated with the dry stack as we prepare new areas for deposition and the like that would potentially be sustaining, but the initial project is growth. We've got approximately $9.8 million in our capital budget for underground development. That is all mine related. That is all sustaining capital. And we have, directionally, $2 million to $2.5 million for underground exploration, and that is definition drilling, not exploration drilling. The intent of that type of drilling is to upgrade your resources to reserves and mineable reserves. That is all-in sustaining. I think I've addressed most of them. The definition really revolves around whether or not it is additive or whether it's maintenance. And underground development is all maintenance. You have to do it to develop your resource. Exploration is an example. It's an attempt to grow the resource long term, increase the life. So that goes in growth capital.

Allen, I think we'll take 1 more from the webcast. And then we'll -- Kate, I think we'll go to the people on the phone as we've likely had people waiting quite patiently to ask questions over there. So Mr. Carter on the webcast is asking, will the dividends continue? And are there prospects for a dividend increase?

Current plans are for the dividends to continue as they have been for the last several years. Prospects for increase is not something that we're considering at this point. We have a reasonable balance sheet. We are in fact anticipating increased capital spending, and it comes down to a capital allocation decision and that will be reviewed on an ongoing basis. I will say that currently there's no intent to increase it, but if metal prices hold and we end up with a large balance sheet, with our large cash position, you never know.

Thanks, Allen. Kate, do we have people waiting in the wings on the phone?

Yes, we do. Our first question today is coming from Heiko Ihle.

Allen, Kim and Ann, welcome to the team. I'm truly looking forward to working with all of you.

Good to hear from you, Heiko.

For the electrification of yourself and the local community, can you just walk me through what all that cost your previous spending? And to be clear, I mean, we won't see any more spending on that for the remainder of 2021 at Don David at all, correct?

In fact, the transmission line was completed in 2019. 2020, we received the benefit of it. There was no capital associated with it in 2020, nor will it be in 2021. The quantum of the project was not particularly significant; and I'm going by memory now, Heiko, so bear with me, but it was only in the order of $1.5 million to $2 million. The issue associated with the transmission line was more one of gaining access to the right of way for installation. And I know that the company took several years to pull together the right of way to enable them to construct the line. Once they were able to do so, the line was constructed very efficiently, very quickly and the spin-off benefits to the local communities was really very remarkable. If you think of 25,000 people who have never -- 25,000 families who have never had electrical power before, that is something that the company is rightfully very proud of.

I wish you could see my computer because my very next question actually was, one would assume community feedback to this is beyond excitement? And have you seen any change to your social license in the area based on that?

Well, I will tell you that the company, over the last 10 years, has established a very, very good relationship with the local community. Now we're dealing in a part of Mexico where you've got a number of ejidos that we deal with because we've got a 55-kilometer strike length of properties. And our relationship with some of those ejidos is not what we would want it to be. But in the immediate community, we have a great deal of support, and they are working very, very closely with us. What we need to do going forward is to leverage off of the good work that has been done with respect to working on infrastructure in the local community, that transmission line is a notable accomplishment. We need to leverage that to obtain -- or improve our social license further to the north so we can continue with our exploration programs and hopefully expand our resources.

And then just 1 last one for me, and this might be a Kim question, I'm not sure. Just as a clarification. On your guidance, you note that your G&A does not yet include restructuring expenses. I mean we're 2/3 through Q1. How much in restructuring expenses should we expect to see for the remainder of this calendar year? It looks like you had $1.32 million in 2020 for severance in the Fortitude spin-off as per your 10-K?

Kim, do you want to take that?

Yes. Thank you, Allen. Thank you for the question, Heiko. It's not going to be significant. There's still a couple unknowns as we finish separating systems and so forth, but it would be less than $1 million.

That is yet to be incurred?

Some of it has been incurred. All of it will be incurred by the end of the first quarter, yes.

All of it will be incurred by the first quarter, about $1 million or maybe a bit less. Excellent.

A bit less. Yes. Yes.

Excellent. I appreciate that. Allen, it's good to see you made it to the site.

I'll be going back again next month.

Our next question today is coming from [ Harvey Bowlen ].

I'm a longtime investor, private investor, in GORO. Gosh, it seems like almost forever. In any event, I have a couple of questions. First of all, I noticed that the guidance for this year has production basically flat from last year, if I understand it correctly. Yet last year you were affected significantly by the COVID shutdown. So I'm wondering why production for 2021 isn't greater than 2020.

Harvey, first off, I'm glad to meet you as a long-term shareholder. If you look at the production profile of the Don David Gold Mine going back over history, 2019 was the highest level of production the mine has ever achieved. What drove that, and I'm going to step into geology right now, but not too much. What we're mining at the Don David are 2 mineralized zones. The first one that was ever developed is Arista. And Arista is predominantly narrow veins -- a cluster of narrow veins. Beginning in 2016, 2017 and then peaking in 2019, we developed the Switchback zone. Switchback is different in that it has one particular vein, Soledad, that is much, much wider than anything that we have found on the property before. I think last year, the average mining width was something in the order of 10 meters. When you have a vein such as a Soledad, you can adopt different mining methods. Effectively, you can long-haul it and you can get higher levels of productivity. We -- the company focused on Soledad all of 2019, part of 2018 and part of 2020. This year, while we are continuing to operate in Soledad in Switchback, we're also reemphasizing the narrow vein in Arista. Now what that is going to mean is our production is going to decline. Arista is actually higher grade. So your metal content isn't going to be suffering dramatically. And what we're doing now is taking advantage of pre-existing resources. We don't want to leave it behind. So while it is a bit flat, the level of production in 2019 was not sustainable, primarily because it's almost exclusively coming out of that 1 vein over in Switchback. We want to utilize the entire resource, and we're mining at a rate that allows us to sustain operations on a long-term basis. Does that mean we won't increase production? No. But in order to do so, we need success in our infill and our near-mine exploration. And that is one of our primary focuses for this year. Hopefully, we can take it back up to 2,000 tonnes going forward, but we need additional resources and good mining widths to enable us to do that.

Yes. I hear you. And on that same topic, I noticed that reserves are less at the end of 2020 than they were at the end of 2019. So how are you addressing that?

I talked about that in -- a little bit earlier, Harvey. What we're doing is we've budgeted $7.5 million for just exploration this year. That's up from about $2.5 million last year. Last year was a very, very difficult year. COVID hit hard, and we were not able to do our underground development so we could do underground exploration. It was really an atypical year. Now I'm going to put it in context for you. These type of epithermal deposits are very difficult to build a long-term resource out in front of you. And it's difficult because of the cost of drilling. Most of your exploration is underground, so you're drifting and then you're drilling from underground. It is expensive. And you're constrained by your ability to develop. I'll put it in context for you, though. I was involved with a company that had a similar type of mineralization located in Latin America. The mine was started in 1952. It's operating today, and it's never had more than 3 years' resources ahead of it. I use that as an example only because these type of mines seldom have a long resource ahead of it. However, history would suggest that we will continue to develop resources as we go. Primary example of that are the drill holes we released few weeks ago. Those are not included in our resources, but it's already indicative of a continuation of the Switchback that we're very excited about. Whether it proves into ore, it's a bit premature. But the holes were very, very good. They were some of the higher grade gold and silver holes that we've pulled on the property. And that is giving us a great deal of optimism that we'll be able to not only replace reserves this year but expand on them.

Sounds good. Sounds good. Of course, I hope that all of this happens, obviously.

There's 2 major factors here. One, it's mining; and one, it's exploration. But we are in fact in a very, very impressive mineralized zone. And we've had a lot of success in the past, and I anticipate that continuing in the future. I really am not overly concerned about our resources.

So the exploration, is that -- is some of the -- or is any of the exploration taking place in areas that you've not been in before? Or is it kind of sticking to the places that you've been and expanding on that?

I think it's more of the latter than the former. We are drilling outside of the direct mine site to the Southeast. It's a continuation of the mineralized zone that we're exploring. It's still relatively close to the mine. But it is in an area where we've not drilled in the past. We are drilling underground, and that is very much near-mine drilling, but we are drilling further to the East to explore for a potential new mineralized zone. We're drilling up-dip of the Switchback, and we're drilling a long strike, both directions for Arista and Switchback. So the answer is a bit of a hybrid. But we are focusing primarily on in-mine and near-mine exploration this year with a specific focus of increasing our mineable resources.

[Operator Instructions] Our next question today is coming from John Bair.

John Bair with Ascend Wealth Advisors. I have been a shareholder -- client shareholder for a number of years here. So I appreciate you taking my call. And I actually had 3, and you've touched on all of them to some extent. Let me start with a real simple one. Going back to Heiko's question regarding the electrical grid, is there any -- you don't have any ongoing costs related to that, if I understand correctly? And also wondering how reliable is that electrical source? How far away is the power being generated?

Okay. Number one, it's good to meet you, John. Quick response to that is that there is no more capital associated with the transmission line. We have on site 6 standby generators that we used to use for power generation. And the only time they were turned on last year, I think it was for a total of 4 hours outside of normal p.m. running. The grid has been very, very stable and very reliable. It is not a line just to the mine. What makes this particular transmission line so attractive is it was something that the power authority wanted to build anyway, and it completed a circuit within the grid. It is their primary transmission line, and we have been very, very happy with the stability and continuity of supply. We do maintain the generators because if there were to be a problem, we need to keep running. So we have our generators as standby. But last year, there was virtually no shutdowns due to power availability.

Okay, great. Harvey's previous question about some exploration; I was looking at this as well. Can you kind of differentiate -- you've got $3 million budgeted for surface exploration versus $1.6 million for exploration development. Can you kind of elaborate what your difference is? Is that simply where you are locating the drill rig, one, underground versus being physically on the surface, and maybe doing a directional borehole?

Okay. The $1.6 million for development is just that. What we're doing there is -- I talked earlier that we're driving an exploration drift, one to the Northwest and one to the Southeast. That $1.6 million just deals with the cost of driving those drifts. That's it. The approximately $3 million for surface drilling, that is very much traditional surface drilling. We've got identified targets, and we're poking holes into it to see what we come up with. In addition to that, there's -- and I don't have the number at my fingertips; I'm sorry, John. But directionally, there's another $2 million for drilling underground. And what we'll be doing on that is, as we go drive those exploration drifts, we slash out drill stations. And then we actually drill from underground, exploration drilling from underground as well. Does that answer your question, John?

Yes. Okay. And so you are going to poke some holes over in the magnetic anomaly area to the Northwest as well as going East and Southeast. And I'm looking -- I have your Page 18 pulled up from one of your presentations on your website. So sort of kind of looking at that.

The -- part of the objective of that drift going to the Northwest is to test the halo around that magnetic anomaly. You're absolutely right. But the other objectives of that drift going to the Northwest is to look for an extension to both Switchback and Arista. Going to the Southeast, it's -- we're a long strike for both of those mineralized zones, and we'll be looking at that. The drift to the Northwest also has one of its objectives pushing a few holes further to the East because there's some indication that there might be an additional mineralized zone beyond Switchback. So we're also testing that. So we've got a multitude of targets for this program.

Yes, that was the other aspect of that, the additional parallel vein system that has been talked about in previous years and presentations and so forth. How many boreholes do you think will be targeted that way? Or maybe better asked, what percentage of your exploration budget would target that particular potential?

We only have about 3 drill stations that get us close enough to that zone to test it. So there won't be a lot of holes in there. If we are lucky enough to find something, then we'll probably end up drifting in that direction to expand the drilling over to that potential new zone. I say it's potential, John, because we really don't have any hard indicators where there's surface expressions that would lead us to believe there might be something there. And the only way to test it is from underground. So it will be limited this year, probably only no more than half a dozen holes. If we get some joy, then we will plan on following that up next year and in subsequent years.

Okay. Great. My last question. Kim touched on it in her comments about base metals and processing fees and so forth. My question was going to be, can you share how significant pricing improvements with various products, lead, zinc. We all kind of see every day the price bouncing around for gold and silver. It's pretty more readily put out on news feeds and so forth. Can you talk about that a little bit more? And it sounds like we're still on a variable maybe month-to-month processing schedule rather than a, say, a 1-year fixed processing for, I believe zinc was the one that kind of nipped you for a couple of years?

Okay. What you're referring to, John, is the smelter contracts and the TCs that were charged for having our material smelted at the smelters. Last year, there was a very, very big squeeze on smelter space and prices went through the roof. The smelters were able to charge almost anything they wanted, and they were near historic highs. That hit us very hard. They've come back to normality this year. Kim talked about it in her remarks. But zinc, because we do produce a lot of zinc, hit us pretty hard. But the indications are right now, based on our current contract and spot, it will be reduced, on a per tonne of concentrate basis, about 30% in our TCs. That is a very significant number. I indicated to you that we are looking directionally at 19,000 or 20,000 tonnes of zinc. And if you have a 30% reduction of cost associated with that level of production, the math is pretty straightforward. It's a significant saving. What we've done for our guidance and our budgeting purposes is we've taken a very, very conservative position for our pricing of all of our by-products. Just for example, we've used, directionally, just under $3 for copper. Copper is now north of $4. Zinc, we used $102, and zinc is trading $128, $130. Lead, we were high $70s and lead is a bit higher again right now. We were conservative on our numbers for silver and for gold. Now gold, I'm going to make a comment on because we've seen a lot of volatility in price recently, who knows where it goes. But certainly, our by-products are looking very, very secure in terms of providing the cash flow we're anticipating. If anything, we'll get excess cash flow out of it. Does that address it, John?

Yes. That -- you basically said that your realized prices for copper, lead, zinc have been going up. Gold has been tough for the last few months. Silver has moved higher. And with all this focus on renewables and so forth, your by-products are used in that as well, obviously, silver. So -- I mean -- so if your processing costs are going down for zinc and your realized price for zinc is going up, that's really a positive double-edged sword. I guess it isn't really a double-edged sword, it's a good boost. It sounds like...

It's a nice multiplier, and it could have a very positive...

Let's call it a good tailwind, I guess, is the way it should be. Okay. Very good. That helps me out.

Allen and Kim, there are a couple more questions on the webcast as we approach the top of the hour. And for anybody whose question didn't get answered, we will follow up with you. We're trying to bucket the questions in general categories. So specifically, a question for Kim. How are you getting prepared in relation to the labor reform on 2021, I'm assuming, in Mexico? And what could be the financial effect?

Thank you for the question. So from the labor reform perspective, the vote was originally supposed to happen in early February, and it's been postponed. Now that the -- there's some other big tickets that the Congress was addressing, they were voted on this week. So we think the reform might be voted on before the election that's going to occur in June for Congress. Because we thought the election -- or the vote was going to occur in early February, we actually had everything ready to go at that point. So when the vote occurs, we'll be ready to go. We've had a lot of discussions with our union. Our union is very favorable. Basically will be a substitution so that all employees will maintain their tenure and all their current benefits. The cost impact we feel is going to be pretty much cost-neutral. So we did have a markup we were paying to our service provider and then there's also the flip side where now there will be some component of profit sharing. Those really kind of wash out, especially given the [ fact ] that we have always compensated our employees with a bonus. So the cost impact really should be about neutral.

And Allen, is -- do you have any concerns with the government of Mexico considering that it could appear anti-mining?

Not particularly. I think that virtually every country in the world goes through periods where it seems to be popular to be anti-mining. But if you look at the economy of Mexico and the degree of -- the percentage of the GDP generated by mining activities, I really do not believe that the government is going to do anything that's going to jeopardize effectively the cash cow that funds a great deal of their expenditures. Will there be changes? Absolutely. But do I think that they're going to be so comprehensive or so all pervasive to -- as to really compromise our operations? No, I don't. I think that there will be, and it's happening in every country in the world, movement to stiffen environmental controls. I think there will be potentially increased taxation. But oftentimes, when we see nameplate increases in taxation, there's offsetting deductions. So the net result is not particularly significant. At this point, I don't see any cause for concern, and I don't anticipate any going forward.

Okay. Let me just check here. From James Thottam at In The Ruff Research. I understand GORO historically was pursuing a potential refund or adjustment resulting from the GILTI tax. Was there any resolution on that?

Kim, do you want to tackle that one?

Yes, I'm happy to. James, that's a good question. So there was some reform that came through in 2020 that basically allowed us to review whether or not we were considered in high-tax jurisdiction. So in 2019, most investors will recall, we had about a $2 million impact in expense related to GILTI for 2018 and 2019. We went back and evaluated 2018 and 2019. In 2018, we did not qualify for the high-tax exemption because at that time we were receiving credits from the diesel fuel we were using from the diesel generators Allen mentioned earlier. So those credits did bring our tax down to a range that was not considered a high-tax jurisdiction. But in 2019, we did not have that benefit from those diesel credits. So we did qualify for a, I hesitate to call it a refund; it basically reduced the exposure for 2020. But in 2019, the impact was tax-effected approximately $800,000. So we did receive back some of that $2 million that was recorded in 2018 -- or 2019, sorry.

I think we have time for 1 last question. This comes in from Craig on the webcast. So Allen, as the new CEO of GORO, what encourages you and excites you most about the prospects and opportunities of the company going forward?

Really, that goes to the reason I joined the company in the first place. I viewed it as a unique opportunity. You have got a very, very, very strong technical team at the mine with excess bandwidth so that we can accommodate any new opportunities. We have got a very impressive property position that is highly prospective. A little bit of exploration was done to the North 8 years ago. Never followed up because the focus was on Arista. I think the opportunities for exploration are extremely attractive. We have no debt. We have -- directionally, year-end, we had $25 million in cash. No reason to go to the capital markets. We will be generating free cash flow in excess of our requirements this year by a significant margin. The company is very well positioned to take advantage of opportunities for organic growth. And if something comes from outside by way of M&A, it's very seldom you get an opportunity to take over a company that has no real issues. It's about challenges, but it's an operating company by definition of those challenges. But it really is a very attractive platform on which to unlock value -- or by which to unlock value associated with the people and the properties in Oaxaca.

Thanks, Allen. Well, that brings us to the top of the hour. We wanted to thank each and every one of you for tuning in and for attending our call. For any of you who posed questions on the webcast that we didn't get to, we will be circling back around with you. And we will talk to you again in the -- on the next quarter conference call. Thank you.

Thanks, everyone.

Thank you. Ladies and gentlemen, this does conclude today's event. You may disconnect at this time, and have a wonderful day. We thank you for your participation.