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Discontinued Operations

9 Months Ended

Sep. 30, 2021

Discontinued Operations

Discontinued Operations

3. Discontinued Operations

On December 31, 2020, the Company completed its spin-off of its wholly-owned subsidiary Fortitude Gold Corporation and its subsidiaries (“FGC” or “Nevada Mining Unit”). FGC is presented as discontinued operations in the Company’s Condensed Consolidated Financial Statements.

Results of discontinued operations for the three and nine months ended September 30, 2020, are as follows (in thousands):


	For the three months ended September 30,			For the nine months ended September 30,
	2020			2020
	(Unaudited)			(Unaudited)
Sales, net	$	15,851		$	30,284
Mine cost of sales		10,714			25,872
Mine gross profit		5,137			4,412
Exploration expenses		780			1,373
Other expense, net		62			172
Profit before income taxes		4,295			2,867
Income tax benefit		(957)			(413)
Net income from discontinued operations	$	5,252		$	3,280

Selected Statements of Cash Flows presenting depreciation and amortization, capital expenditures, sale proceeds and significant operating noncash items of FGC were as follows:


			For the three months ended September 30,			For the nine months ended September 30,
			2020			2020
			(Unaudited)				(Unaudited)
Cash flows from discontinued operating activities:
Net income			$	5,252		$	3,280
Adjustments to reconcile net income to net cash from discontinued operating activities:
Deferred income benefit				(957)			(413)
Depreciation and amortization				2,981			6,263
Other operating adjustments				24			17
Changes in operating assets and liabilities:
Accounts receivable				(1,500)			(1,599)
Inventories				154			(2,662)
Prepaid expenses and other current assets				(6)			(17)
Other non-current assets				(1,048)			(1,304)
Accounts payable and other accrued liabilities				1,654			958
Mining royalty and income taxes payable, net				675			675
Net cash provided by discontinued operating activities				7,229			5,198

Cash flows from discontinued investing activities:
Capital expenditures				(173)			(6,368)
Net cash used in discontinued investing activities				(173)			(6,368)

Cash flows from discontinued financing activities:
Cash transferred from Gold Resource Corporation prior to spin-off				294			8,786
Repayment of loans payable				109			(326)
Repayment of finance leases				(440)			(656)
Net cash provided (to) by discontinued financing activities				(37)			7,804


Supplemental Cash Flow Information Discontinued Operations
Non-cash investing activities:
Change in capital expenditures in accounts payable			$	(14)		$	(1,532)
Change in estimate for asset retirement costs			$	307		$	1,404

Effective December 31, 2020, in connection with the spin-off, the Company entered into an agreement with FGC that governs the relationship of the parties following the spin-off. The Management Services Agreement provided that the Company and its subsidiaries provide services to FGC to assist in the transition of FGC as a separate company. The agreed upon charges for services rendered were based on market rates that align with the rates that an unaffiliated service provider would charge for similar services. Due to the successful development of FGC’s corporate, administrative, and technical capabilities, the Company terminated the Agreement effective on May 21, 2021.