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Gold Resource Corporation: THE INVESTMENT CASE

Gold Resource praises seventh consecutive year of profitability; updates mineral reserve at Oaxaca once again

Thursday evening was a good one for GORO investors; the company posted annual net income of US$4.2mln and released its “strongest” ever updated mineral reserve for the Oaxaca Mining Unit in Mexico
gold mine
INVESTMENT OVERVIEW: GORO The Big Picture
Ever since it first started producing back in 2010, GORO has been a profitable company

Gold Resource Corporation (NYSE:GORO) gave investors a two-for-one after the bell on Thursday after the metals producer heralded a seventh consecutive year of profitability in its 2017 results, while it also updated the mineral reserve at the Oaxaca Mining Unit in Mexico.

GORO – which has operations in Nevada as well – hit its annual production targets last year, producing 28,117 gold ounces and 1,773,263 silver ounces in the 12 months ended December 31.

Net sales of US$110mln

It sold 47,224 ounces of precious metal gold equivalent in 2017 at an average sale price of US$1,267 per ounce gold and US$17.10 per ounce silver, generating net sales of US$110.2mln.

Looking ahead, for 2018, the firm said it was targeting 27,000 ounces gold and 1,700,000 ounces silver plus or minus 10%.

Chief executive and president Jason Reid told investors: “During 2017, our company posted annual net income of US$4.2mln or US$0.07 per share.

"That number factors in the US$7.3mln in non-cash new tax law adjustments that lowered our earnings by US$0.13 per share. We also returned US$1.1mln back to our shareholders through dividends and added $8.2mln to our bank accounts, all while continuing to invest in the Company’s future growth in both Mexico and Nevada.

"We once again accomplished all of these highlights without diluting shareholders through equity sales and without going into long-term debt.”

As for the other key numbers, the company recorded a mine gross profit of US$42.1mln, while base metal production generated US$57.6mln in revenue for 2017.

Updated mineral reserve for Oaxaca Mining Unit..

All of the production tonnage in 2017 came from GORO’s Oaxaca Mining Unit – a group of six properties in the southern state of Oaxaca, Mexico.

The Aguila project is the flagship operation and home to the Arista underground deposit – gold, silver, copper, lead and zinc – which accounted for 90% of production tonnage in 2017. The open pit mine at Aguila was responsible for about 8% of total production last year.

GORO also has a second underground mine in operation – the Mirador mine at the Alta Gracia project, which made up the remaining 2% of production tonnage.

In a separate statement after the market close on Thursday, the company revealed an updated mineral reserve for Oaxaca.

Proven and probable reserves at Oaxaca now total 2.5mln tons grading 1.77 grams per ton (g/t) gold and 136 g/t silver. That equates to 142,400 gold ounces and almost 10.93mln silver ounces – a 32% year-on-year increase.

“This is the strongest Oaxaca Mining Unit reserve report our company has recorded to date from a tonnage perspective, significantly increasing the proven and probable mine-life of our Mexican operations,” said CEO Reid.

“We now have an estimated proven and probable mine-life of over 4.5 years, an increase of a full year from the year-end 2016 reserve report.”

READ: Goro expands mineralization at Arista

GORO isn’t stopping there, though. It still holds around 1.8mln tons of mineralized material which it hopes to also convert into proven and probable reserves and exploration efforts are “off to a strong start” this year as it looks to do just that.

“The company recently reported a 300-meter step-out strike expansion to the Switchback vein system, also not included in the 2017 reserve,” added Reid.

“We took the last 15 months entering and developing the known bottom of this exciting vein system. If history is our guide, we look for future additions in both tonnage and grade as we explore and mine upwards on this large epithermal vein system within the expanding Arista Mine.”

GORO shares opened flat at US$4.22 on Friday morning.

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