Big Picture – A Deep Dive Examination of Gold Resource Corporation
Gold Resource Corporation Snapshot
Gold Resource Corporation (NYSE MKT: GORO) is a gold and silver producer targeting projects that feature low operating costs and high returns on capital. The Company's primary focus is on cash flow, with a priority to return meaningful dividends back to the owners of the Company, its shareholders. The Company has two mining units located in mining friendly jurisdictions of North America. The "Oaxaca Mining Unit" consists of 100% interest in 6 potential high-grade gold and silver properties in the southern state of Oaxaca, Mexico. The "Nevada Mining Unit" consists of 100% interest in three, with an option to acquire 100% interest in a fourth, potential high-grade gold properties in the Walker Lane Mineral Belt in western Nevada, U.S.A.
GORO successfully declared commercial production from its Oaxaca Mining Unit July 1, 2010 from a shallow, high-grade open pit at its Aguila project, which enabled the Company to reach production and cash flow in the shortest amount of time with one of the tightest capital structures for a producer. In March of 2011, GORO announced production from its polymetallic Arista mine. The Arista deposit is comprised of the Arista and Switchback vein systems, both contain high-grade gold and silver as well as the base metals of copper, lead and zinc. The Company targets the extensions of this deposit and is exploring for additional deposits at its Oaxaca Mining Unit to add to its production profile.
GORO received a mine permit for the Mirador Mine in October 2016 located on the Alta Gracia property, and expects first production from this operation during 2017. The Mirador Mine will be the second operating mine within the Company's Oaxaca Mining Unit.
The Company's Nevada Mining Unit consists of four properties with the Isabella Pearl Project being the closest to reaching gold production. The project is in advanced stage engineering and permitting and the Company is working towards production at the earliest possible point in time. Gold Resource Corporation's Nevada Mining Unit now controls approximately 27,300 acres of development and exploration lands in south central Nevada's Walker Lane Mineral Belt.
The Company has distributed consecutive monthly dividends since commercial production totaling over $109 million as of January 2017. The Company's dividend target is to return as much back to shareholders as soon as possible, while balancing the needs of the operations and paying taxes. The Company has remained profitable for six consecutive years, four of which were during bear markets in the precious metal space.
Mexico and Nevada U.S.A. are among the leading venues for mineral potential each with an extensive history of mining. Gold Resource Corporation is positioning to add to its current production profile from its Mexican operations by rapidly advancing its Nevada Mining Unit's potential for open pit heap leach operations.
Gold Resource Corporation (GRC) has consolidated 100% interest in six properties in the southern state of Oaxaca, Mexico. The Company's Oaxaca Mining Unit properties were selected based on their potential to meet the Company's objectives of low operating costs and potential for high returns-on-capital. GRC currently controls over 684 square kilometers, including 55 kilometers of a geologically important structural fault corridor running North 70 West.
The Company's flagship operation is the Aguila Project, where the Arista underground polymetallic deposit is currently in production. The Arista deposit produces gold and silver, as well as the base metals copper, lead and zinc. GRC's second operating mine is the Mirador Mine on the Alta Gracia Project. The Company's additional four exploration properties are all within trucking distance of the Aguila Project's processing facilities. GRC's objective is to ultimately have multiple properties feeding ore to the strategically located mill, which aims to potentially reduce the capital required to put any future deposit discoveries into production.
Development of the Arista mine began in 2009, and initial production from the deposit began in March 2011. Ore is trucked approximately 2 kilometers to the Aguila mill where it is processed into three differential concentrates: a copper/gold; a lead/silver; and a zinc.
Since the initial discovery of the Arista and Baja veins in 2007, multiple additional en echelon veins have been discovered, many which have been mined or will be mined in the future. The Arista deposit is currently "open" in both strike and at depth. The deposit currently extends over 1 kilometer along strike, and over 600 meters at depth. The Company continues to drill the extensions of the Arista deposit to extend the mine life.
El Aguila Mill
Gold Resource Corporation currently processes all of the Arista underground mine ore through the flotation circuit at the Company's El Aguila mill. The plant was built near the mine site and consists of two separate production circuits: a differential flotation circuit (sulphide ores) and an agitated leach circuit (oxide ores). The current nominal capacity of the flotation circuit is 1,500 tonnes per day, while the agitated leach circuit has a nominal capacity of 300 tonnes per day.
The flotation circuit produces three types of high-grade concentrates: a copper concentrate with gold-silver; a lead concentrate with gold-silver; and a zinc concentrate with gold-silver. All concentrates are marketed to a broker in México.
The Aguila plant's agitated leach circuit is currently idle as the Company evaluates long-term sources of oxide ore.
Oaxaca Mining Unit Exploration
Gold Resource Corporation has consolidated and controls 100% of a large, highly prospective property position in the southern state of Oaxaca, Mexico. The Company's six properties now encompass over 68,000 contiguous hectares (684 square kilometers), including 55 kilometers of the regional "San Jose structural fault corridor" which trends North 70 West.
The Company believes the mineralization along the San Jose structural fault corridor is related to the Cocos tectonic plate subducting the North American plate. As the Cocos plate is subducted, it breaks and is partly re-melted into the surrounding mantle. Any faults overlying the North American plate are exploited by the molten magma, which under immense pressure is forced to the surface forming volcanos. It is these volcanic events that have deposited high-grade mineralization along this fault corridor.
The Company discovered the Arista deposit at its El Aguila Project in 2007, a high-grade epithermal system containing gold and silver, as well as the base metals copper, lead and zinc. This polymetallic deposit is located at the far southeastern portion of the Company's land position. The Arista deposit entered production March 2011.
Gold Resource Corporation has also discovered a high-grade gold vein system at its El Rey property, 55 Km's northwest from El Aguila along the San Jose structural fault corridor. Drilling at El Rey has returned results as high as 132.5 grams per tonne gold over 1.0 meter. The Company also announced in 2013 initial drill results from its centrally located Las Margaritas concession, which included 2.85 meters of 27.90 g/t gold and 2,600 g/t silver. Surface sampling and airborne geophysics have generated multiple targets between El Aguila and El Rey warranting additional exploration along this 55 kilometer mineralized structural fault corridor.
Securities and Exchange Commission (SEC) Proven and Probable (P&P) Industry Guide 7 Reserve Estimates
December 31, 2015
ISABELLA PEARL DEVELOPMENT PROJECT
The Isabella Pearl Project is located in south central Nevada's Walker Lane Mineral Belt in Mineral County, Nevada. The land position totals 341 unpatented mining claims covering approximately 6,800 acres, of which 58 claims encompass the Isabella Pearl deposit and planned mine area.
The Isabella Pearl project contains third party Proven and Probable reserves estimated at 2,733,500 tonnes grading 2.18 grams per tonne, which equates to 191,400 gold ounces (report completed by Mine Development Associates, Reno, Nevada; see table below). Future production development anticipates two adjacent open pits with the Isabella pit averaging approximately 1 gram per tonne gold with mineral outcropping at the surface, and the Pearl pit averaging approximately 3.7 grams per tonne gold with a higher grade core averaging nearly 5 grams per tonne gold. The project estimates an average 5:1 strip ratio with metallurgical tests estimating gold recoveries for crushed oxide rock between 80 and 85 percent using conventional heap leaching. Small amounts of silver are expected in recoveries, which would be treated as by-product credits against gold production costs.
Significant mine permitting has already been completed at Isabella Pearl, which includes an Environmental Assessment draft, a Pre-Feasibility study, a Plan of Operations and a Water Pollution Control Permit. Water rights have been secured with points of diversion located adjacent to historic producing water wells.
The Company's is currently evaluating existing mine plans and engineering, with a goal to schedule the Isabella Pearl mine to potentially utilize early cash flow generated from the project to help fund ongoing development while keeping initial project CAPEX expenditures to a minimum. The Company is also attempting to modify and refine the Isabella Pearl project to reach a target of paying back the initial capital needed to establish production within the first year from mine cash flow.
Mina Gold is located in the Walker Lane Mineral Belt, Nevada, U.S.A. The property has a third party mineralized material estimate of 1,606,000 tonnes grading 1.88 g/t gold in the property’s "Monster Zone". The Monster Zone consists of parallel structures approximately 45 meters apart which remain open on strike and depth. The Monster Zone mineralization is covered by patented claims, which are surrounded by multiple unpatented claims included in the transaction, giving additional exploration upside potential along this mineralized trend.
Gold Mesa is located in the Walker Lane Mineral Belt, Nevada, U.S.A. Gold Resource Corporation optioned the property in November 2015. Gold Mesa covers an area of approximately 4,580 acres consisting of 229 unpatented claims and 3 patented claims. A small portion of the property's claims were mined historically on a small scale as an underground mine in the early 1900's and as a small open pit mine in the late 1980's. The property has potential for a high grade gold open pit, or multiple gold open pits with mineralization at shallow depths below surface. Existing infrastructure includes nearby electricity, road access and potential water from a historic well located on the property. Historical metallurgical test work by N.A. Degerstrom Inc. in 1986 showed up to 88% recovery of contained gold and up to 35% recovery of contained silver obtained by a 35 mesh grind and agglomeration.
Drill intercept highlights include;
15.24 meters of 6.27 g/t gold
33.54 meters of 1.89 g/t gold
CEO, President & Director
Chief Operating Officer
Chief Financial Officer
Jason Reid Rick Irvine
Vice President of Exploration
Vice President Corporate Development
Vice President Legal Affairs, General Counsel and Corporate Secretary
Bill M. Conrad
Chairman of the Board
Dr. Gary Huber
Trading Symbols: GORO NYSE MKT
Shares Outstanding: 56,903,272
Options Outstanding: 6,097,001
Restricted Stock Units: 188,803
Warrants Outstanding: 0
Shares Fully Diluted: 63,189,076
Treasury Shares: 336,398
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