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Gold Resource Corp, the dividend-paying precious metals miner, eyeing more decent growth in Mexico and Nevada

Snapshot

The firm has returned US$112 million to shareholders in monthly dividends since commercial production kicked off in 2010

Molten gold

Quick facts: Gold Resource Corporation

Price: 5.21 USD

NYSEMKT:GORO
Market: NYSEMKT
Market Cap: $342.25 m
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  • Delivering on low cost, high margin production

  • On track to increase future global annual gold production by more than 100%

  • Achieved eight consecutive years of profitability

What Gold Resource Corp does:

Gold Resource Corp (NYSEAMERICAN:GORO) is a gold and silver producer, which runs two units in mining-friendly jurisdictions - Mexico and Nevada. It has returned US$112 million to shareholders in monthly dividends since commercial production kicked off in 2010.

In Mexico, the group's Oaxaca unit operates the producing Arista underground mine at the El Aguila project, where initial output started in 2011. It is also advancing the Mirador underground mine at the Alta Gracia project, which it says has the potential to increase future annual silver production by around 500,000 silver ounces and 1,000 gold ounces.

The El Aguila mill is the site for processing from both mines. In all, the Mexican unit has six properties, including El Aguila and Alta Gracia, which cover 560 sq km. The four other exploration properties are Las Margaritas, El Fuego, El Chamizo and El Rey.

The company's Nevada unit controls over 10,100 hectares (25,000 acres) of development and exploration lands in the US state's south-central Walker Lane mineral belt.

The Isabella Pearl mine is currently in production, and already greatly contributing to group numbers, first gold production announced in April 2019. The remaining three properties - County Line, Mina Gold and East Camp Douglas - are in various stages of exploration. All four Nevada properties have the potential to be high-grade open-pit heap leach operations.

How's the company doing:

Gold Resources Corp has enjoyed eight consecutive years of profitability, between 2011 and 2018 and notes that four of these were during progressively worse bear markets.

On October last year, the group reported record gold output in its third-quarter to end September, thanks to the new Isabella Pearl gold mine in Nevada coming online. Production of the yellow metal across the whole group for the three month period was 11,165 ounces, with the Isabella mine contributing 3,703 ounces of gold. Gold Resource Corp's net income came in at US$3 million in the third quarter.

The group reported production of 477,297 ounces of silver and significant copper, lead and zinc for the three months and the firm repeated its 2019 Mexico operations guidance of 27,000 gold ounces and 1.7 million silver ounces, plus or minus 10%. The production ramp-up at Isabella Pearl is expected to continue over the next year.

In December, the group unveiled a boost for the Mexico business as it expanded mineralization at the Mirador mine with 2019 drilling.  Fifteen holes were sunk in the Alta Gracia project - which hosts the Mirador mine. Seven holes targeted expansion of the Independencia West vein and three holes expanded the mineralization laterally, while another three expanded the mineralization deeper, and one extended it higher.

Inflection points:

  • Full-year results
  • Dividend news
  • New reserve update

What the broker says:

Roth Capital Partners repeated a 'Buy' recommendation on Gold Resources Corp in December, with analyst Jake Sekelsky noting that the company was "successfully employing a mine-and-replace strategy at its Mexico Unit".

"Given this, we expect 2019 production to be replaced in the next reserve update, which we expect to be released in 1H20," he said.

The Roth analyst also noted the company's commitment to returning capital to shareholders, pointing out that following commercial production at the Isabella Pearl mine in Nevada, the company announced a 100% increase in the annualized dividend to $0.04 per share from $0.02 a share.

Sekelsky said Roth believes "the potential for further dividend increases remains on the back of sustained higher gold prices and Isabella Pearl reaching steady-state production in 2020."

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Full interview: Gold Resource Corporation achieves record gold production, a...

Gold Resource Corporation (NYSEAMERICAN:GORO) CEO Jason Reid tells Proactive the Colorado-based gold producer posted consolidated year-end and fourth-quarter production results, noting it achieved record gold production. Reid says the miner produced a record 40,318 gold ounces and 1,732,604...

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