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Gold Resource Corp, with new focus solely on Mexico, aims to increase productivity and life of its mines

Snapshot

GORO has now spun out its Nevada unit into a separate public company and is focused solely on Mexico

Gold Resource Corp, the dividend-paying precious metals miner, boasts record production in 2019

Quick facts: Gold Resource Corporation

Price: 2.75 USD

NYSEMKT:GORO
Market: NYSEMKT
Market Cap: $204.71 m
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  • A decade of production under the belt
  • Company boasts production, development, and exploration stage assets in Mexico
  • Poised to expand system at Arista mine

What Gold Resource Corp does: 

Gold Resource Corp (NYSEAMERICAN:GORO) is a gold and silver miner and explorer, which has undergone a shift in focus recently.

Having been a company with producing operations in Nevada and Mexico, it has now spun out its Nevada unit into a separate public company and is focused solely on Mexico.

The new chief executive at Mexico-focused GORO is experienced mining industry executive Allen Palmiere, whose CV includes working in South Africa, Central America, Guyana, and Brazil, as well as a decade in China.

In mining-friendly Mexico, the company controls over 684 square kilometers (sq-km) of ground, including 55 kilometers (km) of a geologically important structural fault corridor in the state of Oaxaca, with six properties.

These assets were chosen based on their potential to meet the company's goal of assets with low operating costs and potential for high returns-on-capital, and include two operating mines.

The first is the flagship Arista underground polymetallic deposit currently in production at the Aguila project at the Don David mine. It also has a second operating mine - the Mirador mine on the Alta Gracia project. There is potential to expand the Arista mine with numerous new targets for up to another 10 years of output, the company reckons.

The additional four exploration properties - Las Margaritas, El Chamizo, El Fuego and El Roy -  are all within trucking distance of the Aguila project's processing facilities.

The company's ultimate goal is to have multiple properties feeding ore to the strategically located mill, which will potentially reduce the capital required to put any future deposit discoveries into production.

In 2010, GORO declared commercial output in Mexico and has distributed consecutive monthly dividends since totaling over $116 million as of January 2021. It has remained profitable for nine consecutive years, four of which were during bear markets in the precious metal space. Between 2010 and 2020 it generated over $1 billion in revenues.

How is it doing:

At the beginning of this year, the company confirmed the spin-off of its Nevada unit into a separate public company called Fortitude Gold Corp had been completed. Fortitude's CEO will be Jason Reid, who has stepped down from all his roles at GORO.

GORO shareholders received one share of Fortitude Gold for every 3.5 shares of the company's common stock they held.

On January 15, the company told investors that it finished 2020 with a strong balance sheet, allowing it to boost the productivity and life of its Mexico operations. It ended 2020 with $25.4 million in cash, it revealed.

On February 25, GORO said it posted net income of $4.4 million in the year to end-December 2020, having produced 30,508 gold equivalent ounces from its Don David mine in Mexico.

The miner generated 20,473 gold ounces, 1,189,366 silver ounces, 1,593 copper tonnes, 7,725 lead tonnes and 19,696 zinc tonnes, it said, which led to revenue for the year of $90.7 million and mine gross profit of $12.5 million from continuing operations.

Cash from operating activities was $21.2 million, while working capital from continuing operations as at year-end was $30.6 million - a 22% increase on the end of 2019.

Allen Palmiere, the CEO of the Mexico-focused precious metals miner, said output had been 'solid' despite it being a 'demanding' year amid the pandemic, which is expected to remain a challenge in the short to medium term.

For 2021, metal production is expected to increase slightly over 2020 as GORO improves operations and margins reflected in a reduced cash cost per ounce after by-product credits. This year, the miner also expects to make a $22 million capital investment in Mexico and spend $7.2 million on exploration.

Payable production guidance is for between 19,500 and 21,500 ounces of gold and 1.7 million to 1.8 million ounces of silver.

Inflection points:

  • 1Q results
  • Precious metals price moves
  • More exploration news

What the boss says:

"I recently had the opportunity to visit the Don David Gold mine and see first-hand the operations, including the construction of the dry stack tailings filtration plant and facilities, which will allow for the efficient storage of tailings, and the completed electrification project, which connected us to the power grid, allowing us to reduce diesel fuel consumption by 69%, providing significant cost savings for us while providing access for the first time to electricity to approximately 25,000 homes in the communities in which we operate," said Allen Palmiere, the CEO.

He added: "The company finished the year with a strong balance sheet, including $25.4 million in cash, which provides us with flexibility as we move to reinvest capital in Mexico to increase the productivity and the life of the operations."

Contact the author at giles@proactiveinvestors.com

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