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Quality assets in Mexico and Nevada
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Delivering on low cost, high margin production
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On track to increase future global annual gold production by more than 100%
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, with first gold announced in April, last year. 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 it doing:
Gold Resources Corp has enjoyed eight consecutive years of profitability, between 2011 and 2018 and has highlighted that four of these were during progressively worse bear markets.
On January 22 this year, it posted its full-year 2019 results, which showed record gold production. The miner generated a record 40,318 gold ounces and produced 1,732,604 silver ounces last year, it told investors.
With its Isabella Pearl mine in Nevada coming online, the firm said it had increased its annual gold production by 50% compared to the previous year.
Fourth-quarter gold and silver production totalled 7,554 ounces and 417,877 ounces, respectively. Annual base metal production included 1,859 tonnes of copper, 9,202 tonnes of lead and 23,683 tonnes of zinc.
Last month, the group also 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
- Dividend increase
- Reserve update
What the broker says:
Roth Capital Partners noted that Gold Resources' 2019 production had been generally 'in-line' with its estimates and within management's guidance range.
"In our view, the company's Nevada unit is on track to deliver its first full year of commercial production in 2020, which we expect to result in an increased cash flow profile—supporting a potential dividend increase, in our view. As such, we are reiterating a Buy rating and $6.75 price target," said analyst Jake Sekelsky in a note to clients.
The analyst expects 2020 to feature a full year of production in Nevada and expect gold production to reach over 30,000 ounces this year.
"Although the company recently increased its dividend by 100% in 2019, we believe the potential for further dividend increases remains probable on the back of sustained higher gold prices and Isabella Pearl reaching steady-state production in 2020," the broker added.
What the boss says:
Speaking to Proactive recently, chief executive Jason Reid hailed the record gold ounces for its full year.
"What's exciting is that the primary driver, catalyst of this is the Isabella Pearl mine in Nevada. We are ramping that up as we speak and we expect to possibly even hit another record next year," he said.
"We couldn't have timed it better with the gold prices making their way up," he added.
