***Updated with comments from earnings conference call***
Despite a tough year for precious metals markets, Gold Resource Corp (NYSE MKT:GORO) managed to post an increased profit in 2014, while recording its highest annual production ever for both gold and silver and 28 percent lower cash costs.
For the year ending December 31, the Mexico-focused producer, with operations in Oaxaca, Mexico, said it produced record gold and silver ounces, for a total of 83,903 ounces of gold equivalent. Gold output increased 4.7 percent over 2013, while silver production rose 8.7 percent.
The company also posted record annual base metal production, consisting of 1,254 tonnes of copper, 4,555 tonnes of lead and 13,915 tonnes of zinc. Its base metal production helps offset the costs of producing precious metals.
The precious metals producer milled a total of 375,623 tonnes in 2014, compared to 316,720 tonnes in the previous year.
Net income rose to $16.2 million, or 30 cents per share, compared to $85 million, or nil per share, in 2013, as total cash costs declined 28.3 percent over 2013 to $449 per precious metal gold equivalent ounce sold.
Still, net sales dropped to $115.4 million from $125.8 million, as the average realized price of gold in 2014 declined to US$1,260 an ounce from US$1,388 an ounce in 2013.
"During 2014's tough and volatile metal market, the company posted annual net income of $16.2 million or $0.30 per share, remained a low cost producer, returned $6.5 million back to the owners of the company through dividend distributions, and continued to invest in the company's future growth in Mexico and Nevada while adding $12.5 million to our cash position totaling $27.5 million at year end," said president and CEO Jason Reid in a statement.
"We accomplished this without diluting shareholders, without raising money and without going into debt. Overall, 2014 was a very tough year but we had our share of success," he added.
On a conference call, Reid was especially proud of the company's investor focus, higlighting the fact that it has paid some US$102 million in monthly dividends since the start of commercial production at its El Aguila mine in July 2010.
He also noted the company's request for an SEC 10k extension for 2014, not because of additional liabilities, but rather on account of requiring more time to provide more accurate income tax provisions. "Tax problems are a good problem to have in that the company must pay them because it has a profit unlike many other juniors," Reid commented.
Looking ahead, the company is targeting a similar production range to 2014 for this year, of 80,000 to 90,000 ounces of precious metal gold equivalent.
In light of the continued bear market and declining gold and silver prices, the gold miner is planning to focus this year on mining tonnes, based on the net smelter return values per tonne of all the metals, to maximize cash flow, paying more attention to margins and less on ounces.
"Although 2014 was a challenging year for the mining industry in general and specifically the gold and silver markets, the company demonstrated that its El Aguila project can generate healthy profits in this difficult metal price environment," said Reid.
The company will continue to look for cost savings opportunities and efficiencies, it said, with the aim of remaining profitable while positioning Gold Resource Corp to generate larger margins when higher precious metal prices return, a fact in which Reid is confident as demand for the yellow metal remains strong.
The miner, which diversified into a second region last year with its Radar gold project in Nevada, also released updated proven and probable reserves, in which it replaced the tonnes mined in 2014 along with a small increase in reserve tonnage, leaving the same 3.5- to 4-year mine life at its underground La Arista deposit.
Gold Resource Corp is aiming to replace all the tonnes mined again this year by testing the extensions of its Arista deposit, which has a total of 1.54 million tonnes of reserves grading 7.21 grams per tonne (g/t) gold equivalent. It is also planning to further explore the new polymetallic Switchback vein system discovery at the project, with a total of three exploration drills currently in operation at its Oaxaca operations.
The exploration budget for 2015 at its Mexico mining unit is $9.7 million, the company said.
Shares of Gold Resource Corp surged on Friday, last up 12.6 percent at $3.12 on Friday afternoon.