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Gold Resource Corporation: THE INVESTMENT CASE

Gold Resource Corp still glittering in 2017 after enjoying comeback year

With shares up in 165% in 2016, it was safe to say it was a comeback year for GORO.
Gold Resource Corp still glittering in 2017 after enjoying comeback year
INVESTMENT OVERVIEW: GORO The Big Picture
A gold pour

With the shares up in 165% in 2016, it was safe to say it was a comeback year for Gold Resource Corporation (NYSEMKT:GORO).

Sentiment towards the gold and silver producer, developer and explorer, which has operations in Oaxaca, Mexico and exploration assets in Nevada, USA, was certainly helped by the recovery in precious metals prices.

And 2017 is shaping up nicely..

Gold production has increased in the first quarter of the year, totalling around 6,746 ounces (oz) and it is on track to produce 27,500 ounces of gold and 1.85mln  ounces of silver in 2017.

That compares to 6,463oz for the same period in 2016.

Beyond Mexico and into Nevada

In October last year, the shares received a boost when the company announced level 460 ramp development had reached the Switchback vein system at the Aguila Project's Arista mine.

The Susana vein is the first of at least six veins the company expects to crosscut with continued development. This primary 460 level Switchback ramp bifurcated some 100 metres from the Switchback vein system with an inclining secondary ramp to access the veins on the 480 level, 20 metres higher in elevation.

The company targets long-term production from Switchback by developing and preparing multiple levels and ore blocks over the next year for future bulk tonnage mining.

Meanwhile, the company has recently added three Nevada assets to its portfolio, with the Isabella Pearl project being the closest to reaching gold production.

An earlier study completed by a third-party reported that the project contains proven and probable reserves of 191,400 gold ounces at an average grade of 2.18 grams per tonne (g/t) and it is in advanced stages of engineering and mine permitting.

Elsewhere in Nevada, the company also recently acquired the Mina Gold property located in Mineral County. The Mina Gold property contains an historic third-party estimate of mineralized material totaling 1,606,000 tonnes grading 1.88 g/t gold.

The third Nevada asset is the Gold Mesa, located in the Walker Lane mineral belt. News flow from this has also been encouraging, with the company reporting in October that phase II drilling results had not disappointed.

The company continues to encounter significant gold values at shallow depths.

The company tends not to hang about

GORO has a track record of moving fast and always keeping its eyes on low operating costs and high returns.

So, if your idea of a good investment proposition is a long shot explorer that might, repeat “might”, knock one out of the park at some dim and distant point in the future (assuming it does not run out of money before then), then GORO is not for you.

Instead of waiting for “jam tomorrow”, with GORO you can have jam today, with the prospect of even more jam in the not too distant future.

Chief executive Jason Reid says the intention at the Isabella Pearl project is to “hit the ground running” and, all being well, bring it on-stream as early as 2018.

Meanwhile, at the Mesa asset, Reid said: “The potential of minimal overburden to move, lower capital expenditures required to access gold mineralization and potentially attractive return on capital metrics has us eyeing a production decision if we continue to intercept similar results in future drill campaigns as we have achieved in our first two."

Sixth year of profitability...

In March this year, the miner announced its sixth consecutive year of profitability, reporting $4.4mln in net income or $0.08 per share and said it was targeting 2017 annual production of 27,500 ounces gold and 1.85mln ounces of silver.

The company also confirmed its previously announced 2016 annual mill production of 27,628 gold ounces and 1,857,658 silver ounces for 53,023 precious metal gold equivalent ounces (at a realized 73.1:1 silver-to-gold ratio).

For the year to end December, it sold 48,725 precious metal gold equivalent ounces at a total cash cost of $548 per gold equivalent ounce.

Realized 2016 average sales prices were $1,256 per ounce gold and $17.18 per ounce silver.

An updated reserves report

In February, the group updated its Mexico Probable (P&P) Reserve Report as of December 31, 2016 in which it not only replaced the tonnes mined during 2016, but increased reserve tonnage by 15% to 1,891,500 tonnes grading 2.75 grams per tonne ("g/t") gold and 165 g/t silver.

The updated report shows gold grades increased by 14%, gold ounces increased by 31%, silver grades increased by 2% and silver ounces increased by 17%.

Mine life based on P&P at the Company's Oaxaca Mining Unit has been increased from approximately three to more than four years, assuming 2016 annual processing levels. For historical reference, the company was in production for three and one half years prior to completing its first P&P reserve report in 2014 and has consistently replaced reserve tonnes year over year in reserve reports since.

Switchback exploration augurs well for Arista mine

The group has said its Arista mine in Mexico has been further boosted by latest drill results.

Latest assays from the Switchback vein system show high grades, including 4.29 meters (m) at 9.97 gold grams per tonne (g/t).

There was also 5.81 meters of 4.87 gold g/t and 7.69 meters of 3.87 g/t gold.

"We are excited for our Arista Mine's continued growth with these latest Switchback vein system high-grade gold and silver results," added Jason Reid, chief executive and president.

"This bodes well for the Switchback vein system growing as big as, if not larger than, the Arista vein system. Mine development on several levels of Switchback continues.

"We target bulk tonnage mining this area in 2018, as we intend to develop a substantial portion of this exciting expansion of the Arista Mine during 2017.

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