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Gold Resource Corp posts record Q2, 83% sequential revenue growth

|Includes:Gold Resource Corporation (GORO)

Gold Resource Corp (AMEX:GORO) reported Wednesday its second quarter results, beating its first ever profit recorded last quarter, despite some challenges at its El Aguila project in Oaxaca, Mexico.

For the three months ending June 30, the relatively new Denver-based gold producer, which began commercial output from El Aguila in July of 2010, recorded net income of $4.9 million, or 9 cents per share, excluding losses from a storm at its operations in April.

With these losses of $1.76 million, the company still generated a profit of $3.14 million, or 6 cents per share. This compares to a loss in the year-earlier period, and a profit of $2 million, or 4 cents per share, in the first quarter.

The company said it managed to generate record revenue in the latest quarter of $20.7 million, versus $11.3 million in the previous three month period - an increase of 83%.

All this was acheived despite the anomalous storm that negatively impacted April and May production at its high grade Arista mine, causing damage to the mine and some equipment due to flooding.

In March, the company announced that it had begun the transition from processing lower grade, open pit ore, to processing underground ore from the high grade Arista deposit at El Aguila.

Arista, the largest deposit discovered to date at the project, underwent cleanup and repairs that were completed in June, but mining was still delayed and mill throughput reduced, Gold Resource said, and the company had to endure higher costs in April and May.

Nevertheless, the company produced 13,457 ounces of gold equivalent at a cash cost of $156 per ounce, generating a $17.2 million gross profit from the mine. Gold was sold at an average price of $1,576 per ounce and silver at $37 per ounce.

Last quarter, the El Aguila project produced 7,479 ounces of gold equivalent at a cash cost of $87 per ounce, for a gross profit of $8.8 million.

"We are very pleased with our results since they were achieved against the background of a freak storm, our own natural disaster,” said president Jason Reid.
“The project paid for all our activities this quarter including operations, exploration, anomalous storm cleanup and repair which was an additional $2.5 million, General and Administrative, special dividends and added new cash to our treasury."

Indeed, the company increased the cash in its bank by $4.2 million during the quarter, to $42.1 million. Since beginning production at El Aguila last July, the company has returned more than $22 million to shareholders in special dividends each  month.

"This is in line with our objective to be both a growth stock and an income stock and not compromise one for the other,” added Reid. 

“We are very proud of the fact that this management team and our people have demonstrated Gold Resource Corporation’s ability to achieve a high return on capital invested."

Gold Resource continues to ramp up and improve operations at La Arista, with expected higher average grade ore, lower cash costs and greater output levels in the future.

However, due to the storm impact at the Arista mine, the company revised its production target for the year to between 60,000 to 70,000 ounces of gold equivalent, down from 90,000 ounces in May. Still, the gold producer continues to stand by its long-term target of 200,000 ounces in 2013.

Stocks: GORO