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Gold Resource Corp Posts 42% Q2 Production Jump; Capacity To Expand, Costs Expected To Drop

|Includes:Gold Resource Corporation (GORO)

Gold Resource Corp (NYSE MKT:GORO) reported Friday that second quarter production at its Mexico operations rose 42 per cent year-over-year as cash costs increased and prices dropped in line with the mining industry, though the company said it expects production costs to drop as it benefits from higher mill throughput.

The U.S. based gold producer, which produces from its El Aguila mine in Oaxaca, Mexico, posted 20,574 ounces of gold equivalent production for the three months that ended June 30, compared to 14,488 ounces a year ago. The company stood by its full year production target for between 80,000 to 100,000 ounces of gold equivalent.

The planned expansion of the Aguila mill to a nominal 1,500 tonnes per day progressed well during the quarter, according to the company's statement, with the target to complete the project by year-end. Last month, Gold Resource Corp said that its goal was to keep mill operations going through the majority of the construction phase, with minimal shutdown days for equipment installation.

The company sold 19,992 ounces of precious metal during the quarter, at realized average prices of $1,386 per ounce of gold and $23 per ounce of silver. Precious metals prices dropped dramatically in the second quarter, with the price of gold tanking 23% during the period, hurting miners globally.

The gold and silver prices represent a decline of 13.5 per cent and 14.8 per cent, respectively, from the second quarter of 2012.

"With the decrease in precious metal market prices, and the gold-to-silver ratio working against us this quarter, our team was still able to deliver respectable production results," said president Jason Reid in the statement released Friday.

Total cash costs were also higher, at $645 per ounce of gold equivalent, including a 5 per cent royalty, compared to $509 per ounce in the same period last year.

The company swung to a net loss of $1.37 million, or a loss of 3 cents per share, compared to a net profit of $4.13 million, or 7 cents per share, a year ago. Net sales fell to $26.66 million from $30.7 million, while total costs and expenses increased to $11.91 million from $9.75 million as the Aguila mill expansion continues.

The gold miner, with cash and equivalents of $30.4 million at quarter end, realized $12.5 million in cash flow from mine site operations during the latest quarter, and distributed dividends of $6.4 million or 12 cents per share for the three month period, after cutting its monthly dividend in half in response to the precipitous precious metals price drop. Since declaring production more than three years ago, it has returned over $86 million to shareholders in monthly dividends.

"We look forward to the completion of our mill construction so we can focus our efforts on the Arista mine and increase production tonnages to match the enhanced Aguila mill capacity," continued Reid.

"We expect a decrease in per ounce and per tonne production costs with higher mill throughput."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: GORO