Gold Resource Corp.: All You Need To Know About Second Quarter Results

| About: Gold Resource (GORO)

Summary

Gold Resources reported its 2Q 2016 results on August 2, 2016. Total production was 17,706 Au Oz Eq. Up over 50% from the 1Q'16. It was a very good quarter with.

GORO realized an AISC at $649/ Oz AuEq. Which is very exceptionally low.

However, I consider the stocks overbought and also overvalued. It could be a good short potential soon.

Gold Resource (NYSEMKT:GORO) mines in Mexico.

This article is an update to my preceding article on Gold Resource published on July 14, 2016 about production preliminary results for 2Q'16.

GORO 2Q'16 results released August 3, 2016.

Conference call transcript 2Q'16, click here.

Gold and Silver production snapshot:

Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
Ratio gold to silver 74.4 83.4 73.1 77 72 72
Production TPD (Ton per day milled) 1,228 1,301 1,350 1,143 1,127 1,026
Production of gold (Mill production)Oz. 10,011 6,463 7,684 6,825 6,788 8,348
Production of silver (Mill production)Oz. 7,695 5,206 7,864 7,308 8,060 10,122

Production of gold/silver (Mill production)

Oz Equivalent

17,706 11,669 15,548 14,133 14,848 19,347
Total cash cost after by-product credits 317 667 551 603 533 416

CapEx

in $ million

10.276 5.687 - - 11.943 4.937
Gold g/t 3.27 1.99 2.36 2.25 2.25 3.13
Silver g/t 182 131 169 180 189 287
Copper % 0.40 0.29 0.42 0.41 0.35 0.42
Lead % 1.40 1.06 1.37 1.41 1.24 1.46
Zinc % 4.40 3.43 4.73 4.02 3.59 3.71
Price of gold/oz 1,271 1,199 1,091 1,115 1,201 1,203
Price of silver/oz 17.08 14.38 14.95 14.50 16.70 16.74
Copper (By-product) per T 4,740 4,146 4,716 4,883 6,022 5,532
Lead (By-product) per T 1,717 1,807 1,636 1,619 1,908 1,731
Zinc (By-product) per T 1,940 1,717 1,545 1,701 2,275 2,008

La Arista: graphs.

Tab 1 - Balance sheet (6 quarters comparison).

2Q'16 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15

Cash and cash equivalent

$ million

13.264 10.325 12.822 14.405 21.023 21.444

Gold and silver bullion

$ million

3.785 3.413 2.988 3.160 3.358 3.440

Total assets

$ million

107.426 106.350 106.535 114.862 112.745 116.252

Total liabilities

$ million

12.260 16.588 17.717 20.972 18.141 21.682

Revenues

$ million

26.198 17.403 21.619 19.437 23.273 28.372

Total mine cost of sale

$ million

13.805 13.949 16.685 14.996 16.348 14.349

G&A

$ million

1.670 2.178 2.222 2.913 2.388 2.731

Operating income

$ million

10.081 0.772 1.978 (0.282) 1.643 9.580

Net income

$ million

5.608 0.797 (2.334) (0.469) 0.812 5.053

EPS

$/share

0.10 0.01 (0.03) (0.01) 0.01 0.09

Dividend

$/share/month

0.001667 0.001667

0.001667

0.01 0.01 0.01

Shares outstanding

in million

54.671 54.267 54.187 54.179 54.179 54.179

Commentary:

Gold Resources reported its 2Q'16 results on August 2, 2016. Total production was 17,706 Au Oz Eq. Up over 50% from the 1Q'16.
It was a very good quarter with record production of gold and exceptional grade. Furthermore, GORO realized an AISC at $649/ Oz AuEq, which is very low.

In short, GORO hit a home run this quarter.

M. Jason Reid, CEO, said in the conference call:

The second quarter of 2016 was the solid quarter. Comparing Q2 to Q1, we saw increased gold and silver grades, increased metallurgical recoveries and increased production of gold and silver. We also saw increases in net income, gross mine profit and cash in the bank. We accomplished this while decreasing payables, decreasing G&A, eliminating our capital equipment leases and lowering our cost per ounce.

This is even more impressive, because the company continued to process the lower grade open pit stock pile - that could be totally milled by year end - which should dilute the grade. As everyone here knows, the stockpile is mainly low grade gold with almost no by-product metals. However, this initiative that started the preceding quarter is paying off. The company had revenues of $26.2 million this quarter, which is one of the best quarters as you can see in the chart below.

The company paid off the remaining balance of capital equipment leases of $720k in March 31, and is now debt free.

Also, technically, the La Arista mine did not experience any problems this quarter, and development was on target operationally, with adequate management of water and CO2 gas. A new pump has been installed that will increase productivity.

Now, an important point is the Switchback segment. M. Jason Reid said in the conference call:

We are currently developing at a pace that could enable us to start processing Switchback development ore during the fourth quarter of 2016. Though we may choose to stockpile Switchback ore at the mill during the fourth quarter of 2016 in preparation for the 2017 production year.

The Alta Gracia mine is going as scheduled and will be milled with La Arista. No time schedule yet.

On a final note, the Nevada assets seem to be a good potential for a high-grade open pit, but it is really too early to make any assumption about that.

GORO has surprised me by its recent strength, and I was not expecting such a rally. The stock is now trading at the October 2013 level and may eventually continue to around $8, which I see as the next resistance. In my preceding article regarding the preliminary results I said:

GORO's 2Q'16 high production numbers may also boost the stock to $6 before shares give up most of their positive momentum, unless gold finds another reason to rally above $1,400/Oz.

However, I'm totally out for a while now, and I consider the stock overbought and also overvalued. It could be a good short potential soon.

Nonetheless, gold price is of a paramount importance here, and so far, gold is trading at a good level, which is fueling GORO momentum.

Important note: If you like what you read here and you want more articles like this on precious metals, please follow me, as I offer frequent coverage on GORO and the gold/silver/platinum/palladium stocks.

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

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Gold, Earnings
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