Gold Resource Corporation: All You Need To Know About 4th-Quarter Results

| About: Gold Resource (GORO)

Summary

Gold Resource reported its 4Q'16 results on February 28, 2017. Total production for 4Q'16 was 10,818 Au Oz. Eq., down 15.2% from the 3Q'16 figure. A bit of disappointment here.

The real positive that may eventually trigger a solid boost to the stock price in 2018 is the company Nevada mining unit.

It is not too late to take profit off the table. I may start buying around $4.25 or below depending on the gold price. Good potential for the long term.

Gold Resource (NYSEMKT:GORO) mines in Mexico.

This article is an update to my preceding article on Gold Resource published on November 7, 2016, about the company's 3Q'16 results.

GORO 4Q'16 results released February 28, 2017.

To access the company presentation 4Q'16, click here.

To access the 4Q16 conference call, please click here

Gold and Silver production snapshot:

Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
Ratio gold to silver 73.1 64.4 74.4 83.4 73.1 77 72 72
Production TPD (Ton per day milled) 1,373 1,278 1,228 1,301 1,350 1,143 1,127 1,026

Production of gold (Mill production)

Oz.

5,088 6,066 10,011 6,463 7,684 6,825 6,788 8,348

Production of silver (Mill production)

Oz.

5,730 6,697 7,695 5,206 7,864 7,308 8,060 10,999

Production of gold/silver (Mill production)

Oz. Equivalent

10,818 12,763 17,706 11,669 15,548 14,133 14,848 19,347

Total cash cost after by-product credits

AISC

in $/ Au eq. Oz.

698

1,215

623

907

317

-

667

-

551

979

603

1,516

533

-

416

-

CapEx

in $ million

- 12.64 10.28 5.69 - - 11.94 4.94
Gold g/t 1.53 1.86 3.27 1.99 2.36 2.25 2.25 3.13
Silver g/t 121 128 182 131 169 180 189 287
Copper % 0.26 0.24 0.40 0.29 0.42 0.41 0.35 0.42
Lead % 1.28 1.18 1.40 1.06 1.37 1.41 1.24 1.46
Zinc % 3.98 3.45 4.40 3.43 4.73 4.02 3.59 3.71
Price of gold/oz. 1,184 1,339 1,271 1,199 1,091 1,115 1,201 1,203
Price of silver/oz. 16.17 20.79 17.08 14.38 14.95 14.50 16.70 16.74
Copper (By-product) per T 5,499 4,791 4,740 4,146 4,716 4,883 6,022 5,532
Lead (By-product) per T 2,224 1,908 1,717 1,807 1,636 1,619 1,908 1,731
Zinc (By-product) per T 2,640 2,421 1,940 1,717 1,545 1,701 2,275 2,008

Metal grades declined during the period due to the specific area of the Arista Mine being worked during the quarter.

La Arista: Au Eq. Production Graphs (click graph to enlarge).

Balance sheet (6 quarters comparison)

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

Cash and cash equivalent

$ million

14.166 17.065 13.264 10.325 12.822 14.405 21.023 21.444

Gold and silver bullion

$ million

3.307 3.876 3.785 3.413 2.988 3.160 3.358 3.440

Total assets

$ million

118.461 122.955 107.426 106.350 106.535 114.862 112.745 116.252

Total liabilities

$ million

11.385 11.662 12.260 16.588 17.717 20.972 18.141 21.682

Revenues

(Net of smelter charges)

$ million

18.259 21.367 26.198 17.403 21.619 19.437 23.273 28.372

Total mine cost of sale

$ million

17.036 16.004 13.805 13.949 16.685 14.996 16.348 14.349

G&A

$ million

3.658 2.027 1.670 2.178 2.222 2.913 2.388 2.731

Operating income

$ million

(4.722) 2.455 10.081 0.772 1.978 (0.282) 1.643 9.580

Net income

$ million

(3.612) 1.594 5.608 0.797 (2.334) (0.469) 0.812 5.053

EPS

$/share

(0.06) 0.03 0.10 0.01 (0.03) (0.01) 0.01 0.09

Dividend

$/share/month

0.00167 0.00167 0.00167 0.00167

0.00167

0.01 0.01 0.01

Shares outstanding

Diluted

in million

57.732 57.597 54.671 54.267 54.259 54.179 54.179 54.179

Commentary

Gold Resource reported its 4Q'16 results on February 28, 2017. Total production for 4Q'16 was 10,818 Au Oz. Eq., down 15.2% from the 3Q'16 figure. It was a disappointing Fourth-quarter in gold and silver production. Weak production and weak grades (please look at graphs above).

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

The company beat its 2016 gold production outlook range with 27,628 gold ounces and met its annual silver production range at 1,857,658 ounces. In 2017, the company is targeting a similar production outlook range as 2016, with ranges based on plus or minus 5%, of approximately 27,500 gold ounces and 1,850,000 ounces of silver along with significant base metal production.

The company production guidance for 2017 is expected to be similar to 2016 -- 52,966 Au Eq. Oz -- with range of approximately 27,500 gold ounces and 1,850,000 ounces of silver (~24.5 K AuEq.) along with significant base metal production. This includes the area of the deposit scheduled to be mined during 2017 and planned development at Switchback during 2017.

The dividend seems secured at this level for the foreseeable future. M. Jason Reid said:

We plan to keep the current instituted annual dividend to $0.02 for the foreseeable future. We target future dividend increases with primary consideration given when one or a combination of the following takes place. One, we begin processing both tonnage Switchback order; two, Isabella Pearl production comes online; and or three, metal prices increase.

One positive at Arista is that the mine development and water management have been greatly improved compared to 2015. The Switchback vein system has been now reached with the access ramp development done as targeted.

Also, At the end of 2016, GORO secured the final mine permit to commence mining operations at its Alta Gracia project in Mexico. Or will be processed through the Aguila mill by the end of Q1 2017.

The goal is to mine, Arista, Alta Gracia and the Mirador mine at the same time.

The real positive that may eventually trigger a solid boost to the stock price in 2018 is the company Nevada mining unit, without any doubt. M. Jason Reid talked about the Isabella Pearl Project in the conference call:

Turning to our development plans at our Nevada Mining Unit, the acquisition of the Isabella Pearl project launches us from zero to 60 miles per hour along the road toward gold production in Nevada. We acquired the property, but the third-party report showing proven and probable reserves of over 191,000 gold ounces grading at 2.18 grams per tonne gold....

We are pleased to report we've resubmitted the plan of operations to obtain our mine permit. We are fine tuning the capital expenditures, operating costs and working capital costs for the project budget. As we move the project forward, we remain focused on the potential in front of us to increase our company's gold production by 100%, which is a material percentage that should substantially increase shareholder value.

Furthermore, on January 11, 2017, The company acquired 100% of 153 mining claims from Nevada Select for $460k. The newly acquired mining claims brings the total number of mining claims at the Its Isabella Pearl Project to 494, covering approximately 9,000 acres.

Please click here if you want to read my article.

Conclusion:

I like the company long-term and the Nevada prospect is quite exciting. I see it as a significant growth potential in 2018. Lack of diversification was one of my main concerns with GORO, and the company did a good job with now the Oaxaca Mining Unit (including Arista (Switchback vein), Alta Gracia and Mirador) and Nevada Mining Unit.

Technically, GORO can be described in a descending channel pattern. A descending channel or downtrend is the price action contained between two downward sloping parallel lines.

Descending channel patterns are short-term bearish in that a stock moves lower within a descending channel, but they often form within longer-term uptrends as continuation patterns. The descending channel pattern is often followed by higher prices, but only after an upside penetration of the upper trend line. The stock will continue channeling downward until it is able to break either the upper or lower trend line. An upside break is bullish, while a downside break is bearish.

It suggests that GORO may eventually go down short term and I see a support around $4.25. However, depending on the gold price the stock may eventually re-test the lower range around or below $3 (extreme).

I recommend to hold the stock now and wait for a stabilization of the downtrend.

It is still not too late to take some profit off the table. I may start buying around $4.25 or below depending on the gold price and the next FED move on interest rates.

Important note: Do not forget to follow me on GORO and the gold miners. Thank you for your support.

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.

Additional disclosure: Waiting for a better price to start a LT position.

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Tagged: , Gold, Earnings
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