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Gold Resource Corp: Commercial Production Pending At Isabella Pearl

Aug. 16, 2019 10:48 AM ETGold Resource Corporation (GORO)ALIAF, GDXJ86 Comments
Philip MacKellar profile picture
Philip MacKellar


  • Management is shareholder-focused as exemplified by low dilution, a strong balance sheet, consistent annual profitability, and dividends since 2010.
  • Latest results include first contributions from the Isabella Pearl project in Nevada.
  • Pending commercial production at Isabella Pearl could be a catalyst to drive the stock higher.
  • Isabella Pearl makes GORO a multi-operation miner with producing assets in Nevada and Mexico.
  • Risks forinvestors relate to mine life, contractor concerns, commodity prices, and a tradingdisconnect between GORO and its peers.


Gold Resource Corp (NYSE:GORO) is a junior miner headquartered in Colorado with operations in Oaxaca, Mexico and Nevada. In the second quarter, the Isabella Pearl project in Nevada produced its first gold, and in the coming months it is expected to reach commercial output. Historically, the Mexican unit has generated GORO’s revenues with nearly half coming from gold and silver, and the rest coming from zinc, lead, and copper. Going forward, Isabella Pearl is expected to more than double the organization’s gold ounces and shift the entity to more of a precious metal miner.

Here at Contra the Heard, the stock was purchased at $3.86 in December 2018. Since then the shares have traded at a high of near $5.00 and a low of under $3.00. Unlike the Junior Gold Miner’s ETF (NYSE:GDXJ), GORO has not rallied with precious metal prices. This disconnect with peers and commodity prices could be cause for concern. Nevertheless, the fundamentals look strong and reaching commercial production is often a meaningful de-risking event and can serve as a catalyst for driving valuations higher.

The Thesis: A Shareholder Focused Enterprise:

The name attracted our interest years ago for a variety of reasons. The balance sheet, for example, had low debt, a healthy net cash position, and limited shareholder dilution. Since production began in 2010, the share count has only grown from 50 to 63 million shares. This low dilution is impressive given the multi-year commodity bear market and the construction costs associated with Isabella Pearl.

The corporate strategy, which focused on profitability and low operating costs over growth for the sake of growth, has also paid off. The enterprise has generated an annual profit since 2011, and has paid a dividend since 2010. Although the dividend is a sliver of what it was in 2012 (i.e. $0.02

This article was written by

Philip MacKellar profile picture
Philip MacKellar is an analyst, portfolio manager, and investor at Contra the Heard Investment Newsletter. He has been with the company since 2011 and has been investing since 2004. The newsletter’s primary focus is on contrarian and value-oriented investment opportunities traded in the United States and Canada. In addition, Philip sometimes engages in M&A, other special situations, and holds bonds, preferred shares, and convertible securities. Contra the Heard is a Toronto based company and was founded in 1995. Philip also blogs about personal finance topics on his own website called mymoneymoves.ca in his free time. You can also follow Philip at the Globe & Mail, on Twitter @Rallekcam, and catch him on YouTube at Contra the Heard.

Analyst’s Disclosure: I am/we are long GORO, ALIAF. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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