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Gold Resource Corporation: Digging Into The Q1 Results

May 07, 2020 2:35 PM ETGold Resource Corporation (GORO)21 Comments
Taylor Dart profile picture
Taylor Dart


  • Gold Resource Corporation reported its Q1 results this week, with quarterly gold production of just over 10,000 ounces.
  • Unfortunately, due to mine shutdowns in Mexico, the company has seen mining at their Oaxaca Mining Unit suspended since April 1st, which makes up the bulk of the company's production.
  • To make matters worse, treatment charges for zinc have continued their ascent this year with zinc prices declining further, translating to significantly higher costs at Oaxaca.
  • Based on the company continuing to be a mediocre junior producer with volatile margins due to the base metal component, I continue to see much better opportunities elsewhere in the sector.

We're now more than one-third through the Q1 earnings season for the Gold Miners Index (GDX), and we continue to see very mixed results with some mines partially shut down and pulling guidance and others relatively unaffected. Gold Resource Corporation (NYSE:GORO) is in the former group, unfortunately, as the company's Oaxaca Mining Unit [OMU] has now been shut down for nearly six weeks, with the closure expected to extend until May 30th. This should be a significant drag on Q2 for Gold Resource Corporation, and it comes after a feeble Q1 performance on the cost side for the company.

While costs are likely to decline for FY-2020, all-in sustaining costs [AISC] are currently tracking more than 70% above FY-2019 levels of $727/oz, with Q1 AISC coming in at $1,260/oz. Based on volatile costs due to the company's base metal component and what's likely to mark a very weak H1 2020 for Gold Resource Corporation, I continue to see the stock as an Avoid in favor of higher-margin producers in Tier-1 jurisdictions.

(Source: ElkoDaily.com)

Gold Resource Corporation released its Q1 2020 earnings results last week, and it was a tough start to the year operationally, to say the least. The company reported just over 10,100 ounces of gold production in the quarter, which is relatively in line with guidance, but all-in sustaining costs soared to industry-lagging levels above $1,200/oz. To complicate things further, the company tapped its At-The-Market-Offering [ATM] to raise close to $12 million, which led to some further dilution in the company's shares. This dilution of a few million shares has given the company a share count of over 70 million, a very respectable figure for a gold producer, but a slight hit to valuation, given the higher share count. Let's take a closer look at the quarter below:

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Taylor Dart profile picture
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I am/we are long GLD. 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.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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