logo
  Join        Login             Stock Quote

Gold Resource Corporation (GORO) Producing Extremely Cheap Mexican Gold

 December 28, 2012 02:37 PM
 


Gold Resource Corporation (GORO) has the distinction of being a junior mining company that pays a dividend.  I'd like to figure out how they became healthy enough to do that.  Management is led by two senior gold executives.  I'm extremely pleased to see that serious professionals are running this show.  

They have an NI 43-101 report for their flagship El Aguila project, although as a U.S.-listed corporation they really don't need one.  I find it interesting that the report only addresses MII resources (no 2P), yet this company is operating a producing mine at El Aguila.  They also have four other properties in development but are returning cash to shareholders as a dividend rather than holding it to fund future development.  I couldn't see the logic behind such a decision until I looked at their operating costs.  I am very intrigued by the 43-101 report's estimate that the project's operating costs are US$136/oz of Au equivalent.  That is extremely cheap gold!  No wonder the management was so confident about beginning operations before 2P was confirmed.  They can afford to return money as dividends because they save so much cash in production.

[Related -Dividend Roundup: DLPH, GORO, MCY, PRE, SBGI, UTX]

I normally consider a junior mining company's ability to stay alive, but since this one has an established operating history it's more appropriate to use the fundamental screening criteria for a mature company.  They were profitable in 2011 but not in the two years prior.  It's good that they have no long term debt and positive free cash flow.  It's bad that their five-year ROE has been negative.  That number is a legacy of the losses incurred in the years prior to production.  Producing gold at $136/oz makes their main mine profitable at any of gold's historic annual price averages in the past three decades.

[Related -11 Dividend Stocks Giving Shareholders A Raise]

Gold Resource Corporation may very well have turned a corner in 2011.  The two co-founders did so well with their previous venture, U.S. Gold Corp., that famed Canadian investor Rob McEwen put his own name on it.  I am really going to keep watching GORO to see if there's a repeat performance.

Full disclosure:  No position in GORO at this time.  

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageLevel 3 Communications, Inc. (LVLT): A Good Time To Buy Says Macquarie

On a day Wall Street is struggling to advance, Level 3 Communications, Inc. (NYSE:LVLT) is having no such read on...

article imageAbercrombie & Fitch Co. (ANF) Q2 Earnings Preview: The Unkind Quarter

Abercrombie & Fitch Co. (NYSE:ANF) will be holding its second quarter 2014 earnings conference call for all read on...

article imageWorkday Inc. (WDAY) Q2 Earnings Preview: Built In Surprise

Workday Inc. (NYSE:WDAY) plans to announce its fiscal 2015 second quarter results after market close on read on...

article imageArcelorMittal SA (ADR)(MT): Steel Stocks about to Get Red Hot

For the second consecutive day, a major broker upgraded a steel company by advancing their recommendation read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

3 Gold Stocks With Dividends
More Articles on: Basic Materials



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.