Gold Resource Corporation faces operational challenges in Q4 By Investing.com

Gold Resource (NYSE:) Corporation (NYSE American: GORO) reported its Fourth Quarter 2023 Financial and Operating Results, highlighting operational challenges, including lower ore grades and a decrease in byproduct revenues influenced by the strengthening Mexican peso and lower zinc prices. The company also noted a decrease in cash balance and reported net losses of $3.1 million for the quarter and $16 million for the year.

Despite these setbacks, Gold Resource Corporation has taken steps to reduce costs and improve operations, and remains optimistic about the incorporation of high-grade material into future mine plans.

Key Takeaways

• Lower ore grades and decreased byproduct revenues impacted financial results.
• Cost reduction strategies implemented, including workforce cuts and contract renegotiations.
• Preliminary economic analysis of the Back Forty Project reveals a $215 million NPV.
• Exploration successes lead to higher grade material in reserves.
• Increased cash costs per gold equivalent ounce sold due to various factors.
• The company is exploring strategic alternatives, including potential mergers or sales.

Company Outlook

• Test work underway to enhance processing plant recovery.
• Anticipated incorporation of new high-grade areas into revised life of mine plan by year-end.
• Considering debt facility to update mining equipment and boost exploration spending.

Bearish Highlights

• Net sales and cash balance declined due to lower volumes and zinc prices.
• Total cash cost after co-product credits was $1,250 per gold equivalent ounce sold.
• All-in sustaining cost reached $1,630 per gold equivalent ounce sold for the year.
• Potential delisting from NYSE American if stock price remains low.

Bullish Highlights

• Positive exploration results, particularly in the Gloria and Three Sisters areas.
• Preliminary economic analysis suggests a robust life of mine NPV for the Back Forty Project.
• CEO Allen Palmiere optimistic about increasing gold prices and value creation through strategic transactions.

Misses

• Missed guidance on certain performance measures.
• Share price decline alongside peers, raising concerns about shareholder value.

Q&A Highlights

• No communication received from NYSE American regarding potential delisting.
• The board opposes a reverse stock split due to its tendency to destroy value.
• Strategic process underway that may include a merger or sale to support the stock price.

Gold Resource Corporation’s efforts to navigate the current challenges it faces are multifaceted, ranging from operational improvements to strategic financial planning. The company’s focus on cost reduction and exploration success is aimed at countering the negative financial outcomes of the past year and strengthening its position in the market. The exploration program’s positive results and the potential expansion of operations through strategic initiatives offer a glimpse of optimism for the company’s future. However, the threat of delisting from the NYSE American looms, prompting the company to consider alternative options to maintain its market presence. Gold Resource Corporation’s strategic moves in the coming months will be critical in shaping its trajectory and the value it offers to its shareholders.

InvestingPro Insights

Gold Resource Corporation’s (NYSE American: GORO) recent financial challenges and strategic responses are reflected in several key metrics and insights from InvestingPro. As investors consider the company’s future, the following data and tips provide a deeper understanding of GORO’s current financial health and market position.

InvestingPro Data:

• Price / Book (last twelve months as of Q3 2023): 0.24, indicating the stock may be trading at a low valuation relative to the company’s book value.

• Revenue Growth (last twelve months as of Q3 2023): -24.55%, showing a notable decline in revenue.

• 1 Month Price Total Return (as of the current date): 33.66%, reflecting a strong return over the recent period.

InvestingPro Tips:

• GORO is currently trading at a low Price / Book multiple, which could be of interest to value investors seeking underpriced assets relative to their net asset value.

• Despite the recent price surge over the last month, analysts anticipate a sales decline in the current year, which may impact future stock performance.

Investors can explore additional insights and tips on GORO by visiting https://www.investing.com/pro/GORO. There are 12 more InvestingPro Tips available that could further inform investment decisions. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a more comprehensive investment analysis toolkit.

Full transcript – Gold Resource Corp (GORO) Q4 2023:

Operator: Good morning, and welcome to the Gold Resource Corporation Fourth Quarter 2023 Financial and Operating Results Conference Call. At this time, all participants are in listen-only mode. Following managements presentation, there will be a question-and-answer session. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, March 14, 2024 at 10:00 a.m. Eastern Time. I will now turn the conference over to Chet Holyoak, Gold Resource Corporation Chief Financial Officer. Mr. Holyoak, you may proceed.

Chet Holyoak: Thank you, Joelle, and good morning to everyone. On behalf of the Gold Resource team, I would like to welcome you to our conference call covering our fourth quarter 2023 results. Before we begin the call, there are a couple of housekeeping matters I would like to address. Please note that certain statements to be made today are forward-looking in nature and as such, are subject to numerous risks and uncertainties, as described in our annual report on Form 10-K and other SEC filings. All financial measures are unaudited. Audited financial statements will be presented in our 2023 Form 10-K, which will be filed at a future date no later than April 1, 2024, once our external audit firm, BDO USA, LLP, completes their audit procedures. Please note, all amounts referenced during this presentation are in U.S. dollars unless otherwise stated. Joining me on the call today is Allen Palmiere, our President and CEO; and Alberto Reyes, our Chief Operating Officer. Following Allen, Alberto and my prepared remarks, we will be available to answer questions. This conference call is being webcast. For those of you joining us on the webcast, you can download a PDF copy of the conference call slides. The event will also be available for replay on our website later today. Yesterday’s news release that was issued following the close of the market has been filed with the SEC on EDGAR and is available on our website at www.goldresourcecorp.com. I will now turn the call over to Allen.

Allen Palmiere: Thank you, Chet, and good morning, everyone. I’d like to thank you for joining our Q4 conference call. I’d like to address a few points first, and then Alberto will address operations, followed by Chet with the financial results. Following their remarks, I will then make a few closing comments, and we will take questions. The fourth quarter was another challenging one for us. As previously guided, mine sequencing resulted in lower ore grades. While this was always in the plan for the latter part of the year, the unexpected strengthening of the peso and the lower than forecast zinc — price of zinc adversely affected our byproduct revenues. While commodity prices and foreign exchange rates are beyond our control, we are very focused on those factors that we can control, including costs and productivity. During 2023, we performed an assessment of our workforce in Mexico that ultimately resulted in a reduction of approximately 10%, and we will continue to evaluate for further reductions. Additionally, we renegotiated certain supply and service contracts that resulted in cost reductions. We obtained certain practices underground to reduce mining costs, reduce dilution and increase productivity. Concerning our processing plant, we are doing test work to attempt to improve recovery while maintain and concentrate quality. Cash continues to be tight and remains our primary focus. We published a preliminary economic analysis for the Back Forty Project last year, which demonstrated the robust nature of the project and confirmed our assumptions when we first acquired it. The project carries some life of mine NPV at a 6% discount rate of approximately $215 million with an initial capital requirement of $325 million. This study demonstrated the economic viability of the Back Forty Project. Now please turn to Slide 4, and I’ll provide a brief update on our Q4 exploration results. Our exploration program continues to produce good results, which will result in higher grade material in our reserves and resources and will increase the mine life. In the past 1.5 years, we had discovered areas of mineralization knowing as of Three Sisters, Gloria, Marena and a continuation of Splay 31, which had been previously identified, all of which contain high grade intercepts and will be part of the future of Don David. As you know, exploration has been the major use of cash over the past two plus years, but the results are more than sufficient to justify the expense and point to the need and desirability of additional drilling in the future. I will now turn the call over to Alberto for an update on the operations.

Alberto Reyes: Thank you, Allen, and good morning to everyone. I’m thrilled to share our latest achievements, indicative of our strong commitment to cultivating a mature health and safety culture. We’re proud to announce that our leading indicators continue to surpass expectations, a testament to the dedication and outstanding participation from our leadership team. I’m pleased to report that our collective efforts have resulted in our lowest LTIFR yet, extending at a rate of 0.2, surpassing our yearly target of 0.25. This milestone underscores…