Gold Resource Corporation

Gold Resource Corporation (NYSE: GORO) is a mining company that produces precious and base metal concentrates and doré, including gold, silver, lead, and zinc. Its Mexican affiliate Don David Gold Mine has six projects, including the Arista underground mine at the Aguila project, which supplies ore to the Aguila complex's processing facilities.

Why should Investors Book Profits?

• Industry Lagging Margins: GORO's gross, EBITDA, and net margins have improved year over year. However, in FY21, its gross, EBITDA, and net margins were 29.4%, 32.0%, and 6.4%, respectively, significantly lower than the industry medians of 49.6%, 41.0%, and 11.0%.
• Decline in Liquidity: The company's current ratio fell to 1.99x at the end of December 31, 2021, compared to 3.55x at the end of December 31, 2020, indicating that it may suffer solvency challenges.
• Metal Price Risk: On the worldwide market, the highly unpredictable and uncontrollable prices of gold, silver, and base metals substantially impact GORO's operations. As a result, any adverse price movement may harm the company's bottom line.

• Regulatory Risk: GORO is a gold mining company requiring several permits from federal and local governments. As a result, more onerous restrictions or non-compliance with required legislation may wreak havoc on the company's bottom line.
• Macro Headwinds: The relationship between gold and interest rates has been negative in the past. It's impossible to say for sure, but gold prices tend to climb when interest rates decrease and fall when interest rates rise. In such prosperous times, the appeal of a safe haven investment evaporates, and with interest rates rising and the home currency strengthening, the short-term gold price should decline. Recent market fears about the Federal Reserve raising interest rates sooner to combat inflation will put downward pressure on current gold prices, affecting the company's operational profitability.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

GORO's stock price had surged 30.18% in the past month and is currently leaning towards the mid-band of its 52-week range of USD 1.50 to USD 3.11. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 1.75.

Considering the surge in the share price in a brief span, macro headwinds, industry lagging margins, current valuation, and associated risks, we recommend a "Sell" rating on the stock at the closing price of USD 2.20, as of March 14, 2022.

Three-Year Technical Price Chart (as of March 14, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.