Gold Resource Corporation

GORO Details

Gold Resource Corporation (NYSE: GORO) is a gold, silver, copper, lead, and zinc mining firm that produces precious base metal concentrates and doré. The Arista underground mine at the Aguila project, GORO's Mexican subsidiary Don David Gold Mine's main mineral production project that supplies ore to its processing facilities, is also located at the Aguila complex.

Latest News:

• Announced Preliminary Results: On April 14, 2022, GORO announced it sold a total of 8,381 ounces of gold and 265,407 ounces of silver for a total gold equivalent of 11,729 ounces in Q1 2022. The Company also sold 4,359 tons of zinc, 408 tons of copper, and 1,639 tons of lead, resulting in a solid cash balance of over USD 31 million.

FY21 Results:

• Surge in Topline: The company reported a YoY growth of 38.05% in sales, net to USD 125.20 million in FY21 (ended December 31, 2021) from USD 90.69 million in FY20. The Concentrate sales, accounting for 92.28% of the net sales in FY21, witnessed an increase of 45.36% YoY, whereas the Doré sales declined by 23.07% YoY.
• Growth in Profitability: GORO reported a net income of USD 8.03 million in FY21 increased from USD 4.36 million in FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash & cash equivalents of USD 33.71 million and no outstanding debt.
  

Key Risk:

• Metal Price Risk: The highly volatile and unmanageable prices of gold, silver, and base metals on the world market significantly impact GORO's activities. As a result, any adverse price movement may harm the company's bottom line.
• Regulatory Risk: GORO is a gold mining corporation that needs several permits from the federal and local governments. As a result, tougher restrictions or non-compliance with required legislation may wreak havoc on the company's bottom line.

Outlook:

2022 Guidance (Source: FY21 Earnings Release, March 10, 2022)

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 decreased 27.18% in the past twelve months and is currently leaning towards the lower 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 2.62.

Considering the significant correction in the stock price in the past twelve months, strong balance sheet, strong preliminary results, current valuation, and associated risks. We recommend a "Speculative Buy" rating on the stock at the closing price of USD 2.09, down 5.00% as of April 22, 2022.

Three-Year Technical Price Chart (April 22, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

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