Gold Resource Corporation

GORO Details

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

Latest News:

• Strategic Acquisition: On December 10, 2021, GORO and Aquila Resources Inc. announced the completion of the previously announced statutory plan of arrangement under the Business Corporations Act (Ontario). GORO acquired all of Aquila's issued and outstanding common shares through its wholly-owned indirect subsidiary Gold Resources Acquisition Sub, Inc. On November 17, 2021, a special meeting of Aquila Shareholders approved the Transaction, as did the Ontario Superior Court of Justice (Commercial List) on November 19, 2021.
• Dividend Declaration: On October 28, 2021, the company declared a quarterly dividend of USD 0.01 per common share, payable on December 29, 2021, to shareholders of record on December 15, 2021.

Q3FY21 Results:

• Growth in Topline: The company reported a YoY increase of 9.81% in net sales to USD 29.03 million in Q3FY21 (ended September 30, 2021) from USD 26.44 million in Q3FY20. The Concentrate sales, representing 95.96% of the net sales in Q2FY21, witnessed an increase of 18.14% YoY, whereas the Doré sales declined by 28.40% YoY.
• Decline in Profitability: GORO reported a net income of USD 1.53 million in Q3FY21 reduced from USD 5.00 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents of USD 29.54 million and no outstanding debt.

Risks:

• Metal Price Risk: The highly volatile and uncontrollable prices of gold, silver, and base metals on the global market significantly impact GORO's business. As a result, any adverse price movement could harm the company's bottom line.
• Regulatory Risk: GORO is a gold mining corporation that requires several ongoing permits from federal and municipal governments. As a result, stricter laws or non-compliance with required legislation may harm the company's profitability.

Outlook:

Updated FY21 Guidance (Source: Press Release, October 14, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

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

GORO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GORO's stock price had decreased 47.94% in the past nine months and is currently leaning towards the lower band of its 52-week range of USD 1.50 to USD 3.20. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 30.41. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 1.91.

Considering the correction in the stock price, strong balance sheet, strategic acquisition, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 1.515, down 1.62% as of January 06, 2022, 12:49 PM ET.

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

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.  

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