Gold Resource Corporation

GORO Details

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

Latest News:

• Inorganic Growth Initiatives: On December 10, 2021, GORO and Aquila Resources Inc. announced the conclusion 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 via its wholly-owned indirect subsidiary Gold Resources Acquisition Sub, Inc. Aquila Shareholders approved the Transaction at a special meeting on November 17, 2021, and the Ontario Superior Court of Justice (Commercial List) approved it on November 19, 2021.

Q3FY21 Results:

• Growth in Topline: The company reported a YoY growth of 9.81% in sales, net to USD 29.03 million in Q3FY21 (ended September 30, 2021) from USD 26.44 million in Q3FY20. The Concentrate sales, accounting for 95.96% of the net sales in Q3FY21, 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: On the global 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 could harm the company's bottom line.
• Regulatory Risk: GORO is a gold mining company that requires a number of permissions from both the federal and local 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. 

Stock Recommendation:

GORO's stock price had decreased 43.32% in the past nine months and is currently leaning towards the lower band of its 52-week range of USD 1.50 to USD 3.11. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 1.94.

Considering the significant correction in the stock price in the past nine months, strong balance sheet, inorganic growth initiatives, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 1.57, up 1.29% as of February 04, 2022, 01:10 PM ET.

Three-Year Technical Price Chart (as on February 04, 2022, at 01:10 PM ET). 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.