Gold Resource (GORO) recently completed its split into two companies, notes Benj Gallander, a leading Canada-based investment expert and editor of Contra the Heard.
Alex Morrison became the new Chair at Gold Resource and Allen Palmiere was appointed CEO. Both of these gents have extensive experience in the mining industry.
Quite simply, our recommendation is based on the fact that we wanted more commodities in the portfolio — and with the spinoff of the company's Nevada gold assets, GORO is now refocused on its core of industrial metals.
The lion´s share of those is zinc, with production of 19,322 tonnes last year. Zinc is the world´s fourth most consumed metal; it is used in a myriad of applications, from alloys and batteries to paint and fire retardants.
GORO also produces lead and copper. All of these metals are deeply embedded into the economy. If economists are correct about a springy bounce in global growth later this year, then demand for these essential raw materials will surge. And of course, GORO will still mine gold and silver.
They actually just reported that, "The Company finished the year with a strong balance sheet, including $25.4 million in cash, which provides us with flexibility as we move to reinvest capital in Mexico to increase the productivity and the life of the operations."
Of course, it is important to remember that COVID remains a risk and could shutter operations in the short-and/or medium term.
Since the subdivision, the company is a new entity, thus making it somewhat harder to evaluate. It also means that the upside — and thus the Initial Sell Target — is reduced. We settled on $7.24.
Last year's revenue was $135 million with only $15 million of that coming from the US. So most of it was from the current "Mexican" GORO. That looks good.
Plus, the company continues to explore and perhaps will add to their current reserves. Of course, all miners try to accomplish this but we envision this outfit will be successful. The current dividend is about 1.5 percent. It should be maintained.
Lastly there was quite a bit of mining consolidation last year. Perhaps GORO will become a takeover candidate, at a premium we would suspect. That is written without even the smallest whiff of rumor. Here is hoping.
