Gold Resource Corp. Interview Transcript with Bill Reid, President, CEO and Director

Harry Norman:    Hello, this is Harry Norman for Proactive Investors and welcome to another Proactive Audio Interview.  Today is 26th May 2010 and I am talking with Bill Reid, President CEO and Director of Gold Resource Corporation.  Listed on the Over The Counter Bulletin Board in the United States Metals and Mining Sector.  Stock ticker GORO; share price $10.44 US; market cap $508.94 million US.  Gold Resource Corporation shares also trade on the Frankfurt Exchange.  Web address: www.goldresourcecorp.com. 
    Bill thank you very much for joining us for this interview.

Bill Reid:    Thanks Harry, it’s my pleasure. 

Gold Resource Corp has described itself as engineered from day one to maximise shareholder value, what does this mean Bill?
Well, let me take a moment to explain that because I think it’s very important.  We have a unique opportunity here with Gold Resource Corporation.  We created it from scratch.  We did not even want to do a reverse takeover to go public which a lot of companies do,  because we wanted to stay in control of the capital structure and everything associated with the company.  So we’ve used our 30 years worth of experience to create Gold Resource Corporation. For instance, we’re very disciplined on our capital structure.  We did not want to be a 20 or 30 cent stock.  I wanted to come out at a dollar per share with our IPO.
    As a matter of fact we turned down investment bankers because we wanted to stay in control.  I know when I had one meeting with an investment banker, I said I wanted to go out at a dollar a share for my IPO and he said, “Well no, I will tell you what you go out at.”  Anyway, in my own mind I said, “Well I don’t think I will be dealing with you.”  So the point I am trying to make is, we’re very specific.  Capital structure is important.  How we approach the business looking for high grade, low cost operations.  Everything is there to maximise shareholder value.

Gold Resource Corp shipped its first concentrate for sale from the El Aguila project in Oaxaca, Mexico on April 14th.  Is the mill operating at design throughput and recovery levels yet?

We’re not quite there, our design throughput or recovery levels, but we’re very close.  And once we achieve that which we think is in the very short term, we will declare commercial production and be on our way.  I think it’s very interesting that shipping our concentrates in April was essentially three years to the day that we decided to put the El Aguila project into production.  So we did that relatively quickly for the mining business.

How do you think moving into commercial production at El Aguila could affect the way the market values Gold Resource Corp, Bill?

We obviously think that as we achieve production here, commercial production, the market should reflect an upgrade to our rating.  What it means is that we basically eliminated all the risk factors that junior companies generally have in order to obtain production.  The ability to finance – we’ve been able to do that.  The ability to construct – we’ve executed.  So we expect that by eliminating many of those risks now and being in production that we will be re-rated by the market place.

When will the Arista and El Aire vein systems at El Aguila be taken into production?  And how will producing from them compare with current production Bill?

The first 12 months of production comes from our El Aguila open pit.  And we are targeting 70,000 ounces of gold the first 12 months of commercial operation.  At the same time now, we are actually developing our underground mine at the Arista vein system, that’s the place where year two and year three on, up to eight years of additional mineralised material will come from.  So we’re developing the Arista mine at present.
    Our production level, we have a very good growth curve the first 12 month with 70,000 ounces.  The second 12 month we’re targeting 110,000 ounces and the third year will be at 200,000 ounces.  And what’s great about the Arista deposit is suddenly as the gold and silver begin, we’re going to produce 200,000 ounces of gold equivalent, that’s gold and silver, but at zero cost.  And the zero cost comes by way of the fact that we also mine at the same time in that tonne of ore, copper, lead and zinc.  The copper, lead and zinc are rich enough that it’s going to pay for the whole operation.  So we think it’s a very nice set of circumstances to say that by year three we will be producing 200,000 ounces of gold equivalent at zero cost.

What potential does El Aguila have for further discoveries, Bill?

We are very excited about this property.  And we think we’ve just only begun.  From a geologic system stand point this system is very young, like 15 to 17 million years.  Compare that with the balance of Mexico up north where most of the deposits are 30 or 40 million years old.  The point I would simply make is that we think that we have a virgin system that we’re the first to discover.  And our main deposits don’t start until about 100 metres below the surface.  Had we had another five million years of erosion, these deposits would have been explored and found by the Spaniards or the Mexicans. 
    So we have a very high grade system.  It appears from all the geologic work that we’re doing, to be potentially very large and very robust.  It’s a high grade system.  So we think it holds a lot of potential in the future.

What is in Gold Resource Corp’s exploration pipeline beyond El Aguila?

Well, a structural setting here is that we have a structural corridor of about 16km long.  The El Aguila project is only 4km of that 16km.  Along that trend we go through two other districts, the Las Margaritas District and the Ultagracia  District.  These we have not really explored yet.  They haven’t had any drillings done.  So we’re actually going to be moving a drill rig over to Las Margaritas before too long.  So we think the potential past El Aguila project is significant. 
    We also have two other properties, one we’ve drilled, El Rey which is a high-grade gold property and we’ve got up to a meter of four ounces of gold out of that drilling programme.  And then we have another property called Solaga.  So we feel like we have a tremendous pipeline of projects.  Not only do we have a growth curve that’s significant, we have a pipeline of potential projects that could add to our production profile considerably.

Who are Gold Resource Corp’s significant shareholders and how supportive are they Bill?

Okay, first we have what we call a strategic alliance with Hochschild Mining, which is a mid tier gold and premier silver producer located in Peru.  Hochschild is listed on the London Stock Exchange.  They’ve been very supportive.  They own about 30% of the company as a shareholder.  And they’ve been very supportive both financially as well as technically.  Any questions we have or any assistance we ask for they’re there to provide that.  So they’ve been very helpful.
    The second largest group of shareholders is management.  And we think that’s significant because management owns about 22-23% of the company.  And so you’re dealing with owner management as opposed to caretaker management.  Because we’re owner management, one of the key aspects that we’re focused on is having the goal of paying a meaningful dividend.  In other words, distributing as much cash and as fast as we can, back to the owners of the company.  We think that’s an important part of our philosophy that will someday distinguish us from a lot of other junior mining companies.
    We also have some significant gold funds.  One of the lead funds out of New York is Tocqueville Gold Funds, run by John Hathaway.  They’ve been loyal supporters and are a large shareholder.  I mean we also have many other gold funds.  So we have a pretty good list of shareholders in our company.

What is Gold Resource Corp’s financial situation going forward, Bill?

Well we expect to achieve commercial production in the short term.  We believe and it’s the target, once we achieve commercial production you’re on your way – paying your own way, which we think we will be doing here shortly.  So we think we’re in fine shape with regards to that.

What can investors expect from Gold Resource Corp over the next 12 to 18 months?

Well we’re looking at the first 12 months to be 70,000 ounces of gold.  This is coming from our open tip, does not have any base metals, it has a small amount of silver which we are going to use as credit against our costs.  So we’re looking at about $200 per ounce cost this first 12 months on a 70,000 ounces of gold from the open tip. 
    But then we start processing ore from the Arista underground high-grade system and we target 110,000 ounces in the second 12 months and that will be at a lower cost and then we move on up to a targeted 200,000 ounces at zero cost.  So we have an excellent growth profile. 
    We also, as I mentioned, are going to be looking at our cash situation and seeing what is the first point in time we can start paying the dividends, so that’s a potential situation to develop in the near term.  And then we think this property and our property position holds tremendous potential, so I think we can expect some very exciting drill results as time goes on.
    So we are in a very exciting phase for Gold Resource Corporation, just about to declare commercial production in the near term and be on our way.  And then be able to really exploit our great property position.

http://www.proactiveinvestors.co.uk/companies/news/17615/gold-resource-corp-interview-transcript-with-bill-reid-president-ceo-and-director-17615.html