Gold Resource Corp posts record 2011 results, profit of over $58 mln

Gold Resource Corporation (AMEX:GORO) reported late Wednesday record annual results, with 2011 marking its first full year of production from its El Aguila operations in Oaxaca, Mexico.

The gold company, which began commercial production from its El Aguila project in Oaxaca, Mexico in July 2010,  posted net income of $58.37 million, or $1.10 per share in the year to December 31, 2011, versus a loss of $23.07 million, or 46 cents per share in 2010.

Shares of Gold Resource rallied 5.5 percent on Thursday, to trade at $25.79 as of 12:29pm ET.

El Aguila is located 120 kilometres southeast of the state capital city of Oaxaca, Mexico and has yielded several strong metal samples, including 36.0 grams per tonne (g/t) gold, and 3,100 g/t silver.

Last March, the company announced that it had begun the transition from processing lower grade, open pit ore, to processing underground ore from the high grade La Arista deposit at El Aguila.

Combined open pit and underground operations in 2011 yielded 66,159 ounces of gold equivalent production. This compares to the 10,493 gold equivalent ounces produced from the six months of open pit El Aguila operations in 2010.

As underground development continues, Gold Resource management said on a conference call this morning it expects to mine more efficiently with greater tonnages and less dilution.

Cash costs in 2011 were $136 per ounce of gold equivalent, excluding royalty expense, 37 percent lower than $217 per ounce in the six month period in 2010.

This led to record annual revenue of more than $105 million in 2011 as the company realized much higher gold and silver prices for its combined operations of $1,596 per gold ounce, and $35 per silver ounce. Revenues in 2010 stood at $14.75 million.

The company's gross profit from the mine came in at $87.2 million, way up from $9.8 million the prior year.

Gold Resource Corp returned $26.5 million in dividend distributions in 2011, which as a percentage of its gross profit from the mine, is "very close" to its 33 percent target, said the company on a conference call this morning.

The company also said Thursday that February production has been its best month yet, with the Aguila mill now back online. In January, Gold Resource said that as part of its normal operating procedure, the Aguila mill was shut down during the last 10 days of 2011 and the first five days of 2012 for routine maintenance, holidays and the installation of an expanded cleaner flotation circuit.

The new circuit is part of the gold producer's ongoing mill optimization, which is expected to provide opportunities for future expansion, the company added. Mill optimization continues as the company ramps up daily production to an estimated average 900 tonnes per day for 2012, with 1,200 tonnes per day targeted next year.

Average gold recovery in 2011 was 87 percent.

“We are very pleased with our first full year of production and proud of our good people in Oaxaca that made it possible," said president of the company, Jason Reid, in a prepared statement.

"Ramping up a mining operation, particularly an underground mine, is not an easy task. The results for the year underscore our ability to execute as a company, as much was accomplished in 2011.”

"These results allowed management to continue our shareholder friendly and focused philosophy by distributing 2011 record dividends of $26.5 million, or $0.50 per share.”

In the fourth quarter, production from the El Aguila project totaled 19,934 gold equivalent ounces at a cash cost of $120 per ounce. Average realized sales prices were $1,691 per ounce gold and $30 per ounce silver.

The company paid $7.9 million to shareholders in dividends in the latest period, and repurchased 53,251 shares at an average share price of $18.39, after which the it increased its bank account by $7.0 million over the previous quarter, to $52 million.

Gold Resource Corp also has a physical gold and silver treasury of $2.5 million, with the company "very close" to launching its gold/silver dividend program.

The company reiterated its 2012 outlook for production in the range of 120,000 to 140,000 ounces of gold equivalent, with cash costs between $50 to $150 per ounce.

Gold Resource is also looking forward to its formal NI 43-101 resource report, in consideration for a possible secondary listing in Canada. The report is being prepared by
engineering firm Pincock Allen and Holt of Denver and is expected to be completed in March, but could also push into April, the company said.

At its operations, mine development at La Arista is progressing well, the gold producer added, with the primary decline ramp approaching Level 11.

The company is also developing an additional decline ramp south from Level 7 to access the southern part of the ore body. By developing off the veins, it anticipates the Level 7 decline ramp will allow for more "expedited access" for future mine development along the entire strike length of the deposit.

In 2012, Gold Resource is planning an aggressive exploration program, with a "great deal of exploration potential along the company's mineralized trend".

A total of four exploration drills are currently at the company’s properties, with a fifth drill expected to arrive shortly.

Gold Resource Corp has a 100 percent interest in six potential high-grade gold and silver properties in Mexico’s southern state of Oaxaca.

The primary focus for drilling in 2012 will be to test the extension of the Arista deposit, which remains open on strike and depth. The company added it could add additional drills as it expects to boost the size of its exploration program. It recently hired an exploration manager for the Oaxaca mining unit, and another core logging geologist.

At the Alta Gracia property, the company has budgeted around $1 million for exploration this year, with the 2011 program encountering 33 intercepts grading more than 200 grams per tonne of silver.

At Las Margaritas, Gold Resource is constructing a new road that will allow year-round access to the property, with a drill program planned for this year to test high-grade targets identified from surface mapping and sampling. It expects to spend $700,000 in this area in 2012.

The gold miner is also planning a 2012 regional airborne geophysical survey for five of its contiguous properties, which span a mineralized structural corridor over 48 kilometres. This will be the first wide-scale exploration program to cover the company’s entire mineralized trend.

The company also said on the conference call earlier today that it will look globally for a second project to acquire as it anticipates the El Aguila project can keep it in production for the next 20 years.