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Gold Resource Corp: An Excellent Quarter With Two Catalysts Ahead

Gold Resource Corp reported consolidated operating and financial results for Q3 2020. The company produced 12,575 gold ounces and 333,761 silver ounces.  In addition to precious metals, the Company produced base metals resulting in consolidated net revenue of $42.3 million for the quarter.  

Highlights From Q3 2020:

  • Record gold production from Isabella Pearl of 7,847 gold ounces (the run-rate will increase in 2021 to approx. 10k oz. Au per quarter as the company begins mining in full at the higher grade Pearl deposit). 
  • Total Oaxaca Mining Unit (OMU) cash cost after by-product credits of $589 per ounce; An excellent rebound after Q2, when most companies in Mexico were forced to suspend operations due to CV19. 
  • Total Nevada Mining Unit (NMU) cash cost after by-product credits of $935 per ounce; these should come down in Q4 and into 2021 due to the aforementioned mining of the Pearl deposit. 
  • $31.3 million cash balance at end Q3.
  • Cash from operating activities of $17.7. YTD, greater than 100% increase vs. the comparable period in 2019. 
  • As many know, GORO will be spinning off its NMU in 2021 (targeted to be completed by the end of Q1 2021), which is to be called Fortitude Gold Corporation. 

This should unlock significant shareholders value both in the near term (as Fortitude should earn a premium multiple given its operations are in a tier-I mining jurisdiction) and the medium-long term as each company will be able to focus more aggressively on optimizing operations. For example, there is significant upside (production and resource expansion) at its OMU, which Gold Resource Corp can no focus on advancing much more aggressively. The same applied to the future Fortitude gold. 

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