Gold Resource Corp.

By: Peter Zihlmann | Fri, Nov 7, 2008
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Gold Resource Corp. (OTC BB:GORO)
Follow-up N° 3/November 5, 2008

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GOLD RESOURCE CORP: RETURN ON USD 20,000 INVESTMENT
Purchase Date No. of Shares Purchase Price Cost (CAD) Price Today Value Today
October 5, 2007 2'700 3.80 10'260.00    
October 26, 2008 4'600 2.20 10'120.00    
Total 7'300 2.79 20'380.00 2.85 20'805.00
Loss         425.00
Loss (in %)         2%

SHARES OUTSTANDING / FULLY DILUTED MARKET CAP
34,156,952 / 36,806,952 USD 109.8 Million
52 WEEK LOW / HIGH OTC BB
USD 2.00 to 6.09 102,200 (200-day)
RECOMMENDATION RISK RATING
BUY HIGH

773,355 OUNCES GOLD RESOURCE IN OAXACA, MEXICO

Business Summary

Gold Resource Corporation's objective is to create shareholder value by establishing production and generating superior financial performance through the development of gold and silver projects that feature low operating costs and produce high returns on capital. Management's commitment to shareholder value is reflected in the disciplined approach it has taken to the Company's capital structure, its focus on rapid project execution and its goal of meaningful dividend distributions.

GRC's initial exploration efforts have been focused on the El Aguila project, a property featuring high-grade gold and silver mineralization located in Oaxaca, Mexico. Recent discoveries indicate the project is well suited for GRC's performance targets.

An independent scoping study indicated cash production costs of approximately $100 per ounce of gold, and an annual return-on-capital of greater than 100%, indicating a capital payback of less than one year.

Management has established an aggressive schedule for the El Aguila project and targets production mid-2008.

Three additional project opportunities have been established in relatively close proximity to El Aguila: the Las Margaritas silver property, the El Rey gold property, and the Solaga silver property. Collectively, they provide the Company with a pipeline of potential projects that would expand and diversify the Company's precious metal production profile. The Company plans to have four high-grade properties feeding one mill.

Why Mexico?

Mexico is one of the world's leading venues for mineral potential and has a 500 year history of mining. The Fraser Institute's 2004/2005 Mining Survey ranked Mexico fifth out of 64 worldwide venues in current mineral potential. Additionally, Mexico ranked eighth in the same survey for composite policy and mineral potential.

El Aguila Project

Exploration: El Aguila cross section

The El Aguila Project, located 120 kilometers southeast of the capital city of Oaxaca, Mexico, is a significant, newly discovered high-grade gold and silver system. The property has yielded several exceptional gold and silver surface samples, including a 36 grams-per-ton (g/t) gold sample and a 3,100 g/t silver sample. *

The first drill hole initiated from the area of these surface samples resulted in the discovery of 16 meters of mineralization at 6.56 g/t of gold. Subsequent drilling identified a shallow, sub-horizontal mineralized zone (manto) with an inferred grade of 7.43 g/t of gold and 63 g/t of silver. The Company believes the discovery can be mined via an economical, shallow open pit.

The second round of drilling confirmed and expanded this initial mineralization and established the possibility of additional vein mineralization at El Aire, located 2 kilometers south east from El Aguila along the same important structural corridor, with the best intercept of 4 meters of 1.9 g/t of gold and 755 g/t of silver.

Management believes this limited, early work on one very small portion of the property is an encouraging indicator, as there are numerous additional areas along this important structural corridor where high-grade surface samples exist, such as Turkey Hill (up to 20.9 g/t of gold), Cerro Colorado (up to 18.9 g/t of gold) and Andesite Hill, where the highest-grade surface samples of both gold (35.2 g/t) & silver (3,170 g/t) occur.

The gold and silver mineralization at the El Aguila Project is of classic low-sulfidation, epithermal character. These types of deposits form some of the richest, most sought-after deposits in the world.

An exploration program designed to expand the known mineralization and test the many additional targets of high-grade surface samples over 4 kilometers is underway. Management's objective is to define sufficient mineralization to justify mine development at El Aguila.

Las Margaritas Project

Las Margaritas is a high-grade silver property in which GRC holds a 100% interest. It comprises the four northwest kilometers of the important N 70 W structural corridor, which is an extension of the El Aguila system. In addition, Las Margaritas occupies ground within an inferred caldera (collapsed volcanic center).

Historical records from a 1905 Mexican Government-authorized report titled The Mines of Mexico described the Las Margaritas mining district as, "...the place in which has been found some of the richest ores in Mexico, some of the ores having reached the value of 18,000 ounces to the ton, and ores are frequently found which assay 4,000 and 5,000 ounces to the ton."

Though mineralization at these levels is rare, the important point is that the Las Margaritas property shows indications of potentially significant silver mineralization. Surface samples taken by GRC have yielded silver mineralization as high as 1,200 g/t.

El Rey Project

El Rey is a high-grade gold property in which GRC has a 100% interest. While the site has been mined previously, very little information is known about the property. GRC has taken two selective grab samples from the dump material around the original shaft. The two samples assayed 80 and 85 g/t of gold, indicating that the samples are of potential vein material.

GRC intends to explore this property as a potential high-grade gold vein. If it were mined, material could be trucked to the prospective El Aguila mill for processing. El Rey is in the early stages of exploration.

Solaga Project

Solaga is a high-grade silver property in which GRC holds a 100% interest. The 400 hectare property was previously mined in the 1980's. Initial high-grade selective sampling ran 15 kilo's (15,000 grams / tonne or 488 oz/ton or 1.5%) silver per tonne.

GRC intends to explore this property as a potential high-grade silver vein. If it were mined, material could be trucked to the prospective El Aguila mill for processing.

Solaga is in the early stages of exploration.

Recent News: October 22, 2008: GOLD RESOURCE CORPORATION UPDATES MINERALIZED MATERIAL ESTIMATE FOR EL AGUILA PROJECT. INCREASES GOLD AND SILVER PRODUCTION TARGETS TO 200,000 GOLD EQUIVALENT OUNCES / YEAR

Gold Resource Corporation announced results from an internal analysis of delineation drilling at its Arista deposit. The Arista deposit is part of GRC's 100% owned El Aguila Project in Oaxaca, Mexico.

Estimates of in-place mineralized material at the Arista deposit, from Arista and Baja veins only, equal 2,187,000 tonnes grading 5.92 g/t gold (Au), 403 g/t silver (Ag), 0.45% copper (Cu), 1.56% Lead (Pb), 5.05% zinc (Zn).

Total metal values yield a 22.40 g/t gold equivalent (AuEq) (0.72 oz/t AuEq) using the metal prices given in the mineralized material estimate table. This AuEq per tonne value multiplied by the estimated 2,187,000 tonnes equates to 1,334,000 AuEq ounces.

The mineralized material estimate does not meet the SEC definition of Proven and Probable Reserves.

GRC targets production at its El Aguila Project Q1, 2009, subject to obtaining remaining permits, regulatory approvals, equipment delivery and construction schedules.

The Arista deposit's 1,334,000 AuEq ounce estimate is an internal estimate of in-place metal value using the polygonal method of calculation, uncut assay values and with a 0.30 oz/t AuEq cutoff grade. Both veins remain open laterally as well as with depth.

There are indications that a third vein is present for which no mineralized material numbers have been estimated. The Aguila Project's open pit deposit, from which the first 12 months of production is targeted, and the Aire vein system deposit add an additional 290,000 gold equivalent ounces, resulting in the Aguila Project 1,624,000 AuEq ounce estimate.

Gold Resource Corporation's president William W. Reid stated, "Gold Resource was created to maximize shareholder value by emerging in the elite class of low cost gold producers. With a financially focused approach to the business of mining we have come a long way in just two years as a public company. Our decisions are based on anticipated financial performance, not some arbitrary number of ounces in the ground.

That is why we were able to make our production decision back in April of 2007 with approximately 300,000 gold equivalent ounces delineated at that time because this highgrade, low cost project had an estimated capital repayment of only 6 months. Project construction is well underway as we continue to increase our estimate of in-place mineralized material. The 1.6 million gold equivalent ounces surpasses our previously stated near term goal of 1.3 million. Based on our increased understanding of this exciting, high-grade geologic system, we now set as our new near term mineralized material target 3 million gold equivalent ounces".

October 29, 2008: GOLD RESOURCE CORPORATION INTERCEPTS 1.2M OF 83.10 G/T GOLD AND 2340 G/T SILVER WITHIN 4.5M OF 33.27 G/T GOLD AND 1105 G/T SILVER AT EL AGUILA PROJECT

William W. Reid, President of Gold Resource Corporation, stated, "We continue to be impressed with the grade and potential size of the Arista deposit. Hole 108034 is one of our first step-out holes following completion of our detailed delineation drilling and it has now yielded our best hole to date. It not only extended the vein system approximately 35 meters to the southeast but more impressively it has given us our deepest mineralized intercept at 125 meters below any previous drilling. Gold and silver values are strong as are the increased copper values which we think bodes well for significant expansion of this deposit". 1B

Fundamental Considerations

Gold Resource Corporation's president William W. Reid stated, "Gold Resource was created to maximize shareholder value by emerging in the elite class of low cost gold producers. With a financially focused approach to the business of mining we have come a long way in just two years as a public company. Our decisions are based on anticipated financial performance, not some arbitrary number of ounces in the ground.

That is why we were able to make our production decision back in April of 2007 with approximately 300,000 gold equivalent ounces delineated at that time because this highgrade, low cost project had an estimated capital repayment of only 6 months. Project construction is well underway as we continue to increase our estimate of in-place mineralized material.

The 1.6 million gold equivalent ounces surpasses our previously stated near term goal of 1.3 million. Based on our increased understanding of this exciting, high-grade geologic system, we now set as our new near term mineralized material target 3 million gold equivalent ounces".

1BMr. Reid stated, "Because drilling results have yielded higher values than originally anticipated and because the mill we are building is capable of approximately 1100 tonnes per day, we are pleased to set increased production targets up to 200,000 gold equivalent ounces of precious metals (gold and silver only) targeted by year three.

These targets are hypothetical at this point because they depend on the rate of mining from the underground mine which is currently being designed but this level of production is what we target".

Now that the production target has been increased to 200,000 ounces gold equivalent, the future for the shares price looks even brighter.

With increased production, also the target dividend of 52 cents per share should be considered a minimum.

Technical Considerations

AS SO MANY OTHER GOLD STOCKS, GOLD RESOURCE IS ALSO A COMPELLING BUY AT TODAY'S PRICE OF $ 2.50.

THE TIMELESS PRECIOUS METAL FUND is a shareholder in the company and will benefit from any increase in the company's share price.

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Disclosure: The author has not been paid to write this article, nor has he received any other inducement to do so. The author is a shareholder in the company and will benefit from any increase in the company's share price.

Disclaimer: The author's objective in writing this article is to invoke an interest on the part of potential investors in this stock to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell this stock. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions in the stock.

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Peter Zihlmann

Author: Peter Zihlmann

Peter Zihlmann
P. ZIHLMANN INVESTMENT MANAGEMENT AG
www.pzim.ch
invest@pzim.ch

Peter Zihlmann

Chairman of the Board, domiciled in Zurich, Switzerland

Majority shareholder and CEO of P. Zihlmann Investment Management Ltd (the Investment Manager), with over thirty-years experience as an asset manager with different prime banks, and since 1994 CEO of P. Zihlmann Investment Management Ltd.

Your independent Swiss asset manager

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