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Monday, July 4, 2011

Gold Resource (GORO) best performing gold stocks over the past five years

Gold Resource (GORO) best performing gold stocks over the past five years : Gold Resource Corp (GORO) has been one of the best performing gold stocks over the past five years, outperforming the appreciation in gold bullion by around 2,000%. From a price of $1 per share in September 2006, Gold Resource rose to the $5 per share range by mid year 2007 and earlier this year hit an all time high of $31.38. GORO closed at $24.10 on Friday and may head much lower in the aftermath of a devastating article published in this week's Barron's.

Highlights of the disclosures and questions raised about GORO in the Barron's article include the following:

1. The company is run by the Reid family and Bill Conrad, who helped the company in its initial public stock offering in 2006. Barron's discloses that the Reids and Conrad "have been consistent sellers of the stock" with $13.7 million of sales in the just the past year.

2. Gold Resource's primary mine in El Aguila, Mexico, has seen constant production delays despite promises since 2007 that production would soon increase. In April of this year, according to Barron's, the mine produced only 20,000 ounces after being targeted for 70,000. The expenditure of $95 million, raised in equity offerings, has produced minimal results in terms of gold production.

3. The El Aguila mine was abandoned by Apex Silver Mines after they explored the site in the early 2000s.

4. Gold Resource has never conducted a study to accurately assess the "proven and probable reserves" of the El Aguila mine. According to Barron's, investors only have the Reids' word to rely on for estimates of gold deposits and the cost of extraction them.

5. The two largest investors in Gold Resource are Hochschild Mining of Peru and the Tocqueville Gold Fund. According to Barron's, "the largest holders, who have known the company the longest, have not been buying stock at anywhere near the current price". Legendary gold investor John Hathaway of the Tocqueville Gold Fund told Barron's that his geologist has visited the El Aguila mine twice and ore samples are "consistent with a potential deposit of two to three million ounces of gold equivalent", worth up to $4.5 billion in gross revenue. Almost 4% of the Tocqueville Gold Fund is invested in Gold Resources.

6. Barron's discloses that Gold Resource President Jason Reid sold $700,000 of stock "on May 19th, a day after Barron's first emailed him some questions".

7. Barron's claims that Gold Resource management is "promoting the stock" with cash dividends despite the fact that "the company has never, in a single quarter, produced positive cash flow".

8. Barron's concludes that investors shorting the stock "are probably wise" not to take management's word on how much gold Gold Resource actually has or how much it will cost to mine.
The recent trading action in Gold Resource Corp stock raises some intriguing questions. On June 24th, GORO traded down $1.47 as trading volume exploded to 3.3 million shares, the highest volume in the stock's history and 7.7 times the stock's daily average trading volume. The massive surge in trading and lower stock price a mere week before the damning Barron's article was published suggests that some investors knew in advance what was coming. Investors also have a significant short interest position in GORO of almost 11% of the stock's float. For the latest updates PRESS CTR + D or visit Stock Market news Today

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