Gold Resource Corporation (NYSE MKT: GORO) announced Tuesday record mill production last year, and stood by its outlook for 2013, despite some challenges it experienced in 2012 with the first year of underground mining at its Arista deposit – part of its El Aguila mine in Mexico.

The U.S.-based gold and silver producer, with operations in the southern state of Oaxaca, Mexico, said it produced 90,432 ounces precious metal gold equivalent in 2012, and sold 72,399 ounces at a total cash cost of $419 per ounce. 

This compares with 60,690 ounces produced in 2011, and 58,514 ounces sold.

The company made record annual revenue of $131.8 million, compared to a $105.2 million in the prior year. 

Gross profit from its El Aguila mine was $87.8 million, up from 80.6 million in 2011. 

Net income for 2012 was $33.7 million, or 64 cents per share, versus $58.4 million, or $1.10 per share in the prior year. 

Total costs and expenses rose to $38.1 million from $34.8 million, while production costs surged  with the significantly higher output. 

In the fourth quarter, production from its El Aguila project totaled 23,782 ounces of gold equivalent, at a cash cost of $551 per ounce, versus 19,934 ounces a year earlier at a cash cost of $279 an ounce. 

Average realized prices for gold in the latest period remained steady at $1,691 an ounce, while silver prices rose to $36 an ounce from $30 an ounce in the fourth quarter of 2011. 

The mine generated a gross profit of $17.2 million in the latest quarter, it said. 

During 2012, the company also paid out a record amount in annual dividends at $36.5 million, or 69 cents per share, with $9.5 million paid in the last quarter. The gold producer has returnmed more than $75 million to shareholders in monthly dividends since starting commercial production at El Aguila in July 2010, and now offers investors the option to convert their cash dividends into physical gold and silver. 

“Our Arista mine completed its first full year of underground mining in 2012 but not without its share of challenges,” said president Jason Reid in a statement Tuesday. “Though 2012 marked a record production year, we had to deal with greater than expected water flows and unexpected and substantial carbon dioxide gas that required increased pumping and increased ventilation for safe operations.”

“Our approximate 37% increase over last year’s mill production evidences the turnaround that took place after issues in the mine slowed down development during the second quarter,” he added. 

Last year, the company announced a series of management hires, including general manager Jesus Rivera, and the rest of its new onsite management team in Oaxaca. 

President Reid told investors that ramping up a mining operation, particularly an underground mine, is not an easy task, saying that the organization has been “retooled” with a team “well-suited” to meet the challenges ahead. 

“The results for the year underscore our ability to overcome challenges and execute the company’s business plan.”

For 2013, the company is aiming to produce between 80,000 to 100,000 ounces gold equivalent, and is targeting to be in the lowest quartile of total cash costs, ranging from $300 to $500 per ounce. Gold Resource Corp is implementing cost cutting measures and production increases aimed at lowering costs. 

The plan for this year is to position the project to produce 1,500 tonnes per day by the end of the year, the company said, with the south and southeast area of Arista anticipated to provide the ore for production in 2013. Upgrades to the mill are also in the works, which could impact daily output periodically, it warned. 

In terms of exploration, six drills are currently at its properties in Oaxaca, with three surface drills and two underground drills at the Arista mine and the sixth drill at the Las Margaritas property. A $10 million exploration budget has been set aside for its Oaxaca mining unit this year. 


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