(NYSE MKT:GORO) reported Friday what it called a challenging third quarter with operational results coming in weaker than anticipated but the company has responded by hiring new management to support a fourth quarter rebound which would put it on track to meet the lower end of its 2014 production guidance.
The Mexico-focused gold and silver producer which produces from its El Aguila mine in Oaxaca posted 17262 ounces of gold equivalent production in the third quarter down from 21244 ounces in the same period last year. Production levels were approximately 24 percent lower in the most recent period than the quarterly average for the first half of 2014.
It also only sold 11923 ounces in the latest quarter with the discrepancy between ounces produced and sold explained by smelter concentrate processing deductions and an increase in gold equivalent ounces contained in inventory the company said.
had 5878 gold equivalent ounces of concentrate produced and stockpiled in ending inventory it added.
Average realized gold prices increased 4 percent to $1295 per ounce in the quarter from $1240 an ounce a year ago. Total cash costs after by-product credits improved by 52 percent to $364 per ounce from $756 an ounce in the third quarter of 2013.
For the latest quarter the company recorded a net loss of $1.5 million or 3 cents per share. It said that had it not stockpiled the 5878 ounces of unsold gold and silver concentrates in its inventory in preparation for processing in its new Aguila mill Dore facility it would have recorded a net profit. The inventory is planned to be processed and sold in the fourth quarter as Dore bars at the new facility.
"The company has implemented new mine management in response to these unsatisfactory results and believes that fourth quarter production can rebound which puts the lower range of the company's 2014 outlook within reach" said president and chief executive officer Jason Reid.
"We stockpiled much of our high-grade gold and silver concentrates produced during the quarter in preparation for pouring Doré bars in our new Doré facility which we began commissioning at the end of the quarter and which increased our unsold inventories."
The CEO said that by expanding the company's production methods it expects to lower its treatment and royalty costs for the Dore ounces sold further optimizing operational costs.
In response to the weak quarter appointed last month Oscar Zelaya as the new general manager of the El Aguila project succeeding Jesus Rivera who Gold Resource said will pursue other interests.
Zelaya a metallurgical engineer has more than 29 years of industry experience the company said and was most recently general manager at Corp. Prior to Endeavour he worked as Nyrstar's Peruvian country and general manager.
Though the company has had a tough few months it remains optimistic that it can bounce back and meet its annual production guidance for between 85000 to 100000 gold equivalent ounces.
"Though the third quarter was a challenging one it was not without some measures of success as we reached a major company milestone by returning an aggregate of over $100 million dollars back to shareholders in consecutive monthly dividends" Reid added.
Indeed in September it returned more than $100 million back to its shareholders in just over four years since beginning production at its El Aguila mine in Mexico with $1.6 million distributed in the third quarter. The U.S. based gold producer has said its continued goal is to position the company to "capitalize and prosper" when precious metals markets resume their longer term bull trend.
It ended the latest quarter with cash and equivalents of $24.8 million a 66 percent increase from year-end 2013.
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