Gold Resource In Leadership Reshuffle After NMU Spinoff; Shares Drop 5%

Gold Resource on Dec. 31 announced leadership changes following the spinoff of the Nevada Mining Unit (NMU) into a distinct, separate public company, named Fortitude Gold on Dec. 31, 2020. Shares of the precious metal explorer lost 5.5% at the close on Thursday.

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Gold Resource (GORO) appointed Bill Conrad as Fortitude Gold’s Board Chairman and Jason Reid as CEO, President and director.

Meanwhile, Alex Morrison will succeed Conrad as the Chairman of Gold Resource. Conrad will continue to serve as an independent director on the company’s board.

Allen Palmiere was appointed to succeed Reid as the CEO and director of Gold Resource. As such, Reid will step down from all company positions to be at the helm of Fortitude Gold.

In addition, Lila A. Manassa Murphy and Mr. Joseph Driscoll have been appointed as independent directors to sit on Gold Resource’s board.

In reaction to the company’s 3Q20 financial results and strong liquidity position to support the spinoff, H.C. Wainwright analyst Heiko Ihle reiterated a Buy rating on the stock on Nov. 4.

Ihle set a price target of $7.50 (158% upside potential) on the stock. Shares have lost 47.5% in 2020.

“During the quarter, the company generated an impressive $42.3M in revenue (+6% YoY) and strong net income of $5.0M, or $0.07 per share. The YoY revenue improvement is primarily attributable to greater gold production from GRC’s Nevada Mining Unit, as well as higher average realized prices for gold, silver, copper, and zinc,” commented Ihle in a note to investors.

“GRC held a working capital balance of $50.0M, including $31.3M in cash, at the end of 3Q20. This figure increased from $33.6M at the end of 2Q20. In short, we believe that GRC’s liquidity should suffice to support the proposed near-term spin-off of its NMU into a separate publicly traded company,” the analyst summed up.

Furthermore, Ihle believes that the proposed spinoff will allow the Oaxaca Mining Unit (OMU) to better focus on exploring its large land package with polymetallic production, while he anticipated the NMU to focus on exploration and a meaningful dividend with exposure to gold production. (See GORO stock analysis on TipRanks)