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Gold Resource Corp (GORO): Got gold missing?

We start here, with a basic earnings overview chart for GORO that shows the quarterly evolution for revenues, costs and the resulting gross profit for the last two years:

See that big drop in revenues in 3q14? Back when it announced its 3q14 numbers, here's how GORO explained the revenues shortfall in its news release (IKN highlighting in red):
“The Company delivered weaker than expected quarterly operating results with production levels approximately 24% lower in the quarter compared to the quarterly average of the first half of 2014,” stated Gold Resource Corporation’s CEO and President, Mr. Jason Reid. “The Company has implemented new mine management in 2 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. 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. We recorded a $(0.03) per share loss which was contributed by unsold concentrate inventory as a result of stockpiling the high-grade concentrates for the Doré facility process. These inventoried ounces are planned to be processed and sold during the fourth quarter as Doré bars
And indeed, if we check out the evolution of the inventories of concentrates as reported per quarter by GORO, we see a pattern that matches the statement. For five previous quarters to 2q14 concentrates held in inventory were at or under $1m. Then in 3q14 the number jumped to $3.4m. We can then see that GORO was apparently true to its word about processing the extra in 4q14 because the number dropped back most (though not all) of the way, with 4q14 filing $1.481m in inventory of concentrates.

If we then look to the production and sales of silver, the pattern also matches.

Above you see how production tends to be higher than sales, which is normal enough. We also see how in 3q14, production and sales of silver dropped sharply. Then finally in 4q14 production rebounded but in this quarter, sales actually managed to outstrip production. That's just what you'd expect from a company that was working through its unsold inventory during the quarter.

However, when we get to gold something strange happens:

Again we see how gold production is typically higher than gold sales (to cut a long story short, GORO has middlemen to pay so that's understandable). We also see how in 3q14 production dropped sharply and sales even more so. That matches its explanation in the 3q14 filings about the plans to run it via the new doré circuit and also matches the inventory spike.

BUT! Come 4q14 we see two things that don't fit at all. Firstly, production fails to recover to previous levels. Secondly (and most importantly) sales are still lagging way behind, even more than in a typical quarter in fact, when by all rights we should have seen the extra unsold gold from 3q14 make up the gap and even outstrip the production total, in the same way as we saw in the silver table above. If you asked me for a best guess, I'd say there were at least 3,000 Au ounces of negative reconciliation in the numbers published by GORO, maybe even 4k oz Au.

Somewhere else you see the gap in the numbers is when considering the revenues numbers filed by GORO per quarter. This chart shows the filed revenues in the darker green bars. It also shows "calculated revenues" and that's something that needs a line or three of explanation

In its quarterly filings and thanks to the US markets' system getting more disclosure out of companies than the Toronto guys, GORO gives us the amount of each metal sold as well as the realized price for each metal. From those data it's easy enough to calculate a raw revenue total for each metal, then add 'em up. That little sum gives you the "calculated revenues" light green bar you see in that above chart.

If you stare at the chart a bit you see that the "real revs" number is typically slightly lower than the "calc revs" number, and again that's okay by me as long as it's a typical trend. But again you see in 3q14 a big difference between the two numbers in 3q14 (in fact a 21.4% difference, when the average for the previous ten quarters was 9.6%). And again where you might expect a better than normal revenues number reported for 4q14 as GORO reports its catch-up sales, there's nothing to show.

And by the way of a slight sidebar, one of the weirdest things about this company these days is how it gets more of its revenue from the zinc, lead and copper base metals credits than it does from silver or gold. This chart (based on the "calculated revs" numbers) shows how Gold Resource Corp has only ever been "gold" in name, as silver's always been its greatest revenue generator. But even the cash from Ag was surpassed in 4q14 by the Zn/Pb/Cu base metals combo. Gold the metal was a mere 22% of its revenue source in Q4.

There are other charts I could show you but at some point it gets to offering up too much information. The suspiciously low realized price for gold in 4q14. The costs pop in 4q14. Etc etc. The bottom line story here is the one that counts, that of the apparently missing revenues for gold at GORO in 4q14.
  • Inventories went up in 3q14, then down again in 4q14.
  • Silver sales dropped in 3q14, then made up for the quarter with extra sales in 4q14.
  • But gold sales didn't. For reasons known only GORO insiders, the amount of gold sold is much less than it should have been, even accounting for the poor Au production in the six month period.

Hey dudes, mislaid some gold?