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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Wednesday, May 7, 2008

Gold-Ore Reports Q108 Results!

Yesterday, Gold-Ore Resources issued a press release announcing their Q108 operational results.

Despite the confusing accounting in the financial report, there is a lot of good news in the release. I say confusing because:

1) The first quarter includes December 2007, and January and February of 2008.

2) The results reflect 1 month (December 2007) as the “operator” of the Bjorkdal gold mine and 2 months as the “owner.”

3) They did not book revenues on the income statement, but under Investing Activities on the statement of consolidated cash flows. My understanding is they could have booked revenues on the income statement, but for some reason will be waiting to account for gold sales in this way until they receive a feasibility study later in the year.

See press release.

In short, until the feasibility study is released and says that the gold is recoverable, Gold-Ore is not officially a producer. This technical detail is similar in effect to Metanor not being officially in production despite reports of a first pour because the first pour was based on “bulk samples.”

All the accounting confusion aside, there is a lot of great news in the Gold-Ore release and Q108 financial report.

1) As of the first of this year, Gold-Ore owns 100% of the Bjorkdal Gold Mine,

2) Gold-Ore processed 198,417 tonnes of ore, averaged 3,307 tonnes per day, recovered 4,038 ounces of gold, and sold 4,318 ounces of gold including gold from inventory. They had an average processing recovery of 87 percent.

3) Gold-Ore’s goal is to source 1,500 tonnes/day from underground, and to have sustained processing of 3,400 tonnes/day at Bjorkdal. They are very close to that goal.

4) Gold-Ore has successfully increased production during February 2008 to an annualized rate of 24,700 ounces of gold. Their goal is to eventually increase annual gold production to 70,000 ounces by the end of 2008 as they process higher grade ore over time.

5) April gold production is estimated at 2,350 ounces.

6) Gold-Ore had accounts receivable of $1,734,797 in Q108.

7) Gold Ore is cash flow positive, realizing $400,291 in free cash flow for Q108.

Moreover, significant Gold-Ore exploration and development was also advanced during Q108.

Gold-Ore remains the most undervalued of all the emerging junior gold producers according to my financial metrics. There is still a way to go before investors realize the deep value in Gold-Ore. I expect this to happen by the end of this year when they hopefully report revenues on the income statement.


Gold Stock Strategist


Full disclosure: I own shares in Gold-Ore Resources. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their own investment decisions. Do your own due diligence.

1 comment:

Anonymous said...

Just took a peek at GOZ's presentation. Sounds like its a case of:
(a) Good price / annual oz produced (if they hit their production increase targets, which don't seem like a slam-dunk to me).
(b) Short mine life - as such it depends on exploration turning out ok and they claim they have reasons to think they will turn out ok.

Sound very similar to some other Jr precious metal miners I follow. For example, its very similar to:
(a) Metanor (MTO) - one of your favorites. This one's upside comes from the open pit (which was in the original business case just to provide cash-flow to reopen an underground mine, but which now has a couple of good drill holes and may contain a lot more gold). I hold a decent sized position in MTO.
(b) New Guinea Goldd (NGG.V) - which has a 30K oz/year high-grade open pit mine starting up right now (like GOZ it has not achieve its target production yet and like GOZ is doesn't without more exploration have more than 3 years of mine life) and has a bunch of holes (some historical) at another high grade open pit. NGG expects to have an NI43-101 for this other open pit in June. That's the catalyst I'm waiting for. I have a big position here.
(c) ATW.V - which is reopening a mine with a short mine life in Australia and which claims they are in a historic district and can prove up a longer mine life. I'm thinking about this, but am not convinced they can really find more gold.
(d) GORO.OB - which is opening a mine this year based on proven management and excellent drill holes (but no NI 43-101). These guys seem so classy and have such a nice share structure and their holes seem so good that I'm willing to go along with their claims that they can get the mine going and prove up actual ozes after the cash flow is coming. I have a very big position here.
(e) AUN.V - a silver mining Jr reopening mexican mines with good historical resources. They claim they'll be proving up the historical resources while they ramp up production at the first mine and open the second (and finish purchasing the third). I believe the ozes of silver are there and they can open the mines and prove up the ozes. I have a big position here.

So, I guess I'd like some more info on what makes GOZ enthusiasts confident that they can really prove up more resources and that the mine has more than a 3 year mine life.

Comments on these other miners I mention are also welcome.

I hope you appreciate what I think is a value added comment on your web site.


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