Review of GORO's Earnings and 10-K So here are some preliminary thoughts on the 2021 Guidance and review of the 10-K (definately would appreciate anyone's thoughts before the call tomorrow):
1. The AISC GORO uses is based on a very old price deck for computation of the by-product credits (refer to the notes on the pricing and volumes they used for the base metals). The base metals are discounted between 17% to 32%. When you update them for this year (at current price levels), it would add an additional $20MM in by-product credits potentially cutting AISC in half.
Here is the calculation
Production volume provided for 2021 Guidance:
Tonnes of Lead: 8,000
Tonnes of Copper: 1,800
Tonnes of Zinc: 21,000
Base Metal Price Deck used in 2021 Guidance:
$/lb of Lead: $0.80
$/lb of Copper: $2.80
$/lb of Zinc: $1.04
Current Price Deck:
$/lb of Lead: $0.97
$/lb of Copper: $4.15
$/lb of Zinc: $1.30
Diffential in By-Product Credit Using Volume and difference in Prices:
Lead: $2,922,444.27
Copper: $5,373,099.86
Zinc: $11,898,334.14
Total: $20,193,878.28
2. Beyond just the rise in by-product credits, the 10-k indicates that treatment charges per tonne were also recently reduced from $729 to between $525 and $550 per tonne (essentially by ~$200/tonne).
3. Although GORO's forecasted 2021 gold production is lower than I would have expected, every other metal is higher than expected given the lower production level (not sure how that is achieved, unless they are targetting specific stopes with lower Au concentrations, but higher other metal concentrations).
4. Their guidance on G&A dropped from $8.4MM in 2020 to between $6MM - $6.5MM for 2021 (not sure what is driving this drop...I know $0.4MM was related to legal/regulatory, but not sure what lead to the other $1.5MM to $2MM unless it is subsidized by Fortitude somehow with their MSA).
5. I assume that the Capital Investments is a Sustaining Costs and is baked into the AISC already. But I also assume that the Exploration Commitment is not and would be excluded from the AISC.
I ran the numbers for a low-end case (assuming the lowest guidance) as follows:
Gold Ounces 19,500
Silver Ounces 1,700,000
Silver Gold Equivalent Ounces 26,520
Gold Price Per Ounce $1795.5
Silver Price per Ounce $28.01
Gold Revenues $35,012,250
Silver Revenues $47,617,000
Total Revenues $82,629,250
AISC / Ounce $900
Total Au & AuEq Ounces 46,020
Total AISC $41,418,170
Sub-total Pre-Tax Profit $41,211,080
Add. Profit from By-Products Differential (see above): $20,193,878
Total Pre-Tax Profit $61,404,958
Less Exploration Commitment $7,200,000
Final Pre-Tax Profit: $54,204,958
Mexico Taxes@Rate of: 30.00% (based on profit....I think GORO has NOLs but not sure))
Mexico Royalties @Rate of: 7.50% (I believe this includes everything but exploration cost)
Gold & Silver Royalty Rate: 0.50% (based on gross revenues)
Mexico Taxes: $16,261,487
Mexico Profit Royalties : $4,605,372
Addl Gold & Silver Royalty: $413,146
After Tax Free Cash Flows: $32,924,952
If you rerun the numbers in the higher end of the guidance you end up with an ATFCF of ~$38MM
This does not include any non-cash expenses (e.g., "Stock based compensation", "Depreciation", "Restructuring Amortization")
So, in the end, we should have ATFCF between ~$33MM and ~$38MM
Anyone have any thoughts on this or corrections?