Gold Resource planning further Mexico cost reductions

Gold Resource (NYSE MKT: GORO) is eyeing further cost reductions at the company's Águila gold-silver mine in Mexico, partly through cutting energy costs, CEO Jason Reid told the first quarter earnings call.

The US company reported total cash costs of US$422/oz precious metal gold equivalent in Q1 at the Oaxaca state mine, down 18% year-on-year and 38% on the previous quarter.

And the CEO said he will continue to seek further efficiency improvements at the mine, with a focus on energy, the operation's biggest cost after labor.

Constructing a power line to the mine will reduce annual energy costs by US$3.5mn at a cost of about US$5mn, Reid told the call.

The company will also consider installing high efficiency water pumps and other equipment to reduce power costs.

All-in sustaining costs for Q1 were US$816/oz, he added, without giving details for other periods. While this is likely to fluctuate, the company expects the figure to remain below US$1,000/oz.

HOCHSCHILD AGREEMENT

Gold Resource has entered into an agreement with its biggest shareholder, Peruvian precious metals miner Hochschild Mining (LSE: HOC), with the aim of minimizing the impact on the former's share price should Hochschild sell Gold Resource stock, Reid said.

Under the arrangement, a portion of the Gold Resource shares to be sold by Hochschild will be registered so that they can be traded with lock-up/leak-out agreements attached, which the CEO said would allow for some or all shares to be sold into "friendly hands."

Gold Resource may consider buying back some shares sold by Hochschild, he added. Gold Resource has a 100% interest in six gold and silver properties in Oaxaca state.