Gold Resource Corp (GORO)

[stock_peeker]

Optimistic GORO price projection posted on Yahoo message board by "Rival":

Projected La Arista Cash Flow And Share Price
Posted by: "Paul" [e-mail] rival_no2
Wed Sep 16, 2009 6:38 pm (PDT)

We have a lot of new members that may not have seen this before. It
really opens the eyes to what the potential is for GRC a year or two
from now. Take note of the bottom line where the projected share price
is listed.

Here's the latest metal prices:

Gold = $1,015
Silver = $17.42
Copper = $2.92
Lead = $1.03
Zinc = $0.87

3 meter mining width metal content for La Arista and Baja veins taken
from the October 2008 resource study:

Gold = 6.45g/tonne
Silver = 578g/tonne
Copper = 0.54% = 11.90 lbs/tonne
Lead = 1.79% = 39.45 lbs/tonne
Zinc = 6.67% = 147.01 lbs/tonne

Amount of recoverable metal:

Gold = 6.45g X 0.94 = 6.06g/tonne
Silver = 578g X 0.90 = 520g/tonne
Copper = 11.90 lbs X 0.90 = 10.71 lbs.
Lead = 39.45 lbs X 0.90 = 35.50 lbs.
Zinc = 147.01 lbs. X 0.90 = 132.31 lbs.

Dollar value per tonne of recoverable metal at today's spot price:

Gold = 6.06 / 31.1 X $1,015 = $197.78
Silver = 520 / 31.1 X $17.42 = $291.27
Copper = 10.71 X $2.92 = $31.27
lead = 35.50 X $1.03 = $36.56
Zinc = 132.31 X $0.87 = $115.11

Total value of recoverable metal = $671.99 / tonne
Total value of precious metals = $489.05 / tonne
Total value of base metals = $182.94 / tonne
Percentage of value in precious metals = 72.7%

Value of recoverable metal per day = 1,150 t/d X $643.32 = $772,788 /day

Cost to process at $98 a tonne = $98 X 1,150 = $112,700

Free cash flow per day = $772,788 minus $112,700 = $660,088 / day

Assuming 328 mill days a year (90% up time) = $660,088 X 328 =
$216,508,864 / year

There will a discount to the total because the refiners pay a discount
to spot price. The discount runs from 1% to 3% for gold and silver and
maybe 10% for base metals. Approximately 71% of the value is in the
precious metals so let's use an overall discount of 4%. So the free
cash flow would be:

$216,508,864 X .96 = $207,848,509 a year

Assuming 50 million shares, that works out to be $4.16 a share in free
cash flow.
Figuring 1/3 of free cash flow, the dividend would be $1.39 a share.
Earnings per share should be approximately $2.77 a share.
Assuming a PE ratio of 20, the share price would be $55 a share!!!!

If this comes to fruition in the next two years (or less), the cost of
the mine/mill is going to look dirt cheap at $30 million. Can it
happen? Absolutely. And if the price of the metals continues higher,
it just gets better.

Note: The cost to process a tonne of ore ($98) is way up from the cost
of $68 I used last time. The $98 cost is taken from Jason's
presentation which is on GRC's website. Based on what has been reported
by Gammon Gold and others, the $98 cost seems to be very conservative.
Obviously, if $98 proves to be too high, the earnings will be better
than what is presented here. Interestingly, I believe the previous
presentation used a cost of $68 or $70, which is very close to what
Gammon says it cost them to mine and mill underground ore.

Rival