The Precious metal sector showed promise during the early part of the year. However, despite some increase in the prices of gold and silver, the general price level of these metals remained under pressure.
The strain is likely to ease up in the coming year as various international factors including Brexit and low interest rates may help spark interest in these metals.
Gogold Resources Inc. (TSX:GGD) is a Canadian mining company which may benefit from this development.
Gogold Resources announced financial results for the quarter and year ending September 30, 2016. The company’s stock reacted positively to the announcement on Friday, but as of today, shares were being pulled lower as a downtrend that started in April continues.
The company’s operating income for the year stood at $943,000 and its revenue for the same time period was reported at $16.7 million.
The revenue numbers are impressive considering that the company had to deal with heavy rainfalls in the fourth quarter, which hindered the process of prospecting for the precious metals. However, the production and grade levels kept increasing to reach normal levels.
For the quarter ending September 30, 2016 the company earned $2.65 million in revenue. However, at the same time, it suffered an operating loss of $747,000. Its cash cost per silver equivalent ounce stood at $7.50, higher than the annual average of $6.60 per ounce.
It is notable that these costs are currently at industry lows. The new financial year may see an increase in these costs, leading to a strain on margins, according to the company.
The company is taking several measures to improve its efficiency. One of the main focus of the company is to improve its recovery time.
For this purpose, Gogold Resources commissioned an oxygen plant in November. The plant will help in increasing oxygen levels and push up cyanide concentration levels as well. The initial results of this new project are encouraging. It is likely that the successful operation of this initiative will help the company in optimizing its performance.
Another cost controlling effort of the company is related to controlling the cyanide costs. Gogold Resources is looking to commission a 'SART', i.e. a sulphidization, acidification, recycling and thickening. The new plant will not only help in reducing the cost but will also provide an additional revenue stream from base metals.
As mentioned above, shares of Gogold have shown rather lackluster performance this year as they slid over 52% this year. Given the efforts made by the company to increase its efficiency and the fact that the stock is currently trading close to its 52-week lows, there might be a light at the end of this long and dark tunnel for patient investors.
