Our definition of cluster buying is when multiple insiders purchase their company stocks simultaneously. It’s one of our favorite “buying with a purpose” criteria. A trio of directors at Gold Resource Corporation (GORO) bought a combined 57,900 shares of the stock for about $160,000 since March 9, 2021. (1)
Gold Resource Corporation is a gold and silver producer, developer, and explorer with operations in Oaxaca, Mexico. The company has six potential high-grade gold and silver properties covering 560 square kilometers with a 55-kilometer mineralized structural corridor and two operating mines:
- Aguila Project, Arista underground mine
- Alta Gracia Project, Mirador underground mine
Despite the fact that gold’s price has risen dramatically in the last two years, GORO shares have languished. Gold rose from $1,200ish in late 2018 to $2,000ish in early 2020. Since, the yellow metal has fallen to a little more than $1,700. During the same timeframe, Gold Resource Corporation shares have basically fallen from $5 to where it is as we type, $2.66, which is close to a multi-year low.
It’s our guess that the trio of directors see value in GORO shares at the current price level. Of the three, we are focused on Director Richard M. Irvine’s trade history. (2) In 2014, he purchased 2,000 shares at $4.38, small potatoes by insider standards. However, in the next six-months, GORO jumped to $6.
In 2016, Irvine had a different take on Gold Resource Corporation, he started unloading shares. He sold the stock four times in the next two-years starting at $5.90 and as high as $6.81, with his last red ticket in September 2018 at $5. On March 11, 2021, he reversed course once again, picking up 20,000 shares at $2.85 for $57,000. Again, not a ton of cash relative to plenty of other six, seven, or eight figure transactions.
While dollar amount is absolutely one of our top considerations, an insider’s history of being on the right side of the trade is equally, if nor more important, regardless of money spent.
For the three insiders, shareholders, and prospective investors, GORO’s stock price depends on two basic things:
- The ability to take gold, silver, and other commodities out of the ground at a reasonable cost.
- The price of those commodities (mostly gold and silver) going higher or at least remaining stable.
According to Goldman Sachs, gold and silver should rebound in 2021. Goldman forecasts gold reaching $2,300 in 2021. (3) As we type, gold is trading at $1,730.10. If Goldman has made the right call, then Au has 33% upside to the investment firm’s forecast. As for silver, Goldman is calling for $33 in 2021. (4). Today, silver is at $25.11.
In 2020, the company “produced 20,473 gold ounces, 1,189,366 silver ounces, 1,593 copper tonnes, 7,725 lead tonnes, and 19,696 zinc tonnes, despite the two-month mandatory government shut-down in 2020 of the Don David Gold Mine in response to the worldwide COVID-19 pandemic.” (5)
For 2021, management provided the following guidance:
- 19,500 to 21,500 Gold Ounces
- 1,700,000 to 1,800,000 Silver Ounces
Outlook: If Goldman Sachs is correct with their gold and silver forecasts, then Gold Resource Corporation (GORO) should benefit from rising prices. Using the mid-point of management’s guidance, the exploration company should mine about the same amount of gold in 2021 as 2020. However, silver production would increase by 47%.
More production and higher prices usually lead to higher stock prices. Of course, if management fails to execute and commodity prices fall, then GORO shares would likely fall as well.
Investors looking to add speculative dollars to gold and silver exposure might consider following the trio of GORO directors. Richard M. Irvine’s history of being on the “right side” of the trade is a positive in our view.
However, Gold Resource is only appropriate for investors with the highest tolerance for large percentage price swings. With only 74.44 million shares outstanding, GORO is likely to be a highly volatile ride.
1 – https://www.secform4.com/insider-trading/1160791.htm
2 – https://www.secform4.com/insider-trading/1565800.htm
3 – https://ieconomy.io/goldman-sachs-forecasts-commodities-are-waiting-for-a-bull-market-in-2021/
4 – https://www.kitco.com/news/2021-02-03/Goldman-Sachs-sees-silver-price-rising-to-33-an-ounce-Reddit-squeeze-was-doomed-to-fail.html
5 – https://goldresourcecorp.com/news-releases/gold-resource-corporation-reports-net-income-of-4-2154/