GORO: One My Top Picks for Here s Why.

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1 GORO: One My Top Picks for 2007 Key Highlights: Here s Why. Experienced Management Founders of US Gold which skyrocketed 2,300% during 2005 into 2006! Accelerated Drilling Program Underway Production Decision Early 2007 Production Possible This Year Approx. $100/oz Cash Production Cost Strong Cash Flow/Dividends per share Projections $7.5 million Working Capital Strong Institutional & Management Ownership 0-6 Month Price Target: $3 $5-10 Minimum Share Price Projection assuming profitable production Overview: Gold Resource Corporation [OTCBB: GORO] is not a name most gold investors have heard of, yet that is. With the IPO of Gold Resource Corp. back in mid- September at $1/share, one of the newest gold companies on the market has yet to receive the recognition it deserves. Time will change this as the company and its properties are noticed.

2 Gold Resource Corp. is currently an exploration company focusing on high-grade gold and silver deposits in southern Mexico and aims to be a low-cost gold and silver producer in Should the company proceed with production, Gold Resource Corp. s high-grade gold and silver El Aguila project should see cash production costs around $100 an ounce (gold). The project is also forecasted to have less than one year payback on CapEx. Along with the targeted 100,000 ounces of high-grade gold equivalent production, Gold Resource Corp. seeks to maintain its extremely shareholder-friendly share structure and to target a 1/3 payout of potential strong cash flow in the form of dividends. Management: Gold Resource Corp. was founded by Bill and David Reid, who co-founded US Gold Corp. (UXG) since its inception in 1977 until late 2005, when Rob McEwen founder of Goldcorp (NYSE: GG) purchased 1/3 of US Gold Corp. which resulted in approximately 2,300% increase in US Gold s share price. During their time at US Gold Corp., the Reid s built or participated in 6 producing mines. After Mr. McEwen s substantial investment into USGL, the Reid brothers departed to focus on their current venture, Gold Resource Corp (OTC-BB: GORO). I believe that the tremendous success of US Gold Corp. is a strong asset for the Reid s resume and will bring additional confidence and interest into the already attractive projects in Gold Resource Corp. Also note the strong interest management holds with about 1/3 ownership of Gold Resource Corp. 2

3 Note: US Gold Corp. was a past recommendation of our Gold Forecaster newsletter, which produced a 623% return. The company saw its shares move from under $0.50 per share in 2005 to nearly $10 in early During their time at USGL, the Reid s built or participated in 6 producing mines shown above. Properties: Gold Resource Corp. holds three projects in the Mexican state of Oaxaca. They have been identified as part of management s objectives of low operating costs and potential for high returns-on-capital. The flagship property, and the one I will focus on in this report, is the 100% owned El Aguila project, a newly discovered highgrade gold and silver system extending over a structural corridor of 8 km. Several surface samples have yielded exceptional grades including a 36 g/t gold sample and a 3,100 g/t silver sample! A subsequent drilling program confirmed and expanded the initial mineralization and established the likelihood of additional vein mineralization at El Aire, 2 km from El Aguila along the same structural corridor where a 2006 geochemical survey also returned significant anomalies. A cross-section is shown below and illustrates the exceptional high-grade gold and silver at El Aguila. Gold Resource Corp. s management believes this limited work on a very small portion of the property is an encouraging indicator, as there are numerous additional areas along this important structural corridor where high-grade surface samples exist. On October 19 th the company announced the start of a targeted 6-month 10,000- meter core drilling program, currently underway, to expand and test additional targets. Initial results have just begun to come in and the first set of results was 3

4 released just a few weeks prior. The results continue to be very encouraging as the first set of drill holes hit high grade intercepts in the targeted open pit as the company looks to define the boundaries of this manto. With oz/ton and oz/ton results so far released, these grades continue to demonstrate the high-grade deposit with data most underground mines would desire! The drill program will continue to provide more results over the coming weeks and months which will help to better define and identify the vein structure and resources/reserves. William W. Reid, Gold Resource Corp. s president commented in the October 19 th press release, "Additional drilling will focus on similar open pit targets identified by numerous high-grade, rock chip surface samples with gold as high as 35 g/t (1 ounce/ton) and silver as high as 3,170 g/t (92 ounces/ton). We also intend to follow up on our discovery of a possible highgrade vein found in our previous drilling. We are particularly excited about drilling along a specific 2km structure where at one end we intercepted four meters of g/t (1.60 ounces/ton) gold and 701 g/t (20.45 ounces/ton) silver and the other end we intercepted four meters of 1.9 g/t (0.06 ounces/ton) gold and 755 g/t (22 ounces/ton) silver." On November 14 th, the company announced positive geochemical survey results William W. Reid, GRC's president, said, "We are pleased to have commenced our next phase of exploration, which will hopefully lead us to a production decision by early next year. Our recently completed geochemical survey, which was conducted over a limited portion of the property, has returned significant anomalies in several areas, including over a possible high-grade vein discovery found in our previous drilling. This impressive geochemical anomaly extends over a 2km structure that connects the previously intercepted four meters of grams per ton (g/t) (1.6 ounces/ton) gold and 701 g/t (20.45 ounces/ton) silver at one end, and the four meters of 1.9 g/t (0.06 ounces/ton) gold and 755 g/t (22 ounces/ton) silver at the other end. We are eager to test this significant target." Late Breaking News: Gold Resource Corp. announced at the start of the year a second drill rig has been contracted and will arrive shortly. This follows news in late 2007 that Gold Resource Corp. has moved to an accelerated exploration schedule, which management anticipates will lead to an early-2007 production decision related to the Company's El Aguila high-grade gold and silver project in Oaxaca, Mexico. 4

5 An independent scoping study was performed in 2004 by Denver-based Lyntek Inc. with the goal to assess possible mining operation parameters based on the first round of drilling. The study indicated excellent precious metals recoveries and based on the assumptions made at the time of the study, cash costs of producing an ounce of gold would be $102 using silver revenues as a credit against costs. The payback of the capital for the project would be just 7 months (Note: The silver price used for the study was $7.00/ounce and $430/ounce for gold! To check the latest gold price visit: and for the latest silver price: Although the scoping study called for a 55,000 ounces per year open-pit production, the company is targeting even higher levels with a 100,000 ounces per year milling operation. El Aguila holds the potential to mine its high-grade gold and silver deposit around $100 an ounce, potential cash flow from this model would be tremendous. Assuming $600 ounce gold prices, this could translate into a $50 million per year in positive cash flow climbing to over $60 million should the gold price return to its early 2006 highs. 5

6 Assuming 100,000 oz/year gold-equivalent production and $100/oz cash cost, potential cash flow. Should the company proceed with production, Gold Resource Corp. will require around $20 million in additional funding. Therefore a secondary offering will be needed, but with the share price rising to $3 or higher, the total effect on the share structure should not exceed the company s targeted 35 million share maximum an absolutely terrific share structure potential for a high-grade miner with among the lowest production costs in the industry! The story gets even better when you learn about the targeted dividend. The company would like to reward shareholders with a targeted dividend of 1/3 distribution of cash flow. Although these are currently targets and hypotheticals, should they be achieved, shareholders could see nearly $0.50 per share in payouts at a $600 an ounce gold price! Potential per share dividend distributions using figures given above. 6

7 Even by dropping the targeted production figures by half and assuming early 2006 metal price levels, I still show around $0.30 a share in dividends and yielding some $30 million/year in positive cash flows! The figures discussed above are quite resounding and investors are likely to concur that current market valuations do not properly reflect the potential El Aguila alone brings, but this should likely change as investors learn about this company and additional drilling data confirms current data. Other Projects: Las Margaritas and El Rey are two early-staged exploration high-grade gold/silver properties. With their close proximity to El Aguila, should these properties eventually enter into production, ore could be sent for processing to the prospective El Aguila mill. These two high-grade properties add additional projects to the pipeline by bringing lucrative potential to the company s promising future and by providing additional value to shareholders. Las Margaritas: An extension of the El Aguila system, Las Margaritas is a high-grade silver property, which Gold Resource Corp. retains a 100% interest. Surface samples taken by the company have yielded silver mineralization as high as 1,200 grams per ton. This property remains in the early stages of exploration, yet strategically situated North-West of El Aguila. According to the recently released Wasserman Morris Report, Historical records from a 1905 Mexican Government-authorized report titled The Mines of Mexico described the Las Margaritas mining district as, "...the place in which has been found some of the richest ores in Mexico, some of the ores having reached the value of 18,000 ounces to the ton, and ores are frequently found which assay 4,000 and 5,000 ounces to the ton." El Rey: Another early stage exploration project, El Ray is a high-grade gold property which again Gold Resource Corp. holds a 100% interest. The area was mined previously, but little is known about the property. Gold Resource Corp. took two selective samples from the dump material around the original shaft which assayed 80 and 85 grams per ton of gold, indicative of a potential high-grade gold vein. 7

8 Location: All three properties are located in Oaxaca State in Southern Mexico. Hosting one of the friendliest mining environments in the world, Mexico has a rich 500-year mining history and ranks among one of the best places to mine. Share Structure Balance Sheet: Investors will be positively impressed by the small share structure Gold Resource Corp. currently exhibits. I continually prefer to invest in shareholder friendly companies and Gold Resource Corp. meets and exceeds this criteria. With no debt and roughly $7.5 million in working capital, Gold Resource Corp. is in an excellent position to continue its friendly share-structure even after a secondary offering of around $20 million. The company aims at keeping the total maximum outstanding shares at under 35 million. Even if they are to slightly exceed this target, which remains a possibility, the numbers still add up quite nicely! Technical Chart - GORO: 8

9 The chart above shows a strong uptrend in progress with strong accumulation; investors are evidently eager to buy pullbacks. Although ultimately the stock price will see stronger correlation to metal prices, I see Gold Resource Corp. continuing to trend higher as investors continue to revalue it properly. The stock price is seeing strong upward momentum which could easily carry it to and over $2/share shortly, perhaps higher in the interim. There appears to be a very tight supply of shares around the $1.50 area, a move above $1.80 is expected to trigger the next leg higher. Financing & Investors: The company has proven its ability to successfully raise capital without significant dilution to shareholders. This past December, the company completed a $5.18 million placement to accelerate the exploration schedule for El Aguila. In September 2006, Gold Resource Corp. completed an initial public offering of 4.6 million shares at $1.00 per share. The Company originally planned to sell 7 million shares in the IPO, but due to time constraints, the offering was closed early at 4,600,000 shares. The recent private placement has secured additional funds and has done so at a share price 20% higher than the initial offering and without any warrants! The placement gives Gold Resource Corp. ample funding and proves its ability to finance and attract institutional investors. Besides the strong management ownership of the company, one of the largest gold funds in Europe Gold 2000 took part in the placement along with several Londonbased gold funds. Institutional investors hold nearly 1/3 of the company, a very strong testimonial to the kind of company Gold Resource Corp. is. A Wasserman Morris Research report released on January 17 th places a 12 month price target of $3.06 and rates the company a Buy. Conclusion: The company is run by experienced management as evidenced by their multi-decade tenure of running US Gold Corp., one of the most profitable investments during Management is undergoing an accelerated, aggressive schedule for El Aguila, which aims to define additional high-grade gold and silver mineralization with production decision in early If Gold Resource Corp. feels that they can bring this mine into commercial production, they would aim to do so during Management and institutional investors hold the majority of ownership in the company and Gold Resource Corp. has proven its ability to successfully finance without significant dilution. The recent increase in funds have lead to an accelerated exploration schedule which should help to advance the project even faster than originally planned. El Aguila is proving itself to be an exceptionally high-grade gold and silver project which is anticipated to mine around $100/oz cash production cost. This possibly may become one of the lowest cash-cost producing mines in the world, I find this project too compelling to ignore. The scoping study called for a 55,000 ounces a year production, but management is aiming to increase this to 100,000 ounces per year 9

10 with a targeted capital cost of just $20-$25 million while maintaining a friendly share structure. Assuming a $600 gold price, which I feel is a conservative level at this time, and assuming a 100,000 ounces per year production level, the company could be looking at around $50 million a year cash margin! This equates to upwards of $1.50 per share cash flow. Management feels if these hypotheticals are met, they would target and distribute 1/3 in the form of dividends as discussed above. There remains a lot of work to be done and risks remain before one can even consider the possibility of profitable production. This remains an exploration stage company and there is no guarantee of profitable production. The company still has to provide additional details on its reserves. Yet, the property has yielded excellent initial results and it is unusual to come across such a high-grade property in a historically mining-friendly region as we find in Mexico. Also consider the 2 additional projects nearby, which also have high-grade potential and gives the company other projects in the pipeline. Even at lower production levels, Gold Resource Corp. should be valued multiples above the current market levels, assuming they are successful. Even accounting for conservative projections, one can easily see a $5-10 valuation down the road if production commences, if not higher. It has been my belief that the current discount in the stock is largely attributed to the absent knowledge of Gold Resource Corp. on investors radars. Just recently, with Gold Resource Corp. still trading near a $1/share, I met with the management and offered my services to help tell their story to investors. As such, I have entered into an agreement to help elevate the profile of Gold Resource Corp. and have taken a position in the company. All investors interested in Gold Resource Corp. are urged to perform their own due diligence, to discuss this with a financial advisor, and to not simply go on my opinion alone. I do believe your research and conclusions will concur with mine. I have made this one of my largest positions as I believe 2007 could bring about an excellent performance in its share price. Gold Resource Corp. could be a leader in the exploration/junior sector during the next months, should the story continue to successfully unfold. Stay tuned! For further research and information: Website: News Releases: sign-up: Contact the Company Directly: Reviews SEC Filings: &action=getcompany Quote: Latest Gold Price: 10

11 Latest Silver Price: Additional Research and Reports: Peter Spina Free List: - January, 2007 Disclaimer & Additional Disclosure The owner, editor, writer and publisher and their associates are not responsible for errors or omissions. The author of this report is not a registered financial advisor. The author has received a compensation fee for research, publishing, distribution along with the marketing services provided on the author s website, Readers should not view this material as offering investment related advice. Authors have taken precautions to ensure accuracy of information provided. Information collected and presented are from what is perceived as reliable sources, but since the information source(s) are beyond our control, no representation or guarantee is made that it is complete or accurate. The reader accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Past results are not necessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. The information presented in stock reports are not a specific buy or sell recommendation and is presented solely for informational purposes only. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may make purchases and/or sales of these securities relating thereto from time to time in the open market. Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase or sale of securities & therefore information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein. Investors are advised to obtain the advice of a qualified financial & investment advisor before entering any financial transaction. GoldSeek.com is a leader in precious metals information, established in 1995 and ranked as one of the most visited gold resource website in the world. More information can be found at and the author may be contacted via: 11