The spin out will allow each company to allocate resources and deploy capital according to their own business strategies, while unlocking a value premium for the Nevada mining unit, said the company.
The company produced 27,000oz of gold at Oaxaca in 2019 and 10,800oz in Nevada. Production in Nevada is due to grow to 40,000oz a year from 2021.
"Significant management effort places us at a point where both of our mining units are poised to experience meaningful increases in future free cash flow," said Gold Resource president and CEO Jason Reid.
"Our Oaxaca mining unit looks to benefit from the confluence of several recently completed capital projects that are expected to positively impact our future operations, cost structure and exploration potential, and our Nevada mining unit continues ramping up its gold production rate as it begins to benefit from the high-grade Pearl zone of the Isabella Pearl Mine and exploring our highly prospective properties."
Gold Resource's Oaxaca mining unit has been in production for more than 10 years and the company aims to allocate more of its cash flow and capital back into operations to better facilitate growth in addition to undertaking more exploration to expand and discover new vein systems. It is currently developing two exploration drifts at its Arista Mine to access and target extensions of known vein systems.
Oaxaca has an under-explored 55km fault corridor on a 560sq.km land package of which the company estimates it has drilled about 2%.
In Nevada, the spin out company would have similar benefits, with the company expecting increased margins from its Isabella Pearl project, with increased cash flow potentially funding dividends and exploration and development of its property portfolio in the Walker Lane district. The company controls over 25,000 acres in five properties in various stages of production, delineation and exploration.
Gold Resource would provide a US$10 million capital contribution to the spinco.
Shares in Gold Resource are trading at $3.62, valuing the company at $254 million.
