Company Overview - Gold Road Resources Limited (Gold Road) is an Australia-based mineral exploration company in Western Australia. The Company is engaged in exploring and developing the Yamarna greenstone Belt, which is a gold region with tenements covering approximately 5,000 square kilometers on the eastern edge of Yilgarn Craton, located approximately 150 kilometers east of Laverton in Western Australia. Its other projects include the Gruyere project, the Big Cheese project and the North Yamarna. The North Yamarna contains six of the Company's 10 camp targets on the Yamarna Belt, which include South Dorothy Hill Camp Target, Pacific Dunes-Corkwood Camp Target and Sun River-Wanderrie Camp target. The Yamarna Belt has a mineral resource of approximately six million ounces of gold, with discoveries, including the Company's approximately 5.6 million ounce discovery at Gruyere. The South Yamarna tenements cover an area of approximately 2,900 square kilometers.



GOR Details

Purchase of Mt Gill and Kurrajong Tenements: Gold Road Resources Ltd (ASX: GOR) and South Yamarna joint venture partner, Sumitomo Metal Mining Oceania recently reported that they purchased 54 km² Kurrajong Project tenement from Breaker Resources while 167 km² Mt Gill project has been purchased by GOR. Mt Gill Project has 167 kilometers and contains E38/2513 and E38/2529 tenements while Kurrajong Project comprises E38/2531 tenements. The transaction is worth $50,000 cash while Breaker would get a further $1 million in case of 500,000 ounces are being defined across any of the three sale tenements in a JORC-compliant Resource. On the other side, Sumitomo Metal Mining’s subsidiary, Metal Mining Oceania enhanced its stake in the South Yamarna Joint Venture (SYJV) to 50%. Based on the terms of the Joint Venture Agreement signed between the group and Sumitomo during May 2013, Sumitomo had to deliver A$8 million for exploration on the South Yamarna tenements by the end of 2016 to earn a 50% share in the SYJV. Accordingly, Sumitomo has met this commitment in the month of March 2016.
 
Boosting capital position: Gold Road is strengthening its capital position and accordingly finished it’s $74 million of Equity Raising via Placement and 1 for 10 accelerated non-renounceable pro-rata Entitlement Offer. With the Retail Entitlement Offer, the group raised over A$17 million at $0.44 per new Share with A$11 million raised from eligible retail shareholders and A$6 million from several institutional investors. Gold Road Resources has A$28.7 million in cash and equivalents as of March 2016 and is positioning itself to fund the feasibility study on the Gruyere Project as well as regional exploration. GOR has 699.998 million of ordinary fully paid shares as of March 2016.
 
Yamarna mining leases approval: The group recently reported that they received grant of mining leases for its Gruyere, Central Bore and Attila projects. The leases are at Yamarna Greenstone Belt, which is over 200 kilometers east of Laverton in Western Australia. The leases comprise the entire three JORC 2012-compliant gold resources found by the group at the Yamarna Belt, which has 6.2 million ounce Gruyere deposit. Management reported that these mining leases approval would de-risk its Gruyere Project and the group is on track to finish its Feasibility Study on the Gruyere Project by the end of 2016, enabling a final investment decision on the Gruyere Project. On the other hand, the group also submitted M38/1267 Mining Lease Application in 2014 and is waiting for the approval. GOR made a native Title Mining Agreement on 03 May 2016 and has a gas pipeline, roads and borefields under Miscellaneous License Applications. The group also submitted an Environmental Permit application during March 2016 which is in referral stage to decide the required level of assessment.
 

Yamarna belt (Source: Company Reports)
 
Positive Gruyere Pre?Feasibility Study indicating a long?life gold mine: The group finished its Pre?Feasibility Study (PFS) in the March quarter of 2016 for the development of its 6.2 million ounces’ Gruyere Project (10% increase). Based on the full study, Gruyere promised a huge potential and has the ability to be among the Australia’s best undeveloped gold deposits with a technically sound and financial viability. The project is generating more than A$1 billion in undiscounted free cash flow (pre?tax) during the starting twelve-year life. After finishing the PFS, the group reported a Maiden Gruyere Ore Reserve of 3.17 million ounces of gold, indicating that these resources could sustain an average annual gold production of 265,000 ounces over the life of mine. As a result, GOR expects that this would enable the company to be among the Australia’s mid?tier gold producers. The Feasibility Study is expected to finish by December 2016 quarter, while the group would make an investment decision in late 2016 or early 2017. As per the Mineral Resource update for the Gruyere Gold Project, the group reported a total 147.71 million tonnes at 1.30 g/t Au for an overall 6.16 million ounces of gold, representing a 15% increase in tonnes, but a 5% decrease in grade (on the back of decreasing the cut?off grade), and a 10% increase in metal against the previous Mineral Resource. The updated Mineral Resource comprises 13.86 million tonnes at 1.18 g/t Au for 0.53 million ounces in the Measured resource category. The updated Mineral Resource is reported at a 0.5 g/t Au cut?off against the earlier 0.7 g/t cut-off Au which is evaluated at A$1,700 per ounce gold price against the earlier price of A$1,600 per ounce gold. Meanwhile, most of the portion of the Indicated Resource was upgraded to Measured Resource by adding over 15,000 meters of new RC drilling on a grade control equal drill spacing with slight variance. The new measured volume indicated a rise of 3% tonnes, a fall of 1% in grade, for an extra 2% ounces, reporting at the 0.5 g/t cut?off Au, signaling that Gruyere Mineral Resource is robust having slight variability confirming addition of closely spaced drilling data.
 

Mineral resource update (Source: Company Reports)
 
Gruyere PFS Financial Performance highlights: As per the PFS Financial Performance highlights, the group reported less than A$850/oz or US$620 AISC for one to two years. On the other hand, the Project is highly leveraged to gold price and estimates over $460 million of EBITDA at a gold price of A$1,500/oz for one to two years while EBITDA is expected to reach over $580 million at the gold price of A$1,700/oz for the same period. The group also estimates the project to be among the lowest quartile producer and a rapid project payback. As per the group’s financial estimates, they expect a payback by 42 months at the gold price of A$1,500/oz while a payback of the project in 27 months at the gold price of A$1,700/oz.
 

Gruyere PFS Financial Performance (Source: Company Reports)
 
Exploration highlights for 2016: For the Sun River-Wanderrie Camp Scale Targets, the group is planning more Aircore drilling in the June 2016 quarter to test the five kilometer southern extension of the Supergroup Anomaly mineralized trend that is interpreted to be fault?offset to the west of the current drilling. The group would also test several untested targets left from the 2014 Aircore program to test during 2016. With regards to the South Yamarna Joint Venture Project, RC testing of Aircore anomalies indicated potential quartz dolerites with likely biotite?rich alteration zones at the Yaffler prospect at Riviera?Smokebush having assays pending for the June 2016 quarter. Drilling at the Toppin Hill is in progress.
 
Stock performance: The shares of GOR have delivered an outstanding return of 70.95% (as of June 07, 2016) during this year to date mainly driven by the group’s positive Gruyere Gold Project feasibility study. This project is estimated to have a 12-year project life and generate 265,000 ounces production per year while LOM AISC is expected to be A$960 (or US$700) per ounce. The project has a Maiden Ore Reserve of 3.2 MozGold just within 28 months of its discovery. Moreover, the group is also focusing on Yamarna Belt which is a new Gold District comprising over 5,000 km tenement holding in prolific Yilgarn Craton. This is a highly prospective and underexplored area, and accordingly, the group allocated over A$12 million exploration budget for 2016. GOR stock has been rising by over 18.87% (as of June 07, 2016) since the last four weeks driven by the recovering gold prices and positive updates from the group. Given such solid prospects at hand, we believe that the stock has potential to rise further in the coming months. Based on the foregoing, we give a “Buy” on GOR at the current price of  $0.605

 
GOR Daily Chart (Source: Thomson Reuters)

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