Company Overview - Gold Road Resources Limited is engaged in mineral exploration and development in Western Australia. The Company is involved in the development of the Yamarna greenstone Belt, which is located approximately 150 kilometers east of Laverton in Western Australia. It holds interests in tenements, covering approximately 5,000 square kilometers in the Yamarna greenstone Belt. Its tenements contain a gold resource of approximately 6.6 million ounces, including approximately 6.2 million ounces at the Gruyere deposit. Its projects include the Gruyere project, Yamarna Belt-Central Bore Trend, Yamarna Belt-Attila Trend and Gold Road. Gruyere project has width that ranges from 7 meters (m) to 190 m with an average width of 90 m. The Gruyere project's mineral resource amounts to approximately 96.93 million tons at approximately 1.23 gram per ton (g/t), and is based on a total of over 38,000 m of drilling, which includes approximately 11,600 m of diamond and over 26,400 m of Reverse Circulation. 

GOR Details 
Joint venture with Gold Fields Limited: Gold Road Resources Ltd (ASX: GOR) has formed a 50:50 joint venture with a wholly owned Australian subsidiary of Gold Fields Limited, for developing Gruyere Gold Project in Western Australia (which includes the Central Bore, Attila and Alaric deposits and the YAM14 and Toto Prospects, in total comprising 144 km²). The group would retain the entire stake at the remaining North Yamarna tenements, which has an area of over 2,300 km. For this, Gold Fields would buy a 50% interest in the Gruyere Gold Project from GOR for the cash consideration of A$350 million, from which A$250 million is payable on finishing the transaction while A$100 million would be contributed by Gold Fields to fund GOR’s initial cash calls during the construction phase. GOR would retain greater than 50% economic interest in the Gruyere Joint Venture via 50% direct ownership and the 1.5% net smelter royalty. Moreover, Gold Fields would fund up to 10% of cost overruns on the Gruyere development budget while offering funding support for any project-level guarantee requirements. This transaction would expedite exploration activities across both its 100%-owned North Yamarna tenements and the 50%-owned South Yamarna tenements without the need to raise the new funds through debt or equity markets. The joint venture is committed to progressing to the project construction phase early in 2017, and offers a significant exploration upside and de-risks the development. In addition, the joint venture is governed by Joint Venture Agreement (JVA) and Regional Cooperation Memorandum of Understanding (Regional MoU) while the transaction is expected to be finished in December 2016. However, the transaction is subject to FIRB and related approvals. Overall, the move by GOR is said to de-risk the Gruyere funding as the JV will act as a robust endorsement for the quality of the project given the scale, margin and long life.

 

Gruyere Joint Venture Tenement Map (Source: Company Reports)
 
Finished extensional resource drilling at the Attila Deposit: GOR finished the infill and extensional drilling at the Attila Deposit, which is at over 27 kilometers south-west of the 6.2 million ounce Gruyere Gold Project in Western Australia. This program is a part of a larger effort targeting high-margin gold deposits to supplement ore feed from the planned Gruyere Open Pit and has also confirmed major extensions to mineralization outside the current 220,000 ounce Attila open pit Mineral Resource. Moreover, the potentially economic mineralization has been confirmed on the Main Shear, Hangingwall and Footwall Structures, below and to the north of the 2015 open pit Mineral Resource, which is constrained within a A$1,600/oz pit shell. GOR is targeting to refine high-grade mineralization controls within the multiple parallel ore zones. Efforts are also made to enhance the modelling of the intersection zone between the Main and Footwall structures, where mineralization increases to widths in excess of 80 metres at lower-grades. Additionally, a recently finished deep diamond hole has also confirmed mineralization of 240 metres below the surface that shows major potential to extend mineralization along the entire length of the resource of almost two kilometers strike. In addition, the update on the Attila Mineral Resource is planned for the first half of 2017. After this, GOR would start the Pre-Feasibility Studies to determine the appropriate approach to exploiting the deposit.
 

Gruyere Feasibility Highlights (Source: Company Reports)
 
September Quarterly Update highlights: GOR finished Feasibility Study (FS) for the development of its 6.16 million ounce (Moz) Gruyere Gold Project and confirmed the project’s ability to be one of the longest life, lowest cost, undeveloped gold deposits in the world. Based on the study, the group reported an NPV of A$486 million (US$305 million) in pre-tax and intends to generate an IRR of 24% pre-tax. Overall, LOM Free Cash is A$1.22 billion or US$892 million. Capital expenditure is A$507 million or US$360 million and SUSEX is A$77 million or US$56 million. The project has an Ore Reserve in excess of 3.5 Moz over a 13-year Mine Life with an average annualized gold production of 270,000 ounces and a Project Life of 15 years. GOR even announced the early works at over A$18 million which would start for the Gruyere Gold Project, after getting the grant of several key Miscellaneous Licenses by the Department of Mines and Petroleum. GOR has entered into gold forward sales facility for up to 150,000 ounces, with 50,000 ounces hedged at A$1,792 per ounce. Moreover, the deep diamond drilling at Gruyere confirmed the internal high?grade gold mineralization beneath the final Feasibility Study open pit. To determine if further drilling is required, the review of geology and underground economics will start in the December 2016 quarter. Regional aircore (AC) drilling program recently identified gold in multiple targets while a Reverse Circulation (RC) drilling program would start testing the priority targets in the December 2016 quarter. The four-target areas have been identified for priority follow?up RC drilling, YAM10, Riviera, Yaffler South and Kingston North in which YAM 10 mineralization is confirmed like Gruyere?style. Moreover, GOR has completed the infill and extensional drilling program at the Alaric Deposit and finished initial resource drilling at YAM14 Prospect. The Reverse Circulation (RC) and/or diamond drilling program are finished at Attila open pit resource, Smokebush, Ibanez Prospect (Pacific Dunes – Corkwood camp), and Santana and Satriani Prospects (Sun River – Wanderrie camp).
 
Exploration in CY 17: GOR would test more than 50 drill ready targets in CY 2017. At North Yamarna, GOR is targeting Standalone Projects – (Wanderrie - 20 to 25 targets, Corkwood - 10 to 15 targets, Dorothy Hills - 5 to 10 targets). Stock Route, Dead Dog, Romano-Fontaine projects require assessment. Moreover, in South Yamarna Regional Exploration more than 15 targets are identified. The likely budget for exploration in CY 2017 is A$15 to A$20 million. Despite these efforts, the group has a huge pipeline of 50+ targets to test while huge tracts of land are yet to first pass drill testing.
 

Gruyere Development Schedule (Source: Company Reports)
 
Capital obligations: GOR is positioning to fund their upcoming project developments and explorations. GOR intends to fund their 50% share of the Gruyere Project construction which has the potential to generate solid free cash flow and be a dividend payer within three years. GOR also intends to fund 50% share of exploration on the Gruyere joint venture. The group is also funding exploration on 100% North Yamarna Project at A$10 to 20 million per annum aimed on discovery of World Class Deposits of > 1 Moz Au. The group is funding their 50% share in South Yamarna JV at A$2 to 3 million per annum to focus on discovery of World Class Deposits of greater than 2 Moz Au.
 
Stock Performance: The shares of GOR stock generated about 71% (as of November 28, 2016) in this year to date. However, the stock has been consolidating since the last three months and delivered over 6.8% despite the gold prices volatility. However, the group’s joint venture with gold fields to develop the Gruyere Gold Project contributed to the stock momentum since the last four weeks which delivered over 11.5% (as of November 28, 2016). Further, the latest Feasibility Study has confirmed for a prospective open pit mining and conventional processing operation that will be economically attractive, yielding prospective annual average gold production, even with prevailing low capital and operating costs. Even though investors could see volatility in the stock affected by the gold prices movements, the positive Gruyere Gold Project prospects make it an attractive investment.  We give a “Buy” recommendation on the stock at the current price of – $ 0.62 

 
GOR Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.