Gold Road Resources Limited

Round-Up of RIU Resources Sydney: Gold Road Resources Limited (ASX: GOR) is engaged in the business of gold and other mineral exploration with a market capitalisation of ~A$895.54Mn as of 16 May 2019. Recently, by investor presentation, GOR updated the market about the RIU Resources. The company stated that it is first gold imminent from Gruyere and an emerging producer of more than 150 kozpa for 12 years.

The company focuses on unlocking the potential for investors as it stated that its share price is underpinned by Tier 1 gold mine and it is also discovering high grade deposits to support a standalone operation on Gold Road 100% ground.

GOR mentioned that it is laying foundations for a Mid-tier gold producer. The company stated about its Yamrana exploration and development project that it is one of the Australia’s leading greenfields gold exploration projects which includes 180km of greenstone strike. GOR commented about its 2019 Exploration budget of A$20.3Mn.

A Quick Look at Quarter Update: The company mentioned in its Q1FY19 report that it’s $150Mn corporate and project syndicated finance facility that supports its ongoing participation in the development of the Gruyere Gold Project and continued exploration at Yamarna won IJGlobal’s 2018 Asia?Pacific Metals and Mining Deal of the Year. GOR commented on financial update that it had cash of $49Mn and $117Mn of undrawn debt facilities.
Gruyere expenditure incurred during the quarter was $47 million towards development and $10 million towards JV Support Costs (100% basis).

Gold Road Resource Limited mentioned that its share of payments for the development of Gruyere including JV Support Costs for the quarter was $16 million.

GOR stated that net cash used in operating activities stood at A$23.402Mn. During the same quarter, it made payments for exploration &evaluation and administration and corporate costs of A$2.230Mn and A$1.069Mn, respectively.

 Q1FY19 Operating Cash Flow Statement (Source: Company Reports)

What to Expect From GOR: In June 2019 quarter, Gold Road forecasts increasing total drawings on the finance facilities to ~$65Mn to fund Gruyere development and commissioning activities, operating costs during the initial ramp-up period and maintain a cash reserve in the range of $30 to $50 million.

The company mentioned that Ore stockpiled continues to increase with ~800,000 tonnes mined ahead of plant commissioning. It also pointed out that first gold production remains on target for second half of June 2019 quarter.
Recommendation: The asset to equity ratio stood at 1.46x in FY 2018 which implies growth of 35.3% on the YoY basis which represents that the company’s assets are primarily financed by debt. The current ratio of the company stood at 2.92x in FY 2018 which is reflecting fall of 79.1% on the YoY basis.

The stock traded at A$1.035 per share as on 16th May 2019. In the span of one-month, three month and six-month stock witnessed a rise of 9.09%, 26.71%, and 60.63%, respectively. Currently, the stock is trading towards the 52-week higher levels of $1.05. Considering the sharp run in the stock price over the past six months, we suggest investors to book profit at the current level and liquidate their holdings. Hence, we recommend a “Sell” rating on the stock at the current market price of A$1.035 per share (up 1.471% on May 16, 2019).


GOR Price Chart (Source: Thomson Reuters)   

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