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Sep 2015 - Gold Road Res

Gold Road (GOR) Update based on a Pre - Diggers 2015 Visit to Gruyere

  • We/ERA attended a mixed broker/media/investor visit ahead of Diggers' 2015 to Gold Road's Gruyere on 2 August 2015, at which the Stage 1 of the PFS was discussed with the decisions behind the throughput rate of 7.5mtpa, together with an exploration update, and a visit to the then progressing deep EIS drillhole.
  • Since our last Gold Road report dated 25 March 2015 at 35.5c with a one year target of >50c, based on a 5%NPV @US$1150/oz & A$ of US75c, GOR raised ~$39m (on 4 June from 89.3m fpo shares at 44cps) to complete the DFS (as shown in Figure 1a), together with an SPP to result in the current 686.4m shares in issue or a ~$250m market cap at ~37cps. Our current BUY target is >45c for a market cap of >$300m (according to our/ERA March 2015 model, adjusting for a gold price of ~US$1120/oz, A$ of 70USc, and 686m shares in issue, GOR's 5%NPV is ~75c per share or ~ a $510m market cap, with conservative capex, and no allowance for exploration upside).
  • The key points from the visit were :
  • Post the raising, at the end of June 2015, Gold Road held ~$50m cash which can easily finance Gruyere through to the completion of the DFS by the end of 2016.
  • The size of the plant to treat Gruyere is to be a rated 7.5mtpa (hard, which means it could initially treat >8mtpa), for gold production averaging ~250kozpa from 2H2018.
  • Capex could be closer to $400m to $450m based on the scoping study and our/ERA's March 2015 model, factoring in the APA Group building and owning the gas pipeline and power station.
  • Long ~120m to 200m intersections of 1.5g/t to 1.8g/t below the ~450m deep pit shell infer that sub-level caving (after the open-cut) may be a possibility.
  • Continuing progress is being made on a number of exploration targets looking for the next orebody in one of GOR's other goldfield targets along the Yamarna greenstone belt.
  • Written by: Keith Goode
  • Tuesday, 01 September 2015

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