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Gold Road Resources flexes $10M drilling budget, PFS beckons

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Gold Road Resources (ASX:GOR) is poised for strong newsflow and growth this year after committing A$10 million to its 2016 gold exploration budget as the company’s 5.6-million-ounce Gruyere deposit in Western Australia progresses fully funded feasibility work.

Gruyere – which is Australia’s largest undeveloped gold deposit – is on track for the start of mining operations and first gold pour in 2018.

Work at the site represents part of Gold Road’s broader strategy in WA’s emerging Yamarna Belt region, where the company controls 6.1 million ounces of already defined gold resources.

Gold Road’s $10-million exploration plan is the largest to be undertaken by a junior Australian mining company this year and will target additional multi-million-ounce deposits within the company’s 5,000 square kilometres of holdings in this historically underexplored area east of Laverton.

The plan includes 2,500 metres of reverse circulation drilling at a 5.2-kilometre-long gold anomaly known as the Wanderrie Supergroup, where a recent aircore drilling campaign by Gold Road identified multiple intersections of greater than 1 g/t gold.

The best results from this program included 1 metre at 27.63 g/t gold from 49 metres, 1 metre at 9.66 g/t gold from 61 metres and 1 metre at 2.32 g/t gold from 76 metres.

The anomaly remains open along strike to the north, and has a potential fault-offset to the south which remains untested over a strike length of five kilometres.

As this ambitious exploration program unfolds across Gold Road’s Yamarna properties, Gruyere is scheduled to generate parallel newsflow in the form of feasibility milestones and permitting progress.

A Pre-Feasibility Study (PFS) is advancing to plan for a Q1 2016 release, which is expected to lead directly into a fully funded Feasibility Study to be completed in short order during H2 2016.

Technical work for the PFS is near completion, with mining, metallurgy, process design work, power studies geotechnical drilling and environmental analyses well underway.

A native title mining agreement negotiation process is also currently moving forward.

Scoping Study results for Gruyere have contemplated production scenarios at 5 million tonnes per annum, 7.5 million tonnes per annum and 10 million tonnes per annum, with an average annual gold production of 190,000 ounces over an 11-year life for 2.1 million ounces total production recovered.

All-inclusive pre-production capital cost was estimated at A$360 million.


Analysis

Gold Road’s $10 million exploration budget provides the impetus for further discoveries in the Yamarna region and based on its success to date we believe there is further multi-million ounce potential beyond Gruyere to expand current mine life of +10 years.

Gold Road’s ground is an unexplored greenstone belt and the majority of the gold in Western Australia is found on greenstone belt.

The systematic approach planned throughout this region in 2016 is expected to unlock the potential of several prioritised targets.

Along with expected feasibility milestones at Gruyere, this program represents as good an outlook for an ASX gold development company to add value as we have seen.

Price catalysts include upcoming PFS results which are expected this quarter to bring its 5.6 million ounce resource at its Gruyere Deposit into production.

Bullishly, Gold Road has a strong institutional shareholding with RCF, Platypus and Van Eck holding 10%, 8% and 6% respectively.

With cash reserves of $43M (Dec ’15) we find the current market valuation of GOR on an Ev/oz peer ranking and price catalysts ahead to be undemanding. In addition, with likely strong metrics from the PFS, Gold Road is well funded to swing into a DFS.

For a gold company with significant cash, a +10 year mine and a +250,000 ounce per annum gold production profile, Gold Road has a runway to significant share price upside from the current $0.37.

Gold Road is in the vanguard of WA gold development companies with quality assets and strong management.


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ASX:GOR
Market: ASX
Market Cap: $988.75 m
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