Royal Bank of Canada - Sydney Branch
Paul Hissey (Analyst)
Cameron Klutke (Associate)
+61 3 8688 6512
+61 3 8688 6551
paul.hissey@rbccm.com
cameron.klutke@rbccm.com
Outperform
Speculative Risk
ASX: GOR; AUD 0.35
February 17, 2015
Gold Road Resources Ltd.
Price Target AUD 0.50
Scenario Analysis*
Right place, right size, right time. Initiating on
Australia's next Au project
Our view: We initiate coverage at Outperform (Speculative risk)
conservatively estimating c.43% upside on the development of the
Gruyere project, which increases to +100% in the event that a larger
throughput rate is chosen, the pit re-optimised for recent drilling, and
benchmark mining costs applied (our upside case). Gruyere arrives at a
time when the landscape for projects is sparse, which in our view adds an
additional corporate angle.
Key points:
Gruyere scoping study suggests feasibility...
Downside
Scenario
Current
Price
Price
Target
Upside
Scenario
0.30
14%
0.35
0.50
43%
1.00
186%
*Implied Total Returns
Key Statistics
Shares O/S (MM):
Dividend:
NAVPS:
BVPS:
594.9
0.00
0.53
8.60
Market Cap (MM):
Yield:
P/NAVPS:
P/BVPS:
Avg. Daily Volume:
208
0.0%
0.7x
0.0x
2,007,148
RBC Estimates
Based on the recent scoping study, we believe a 5mtpa open pit,
using conventional mining and processing and capital costs of c.A$405m
commencing in late 2018 is worth A50c/share. Not included in our
estimates (given the early stage nature of evaluation) but likely to add
upside is drilling completed in the last 3-4 months and upcoming 6 months
(which could increase both resource tonnes and contained ounces) and
greater throughput (we assess the potential for 7.5mtpa), which would
lower the effect of the fixed-cost component through greater economies
of scale and by itself could add a further c.A10c/share. Lastly, despite an
average mill grade of c. 1.2g/t Au, Gruyere enjoys an exceptionally low
strip ratio, providing a unique competitive advantage.
FY Jun
EPS, Adj
DilutedCal
P/AEPS - Cal
CFPS, Adj
DilutedCal
P/CFPS
2014A
0.00
2015E
(0.01)
2016E
(0.01)
2017E
(0.01)
NM
0.00
NM
0.00
NM
(0.01)
NM
(0.01)
NM
NM
NM
NM
All values in AUD unless otherwise noted.
Location, scale, and simplicity are key positives for GOR...
We highlight a dearth of new discoveries following the peak in exploration
investment through 2008-2012 as commodity prices now roll over and
believe the location (WA), relative scale (c.190koz Au for 11 years), and
simplicity of this asset provide an interesting new investment proposition
to investors.
...while ex-growth peers may also see the corporate opportunity
The discovery of Gruyere (and potential for a project) comes at a
time when the large portion of the domestic gold sector moves exgrowth. Several companies under our coverage continue to make public
statements of a willingness to acquire and develop new projects to
aid in what is otherwise a declining output, with the last round of
new project developments committed in 2010-11 and the subsequent
increased volume addition generally complete—making the relatively
straight-forward Gruyere project an appealing bolt-on asset, which could
offset falling production.
Valuation and catalysts
We value the Gruyere asset itself at c.A$296m (10% WACC) or A50c a
share, which underpins to our 12-month forward NAV-based (1.0x) target
price of A50c after taking into account the potential exploration and
project upside, which we offset against corporate costs.
Priced as of prior trading day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see page 32.
Gold Road Resources Limited
Target/Upside/Downside Scenarios
Investment summary
Exhibit 1: Gold Road Resources Limited
125 Weeks
26SEP12 - 16FEB15
UPSIDE
TARGET
0.50
1.00
0.50
0.40
CURRENT
0.35
DOWNSIDE 0.30
0.30
0.20
0.10
0.00
30m
20m
10m
2012
2013
2014
S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F
GOR.AU
Rel. AUSTRALIAN ALL ORDINAIRES
Feb 2016
MA 40 weeks
Source: Bloomberg and RBC Capital Markets estimates for Upside/Downside/Target
Target price/base case
Our 12-month target price of A$0.50/share is based on 1.0x
our sum of the parts (SOTP) NAV. In our base case, we assume
only modest exploration upside, allocating c.A$30/oz for those
resource ounces already identified at Gruyere only but not
yet included within the mineral inventory under consideration
in the scoping study. Our base case assumes production of
c.190koz Au for 11 years at an average C1 cash cost of A$851/
oz Au (ex-royalties) or A$953/oz AISC.
Upside scenario
For our upside, we consider firstly that GOR commit to the
7.5mtpa development option and secondly, the potential
for grade and unit costs to be optimised for the life of
the project, such that lower costs are encountered up front
(thereby increasing NAV). In addition, we also assume A$100/
oz (transaction multiple) for the c.1.5moz and a 1.2x P/NAV
multiple to reflect the corporate appeal of the asset. This
combination of outcomes derives an upside valuation of A
$1.00 a share.
Downside scenario
Our downside case assumes an additional 12-month delay to
the commencement of the project, as well as spot pricing into
perpetuity (US$1,230/oz Au and 0.77c AUD/USD), which is
effectively a downgrade to our house forecasts of c.US$1,400/
oz Au and 80c LT currency. Additionally, we assume that in
the event that sentiment toward gold deteriorates, the market
de-rates gold equities, and as such, we lower our P/NAV to
0.8x. These factors combined suggest a downside scenario of
A$0.30/share.
February 17, 2015
Gold Road Resources (ASX: GOR) is an Australian gold
exploration and development company based in West Perth,
Western Australia.
The company has experienced recent success with its
100% owned Gruyere project in the under-explored
Yamarna Greenstone Belt in Western Australia. GOR recently
announced a maiden resource for the project containing
3.8moz Au, with over 5moz Au in total resources throughout
the broader region. We believe the company’s tenement
package is highly prospective with additional drilling targets
currently being tested.
Gruyere the next gold project in an ex-growth market
Compared to our emerging gold coverage universe, we believe
Gruyere to be one of the better undeveloped gold deposits
globally, given project economics, output, scale, and location.
The project is likely to provide production of c.190koz Au
pa (based on our c.5mtpa nameplate plant assumptions) for
at least 11 years, and potentially beyond if both commodity
prices and additional exploration success permit, with an
additional resource (not included in either the company’s
scoping study or our own estimates) of c.1.5moz Au.
With exploration potential remaining among an underexplored belt in Western Australia
Gold Road’s tenement holdings cover an area of approximately
5,000km², covering the majority of the north-west trending
Yamarna Greenstone Belt with the geological feature having
a strike length of greater than 200km. We believe GOR will
remain committed to exploration and ascribe A$16m pa on
exploration expenditure annualised, with the next 12 months
specifically targeting both resource definition and infill drilling
at Gruyere as well as testing additional regional projects.
1HCY15 to provide significant news flow
We expect the company to release results from a new
drilling program at Gruyere (commencing imminently) as well
as finalising proposed throughput rates at Gruyere (GOR is
exploring both 7.5mtpa and 10mtpa options) toward mid-year
2015 as part of the first stage of a 12-month pre-feasibility
study. We believe these elements should provide positive
news flow in the near term.
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
2
Gold Road Resources Limited
Key questions
Our view
1.
What is a likely economic
outcome, and what are the key
sensitivities to this?
Our base case NAV (10%) for the Gruyere project is A$296m. We have generally
conformed to most estimates provided from the recent scoping study by the
company; however, we incorporated our own views on currency and commodity
price. In addition, NAV is also affected by the relatively early nature of the project,
currently in pre-feasibility study (PFS), which should see first production in mid2018.
The key sensitivities toward the project are grade/gold price, unit mining costs,
AUD/USD movements, and assumed upfront capex. Our base case assumes a life of
mine (LoM) average grade of c.1.2g/t Au, with first production in late-2018
underpinning a project-level NAV of A$296m. In a more positive case, higher grades
(1.4g/t Au LoM) and mining costs closer to our expectations of current benchmarks
(A$3.00/t) results in a project valuation of c.A$550m.
2.
What is the likelihood for further
exploration upside?
3.
What is the corporate potential
surrounding the Gruyere
project?
February 17, 2015
In our view, the relative lack of exploration in the Yamarna Greenstone Belt gives us
a sense of optimism about future discoveries, and as such, GOR would get a first
look at any untapped discoveries. Many targets have been derived by the company,
and many are drill ready. The newly discovered Gruyere ore body has produced a
3.8moz Au resource just 10 months after its initial discovery, with c.40% of this
already in the Measured and Indicated categories, with much of the inferred likely
(in our view) to be updated with additional deeper drilling. Much of the prospective
gold bearing greenstones along this belt are shielded by a thin cover of overburden
sediments, which is one of the main factors in this belt being largely underexplored.
With Gruyere also under a thin cover (~1-50m), we believe the probability of further
significant discoveries in GOR’s tenement holding is good.
In our view, Gruyere represents a relatively straightforward, growth option for
several of our Australian-listed producers that are in effect ex-growth. We expect
that most of our coverage group has the expertise to construct an open-pit carbon in
leach (CIL) gold operation, and the Western Australian location must surely make it
more attractive from a risk perspective than other offshore opportunities. The
existing scale of the deposit (excluding any further potential discoveries) could
support an operation well in excess of 10 years at a meaningful output rate of c.180200koz pa.
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
3
Gold Road Resources Limited
Table of contents
Executive summary – Our thesis in a page:................................................................................ 5
Gold Road Resources Limited – Gruyere: The next Australian gold project? ............................ 6
An important undeveloped gold project: Key highlights ........................................................... 7
Introduction ............................................................................................................................... 8
Gruyere the primary key asset – Exploring the project’s potential ........................................... 9
Project Assumptions… Our base case is 5mtpa ........................................................................ 16
…although a move to 7.5mtpa has some additional merit ...................................................... 17
Gruyere has corporate appeal in an otherwise ex-growth landscape ..................................... 19
Sensitivities – grade the key driver .......................................................................................... 21
Exploration upside ................................................................................................................... 23
Global comps – stacking GOR up against other global emerging names ................................. 25
Key Risks and Price Target Impediments ................................................................................. 27
Valuation and Price Target ....................................................................................................... 28
Production and Financial forecasts .......................................................................................... 29
Appendix I – Board and Management ..................................................................................... 30
Appendix II – Key historical events........................................................................................... 31
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
4
Gold Road Resources Limited
Executive summary – Our thesis in a page:
Put simply
The Gruyere project, in our view, is a potential company maker, which could also provide a
relatively straightforward growth project for an otherwise ex-growth domestic peer group,
thereby attracting an additional level of corporate interest.
What’s in our estimates (base case)
Underpinning our valuation of GOR, we have broadly assumed the specific project metrics
(cost and schedule) provided by the company in its scoping study (released 27 January 2015).
While we believe there are aspects of this study that appear conservative (in comparison to
our observations elsewhere across our coverage group—in particular the mining unit rate),
we take a deliberately conservative approach. The key assumptions underpinning our base
case valuation are as follows:




Gruyere conventional 5mtpa open-pit, CIL gold operation, c.190koz annual production
(steady state) for 11 years at c.A$950/oz all in sustaining cost (AISC)=NAV: A$0.50/share.
Exploration potential (which are resource ounces not in our mine plan and additional
potential within the tenement package) NAV: A$0.08/share
Total capex (development and sustaining) c.A$500m LoM, including A$405m
development;
and net cash and corporate cost: NAV: -(minus) A$0.05/share
What’s not in our estimates (upside)




At a technical level, lower mining costs (as benchmarked) at A$3/t LoM (could add +
A$0.13/share). In addition, we also assume flat costs throughout the project life; when in
reality, we expect lower costs early in the project while the pit is shallower, the strip ratio
lower and haul distances generally are closer. In addition, coarser grinding (studies
underway) could further reduce comminution costs. Optimisation of grade, strip ratio, and
mining costs through the life of the project (we typically run the LoM average flat) are
likely to assist NAV.
With a less conservative pricing of exploration upside (if we assumed an average
industry transaction multiple of A$100/oz, we could value the existing additional
resource at c.A$150m, which could add a further +A$0.25/share onto our valuation).
Premium to account for corporate appeal to existing Australian producers aiming to
address a flat (or declining) production outlook (+A$0.10/share if we assume 1.2x NAV).
A lower WACC (as the project potentially is de-risked, our 10% real WACC would likely
move lower to be more in line with other single-asset, Australian-based producing peers,
for example, at 8%—which could add +A$0.10/share).
What are the risks?
Applying any valuation to exploration potential creates risk; however, in this instance, much
of the value that we include in our base case is underpinned by existing identified resources
that are not in our base-case (explicit) mine plan. We do not specify any funding route in our
base case, but rather, we assume any and/or all capital required for growth would be at our
existing WACC (10% real) regardless of debt and/or equity mix, and any potential equity
raising would be neither dilutive nor accretive, in our view. In the section “Funding strategy
for Gruyere…” we highlight our assumptions for potential funding of the project.
Obviously, the potential capital cost of such a remote project is subject to change, and we
expect existing scoping study estimates to be narrowed with both PFS and definitive
feasibility study (DFS).
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
5
Gold Road Resources Limited
Gold Road Resources Limited – Gruyere: The next Australian gold project?
Introduction
Gold Road Resources (ASX: GOR) is an Australian gold exploration and development
company based in West Perth, Western Australia.
The company has experienced recent success with its 100% owned Gruyere project, in the
underexplored Yamarna Greenstone Belt in Western Australia. GOR recently announced a
maiden resource for the project containing 3.8moz Au, with over 5moz Au in total resources
throughout the broader region. We believe the company’s tenement package is highly
prospective with additional drilling targets currently being tested.
The company recently released a scoping study for Gruyere, which outlined a potential
5mtpa operation, producing c.190koz Au pa with an average AISC of c.A$916/oz Au (our
estimate is c.A$953/oz). The study outlined the mining of both Central Bore and Gruyere
with upfront capital costs of c.A$360m (we take the midpoint of the stated error margin at
A$405m). Under our house view on commodity prices (we assume flat US$1,400/oz Au and
0.80c AUD/USD from 2019 onward), we estimate an in-principle IRR of c.28%.
The project looks financially viable against our estimates as a standalone development. In
addition, we believe there is potential for both lower risk and greater value creation if this
project were to exist as part of a portfolio of producing assets, with existing cash flow and
development expertise, or in the event that additional exploration potential suggests the
resource base could be materially increased.
Gruyere to provide an avenue for cash flow…
We initiate coverage on GOR with an Outperform rating, and a 12-month target price of
A$0.50/share. Our positive views on the project are driven in equal measure by the inherent
potential that we see as a standalone project but also the corporate attraction to the resource in
the relatively attractive Western Australian jurisdiction. The recent Tropicana development
(AngloGold and Independence Group) provides a close analogue (in terms of scale and
geography) to Gruyere, although we believe that an improved market for project development
and/or construction and potentially more conservative development plan could deliver additional
capital cost savings over the aforementioned project. Despite some similarities, the average grade
of the Gruyere resource is lower than that of the Tropicana asset (1.4g/t Au versus Tropicana at
c.2.1g/t Au); however, Gruyere also boasts a materially lower stripping ratio (the proportion of
waste required to access one tonne of ore), which to some degree, offsets this feature.
Compared to our emerging gold coverage universe, we believe Gruyere to be one of the
better undeveloped gold deposits globally, given project economics, output, scale, and
location. The project is likely to provide production of c.190koz Au pa (based on our c.5mtpa
plant assumptions) for at least 11 years, and potentially beyond if both commodity prices
and additional exploration permit, with an additional resource (not included in either the
company’s scoping study or our own estimates) of c.1.5moz Au.
In addition, the exploration upside remains strong throughout this relatively underexplored
region of Western Australia, for which GOR holds a dominant land package with
approximately 5,000km² under investigation. We believe additional discoveries could be
achieved through GOR’s significant tenement holdings among the Yamarna Greenstone Belt.
Target price/base case
In setting our 12-month forward target price, we apply a 1.0x multiple to our estimated asset
level NAV (A$296m or A50c/share post-tax) and incorporate an additional A$50m (or
A8c/share), which equates to c.A$33/oz for gold in resource but not included in our base
case. Netting out cash and corporate costs arrives at our A$0.50c target price.
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
6
Gold Road Resources Limited
An important undeveloped gold project: Key highlights
We believe Gruyere to be one of the more interesting development projects because:
There’s no historical baggage – a new discovery
Firstly, the project is newly discovered and as such does not suffer the legacy of many other
recycled assets that appear to exist as a function of commodity price and the resource cycle.
Coupled with this, we see the rapid discovery of the resource base at Gruyere as an
indication of the potential of what is a new gold province in Western Australia.
Probabilistically, it seems unlikely that a company could discover such a magnitude of gold
ounces in a new area, at such pace, and have exhausted all the potential. Hyperbole aside,
we genuinely believe this district could continue to yield additional exploration success for
many years to come.
Scale
The magnitude of the resource at Gruyere is material. The scoping studies (and our own
estimates) suggest an operation could support production in the order of 190koz Au per
annum for in excess of 10 years. This would provide not only sufficient output to make a
meaningful contribution to domestic production (it would be sixth in a list of the highest
contributing assets within our coverage group and would be larger than IGO’s exposure to
Tropicana, which is c.140koz pa) but also longevity such that there is breathing room
between the completion of a project and the necessity to find another.
Simplicity
The deposit should be mined via open pit and processed using a conventional CIL circuit,
which would be similar to the majority of the deposits in the region and in fact what we
would consider ‘bread and butter’ for many aspiring producers.
Location
The Yamarna Gold Project is located in eastern Western Australia. The project is in a remote
location; however, we consider this to provide a lower-risk alternative to a less-remote
opportunity in recent hotspots such as West Africa. Western Australia is a renowned gold
mining district, and with large modern day projects, such as Tropicana to the south, we
believe this is still a material positive for the company when compared to other undeveloped
global gold deposits. In a global sense, we believe this is appealing not only for investors but
also corporates—particularly when recent declines in local currency are factored in, which
could provide sustained additional margin against a predominantly local cost base.
Sensitivity
As our analysis shows, the project is fairly robust economically, with commodity price,
currency, and grades the key drivers to our estimates of valuation. In particular, our existing
IRR of 28% outlines a solid investment margin—even when taking into account GOR’s
existing size and balance sheet.
Opportunity
Outside of the asset itself, the discovery (and potential for a project) comes at a time when
we observe that the large portion of the domestic gold sector moved ex-growth. Several
companies under our coverage continue to make statements (through presentations,
conferences, and market releases) of a willingness to acquire and develop new projects to
aid in what is otherwise declining output, with the last round of new project developments
committed in 2010-2011 and the subsequent increased volume addition generally complete.
This market ‘pre-condition’ and the potential that we see within GOR provide both the right
timing and exposure for investment, in our view.
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
7
Gold Road Resources Limited
Introduction
Background
Gold Road listed on the ASX in July 2006 under the former name of Eleckra Mines Ltd. The
company listed raising c.A$6m and immediately completed the 100% acquisition of a
significant tenement holding within the Yamarna Greenstone Belt east of Laverton in
Western Australia, named the Yamarna Gold Project.
Exhibit 2: Tenement map of GOR’s holdings in the Yamarna Belt (showing its location to the
Tropicana deposit to the southeast)
Source: Company reports
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
8
Gold Road Resources Limited
Gruyere the primary key asset – Exploring the project’s potential
Based on a gold price of A$1,350/oz (which is materially below the spot realised AUD price of
c.A$1,580/oz, and our forecast Long-term of A$1750/oz), GOR has released a scoping study
showing an 11-year LoM, exploiting both Gruyere and Central Bore deposits, which the
company has forecasted could produce a net pre-tax, undiscounted cash flow of A$550m.
Scoping study suggests an economic project at 5mtpa throughput, 28% IRR (RBCe)
provides appropriate return
On our estimates, we are able to generate a NAV (using 10% real WACC) of c.A$296m or
A50c per share for the asset, while we believe GOR as a corporate entity (including
exploration upside, corporate costs, and cash position) is worth A53c/share. The key
departures between our estimates and those provided in the scoping study are the
commodity and currency outlooks (we use RBC Capital Market estimates as outlined in
Exhibit 4) and capex (where we assume the midpoint of the tolerance on the company’s
range). We outline the key parameters for both our and the company’s published estimates
in Exhibit 3.
Exhibit 3: Details from the scoping study
Scoping Study
Initial Capex
Peak annual output (Y+3)
$360m
$405m
5.0mtpa
5.5mtpa
Mine strip ratio
Grade (LOM average)
RBCe - 5mtpa base
1.6:1
1.4:1
1.2g/t Au
1.2g/t Au
Recovery
95%
95%
Annual gold production (average)
190koz Au
190koz Au
Total gold production
2.1moz Au
2.1moz Au
Project life
11 years
11 years
Cash Costs (average)
A$838/oz Au
A$851/oz Au
All-in sustaining costs (average)
A$916/oz Au
A$953/oz Au
NPV (10%)
$296m
IRR
28%
Source: Company reports, RBC Capital Markets estimates
Exhibit 4: RBCe commodity and currency forecasts
Scoping Study gold price
RBCe gold price
RBCe Currency
Spot Currency
Spot A$ gold price
2000
0.90
0.86
1500
0.84
0.82
1000
0.80
0.78
500
AUD:USD
Gold Price (A$/oz)
0.88
0.76
0.74
0
0.72
FY15E
FY18E
FY21E
FY24E
FY27E
FY30E
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
Source: Company reports, RBC Capital Markets estimates
February 17, 2015
9
Gold Road Resources Limited
Current mineral resource estimate
The Gruyere deposit, containing 3.8moz Au at 1.23g/t Au, has been outlined in just 10
months following its initial discovery. Gruyere was discovered along the Dorothy Hills Trend
at Yamarna and, along with already reported resources at both Central Bore and Attila,
brings the company’s total mineral resources to more than 5moz Au. Drilling is ongoing at
Gruyere, largely to infill the known deposit; however, we believe that significant exploration
remains at Gruyere and the greater portfolio of exploration projects held by the company.
The initial resource at Gruyere was based on 30,000m of drilling, with a further c.22,000m
that should be completed by June 2015.
Importantly, approximately 41% of the current resource ounces are already in both indicated
and measured resource categories (higher geological confidence). The continuity and
consistency of both the grade and mineralisation at Gruyere have played a large part in
unravelling the understanding of this newly discovered ore body. We believe, due to these
factors, that the majority of the current inferred material at depth, although still within the
current pit shell design, is likely to be upgraded to a higher resource category and is
essentially a function of drill density rather than complexity.
The resource lies beneath between 1m and 50m of overburden cover, with this cover
thickening to the northwest. The relatively shallow nature of the deposit removes the impost
of a large pre-stripping campaign that is sometimes required in instances where the
overlying barren material is considerably thicker. In this case, we incorporate c.A$50m of
pre-strip in the development capital, which assists in lowering the LoM strip ratio from 1.6 to
1.4:1, with this upfront cost capitalised.
Exhibit 5 clearly shows the distribution of drilling along the strike of the deposit, as well as
the current resource category. As evidenced, the inferred material is at depth, rather than
near surface, and reiterates our view that further upgrades are primarily related to sufficient
drilling budget and an effort in exploring the greater depths for a potential open-pit mine.
Exhibit 5: Long section of Gruyere resource illustrating the top 100-150m of the resource in both measured and indicated
categories and the remaining deeper material as inferred. In addition, you can clearly see the grade distribution down hole,
which is generally fairly continuous.
Source: Company reports
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
10
Gold Road Resources Limited
Drilling is currently being conducted by GOR at Gruyere aiming to increase both the volume
of ore and level of confidence of the resource (by promoting material to indicated and
measured levels). This program should see approximately 22,000m drilled over the next five
to six months. We understand some regions of the existing block model contain zero grade,
because blocks have not been interpolated given the scarcity of appropriate drilling data in
the immediate region. Although we cannot predict the likelihood of further high-grade
results being realised (which would obviously add ounces to the deposit), given that the
material inside the conceptual pit shell must be mined, the potential for additional material
to be identified that has sufficient gold value to generate a profit solely over processing costs
is high (as mining costs are effectively sunk), in our opinion.
Any material that can be upgraded in confidence from inferred to measured or indicated has
potential to be upgraded to a maiden ore reserve on the completion of the PFS. (Note: the
principles of reserve estimation do not allow for inferred resources to be included in an ore
reserve.)
Cut-off grade and sensitivity
The varying cut-off grades applied to the Gruyere deposit illustrate the consistency of grade
throughout the known mineralisation. This factor provides us with further confidence in the
resource, especially when upgrading the current inferred material to indicated and
measured. In addition, there is a considerable amount of material (c.1.5moz) that is not
currently outlined in the scoping study (assuming A$1,350/oz Au), but it is contained within
the envelope of the mineral resource (which was assumed at c.A$1,550/oz Au). Clearly, a
greater portion of the resource would appear economic at spot prices (c.A$1,580/oz - at the
time of writing, with all else being equal); however, the initial development would be well
served by these more conservative estimates, which would (on paper at least) deliver greater
margin and returns and inversely less leverage to fluctuations in gold price.
Exhibit 6: Mineral resources totalling over 5moz Au
Tonnes
Grade
Containing Metal
Gruyere
(mt)
(g/t Au)
(koz Au)
Measured
1.4
1.36
62
Indicated
38.8
1.22
1,515
Inferred
56.7
1.24
2,260
Total
96.9
1.23
3,838
Measured
0.0
26.6
36.7
Indicated
0.4
8.7
119
Inferred
0.3
4.1
45
Total
0.8
7.7
201
Measured
8.4
1.4
389
Indicated
9.4
1.2
373
Inferred
7.8
1.2
298
Total
25.5
1.3
1,060
Grand Total
123.3
1.3
5,098
Central Bore
Attila
Note:Gruyere
Gruyere
cut-off
at 0.70g/t
Au;Au;
Central
1.0g/t
Au; and
cut-off
at 0.5g/t
Note:
cut-off
grade
at 0.70g/t
CentralBore
Borecut-off
cut-off at
grade
at 1.0g/t
Au;Attila
and Attila
cut-off
grade Au
at 0.5g/t Au
Source: Company reports
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
11
Gold Road Resources Limited
Exhibit 7: Gruyere resource – changes in cut-off grades show little effect of change in total
ounces, indicating consistency of grades throughout the deposit.
Cut-off grade
Tonnes
Grade
Containing Metal
(mt)
(g/t Au)
(koz Au)
0.0
100.8
1.21
3,917
0.5
100.8
1.21
3,916
0.7
96.9
1.23
3,838
1.0
67.6
1.39
3,013
1.5
18.4
1.85
1,097
Source: Company reports, RBC Capital Markets estimates
Although a topic worthy of greater analysis, we believe it is the overall distribution of grade
within a deposit that has the greatest influence on project economics, and by extension,
mines are inherently sensitive to commodity prices, given the financial effect that it could
have on those marginal areas of mineralisation typically found at the periphery of a deposit.
We believe that the ore is relatively evenly distributed at Gruyere (disseminated), with a
relatively small component of higher-grade material (+1.5g/t Au) among a much larger,
uniform mineralised envelope (Exhibit 7). In our view, while higher grades (or a greater
distribution of high and low grades) may be preferred, because it could accommodate more
aggressive scheduling to increase NAV—the trade-offs are bulk mining and generally lower
strip ratios.
Processing
The company released metallurgical test results from the work carried out by ALS Metallurgy
(Perth) and JK Tech (Brisbane) based on 500kg of selected drill core samples from the
Gruyere deposit. Results were highly encouraging, providing confidence for GOR to progress
with a scoping study over the project.
The mineralised host rock, the Gruyere tonalite, at Gruyere has demonstrated properties
amenable to conventional crushing and grinding methods. The test work on the Gruyere ore
has shown total gold recoveries of c.94-98% at grind sizes of 125-75µm. Also, c.50-69% of the
gold was recovered simply through gravity methods, which should provide some confidence
for reduced processing costs. The strong recovery results from 125µm (greater than 94%)
have triggered the company to run further analyses at 150cm to potentially lower processing
costs.
Grind size in the scoping study level test work is assumed at 106µm, which we would
consider to be coarser (therefore lower cost given the energy component of grinding
increases exponentially) than more typical Western Australian gold projects, which are
typically around 75µm (such as the neighbouring Tropicana). Although we have not assumed
such a result in our base case, any potential for a coarser grind size could assist in lowering
the processing cost (on a $/t basis).
Ongoing monitoring (by RBC Capital Markets Research) of new projects shows an average
observed ramp-up time of approximately 7 quarters to reach 90% of operating capacity. The
data set includes 18 projects followed as part of the team’s global coverage. In our view this
is conservative, with an asset like Tropicana (part of the dataset) operating at 103% of its
rd
nameplate capacity within the 3 quarter of operation. Given the comparison with
Tropicana, we also model 3 quarters ramp up to 5mtpa nameplate in our base case, although
we remain comfortable that over a period of time, a plant at Gruyere would move beyond
this level (RBC Capital Markets Research also shows that over 5 years, average throughput
approaches 120% of design capacity).
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
12
Gold Road Resources Limited
Exhibit 8: Likely processing ramp up compared against Tropicana and 17 other projects
followed by RBC. We assume a successful ramp-up, in line with Tropicana, which is more
optimistic than observed projects – and therefore represents some downside risk.
Through/Design Capacity (%)
120%
100%
80%
60%
40%
20%
0%
1Q
2Q
3Q
4Q
Tropicana
5Q
6Q
7Q
8Q
Gruyere - RBCe
9Q 10Q 11Q 12Q
Industry average
Source: RBC Capital Markets estimates
Mining
We have attempted (where possible) to break out the recent actual unit mining costs for
companies under our coverage. While all companies do not report sufficient granularity to
assess changes in unit costs, those outlined in Exhibit 9 show current unit rates materially
below the LoM average outlined by GOR in its scoping study. It is most likely that Gruyere
will benefit from lower costs in the early days of the open-pit mine, experiencing higher costs
than the average toward the end of its LoM as pit depth and haul time increase. Taking these
figures into account provides us with a level of comfort that there is a remaining level of
conservatism in our unit cost assumptions for mining.
Exhibit 9: Benchmark mining costs for similar-scale open-pit operations in Western Australia
(A$/t)
Average
Gruyere
Tropicana
Edna May^
Mt Rawdon
Moolart Well*
Garden Well*
GOR
IGO
EVN
EVN
RRL
RRL
1Q14
2Q14
3.92
0.91
3.05
8.61
1.12
3Q14
4Q14
8.80
2.54
not reported
8.99
3.85
1Q15
2Q15
2.23
0.99
2.63
2.24
2.05
4.40
2.84
2.80
1.91
2.40
2.90
* feasibility study numbers only, ^ discrepancy due to transition to owner mining and pit pushback (capital) decisions.
Source: Company reports
We highlight that the scoping study outlined a LoM strip ratio of 1.6:1, and an additional prestrip component totalling c.A$50m (to move c.14mt of overlying barren material). After
clarification, we have ascertained that this is essentially double-counting that material, and
as such, our forecast of LoM strip ratio of 1.4:1 factors in that this additional 14mt would
have already been removed as part of the pre-development capital for the project.
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
13
Gold Road Resources Limited
Capex
There are two reasonably similar analogues to Gruyere, which have been constructed in the
previous two to three years, which we believe provide end members to a potential
development at Gruyere. The Tropicana project (AngloGold and Independence Group) was
commissioned in 2013, with a nameplate throughput rate of c.5.8mtpa and a capital cost of
in excess of A$850m. In many regards, this is a close replica to what Gruyere may look like,
although we believe higher grades at Tropicana (therefore production and margin) has
allowed additional capital to be spent on items that may not otherwise be considered
essential for other operations. Tropicana was also built in what we believe was a tighter
market for project construction (2011-2012)—during the peak of the investment cycle in
Australia.
At the opposite end of the spectrum is Regis Resource’s (RRL) Garden Well project. This mine
was similarly built during the height of mining investment in 2011-2012 also, but with several
critical differences. RRL effectively ran the build itself, with an experienced in-house project
team, and bespoke design and engineering, which clearly removed the cost of much of the
contingency that large procurement firms will build into any project. In addition, RRL
benefitted from some existing site infrastructure (access roads, camp, etc.), which may have
required incremental upgrades, whereas Tropicana and likely Gruyere are true greenfield
developments. We also believe that there is a significant distinction between the required
specs for an operation, and our observation would be that RRL very much built for purpose,
whereas under the joint venture at Tropicana, construction was built with a strong focus on
quality. Regardless, it is hard to account for the full c.A$600m difference among the projects.
A more detailed study (now that both Tropicana and Garden Well are fully in operation may
reveal additional factors that need to be normalised to account for project specifics—such as
ore hardness, which may require additional grinding capacity, etc.).
What is immediately obvious to us, however, is that Gruyere clearly fits somewhere in
between these two, and as such, we anticipate further analysis to understand better where
the risks (and opportunities) might lie for GOR, given the benefit of two recent and similar
cases in the same jurisdiction.
Exhibit 10: Project comparison (based on feasibility study level announcements) of Tropicana, Gruyere, and Garden Well
Resource
Reserve at BFS
Price assumptions
Strip ratio
Throughput
Mill grade
Recovery
Average annual production (LoM)
Mine life
Capital (pre-production, initial estimate)
Cash cost
Build time
Tropicana
Garden Well
Gruyere
78mt @ 2.12oz Au
(26 July 2011)
61mt @ 1.29g/t Au
(25 November 2011)
96mt @ 1.23g/t Au
(27 January 2015)
48mt @ 2.2 g/t Au
Optimised at A$1210/oz
27.5mt @ 1.52g/t Au
Optimised at A$1000/oz
n.a.
n.a.
5.5:1
5.8mt
2.2g/t Au
90.4%
330-350koz Au
> 10 years
3.5:1
3.8mt
1.46
95%
180koz Au
9 years
1.4:1
5.0mtpa
1.20
95%
190koz Au
11 years
A$690-740m
A$710-730/oz Au (pre-royalty)
A$109m
A$555/oz Au (pre royalty)
A$360m
A$838/oz Au (pre-royalty)
Pre-dev works commenced Dec 2011
Commission Dec 2013
Commence Sept 2011,
Commission Sept 2012
RBCe: 2017-2018
Source: Company reports,
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
14
Gold Road Resources Limited
Timing and news flow
Although timing is not specified within the scoping study (and remains subject to numerous
factors), we estimate the general timetable for development of a potential project at
Gruyere. The critical path items that we believe bring additional risk to our estimated
timetable are:



Permitting,
Native title clearance (started for Central Bore, yet to be started for Gruyere), and
Financing.
In the current climate for resources (and general lack of development) we do not expect
there will be significant lead-times in the acquisition of long-lead items (such as crushers and
milling equipment) or mobile fleet (likely to be delivered by a contractor).
Exhibit 11: RBCe - timetable of major events for GOR leading up to first gold production in 2018.
Calendar Year
Pre-feasibility Study
Definitive Feasibility Study
Financing
Construction
First gold poured
Ramp-up/debottlenecking
2015
St. 1
2016
2017
2018
2019
St. 2
Source: RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
15
Gold Road Resources Limited
Project Assumptions… Our base case is 5mtpa
We generally assumed the LoM and same physical outputs as advised by GOR in its scoping
study, with only minor exceptions: namely RBC Capital Markets commodity and currency
prices and a 10% greater throughput to take into account common observations of
processing plants exceeding nameplate capacity (average).
Some discrepancies arise on our cost estimates as a result of the profile of changes in
throughput rate and cost assumptions. We show our production profile for Gruyere in Exhibit
12.
Exhibit 12: Production profile for the 11 year mine life at Gruyere
Grade
Gold Production (koz Au)
250
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
200
150
100
50
0
Gold Grade (g/t Au)
Gold Production
Source: RBC Capital Markets’ estimates
Given that Gruyere is the sole asset under consideration at this stage, the fortunes of GOR
are (in our view) directly tied to the outcomes of this project. In addition, corporate costs
and other cash expenditure must also in effect be borne by the development project. As a
result, we consider the cash flow profile of GOR as a consolidated entity in assessing the
valuation of the project and by extension the target price. Our cash flow profile is outlined in
Exhibit 13, below.
Exhibit 13: Aggregate LoM cash flow
Base 5mtpa nameplate
A$m annual free cash flow
400
200
0
FY15E
FY18E
FY21E
FY24E
FY27E
FY30E
-200
-400
Source: RBC Capital Markets’ estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
16
Gold Road Resources Limited
…although a move to 7.5mtpa has some additional merit
In the scoping study, the company also identifies the potential to increase the throughput of
the processing plant in order to minimise overall unit cost rates for the operation. In theory,
this is a logical step: given the remote nature of the business, there are fixed components of
the capital works program which will be required regardless of the overall scale of the
operation. As an example, the project will require access infrastructure (such as a road
upgrade, an airstrip) and accommodation and services (camp, site administration), which are
largely fixed cost expenses. There is a smaller variable component to such purchases if extra
workers are required to be housed, but this represents only an incremental provision in our
view. Similarly in the processing plant, a move to 7.5mtpa is likely to require incrementally
larger crushing and grinding components (which we believe would be the key drivers of
overall higher capex cost suggested for 7.5mtpa at A$435-480m – we assume $500m),
however, other items (such as the elution circuit and gold room, as well as tankage for the
tail-end of the circuit) are likely to be only marginal increases on a proposed 5mtpa plant.
Also, there is likely to be an improvement in the fixed cost unit rate for the build-ownoperate turnkey power solution as well.
From an operating perspective, clearly a 7.5mtpa throughput rate is going to consume
greater absolute quantities of cyanide, diesel and electricity; however, given the variable
consumption of such items, each additional tonne of gold ore is likely to cover the costs –
further demonstrating the benefits of scale. In Exhibit 14, we include a snapshot of our
estimates at:

5mtpa nameplate (which we think could treat 5.5mtpa), for 11 years assuming
treatment of only the material assumed in GOR’s scoping study (c.2.1moz out of the
3.8moz Au total resource);

7.5mtpa for 6-7 years, exploiting the same identified resources as those assumed in
the 5mtpa case,; and

7.5mtpa, de-bottlenecked to 8.5mtpa, for 11 years, exploiting additional material
not considered in the Scoping Study, but still within the recognised mineral
inventory.
Exhibit 14: RBCe summary of potential move to 7.5mtpa
Scoping Study
Initial Capex
Peak annual output (Y+3)
Mine strip ratio
Grade (LOM average)
Recovery
RBCe - 5mtpa base
RBCe - exp to 7.5mtpa, same
resource
RBCe - de-bottleneck to
8.5mtpa, incl lower grade and
inf material
$360m
$405m
$500m
$500m
5.0mtpa
5.5mtpa
7.5mtpa
8.5mtpa
1.6:1
1.4:1
1.4:1
1.4:1
1.2g/t Au
1.2g/t Au
1.2g/t Au
1.1g/t Au
95%
95%
95%
95%
Annual gold production (average)
190koz Au
190koz Au
257koz Au
240koz Au
Total gold production
2.1moz Au
2.1moz Au
2.1moz Au
2.9moz Au
11 years
11 years
7 years
11 years
Cash Costs (average)
A$838/oz Au
A$821/oz Au
A$780/oz Au
A$1009/oz Au
All-in sustaining costs (average)
A$916/oz Au
A$953/oz Au
A$910/oz Au
A$1153/oz Au
$296m
$363m
365m
28%
32%
32%
Project life
NPV (10%)
IRR
Source: Company reports, RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
17
Gold Road Resources Limited
Obviously the expansion represents additional value to the company, and stands a
reasonable chance of becoming the base case in the event that additional drilling improves
the confidence of material at the base of the pit (also likely in our view). This is driven by the
generally consistent nature of the ore body, which sees no real change in grade or strip ratio
at depth (meaning the waste mining cost remains at the same rate) at depth. The pullforward of production ounces offsets the increased capital requirement, although this would
have less impact on valuation if using a less conservative WACC (we use 10% real). Lastly, the
ability to spread the fixed costs over a larger volume has a positive effect on cash costs,
aided by an increase in production ounces.
However, this also carries potentially higher risks, given higher volume, capex and
potentially lower feed grades
Obviously, any move to treat greater volumes would increase the absolute cost base, and as
such, the business would become more exposed to gold price and currency. As outlined in
Exhibit 14, the addition of lower-grade material beyond the initial six- to seven-year mine life
of an expanded case has a dilutionary effect on cash costs, and it is this period when the
company could become more exposed to volatility in commodity price. Granted, this is
beyond the horizon of many investors, and in the event the project is constructed at
7.5mtpa, capital costs become sunk, and from that point on, the economic decision-making
changes to that of maximising leverage to the installed capacity.
Our assumption of an 11-year life at the greater 8.5mtpa throughput rate still does not
incorporate the complete mineral inventory, which has already been reported (in the
absence of any additional exploratory drilling). In adding this material into our upside case,
we effectively assume lower grades to account for the greater degree of uncertainty
presented by the largely inferred material—which clearly demonstrates economic feasibility.
There is of course some likelihood that the material at the base of the pit (currently classified
as inferred) is in fact the same grade as the remainder of the ore body, and as such, further
drilling would not only confirm this but also increase the confidence levels.
In essence, even attempting to allow for the increased risks in an expanded project, we
believe there is considerable value uplift available in a potential 7.5mtpa project. Given the
lack of any clearly identifiable high grade zones, Gruyere is likely to be a throughput driven
asset.
Exhibit 15: comparison of cumulative cash flow
Base 5mtpa nameplate
Upside 7.5mtpa nameplate
1250
Additional life requires resource upgrade
A$m cumulative free cash flow
1000
750
500
250
0
FY15E
FY18E
FY21E
FY24E
FY27E
FY30E
-250
-500
-750
Source: Company reports, RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
18
Gold Road Resources Limited
Gruyere has corporate appeal in an otherwise ex-growth landscape
The discovery (and potential for a project) comes at a time when we observe the large
portion of the domestic gold sector move ex-growth. Several companies under our coverage
continue to make statements (through presentations and conferences as well as market
releases) of a willingness to acquire and develop new projects to aid in what is otherwise a
declining output, with the last round of new project developments committed in 2010-11
and the subsequent increased volume addition generally complete. This market “precondition” as well as the potential we see within GOR itself provides both the right timing
and exposure for investment in our view.
Exhibit 16: Our take on the potential for Gruyere development under peers within our coverage group
What if the project was owned by… (we consider potential ownership by companies under our coverage larger than GOR)
Proposed capex as a % of
FY16+17 OpCF
(ex Sus Capex)
Proposed capex as a % of
current mkt cap/EV
Contribution to Growth
(impact of c.190koz on RBCe
FY18 attrib. Au production)
Newcrest
The verdict:
22%
5%/3%
10%
Although NCM has not built an open pit operation recently, we believe the company's scale and IP
would easily facilitate development of a project of this nature. We do not believe NCM has a
mandate to grow through acquisition at this stage, but we could see the benefits of broadening
the equity base to acquire and develop this asset (which would also assist in lowering D/D+E
gearing metrics). In addition, a company like NCM may be able to fast-track a development,
bringing production forward such that Gruyere may be up and running prior to Golpu.
Independence
The verdict:
102%
45%/47%
137%
Taken at face value, the Gruyere project appears to provide a strategic fit to IGO, who have
publicly claimed it is looking to grow. The company has a strong balance sheet, and a proven
exploration track record in the emerging eastern WA gold belt. IGO has not directly built any of
its current operations, however, the relative simplicity makes potential development tangible.
Regis Resources
The verdict:
134%
49%/48%
69%
RRL has also publicly spoken of intentions to grow its business (in quarterly announcements and
also conference presentations), and in our opinion, a potential development would be a good fit
for this company. Gruyere would be almost identical to RRL's existing Garden Well mine, with
similar mining and processing rates, and therefore capex requirements. RRL has a track record of
delivering such projects on a modest capital budget (which would increase Gruyere's project
value), owing to the internal IP surrounding project management and construction.
Northern Star
The verdict:
98%
51%/56%
64%
NST has rapidly grown ints production base through 2014, however this had been through the
acquisition of existing underground operations from much larger companies. As such, we believe
that the acquisition of an open pit development project (regardless of jurisdiction) would be both
unlikely and also depart from the strategy which has brought the entity to its current production
status. While we believe that an open pit, CIL gold project should be one of the easier projects to
build, in our view this does not fit NST's business model and core competence (underground
mining).
Source: RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
19
Gold Road Resources Limited
Exhibit 16 (continued): Our take on the potential for Gruyere development under peers within our coverage group
Evolution Mining
The verdict:
Beadell Resources
The verdict:
Proposed capex as a % of
Proposed capex as a % of
Contribution to Growth
FY16+17 OpCF
current mkt cap/EV
(impact of c.190koz on RBCe
(ex Sus Capex)
FY18 attrib. Au production)
136%
95%/75%
60%
This project would comfortably fit within EVN's skill set (in our opinion) given not only the recent
development of the Mt Carlton open pit in Queensland, but also an excellent track record
operating the remaining four mature assets in what has been a tough operating environment for
Australian producers. The company's executive chairman continues to state ambitions to grow,
and we believe a project like Gruyere would make sense for a company in EVN's position.
484%
259%/191%
103%
A move to acquire Gruyere would add significant ounces to BDR, however, we would not consider
BDR to be in a position financially at this stage for such a move. The company recently
restarted/developed the Tucano project in Brazil (which we expect has been significantly more
difficult than Gruyere), however, we see the funding hurdle as prohibitive at this stage.
Source: RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
20
Gold Road Resources Limited
Sensitivities – grade the key driver
Since it is still early days for Gruyere, the company may elect to undergo a slightly different
strategy for bringing Gruyere into production versus our assumptions and the Scoping Study,
whether in terms of scale for production or timing; however, we believe the proposed plans
seem logical given the size and style of deposit. Our estimated upfront capital costs of
c.A$405m (for our assumed 5mtpa plant) are also likely to vary considering examples such as
Regis Resources’ Garden Well plant (4mtpa) had an estimated cost of c.A$110m, whereas
Anglo’s Tropicana plant (5.8mtpa nameplate) total cost was c.A$700m.
In order to demonstrate sensitivity, Exhibit 16 highlights the impact a range of scenarios has
on the company’s NAV (all assumed against our 5mtpa nameplate base case).
Exhibit 17: We outline the sensitivity on movements in gold grade, capex, discount rate,
processing cost and AUDUSD at Gruyere against our base case assumptions
Discount Rate
Grade
FX
Capex
Processing cost
450
A$m NPV
400
350
300
250
200
-10%
Base
10%
Source: RBC Capital Markets’ estimates
Fundamentally, grade is the key driver of the project. As a result, any potential to front-end
the grade profile to maximise near-term cash flow would provide additional risk mitigation to
project valuation (Exhibit 17). Fortunately, we would expect only marginal dilution in
physically mining the ore blocks in the pit, given that the nature of the mineralisation seems
to be wide-spread and disseminated, more so than smaller discrete zones which can be
difficult to blast (while minimising heave or throw of the rock laterally) and secondly mine
(without mis-classifying ore as waste and vice versa). Our base case assumption of ore feed
grade at Gruyere is already materially below the company's global resource grade of 1.23g/t
Au (factoring in c.7% dilution). Similarly, it is unlikely mining costs would remain flat
throughout the LoM, with earlier years significantly cheaper than the final stages as the strip
ratio changes (on a $/t ore mined level).
Exhibit 18: Gruyere shows significant leverage if we vary the grade over the first 3 years,
while maintaining LoM averages (effectively high-grading the deposit)
…on 5mtpa
Scenario
Base (LoM average)
Grade first 3 years (g/t Au)
1.6
1.2
Project NPV (A$m)
362
315
Source: RBC Capital Markets’ estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
21
Gold Road Resources Limited
Funding strategy for Gruyere – we expect the company would consider a range of
options….
Should GOR choose to develop the project in its own right, funding is likely to be the key risk
(in our view). We believe a robust project will generate sufficient market interest in providing
the capital, with Gruyere likely to support both debt and equity funding (based on project
physicals, and commodity price environment aside).
The primary risk is the overall scale of capital required, particularly in the event the company
considers the larger development option we discuss in our upside case (7.5-10mtpa, which is
likely to cost in excess of A$500m), particularly given the company’s current market
capitalisation.
At this stage, we make two key assumptions regarding project funding - namely; any
additional capital has the same cost as our existing WACC (10% real), and that any capital
raised in the market through the issue of shares would be neither accretive nor dilutionary at
the time it is raised. We take this approach in order to avoid conjecture on the likely price at
the time equity is raised, and/or any potential discounts which may be realised in doing so.
Of course, we would expect that as project studies are completed and announced to the
market, the project would be considered de-risked and as such the market may be willing to
pay fuller value for stock.
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
22
Gold Road Resources Limited
Exploration upside
Proven Geology
The geology at the Yamarna Gold Project, as part of the Eastern Goldfields in Western
Australia, is host to Archaean greenstones and within the famous part of the Yilgarn Craton.
The greenstone succession at Yamarna trends northwest/southeast and is in part contact
with Archaean plutonic igneous rocks, composed of quartz diorite to granite. The lithologies
are steeply east dipping within the project area. The greenstone belt held by GOR is both
exposed at surface to partial cover from the glacial sediments of the Paterson Formation
(largely to the south). Aeromagnetic data has interpreted the greenstone sequence at
Yamarna to extend over 200km with most of the belt (largely to the north) covered by a
veneer of Quaternary sand and lake deposits. This is evident at Gruyere with the deposit
beneath a thin sedimentary cover of approximately 1-50m.
The typical greenstone sequence at Yamarna is dominated by three distinct units which
include: Middle – interbedded mafic and felsic extrusives, Lower – ultramafics and mafic
intrusives, and Upper – felsic volcaniclastics and sediments. The deposit geology differs from
that of traditional “Eastern Goldfield” deposits around Kalgoorlie, in that it appears to be a
large accumulation of disseminated gold mineralisation between 1-1.5g/t Au, whereas the
common deposit style would typically see narrow intersections of much higher grades (1020g/t Au). The obvious differentiation is therefore one of scale and volume, which in turn is
likely to make a potential project at Gruyere all about economies of scale, more so than
protecting the high grade ore from dilution and minimising overall material movement.
Exploration upside aplenty…
Gold Road’s tenement holdings cover an area of approximately 5,000km², covering the
majority of the north-west trending Yamarna Greenstone Belt with the geological feature
itself having a strike length of greater than 200km.
As shown in Exhibit 2, the green coloured tenements make up the South Yamarna JV with
Sumitomo Metal Mining Oceana earning 50% interest in the tenements by funding A$8m of
exploration until Dec 2016. Exploration activities commenced in May 2013 with the minimum
spend of A$3.5m (which was achieved in Aug 2014). Sumitomo will acquire a 30% interest in
the projects upon spending A$5m.
The northern portion of tenements, (Exhibit 2, in red), are 100% owned holdings. All the
company’s existing resources, including Gruyere (part of the Dorothy Hills Trend), Central
Bore and Attila are all contained within this northern portion.
High-priority exploration targets (shown in Exhibit 2) include:
1.
2.
3.
4.
5.
6.
South Dorothy Hills (100%)
Minnie Hill (JV)
Corkwood (100%)
Wanderrie (100%)
Smokebush (JV)
Beefwood (JV)
GOR has generated these priority targets based on the interpretation of both geological and
geophysical data sets. Each target has a 15-25km target strike length providing the company
with a large scope for drilling for coming months to years, and with the recent success
obtained from the Gruyere discovery, turning initial discovery to resource in 10 months, the
company would likely built upon its already +5moz Au resource.
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
23
Gold Road Resources Limited
We also see further optimism for untouched gold resources due to the shallow cover
material (~1-50m) over the gold bearing host rocks, shielding any discoveries from walk-up
surface sampling, which is one of the reasons for this whole Yamarna Greenstone Belt being
relatively unexplored in comparison to the adjacent belts, such as the Laverton and
Kalgoorlie-Norseman Gold Belts. We believe GOR will remain committed to exploration and
ascribe A$16m pa on exploration expenditure before tapering off once Gruyere is nearing
production (JunQ’18).
Exploration program
Over the next 12 months, GOR has identified three priority exploration programs:
1.
Gruyere (Dorothy Hills Trend): Both RC (reverse circulation) and diamond drilling is
planned within and around the Gruyere deposit, which intends to not only infill drill the
defined pit shape (which may in itself add ore tonnes as regions of the model currently
not interpolated are drilled out), but also test the vertical extensions which may add
vertically to the potential pit limits. This is expected to be completed by May and should
bring the majority of the material outlined in the scoping study into an indicated
resource category, at a cost of A$3.5-4.0m.
Exhibit 19: Long section of conceptual pit shells at Gruyere. The current drill program is intended to not only infill data spacing
in the lower extents of the pit, but also test the vertical potential. As it stands, drill results released on 20 Jan 2015 have already
identified mineralisation beyond the limits defined
Recent drilling (20 Jan 2015) suggests this area is
mineralised and is NOT included in the published scoping
study, but will be included in the PFS (currently underway)
1H 2015 target
Source Company reports, RBC Capital Markets estimates
February 17, 2015
2.
North Yamarna: GOR is planning to execute an initial 1250m of RC drilling to test existing
anomalies at this prospect approximately 35km away from Gruyere. Air core sampling
has previously identified results such as 7m @ 9.6g/t Au from 44m and 15m @ 1.5g/t Au
from 60m. The company has allocated additional metres in 2Q further to assess any
potential from this program.
3.
South Yamarna JV (with Sumitomo Metals): This program is being completed by GOR but
fully funded by Sumitomo under the JV agreement, which requires c.A$8m to be spent in
order to reach the 50:50 ownership, which GOR believe is likely to commence in mid2016 at current activity rates. Aircore results from Riviera-Smokebush included 12m @
0.96g/t Au from just 28m downhole.
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
24
Gold Road Resources Limited
Global comps – stacking GOR up against other global emerging names
RBC Capital Markets Research covers a further 22 companies which we classify as ‘emerging’
globally. Of this group, GOR sits generally mid-pack on P/NAV around the sector average at
0.66x, and has an EV/Resource (Measured & Indicated) of US$58/oz, compared to the sector
average at US$48/oz. It is a slightly smaller company (measured by market cap) than the
peers identified in this list. Whilst it is not our intention to broadly compare exploration
potential and risks within this larger global group, we are comfortable that GOR would rank
favourably against the peer group in both areas owing 1) to the generally under explored
nature of the region and 2) the project’s relative simplicity and location.
Exhibit 20: RBCe global emerging companies comparison table
Emerging Gold Producers - Valuation Summary
RBC Estimates
Company
Asanko
Aureus
Continental Gold
Gabriel Resources
Gold Road Resources
Gryphon Minerals
Guyana Goldfields
Lydian International
Midas Gold Corp.
Midway Gold
NovaGold Resources
Orbis Gold
Orezone
Phoenix
Pilot Gold
Premier Gold Mines Ltd.
Pretium
Probe Mines
Romarco Minerals
RoxGold
Sabina Gold & Silver Corp.
Torex Gold
True Gold
Global
Ticker
AKG
AUE
CNL
GBU
GOR
GRY
GUY
LYD
MAX
MDW
NG
OBS
ORE
PXG
PLG
PG
PVG
PRB
R
ROG
SBB
TXG
TGM
Rating
O - Spec
O - Spec
O - Spec
SP - Spec
O - Spec
SP - Spec
O - Spec
SP - Spec
O - Spec
O - Spec
SP - Spec
O - Spec
SP - Spec
O - Spec
O - Spec
O - Spec
SP - Spec
O - Spec
R
O - Spec
O - Spec
O - Spec
O - Spec
Price
1.94
0.19
1.91
0.77
0.35
0.069
3.3
0.51
0.51
0.87
4.94
0.71
0.58
0.095
1.1
2.45
8.06
5.24
0.58
0.7
0.41
1.21
0.22
Target
(12m)
3.20
0.50
4.50
1.50
0.50
0.15
4.50
0.70
0.75
1.75
4.30
0.85
0.90
0.20
1.50
4.00
10.00
4.00
R
1.30
0.60
2.00
0.75
Implied
Upside
75%
191%
136%
95%
43%
117%
36%
37%
47%
101%
-13%
20%
55%
111%
36%
63%
24%
-24%
R
86%
46%
65%
241%
74%
Mineralization
Reserve Resource
(P&P)
(M&I)
5.2
0.9
0.0
10.1
0.0
0.7
3.5
0.0
0.0
0.9
19.7
0.0
0.0
1.2
0.0
0.0
7.3
0.0
R
0.8
0.0
4.1
0.9
7.0
1.1
2.8
17.1
2.5
2.7
6.8
2.3
6.5
3.7
28.5
1.2
1.3
2.3
0.9
5.8
9.7
5.2
R
0.8
6.5
4.8
1.9
Valuation
NAV
3.82
0.54
3.68
1.52
0.53
0.33
4.65
0.91
0.55
1.87
4.28
1.18
1.07
0.25
1.17
4.23
10.37
3.85
R
1.44
0.71
1.93
0.76
P/NAV
0.51x
0.35x
0.52x
0.51x
0.66x
0.21x
0.71x
0.56x
0.93x
0.47x
1.15x
0.60x
0.54x
0.38x
0.74x
0.58x
0.78x
1.36x
R
0.49x
0.57x
0.63x
0.29x
0.61x
EV/
Rsrv
26
143
n.m.
25
n.m.
-7
99
n.m.
n.m.
122
64
n.m.
n.m.
17
n.m.
n.m.
97
n.m.
R
141
n.m.
157
-8
73
EV/
Rsrc
20
115
47
15
58
-2
50
35
5
28
44
103
31
8
78
45
73
52
R
131
6
134
-4
48
Shares
(MM)
Mkt Cap
(US$M)
172
310
127
384
595
400
126
239
114
131
317
229
87
370
107
147
117
75
R
286
189
783
448
246
265
89
192
234
162
21
330
97
46
90
1239
124
40
27
93
286
746
312
R
158
61
751
78
251
Priced as of market close AEDT February 13, 2015
Source: IRESS, RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
25
Gold Road Resources Limited
Catalysts



February 17, 2015
With what we believe to be good exploration upside in this underexplored gold region of
Western Australia, we believe that a major catalyst for the company remains a material
exploration result. Either the addition of a new prospect, or the increase in confidence
and/or volume within the existing Gruyere deposit is likely to provide support for the
stock. Exploration in the coming 6 months will be focussed on the company’s six priority
targets (as outlined in Exploration upside above) and we would expect ongoing news
flow commencing early in 2QCY15 with any results.
Based on our view around the scoping study (in particular the mining unit rate, the
potential to expand to 7.5mtpa and a coarser grind size - which would reduce processing
costs), we believe further commentary with the release of Stage One of the PFS
(1H1CY15) surrounding potential improvements in the project economics could provide
additional interest in GOR. At present, the company is guiding towards a fully completed
pre-feasibility study (PFS) by the end of 2015.
We believe the newly discovered Gruyere deposit should be on the radar of several
producers as a potential target. Our estimated production for Gruyere, based on a
5mtpa operation and producing c.180koz Au once in full production, could spark interest
from several producers as a potential growth strategy. We believe any announcements
based on this aspect could clearly become a positive for the company given the dearth
of global ready-made growth projects in such an attractive location.
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
26
Gold Road Resources Limited
Key Risks and Price Target Impediments



February 17, 2015
Clearly Gruyere is at an early stage. Tolerances on estimates provided at a scoping study
are typically +/- 30-35%, which leaves considerable uncertainty in preliminary estimates
for this project. However, we take some comfort from recently completed analogues in
Australia, as well as the cooling investment cycle providing an opportunity for more
competitive pricing on all components of capital and operating costs than many of GOR’s
peers experienced between 2010-2013.
59% of resource remains as Inferred, however we believe there is a consistency to the
ore body which (in due course) should be upgraded to a sufficient level of confidence
(indicated or better) such that it can be promoted to reserves. In our view this
confidence is likely to be a function of drilling and therefore time and money. Based on
our understanding of the current drill program which is underway, we would expect that
by mid-2015, the majority of material in GOR’s mineral inventory to be processed in the
first 10 years of the project’s life will be at an indicated and measured state.
Undoubtedly, the gold price (and sentiment towards it) will continue to play a significant
part in the valuation ascribed to Australian-listed (and denominated) projects. While
GOR does not have any ‘real’ cash flows to be impacted by changes in commodity and
currency, there is no doubt, in our view, that enthusiasm for the company (and of course
its producing peers) will rise and fall along with gold price. We would stress that, as our
analysis suggests, Gruyere looks appealing under a range of price outcomes.
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
27
Gold Road Resources Limited
Valuation and Price Target
Our 12 month target price for GOR is based on an operating NAV for Gruyere and we apply a
target multiple of 1.0x and an discount rate of 10% (real) to factor the relatively early stage
nature of the project. As part of our SOTP valuation for GOR, we also factor a A$50m
exploration upside (valuing the material in the resource, but not in the base case mine plan
at c.A$30/oz) and current estimated cash balance to derive our target price of A$0.50/share.
Exhibit 21: Our valuation breakdown for GOR
Gold Road Resources Ltd
ASX: GOR
$/share
NAV target
Operating NAV (fully diluted)
Target Multiple
NAV Implied Target Price (operations)
A$MM
296
0.50
1.0x
0.50
23
50
0.04
0.08
0.00
0.00
-0.09
0.00
A$/sh
add: Cash, Working Capital and Investments
add: Exploration upside
add: Future cash raised (equity)
less: Debt and Reclamation/Closure
less: Corporate costs
Other
(53)
-
Implied NAV TP
0.53
Gold Road Resources Target Price
0.50
Source: RBC Capital Markets estimates
For a more detailed breakdown of our SOTP NAV valuation, refer to Exhibit 22.
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
28
Gold Road Resources Limited
Production and Financial forecasts
Exhibit 22: GOR Financial Summary
ASX: GOR
Diluted Shares (m)
594.9
Share Price: (A$)
0.35
Market Cap: (A$m)
208
Gold Road Resources
Stock Rating: Outperform
Risk Qualifier: Speculative Risk
Implied Return
43%
Price Target:
A$0.50
Ent.Value (A$m)
186
Raw NAV
A$0.53
Fiscal Year Ended June
Gold Price
FY14
FY15E
FY16E
FY17E
FY18E
A$/US$
0.92
0.87
0.84
0.85
0.82
A$/oz
1,296
FY14
1,227
FY15E
1,294
FY16E
1,313
FY17E
1,375
FY18E
515
595
595
595
595
0
(4)
(5)
(7)
(4)
0.1
(0.7)
(0.9)
(1.2)
(0.6)
436.4x
(50.7x)
(39.8x)
(29.6x)
(56.4x)
0.2
(0.4)
(0.7)
(1.1)
0.4
181.0x
(96.5x)
(53.8x)
(32.3x)
82.9x
RATIO ANALYSIS
Issued Shares - wgt avg
m
Underlying Net profit
A$m
EPS - Diluted
P/E
CFPS - post sus. Capex
P/CF
A¢
x
A¢
x
Dividend per share
A¢
-
-
-
-
-
Dividend yield
%
-
-
-
-
-
Payout Ratio
%
-
-
-
-
-
Franking
%
-
-
-
-
-
Book value per share
A¢
6.1
8.6
6.9
4.7
3.6
Price/Book value
x
5.7x
4.1x
5.0x
7.4x
9.7x
R.O.E.
%
1%
(8%)
(13%)
(25%)
(17%)
Revenue Growth
%
n.a.
n.a.
n.a.
n.a.
n.a.
EBITDA Growth
%
-30%
170%
25%
28%
-145%
EPS Growth
%
-113%
FY14
-961%
FY15E
27%
FY16E
34%
FY17E
-47%
FY18E
PROFIT & LOSS
FY15E
FY16E
FY17E
FY18E
LOM
Gruyere
Ore Treated
mt
-
-
-
0.27
5.3
Head Grade
g/t Au
-
-
-
1.73
1.21
Recovery
%
-
-
-
0.95
0.95
koz
-
-
-
14
192
A$/oz Au
A$/oz Au
-
-
-
570
851
953
Gold Production
C1 Cash Costs
AISC
PRODUCTION PROFILE
Gruyere
200
C1 Cash Costs
1000
950
175
Revenue
A$m
1
0
0
0
25
Operating costs
A$m
0
0
0
0
(8)
Mine Operating Profit
A$m
1
0
0
0
17
Exploration Expense
A$m
(1)
(3)
(3)
(3)
(4)
Corporate and Other
A$m
(2)
(3)
(4)
(6)
(8)
EBITDA
A$m
(2)
(6)
(7)
(9)
4
D&A
A$m
(0)
(0)
(0)
(0)
(4)
EBIT
A$m
(3)
(6)
(8)
(10)
0
Net Interest Expense
A$m
0
0
0
(0)
(6)
Pre Tax Profit
A$m
(3)
(6)
(7)
(10)
(5)
Tax Expense
A$m
3
2
2
3
2
Underlying Net Profit
A$m
0
(4)
(5)
(7)
(4)
Significant Items
A$m
0
0
0
0
0
Reported Net Profit
A$m
0
(4)
(5)
(7)
(4)
CASH FLOWS
ATTRIBUTABLE MINE STATS
900
150
850
125
800
100
750
201
700
75
A$/oz Au
Exchange Rate
Au Production (koz Au)
ASSUMPTIONS
650
50
600
25
550
14
0
FY15E
FY16E
FY17E
RESOURCES
Gruyere
FY19E
Tonnes
Grade
Measured
1.4
1.4
63
Indicated
38.8
1.2
1,520
Inferred
Ounces
56.7
1.2
2,262
96.9
1.2
3,838
Measured
0.0
26.6
37
Indicated
0.4
8.7
120
Total
Central Bore
500
FY18E
FY14
FY15E
FY16E
FY17E
FY18E
Tax
A$m
0
0
0
0
0
Operating Cash Flow
A$m
1
(2)
(4)
(6)
3
Sustaining Capex
A$m
0
0
0
0
(0)
Retained Op. Cash Flow
A$m
1
(2)
(4)
(6)
3
Acquisitions
A$m
0
0
0
0
0
Exploration
A$m
(13)
(16)
(16)
(16)
(10)
Other Capex (growth)
A$m
(0)
(0)
0
(90)
(315)
Other
A$m
3
1
0
0
0
Funding Surplus/(Deficit)
A$m
(9)
(18)
(20)
(112)
(322)
Dividends Paid
A$m
0
0
0
0
0
RESERVES
Loan Repayments
A$m
0
0
0
0
0
Gruyere
Proven
-
-
-
Borrowings
A$m
0
0
0
0
0
Probable
-
-
-
Equity Issues
A$m
10
23
0
0
0
Inferred
-
-
-
Other (incl Interest)
A$m
(1)
(1)
0
0
0
-
-
-
Total Funds Provided
A$m
10
22
0
0
0
Cash at start of year
A$m
9
10
14
-6
-118
-
-
-
Net change in cash
A$m
1
4
(20)
(112)
(322)
Cash at end of year
A$m
10
14
-6
-118
-441
BALANCE SHEET
Inferred
0.3
4.1
45
0.8
7.7
202
Measured
8.4
1.4
388
Indicated
9.4
1.2
373
Inferred
7.8
1.2
298
25.5
1.3
1,067
123.3
1.3
5,098
Total
Attila Trend
Total
Total
Total
Total
EV/RESOURCE and RESERVE
FY14
FY15E
FY16E
FY17E
FY18E
EV/Resource
Cash & equivalents
A$m
10
14
(6)
(118)
(441)
EV/Reserve
Other current assets
A$m
1
1
1
1
1
PP&E & Other Mining Assets
A$m
1
1
0
90
402
Capitalised Exploration
A$m
27
40
53
66
71
Other Non Current Assets
A$m
0
0
0
0
0
Total assets
A$m
39
55
48
38
33
Sub total Operating NAV
36.4
-
SHARE VALUATION
WACC (Real)
Gruyere (post-tax)
Economic Interest
A$m
100%
296
0.50
296
0.50
10%
A$/Shr
Total liabilities
A$m
3
4
7
10
11
Exploration upside (resource ounces not in base case)
50
0.08
Total Net Assets
A$m
36
51
41
28
21
Debt
0
0.00
Total Debt
A$m
n.a.
n.a.
n.a.
n.a.
n.a.
Cash
23
0.04
Net Debt (Cash)
A$m
(10)
(14)
6
118
441
Other
0
0.00
Gearing (net debt:nd+ equity)
%
n.a.
n.a.
n.a.
n.a.
n.a.
Group, Corporate & Unallocated
(53)
(0.09)
P/NAV
Interest:EBITDA
x
n.a.
19x
56x
n.a.
1x
Net Asset Value
315
0.53
0.66
Priced as of market close AEDT February 13, 2015.
Source: Company Reports, RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
29
Gold Road Resources Limited
Appendix I – Board and Management
Mr Ian Murray – Executive Chairman
Mr Murray has previously held executive positions in the mining industry, including:
DRDGold and served as a non-executive director of gold refinery Rand Refinery Ltd and
Metaliko resources, and the commodity investment platform GoldMoney.com. Prior to this,
Mr Murray qualified as a chartered accountant with KPMG and a management consultant at
PriceWaterhouseCoopers. Mr Murray holds a Bachelor of Commerce degree and a Post
Graduate Diploma in Accounting from the University of Cape Town.
Justin Osborne, Executive Director
Mr Osborne has more than 25 years’ experience in exploring for and mining of a range of
metals as a geologist, most recently with Goldfields Ltd, WMC Resources and Dominion Gold.
Russell Davis, Non-Executive Director
Mr Davis is also a geologist, with over 25 years’ experience in the minerals sector, for both
Australian and international companies. Mr Davis is a founding director and was responsible
for acquiring the projects, which are now held by Gold Road. Mr Davis is a Fellow of the
Financial Services Institute and also a member of the Australasian Institute of Mining and
Metallurgy.
Martin Pyle, Non-Executive Director
Mr Pyle has held prominent positions at broking firms within Australia and has both
generated and executed M&A deals, equity raisings, and acted as a corporate adviser and
also analyst. With over 25 years’ experience in the industry, Mr Pyle is also the chairman of
Midwinter Resources Limited, managing director of Aurora Minerals Limited and executive
director of Desert Energy Limited. Mr Pyle holds a First Class Honours degree in Geology and
an MBA.
Tim Netscher, Non-Executive Director
Mr Netscher has held senior roles with Gindalbie Metals Limited, Newmont Mining, Vale
Australia, Pt Inco BHP Billiton, and Impala Platinum in a range of disciplines including
operations, project development, and business development. In addition, Mr Netscher is a
chartered engineer, with a BsC in Chemical Engineering, B.Comm, an MBA, and is a member
of the Australian Institute of Company Directors. Lastly, Mr Netscher is currently a nonexecutive director of St Barbara Mines, Western Areas, and Aquila Resources Ltd.
Gordon Murray, Business Development Manager
Mr Murray is a mining engineer, with over 20 years’ experience in the resources industry and
a First Class Mine Manager’s ticket. Mr Murray has previously held positions with BHP
Billiton at Olympic Dam and Barrick Gold, and senior management positions with St Barbara,
Troy resources, and Siberia Mining Corporation.
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
30
Gold Road Resources Limited
Appendix II – Key historical events
Timeline history
2006
Gold Road lists on the ASX as Eleckra Mines Ltd
Drilling commences, and first positive gold assays returned
2007
A$2m Placement in the form of convertible notes
Aircore drilling commences at Thatcher Soak Uranium project
More positive gold results at Yamarna
Mr Ian Murray joins the board as a non-exec director
Acquires new tenements (Yamarna South Project)
Mr Richard Harris step down as Managing Director
2008
Mr Ian Murray is appointed executive chairman
An updated mineral resource of c.750koz Au defined at Yamarna
6.2m lb uranium resource defined at Thatchers Soak project
2009
A$1m placement and entitlement issue
High grade discovered at Central Bore, further positive drilling
A$2.3m Placement
2010
More positive drilling from Central Bore
Additional exploration success across tenements
A$2.5m Placement
Changes name to Gold Road Resources Ltd
Placement raising A$9m
2011
More positive results for Central Bore
Justinian and Khan North prospects return numerous positive results
A$15m Placement and a A$6m Share Purchase Plan announced
2012
Resource upgrade at Attila, including 72% in Measured or Indicated
Scoping Study complete for Attila and Central Bore
Share Purchase Plan raises A$7m
2013
Central Bore Resource upgraded to c.200koz at 7.7g/t Au
Joint Venture created with Sumitomo Metal Mining Oceana over the Yamarna South tenements
GOR discovers Gruyere
Positive drill results return at Gruyere
2014
Positive metallurgical results at Gruyere
Placement raises A$10m
3.84moz at 1.23g/t Au maiden resource for Gruyere
Further gold anomalism and new gold prospects discovered at Yamarna
Successful Placement of A$23m
2015
Scoping study released for Gruyere showing a 5mtpa operation
Exhibit 23: GOR Share Register as reported at FY14 result
8%
7%
5%
Van Eck
Minco Investments
Management
Other
80%
Source: RBC Capital Markets estimates
February 17, 2015
Paul Hissey
+61 3 8688 6512; paul.hissey@rbccm.com
31
Gold Road Resources Limited
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34