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

Increase in Mineral Resource at Attila Open Pit:Gold Road Resources Ltd (ASX: GOR) recently reported that their 50:50 Joint Venture with Gold Fields Limited, which is located at over 30 kilometers west of the Gruyere Gold Project, completed an update of the Attila Open Pit Mineral Resource estimate in accordance with the 2012 JORC Code. The new Mineral Resource has now reached to 6,570,900 tonnes at 1.55 g/t Au for 327,300 ounces of gold, which represents an addition of 103,200 ounces (+46%) as compared to the 2015 Resource, with 91% of the Mineral Resource being classified in the Measured or Indicated categories. This update shows the group’s application of smart geology and efficient drilling to extend their historic resource. GOR has more than 14 kilometers of known mineralization along the Attila-Alaric Trend and the company is now developing a much more detailed understanding about the same. Due to the success at Attila, GOR has a high level of confidence that other recognized zones along this Trend could have the capability to offer similar upside exploration potential. Further, these deposits have the potential to add significant value to the Gruyere Project. Moreover, GOR has identified more than 150 kilometers along this same Trend, extending into their 100% owned North Yamarna Project, and the South Yamarna Project (a joint venture with Sumitomo). In addition, a Pre-Feasibility Study (PFS) has commenced to evaluate the potential for open pit mining at Attila to supply supplementary feed for the proposed Gruyere Mill. Completion of preliminary mine planning, scheduling and financial assessment through the PFS is expected to enable the definition and release of a maiden Attila Ore Reserve in the September 2017 quarter. 

Mineral Resource variance for Attila – April 2017 (Source: Company Reports)
 
Update on Gruyere Joint Venture: The Gruyere Village is due for completion in June 2017 with 630 rooms available for construction start-up. The Bulk Earthworks is awarded to MACA, for which the company would mobilize personnel to site in June 2017. Moreover, the Power BOO Contract is essentially finalized with Gas and Power infrastructure construction to start from the third quarter of 2017. Additionally, the preparation of Mining Tender is in progress. Meanwhile, the group paid A$350 million for 50% share in the venture and would get 1.8 Moz Reserve and 3.4 Moz Resource. The mine life is 13 years at >270koz pa and is totally funded to production with more than 130 kozpa within 2 years. Low cost production from this venture is expected by 2018.
 
Gold Fields increased stake in GOR: GOR has announced that Gold Fields Limited, through its wholly owned subsidiaries, has acquired 74,824,070 shares at $0.86 per share, a 27% premium to GOR’s closing share price of $0.675 on May 18, 2017. After payment of the premium, Gold Fields now has a 10% relevant interest in the group. Moreover, as part of the sale of a 50% interest in the Gruyere Gold Project and formation of the Gruyere Project Joint Venture, GOR has agreed for a standstill arrangement along with Gold Fields Australia Pty Ltd (GFA) and its affiliates. As per the agreement, they must not acquire a relevant interest in any securities of GOR greater than 10%, unless agreed in writing by the company during the standstill period. The Standstill applies to any further acquisition of relevant interests by GFA and its affiliates of GOR shares.
 
Significant mineralization intersected in YAM14 RC:The group has announced positive results from their Reverse Circulation (RC) drilling designed to test the source of high?grade mineralization intersected during aircore drilling reported in January 2017. The result has confirmed a major zone of mineralization at the YAM14 Prospect, with one of the best RC drill intersections the group ever had at Yamarna. Moreover, the significant mineralization intersected in YAM14 RC drilling included 64 meters at 3.73 g/t Au from 79 meters, including 28 meters at 6.50 g/t Au from 79 meters, with 18 meters at 9.78 g/t Au from 87 meters, or 8 meters at 19.16 g/t Au from 90 meters. Further, the mineralisation included 39 meters at 1.52 g/t Au from 119 meters, including 13 meters at 2.24 g/t Au from 119 meters, with 7 meters at 3.55 g/t Au from 123 meters and 22 meters at 1.81 g/t Au from 57 meters, including 14 meters at 2.63 g/t Au from 57 meters. Additionally, the group has planned further RC and diamond drilling during this quarter to extend and infill the mineralization, and to define the plunge orientation of interpreted high?grade shoots. The results from this program would add to the existing drilling to allow evaluation of a Maiden Mineral Resource planned for completion in the second half of 2017.
 
Future Exploration:GOR has allotted an overall A$30 million budget for 2017 with regards to further exploration. The efforts will include planned acceleration of North Yamarna exploration, follow-up two years of regional testing, focus on discovery of standalone deposits, targeting 2 Moz deposits on South Yamarna JV and high margin reserve focus for Gruyere JV to extend mine life. The New Throssel Rise Project is also under application. 

Exploration Pipeline (Source: Company Reports)
 
Competitive edge against peers: GOR has built a competitive edge against its peers with longest mine life and has indicated a lowest quartile cost of production. The group is also projected to be a long-life cash producer and has built a flexible capital position with A$100 million cash excess to construction commitment. The group’s construction efforts are ahead of schedule and indicate for a major exploration upside. The stock is moderately valued on Funded EV/Resource basis while significantly undervalued on EV/Reserve basis. Further, GOR is placed among top 10 Australian Reserve and Resource bases while their Gruyere project is the longest life pure gold mine in Australia. Yamarna Exploration is also said to have over 6,000 km2 tenements with an immature exploration history. The group has a debt free cash flow on production and has the potential to pay dividends after first year of production.
 

EV ratios in global perspective (Source: Company Reports)
 
Stock Performance: The shares of GOR have risen over 24.5% in the last three months (as of May 30, 2017) and still trading at a reasonable level. Meanwhile, the group finished their Gruyere FS in 2016 and this has offered an additional and more accurate estimate of mining cost and other parameters in the evaluation and to demonstrate potential future economics. The updated Mineral Resource has been constrained and reported within an optimized pit shell defined at an increased gold price of A$1,850 per ounce, as compared to the previous A$1,600 per ounce. Meanwhile, further infill and extensional drilling is planned to extend the mineralization at depth and along strike for future open pit resource evaluations. These drilling programs would target structurally controlled higher grade and/or thicker mineralized zones. GOR has a fully funded A$30 million exploration program, which includes the largest Greenfields Gold project in Australia. GOR is well-funded and has adopted an aggressive exploration program for CY17 with Gruyere being one of the most significant greenfield Australian gold discoveries. Further, the JV deal with Gold Fields has in a way de-risked the delivery of the project. Despite the volatile gold price environment, we believe the stock would be able to offset this pressure given the strong prospects in the long term. We give a “Buy” recommendation on the stock at the current price of $ 0.685 
 

GOR Daily Chart (Source: Thomson Reuters)

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