It came thick and fast for Gold Road Resources shareholders this week with the long-awaited news their company had come of age and declared its dividend policy.
If the success of the gold miners on the ASX has delivered one thing in addition to incredible share price appreciation, then it is the investor demand for cash returns from the gold bounty being produced.
Gold Road (ASX: GOR), half-owner of the world-class Gruyere gold mine and a mid-tier producer since last year, has now joined its older peers in declaring the dividend hand.
And showing off its cashflow generating capacity and a strong balance sheet, Gold Road last night followed up with news it had secured an additional $150 million – to $250 million – in revolving debt facilities to assist with executing its growth strategy.
Dividends and debt don’t always fit together because it is often the latter that delays payment of the former.
In Gold Road’s case, it has no debt, is building a sizeable cash pile courtesy of a forecast average 150,000oz a year from Gruyere and very alert to a need to secure the next step-change in the company’s growth.
As with the dividend policy, which targets an annual aggregate payout of 15% to 30% of free cashflow as long as $100 million remains in the corporate kitty, the debt revolver is an option to help deliver significant shareholder value.
PCF Capital again served as Gold Road’s financial adviser in relation to the revolving corporate facility.
“This expanded facility (from $100 million) has been negotiated over recent months in a competitive debt market and provides capacity for Gold Road to rapidly advance exploration discoveries into development or progress value-accretive investment opportunities when identified,” Gold Road managing director Duncan Gibbs told a retail investor briefing in Perth yesterday evening.
With Gold Road now in the Gruyere “cash harvesting phase”, the focus has firmly turned to the “what’s next” within the company’s remit of delivering shareholder value “to complement Gruyere”.
Gold Road has been one of those remarkable stories of delivering exploration success that became world class and then an equally eye-popping gold mine, in this case Gruyere 1000km east north-east of Perth.
Operated in a 50-50 joint venture with South Africa’s Gold Fields, Gruyere produced first gold in June last year and is tracking in line with its forecasts of achieving average annual output of 300,000oz for at least 11 years.
As Gibbs reminded investors yesterday, Gold Road retains “one of the best land packages in Australia” and continues to explore heavily across its massive and underexplored Yamarna tenement position surrounding Gruyere.
While exploration continues, it is worth remembering that world-class discoveries like Gruyere do not grow on trees; in fact, Gruyere and AngloGold Ashanti and IGO’s Tropicana are arguably the only world-class gold finds in Australia this century.
Exploration is therefore not the only game as Gold Road also keeps a keen eye on “the right corporate opportunity at the right time”.
Gruyere’s quality means it is not easy to find an acquisition opportunity that is value accretive and sits – or will sit – in the lower half of the cost curve.
In the meantime, Gold Road is further building up a net cash balance that at June 30 (the last published figure) stood at $84.1 million.
Analysts are expecting a maiden dividend to be declared around February, when calendar-year reporter Gold Road announces its 2020 full-year results.
Hartleys analyst Michael Scantlebury has pencilled in a 1-2¢ maiden dividend to get things going. He yesterday increased his 12-month price target for Gold Road from $1.94 to $2.
Gold Road closed last night at $1.69 for a $1.4 billion market capitalisation.
It seems more value beckons for shareholders.