Well-funded gold development and exploration company Gold Road Resources (ASX: GOR) has signed off on a big 2017 with the publication of its annual report. The report, which also completes Gold Road’s shift to a December 31-end reporting year, highlights the big progress at the world-class Gruyere gold mine development and the Perth company’s ongoing exploration success in the Yamarna Belt in the north-eastern Goldfields.
It is my pleasure to be addressing you again, even though only six months have passed since my last update. This Annual Report marks a strategic shift by your Company to change its financial year end from 30 June to 31 December. This decision, taken by your Board, will align Gold Road’s reporting schedule with that of our 50:50 Gruyere JV partner, Gold Fields.
Notwithstanding that this Annual Report covers only six months, much has happened during this period as Gruyere’s development has advanced and our industry-leading greenfields exploration programme continued apace.
Regarding progress of the Gruyere Project, at year end, overall construction progress stood at approximately 32%. Our project team has achieved a number of significant milestones and has overcome a number of obstacles, the most recent being the previously reported rain events which have occurred subsequent to year end. If further abnormal weather events occur, they could cumulatively impact the project schedule but at the time of writing, I am able to report that Gruyere’s construction is progressing on budget and scheduled for first gold at the end of first quarter of 2019.
The Gruyere JV, entered into with Gold Fields in November 2016, is a perfect example of your Company’s culture of innovatively delivering shareholder value. The Gruyere JV has unlocked a pathway for us to deliver this large project in a reduced-risk and financially conservative manner, suited to your Company’s financial resources. As at the end of 2017, $94 million had been invested by Gold Road in the construction of the Gruyere Project, with all of Gold Road’s share being funded by Gold Fields as per the terms of the Gruyere JV Agreement. From January 2018 Gold Road has been funding its share of the ongoing Gruyere capital investment from the remaining receivable from Gold Fields as well as from its cash reserves.
As part of ensuring that Gold Road has sufficient funding to successfully address its growth objectives, while funding its share of the large-scale Gruyere Project, subsequent to year end, the Company concluded Revolving Corporate and Working Capital Facilities totalling $150 million.
Turning to our exploration activities, in 2017 Gold Road spent $24 million (100% basis) on greenfields exploration across the Yamarna Greenstone Belt, while your Board has approved $23 million (100% basis) in exploration expenditure in 2018 which includes an allocation to continue the development of higher margin Ore Reserves on the Gruyere JV. We continue to believe that adopting a disciplined approach to investing in exploration, particularly our highly prospective tenements on the Yamarna Greenstone Belt, offers the best value proposition for our shareholders.
To that end, Gold Road recently made two strategic investments:
· We entered a new high-quality exploration area through an earn-in joint venture with Cygnus. The transaction, executed in October 2017, will enable Gold Road to earn a 75 per cent interest in Cygnus’ Wadderin and Lake Grace projects in Western Australia’s south-west over the next four years. Cygnus successfully listed on the ASX on 15 January 2018, with Gold Road as a substantial shareholder. We believe that by working with the well-credentialed Cygnus exploration team we have the potential to open up a new gold belt in Western Australia’s relatively under explored south-west.
· On 5 February 2018, we announced the acquisition of Sumitomo Metal Mining Oceania Pty Ltd’s 50% share in the South Yamarna Joint Venture for $7 million, thereby consolidating Gold Road’s ownership of the majority of the Yamarna Greenstone Belt. I would like to thank Sumitomo for its significant support since 2013.
Gold Road ended 2017 in a strong financial position, which has been further enhanced by the Revolving Corporate and Working Capital Facilities mentioned above.
I also want to highlight Gold Road’s commitment to industry-leading standards in health, safety and community engagement. This commitment starts with ensuring the safety and wellbeing of our hard-working staff and contract partners at Gold Road, whom I once again sincerely thank for their ongoing efforts in making us a winning company.
In conclusion and on behalf of the Board, I wish to thank you, our shareholders, for your ongoing support of Gold Road. This year is shaping as another exciting one as Gold Road pursues its twin goals of achieving exploration success and successfully completing the development of the Gruyere Project. I look forward to updating you further at our Annual General Meeting.
. As part of normal process, the Gruyere JV is currently undertaking a detailed review of the Gruyere Project cost estimate and the schedule to produce a Definitive Estimate following completion of 80% of engineering work and award of all major contracts and packages. The results will be finalised and announced in the June quarter 2018
. ASX announcement dated 26 February 2018