Gold Road - Quarterly Activities and Cashflow Report
The December quarter was a milestone period for the Gruyere Project, with Gold Road Resources announcing it had entered into a $350 million transaction to sell a 50% interest in the Project. The 50% interest in the Project was sold to a wholly‐owned Australian subsidiary of Gold Fields Limited (Gold Fields) to form the Gruyere Joint Venture (Gruyere JV), with Gold Fields being appointed Project Manager.
HIGHLIGHTS
- A$337M in cash and equivalents on hand
- Fully funded share of Gruyere Project construction capital as well as expanded Yamarna 2017 exploration activities
Gruyere Project Joint Venture
- Transaction completed to sell 50% interest in the Gruyere Project to Gold Fields Limited
- A$350 million transaction secures the production pathway for the Gruyere gold deposit with Gold Road maintaining a greater than 50% economic interest in the Gruyere Project JV
- Positive Feasibility Study delivered and approved on Gruyere Project, confirming it as one of the longest life, lowest cost, undeveloped gold deposits in the world
- Gruyere Project Ore Reserve updated as part of Feasibility Study to 3.52 million ounces, supporting gold production of 270,000 ounces over 13‐year Life of Mine
- Gold Forward Sales Facility closed, realising A$12 million in pre‐tax profit
- Environmental approval received
Exploration
- 2017 exploration budget doubled to accelerate evaluation of the Yamarna Belt
North Yamarna
- High‐grade primary mineralised structures identified at Ibanez and Santana
- Bedrock gold mineralisation confirmed over 1.2 kilometre strike at Ibanez
- Gruyere Project Joint Venture
- Attila mineralisation extended beyond existing 220,000 ounce open pit resource and to 240 metres depth on the Main Shear
- Extensional resource drilling completed at Alaric Deposit, with high‐grade extensions confirmed below existing 50,000 ounce open pit resource
- Initial resource drilling completed at YAM14 Prospect, demonstrating potential to improve Gruyere economics with higher grade oxide mill feed
- South Yamarna Joint Venture
- Regional aircore and RC drilling programmes completed following up existing aircore anomalism within the Riviera‐Smokebush and Breelya‐Toppin Hill Camp Scale Targets
GRUYERE PROJECT
Gruyere Project JV (Gold Fields 50%)
Transaction and Project Development Update
The December quarter was a milestone period for the Gruyere Project (the Project), with Gold Road Resources Limited (Gold Road or the Company) announcing it had entered into a transaction to sell a 50% interest in the Project (including the Central Bore, Attila and Alaric deposits and the YAM14 and Toto Prospects, in total comprising 144 km2 ). The 50% interest in the Project was sold to a wholly‐owned Australian subsidiary of Gold Fields Limited (Gold Fields) to form the Gruyere Joint Venture (Gruyere JV), with Gold Fields being appointed Project Manager (ASX announcements dated 7 November and 14 December 2016).
Under the terms of the Gruyere JV, Gold Road received A$250 million in cash consideration from Gold Fields and an uncapped 1.5% net smelter return (NSR) royalty on Gold Field’s share of production from the Gruyere JV tenements once total gold production exceeded two million ounces. In addition, Gold Fields will pay a further A$100 million to Gold Road by funding Gold Road’s share of the initial cash calls during the construction phase. Gold Fields will also assume liability for up to a 10% overrun on the Gruyere initial development program and budget of A$514M, subject to certain exceptions.
The A$350 million transaction secures the production pathway for the Gruyere gold deposit. The Gruyere JV is committed to the Project construction schedule with activities commencing in January 2017.
The completion of the transaction places Gold Road in a strong financial position, being fully funded for its share of construction capital for the development of the Project, and enabling Gold Road to accelerate exploration programs across its highly prospective 100% owned North Yamarna tenements, and the 50% owned tenements on the Gruyere and South Yamarna Joint Ventures.
The transition of the Project Team to the Project Manager, Gold Fields, is progressing well, with the transition expected to be completed in the March 2017 quarter.
The transition process has progressed smoothly without interruption or impact to the Early Works programme, which commenced in the December 2016 quarter.
Feasibility Study
On 19 October 2016, preceding the commencement of the Gruyere JV, Gold Road announced the results of the Feasibility Study (FS) (ASX announcement dated 19 October 2016) for the development of the 6.16 million ounce (Moz) Gruyere Project, located 200 kilometres east of Laverton in Western Australia. The FS confirmed the Gruyere Gold Project as one of the longest life, lowest cost, undeveloped gold deposits in the world, supporting average annualised gold production of 270,000 ounces over LOM of 13 years.
The FS confirmed the Gruyere Gold Project as one of the longest life, lowest cost, undeveloped gold deposits in the world, supporting average annualised gold production of 270,000 ounces over LOM of 13 years. The FS was limited to investigating the technical and economic viability of an open pit operation. There remains potential for Life of Mine (LOM) extensions through transitioning the open pit operation into an underground mine at depth. The FS was also limited to processing ore from the Gruyere gold deposit only and excluded the potential of processing ores from other satellite deposits, such as the Attila and Alaric Open Pit resources which have been subject to recent exploration success (see below).
Based on the positive FS outcome, the Gold Road Board approved the FS and recommended progressing the Gruyere Project to the construction phase. After considering alternative financing options, the Board decided development through the Gruyere JV with Gold Fields, to be the most appropriate and beneficial option for Gold Road and its shareholder base.
Project Permitting and Approvals
Permitting and approvals for the Project remain on schedule, with environmental approval received from the Minister for Environment Hon. Albert Jacob MLA in late December 2016. This is an important milestone and clears the path for the Project’s Mining Proposal, Project Management Plan and Works approvals, all of which have been submitted and anticipated to be approved in February 2017. This will allow the Gruyere JV to immediately commence construction of the processing plant and development work on the Gruyere open pit mine (ASX announcement dated 23 January 2017).
Statement of Ore Reserves
As part of work completed on the FS, Gold Road updated the Ore Reserve for the Gruyere Project from the previous reported Ore Reserve on completion of the Pre‐Feasibility Study, on a 100% ownership basis.
On 19 October 2016, the Company announced an updated Ore Reserve totalling 91.6 Mt at 1.20 g/t Au for 3.52 Moz of contained gold, including 14.9 Mt at 1.09 g/t for 0.52 Moz in the Proved category. Gold Road now own 50% of this Ore Reserve post completion of the Gruyere JV (ASX announcement dated 16 January 2017).
Early works commenced
Early works on the Project commenced in the December 2016 quarter which included site works for the construction camp and main access road from the village to the main site.
Work to dismantle and relocate the first 300 rooms of the accommodation village for the Project has been completed, while erection of the units has started and is expected to be completed in March 2017.
Installation of the second 300 rooms for the Gruyere accommodation village will commence in February with completion scheduled in the June 2017 quarter.
EXPLORATION
On completion of the Gruyere JV transaction, and transition of Project management to Gold Fields, Gold Road will focus activities on its core strength of discovering and evaluating gold deposits. The Company expects to spend approximately A$22 million on exploration activities at Yamarna in 2017 (ASX announcement dated 17 January 2017) (Figure 1), allocated to:
- A$12 to 15 million for exploration across the 100%‐owned North Yamarna tenements
- In excess of A$5 million expenditure for its contribution to exploration across the GJV tenements held 50:50 with Gold Fields, and
- A$1.5 to 2 million for its contribution to exploration on the South Yamarna Joint Venture (SYJV) tenements held 50:50 with Sumitomo Metal Mining Oceania Pty Limited.
This will allow the Company to accelerate the geological evaluation of the belt while continuing to use its proven exploration methodology and infrastructure.
