THE BOURSE WHISPERER: Gold Road Resources (ASX: GOR) announced a 50:50 Joint Venture with a wholly-owned Australian subsidiary of Gold Fields Limited for the development and operation of the company’s Gruyere gold project in Western Australia.
The Gruyere gold project includes the Central Bore, Attila and Alaric deposits and the YAM14 and Toto prospects, covering an area of 144 square kilometres.
Under the terms of the Gruyere Joint Venture (GJV), Gold Fields will purchase a 50 per cent interest in the Gruyere gold project from Gold Road for an aggregate consideration comprising:
Cash of $350 million, comprising $250 million payable on completion of the transaction and $100 million contributed by Gold Fields to fund Gold Road’s initial cash calls during the construction phase;
An uncapped 1.5 per cent net smelter return royalty on Gold Fields’ share of production from the Gruyere Joint Venture tenements once total gold production exceeds two million ounces;
An assumed liability by Gold Fields for up to a 10 per cent overrun on the Gruyere initial development program and budget of $507 million, subject to certain exceptions such as overruns due to a force majeure event and agreed scope changes; and
Funding support by Gold Fields for any project-level bonding or guarantee requirements, to the extent required under the Gruyere Joint Venture.
The Gold Road Owner’s team, which has been assembled over the past 18 months will be retained as part of the team to develop the project under the management and leadership of Gold Fields.
The development program and capital budget have been agreed and the GJV is committed to progressing the project to construction phase, including all the usual work that entails.
To say Gold Road will be in a healthy financial situation post completion of the transaction is an understatement.
As a result, Gold Road will be fully funded for its share of construction capital for the development of the project and to accelerate exploration programs across the company’s portfolio of projects in the region, including the highly prospective 50 per cent-owned Gruyere JV tenements, 100 per cent-owned North Yamarna tenements and 50 per cent-owned South Yamarna Joint Venture tenements.
“We are very pleased to have concluded a highly accretive transaction for shareholders, and to have Gold Fields as our chosen joint venture partner, and with who we look forward to having a long and successful partnership,” Gold Road Resources managing director and CEO Ian Murray said in the company’s announcement to the Australian Securities Exchange.
“The highly experienced Owner’s Team that we have established over the past 18 months will be the Team that will develop the Gruyere gold project under the guidance and leadership of Gold Fields.
“This partnership further strengthens our strong balance sheet, allows us to significantly de-risk the Gruyere gold project, and enables us to pursue our growth plans much sooner than we may have under alternative funding options.”