Gold Road’s simple, fast track strategy to 2018 gold production

THE INSIDE STORY: The Gold Road Resources (ASX: GOR) story may be simple, but it remains, nevertheless, a very impressive success story. By Mark Mentiplay

It is a simple success story, five years in the making that should take Gold Road Resources’ Gruyere gold project from discovery to gold production. 

Gold Road has increased the Gruyere gold project mineral resource from a starting point of zero to 6.2 million ounces and Ore Reserves to 3.17 million ounces.

The company has been on a fast track since claiming a major gold discovery in an under-explored Western Australia region in 2013 to its current total gold mineral resource base across three deposits of 6.6 million ounces, with first gold production targeted by the end of 2018.

And there are further chapters to come from the foundation Gruyere gold project, the jewel in Gold Road’s Yamarna crown, which is now recognised as one of Australia’s best undeveloped gold deposits and major contributor to the company’s belief the Yamarna gold endowment potential is at least 20 million ounces.

Top that with $100 million in the bank, after a recent $74 million raising, which was supported by major global institutions that now hold 53 per cent of Gold Road’s shares, the path is laid for elevation to the mid-tier of Australian gold producers.

Gold Road’s sole focus is a 5,000 square kilometre tenement package in the Yamarna region.

Chief executive officer Ian Murray considers the Gruyere project, and two nearby gold projects, all located in the northern half of the tenement package, as large but relatively low technical risk operations.

“It really is the perfect environment to be developing a project like this,” Murray told The Resources Roadhouse.

“The Australian dollar gold price is healthy, cost pressures that were a problem for West Australian miners during the boom years have eased significantly, there is an abundance of well qualified people available and we’ve been able to put together high quality internal and onsite teams.

“On top of those factors working in our favour, the geology at Gruyere and the metallurgical recoveries are relatively straightforward and we don’t envisage any major technical issues in bringing the project online. 

Murray said that unlike many of Gold Road’s junior contemporaries, “we have always stayed with the story.”

“We believe in the Yamarna belt as a major new Australian gold province.

“We believe it has a significant gold endowment potential, so we’ll stay where we are, continue exploring, build on what we have and confirm the gold endowment potential.”

Following a successful Pre-Feasibility Study (PFS), the Gruyere Feasibility Study is scheduled for completion in the fourth quarter of calendar 2016, to be followed by an investment decision in early 2017.

First gold production is scheduled by the end of calendar 2018.

The Feasibility Study was already fully-funded before the closure of the recent $74 million raising, which Murray sees as de-bottlenecking and de-risking the project, and helping to clear the way for negotiations on project funding.

The cash raised will primarily be used for early works programs, front-end engineering design and deposits to secure the construction and delivery of long lead items.

Macquarie Research backs the de-bottlenecking and de-risking strategy, saying in a recent report that it anticipates about $350 million in debt funding for Gruyere, “so having such a high degree of certainty on costs and project economics should substantially de-risk negotiations for final project funding.”

The PFS, which built on last year’s Scoping and Options Study, estimated a development capital cost of $455 million for a large-scale open pit mine to a maximum depth of 340m, producing ore for processing by a conventional 7.5 million tonnes per annum gravity and carbon-in-leach facility utilising an SABC (semi-autogenous grinding and ball mill) to handle the moderately hard fresh ore.

The conventional crushing circuit will also be able to handle additional ore sources, with the potential to add more capacity in the future.

Gruyere’s gold is free-milling and about 40 per cent of the gold is expected to be recovered in the gravity circuit, the remainder by the CIL plant.

Residence times are expected to be quick with up to 80 per cent of gold being leached in the first four hours.

Mining is expected to be carried out by a mining contractor, with the open pit operation being in four stages: two independent starter pits making up stages one and two, which will be combined in stage three and followed by a cut-back in stage four to the final PFS mine design depth of 340m.

The project will be powered by either a pipeline‐supplied gas‐fired generation plant or diesel ahead of the development of the gas pipeline.

The project is expected to deliver an average 265,000 ounces of gold per annum over a mine life of 12 years at an all-in sustaining cost (AISC) of $960 per ounce, which puts it in the lowest quartile globally, kicking off with 300,000 ounces per annum in the mine’s first two years for early cash flow and enabling capital payback within four years.

“The aim is to get production to a regular 300,000 ounces per annum with the additional 35,000 ounces per annum coming from the nearby satellite Central Bore and Attila Trend projects, both of which already show significant potential to supplement the Gruyere project life, as well as future gold discoveries within trucking distance of the Gruyere process plant,” Murray said.

The proven and probable ore reserves of 3.17 million ounces at Gruyere is contained within 81.1 million tonnes of ore grading 1.33 grams per tonne gold.

Gold Road’s total JORC 6.6 million ounce resources spans three deposits on its Yamarna belt tenements – Gruyere, Central Bore and the Attila Trend.