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(ASX: GOR) | GOLD ROAD RESOURCES

May 21, 2024

Sentiment: Sideways

Type of Trade: High Growth, Dividend | Defensive

Industry: Gold

Sector: Materials

As per March Quarter Result CY2024

Gold Road is a mid-tier Australian gold producer and explorer with a Tier 1 mine and exploration projects spanning over 14,000 square kilometers across Western Australia, South Australia, and Queensland.

Gold Road owns 50% of the world-class Gruyere gold mine, developed in partnership with Gold Fields Ltd. The mine produced its first gold in June 2019 and has since produced 1,240,464 ounces (100% basis) up to December 31, 2023. As one of Australia’s largest and most cost-efficient gold mining operations, the Gruyere JV sources all its ore from a single open-pit mine, with an expected mine life extending to 2032. The Gruyere JV boasts significant Open Pit Mineral Resources of 6.04 million ounces and Ore Reserves of 3.67 million ounces (100% basis).

The exploration key highlights for Gold Road Resources:

  1. Exploration Portfolio: Gold Road has a large prospective Australian greenfields exploration portfolio, covering various regions across the country.
  2. JV Partnerships: Gold Road manages exploration jointly with its partners, including the Gruyere Joint Venture and other projects.
  3. Gruyere JV: Exploration activities include drilling below the Gruyere pit to test further mining opportunities. This suggests ongoing efforts to expand the mineral resource base and extend the mine life.
  4. Golden Highway Feasibility Study: Studies are underway to assess the feasibility of projects like the Golden Highway, indicating potential future growth opportunities.
  5. Drilling Activities: Exploration drilling activities are ongoing at various projects, including Gruyere, Gilmour, Balter, Yamarna, Mallina, Greenvale, and Galloway.

These highlights demonstrate Gold Road’s commitment to exploration as a means of discovering new mineral resources, extending mine life, and potentially increasing production in the future.

Gold Road Resources has the third lowest AISC on our list, as shown below, therefore offering great margins:

CompanyASX CodeAISC for FY24Period
Evolution MiningEVNA$1,340/ozFull Year 24
Perseus Mining LimitedPRUA$1,503/oz1HFY24
Gold Road ResourcesGULA$1,662/ozCY2023
Ramelius Resources LimitedRMSA$1,700-$1,800/ozFY24
Northern Star Resources LtdNSTA$1,810-1,860/ozQ3 FY24
West Gold ResourcesWGXA$1,800-2,200/ozFY24
Kingstone ResourcesKSNA$2,053/ozFY24
Resolute MiningRSGA$2,255/ozFY24

✅ Positive growth in all key Fundamental Metrics during CY23

  • Revenue: 2023: A$472.1 million | 2022: A$382.9 million | Growth: 23.3%
  • EBITDA: 2023: A$250.1 million | 2022: A$180.8 million | Growth: 38.3%
  • EBITDA Margin: 2023: 53% | 2022: 47% | Growth: 12.8%
  • Net Profit After Tax (NPAT): 2023: A$115.7 million | 2022: A$63.7 million | Growth: 81.6%
  • Operating Cash Flow: 2023: A$233.6 million | 2022: A$132.2 million | Growth: 76.8%
  • Free Cash Flow: 2023: A$140.2 million | 2022: A$77.5 million | Growth: 80.9%
  • Cash: 2023: A$143.8 million | 2022: A$74.4 million | Growth: 93.2%
  • Investments: 2023: A$465.0 million | 2022: A$406.5 million | Growth: 14.4%
  • Full Year Dividends (fully franked): 2023: 2.2 cents per share | 2022: 1.5 cents per share | Growth: 46.7%

Positive Cashflow for CY23:

  • Operating Cash Flow: $233.6 million
  • Free Cash Flow: $140.2 million
  • Cash and Equivalents: $143.8 million

✅ Key Fundamental Metrics for March Quarter of CY2024 continue to growth strongly.

  1. Revenue: March 2024: A$117.0 million | March 2023: A$97.5 million | Growth: 20.0%
  2. EBITDA: March 2024: A$59.6 million | March 2023: A$48.3 million | Growth: 23.4%
  3. EBITDA Margin: March 2024: 51% | March 2023: 50% | Growth: 2.0%
  4. Net Profit After Tax (NPAT): March 2024: A$26.5 million | March 2023: A$21.2 million | Growth: 25.0%
  5. Operating Cash Flow: March 2024: A$60.0 million | March 2023: A$44.0 million | Growth: 36.4%
  6. Free Cash Flow: March 2024: A$38.2 million | March 2023: A$25.0 million | Growth: 52.8%
  7. Cash: March 2024: A$147.2 million | March 2023: A$88.1 million | Growth: 67.1%
  8. Investments: March 2024: A$457.8 million | March 2023: A$434.7 million | Growth: 5.3%
Outlook and overview

Analysing Gold Road Resources through the lens of current market dynamics, the company emerges as a compelling investment opportunity, particularly given the unprecedented surge in gold prices, which are holding steady around USD 2,400 per ounce.

  1. Robust Financial Performance: Gold Road’s fiscal strength is evident in its record revenue from gold sales in CY23, totaling $472.1 million, coupled with a remarkable net profit after tax of $115.7 million. Such impressive figures underscore the company’s adept management and its ability to capitalize on the favorable gold price environment.
  2. Cash Flow Management: The company’s adept handling of cash flow is notable, with CY23 witnessing substantial operating cash flow of $233.6 million and free cash flow reaching $140.2 million. This liquidity not only provides flexibility for strategic investments but also allows for generous dividend distributions, thereby enhancing shareholder value.
  3. Solid Balance Sheet: Gold Road concluded CY23 with a robust balance sheet, boasting cash and short-term deposits amounting to $143.8 million, while maintaining a debt-free status. Moreover, the company holds significant financial assets in the form of strategic investments valued at $465.0 million, further bolstering its financial resilience.
  4. Dividend Payouts: The declaration of fully franked dividends for CY23 underscores Gold Road’s commitment to rewarding shareholders. Notably, the final dividend of 1.0 cents per share, along with the interim dividend, reflects management’s confidence in sustained cash flow generation.

In light of these factors and the bullish outlook for gold prices, Gold Road Resources emerges as a compelling investment prospect. The company’s strategic positioning, coupled with its robust financial performance and prudent capital management, bodes well for long-term shareholder value creation. However, investors should remain vigilant of market dynamics and exploration outcomes, ensuring a well-informed approach to capital allocation and risk management.


Guidance

✅ Based on the production figures from CY23, which stood at 321,985 ounces compared to 314,647 ounces in CY22, our guidance for CY24 indicates an expected production range of 300,000 to 335,000 ounces.

Considering the increase in gold prices, which rose by 22% year-on-year in the last 12 months, and taking into account the production figures from CY23 (321,985 ounces) compared to CY22 (314,647 ounces), our guidance for CY24 indicates an expected production range of 300,000 to 335,000 ounces.

Given the rise in gold prices, the revenue for CY24 could potentially show a significant increase compared to CY23, reflecting the combined impact of higher production volumes and elevated gold prices.

Life Mine

The mine life of the main project, Gruyere, extends beyond 12 years based on the current estimates and operational plans.

Technical Analysis

  1. Price Performance: Despite a 22% surge in gold prices over the last year, GOR’s stock is currently trading 8% below its one-year price, indicating that it has not performed well relative to the increase in gold prices.
  2. Fair Valuation: GOR is currently trading at a technically fair price considering its strong fundamentals. However, despite the positive fundamentals, it remains one of the cheapest options in the market.
  3. RSI Formation: The Relative Strength Index (RSI) shows a positive formation, resembling the overall chart formation. This indicates potential bullish momentum building in the stock.
  4. Moving Averages: GOR’s stock price is trading between the 250-day Simple Moving Average (SMA250) and the 40-day Simple Moving Average (SMA40), suggesting that it is at a technically discounted price. Additionally, there is a 32% upside potential from the bottom of the last higher low, indicating a favorable risk-reward scenario.
  5. Chart Formation: The overall chart formation shows a bullish pivot, with multiple higher highs and higher lows since February lows. This indicates a positive trend reversal and potential upward momentum in the stock price.
  6. Resistance Levels: The stock faces resistance at $1.8, and a second resistance level is observed at $2. Breaking above these resistance levels could signal further upside potential for the stock price.

GOR’s technical analysis suggests a bullish outlook, supported by positive chart formations, potential upside from current price levels, and resistance levels to watch for potential breakout opportunities. However, investors should consider conducting further analysis and monitoring gold prices.

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