Record Results
Shares in Gold Road Resources’ (ASX:GOR) surged after posting FY23 results and receiving a number of upgrades from various brokers. Results broadly aligned with expectations, highlighting that the sell-off in early 2024 has been overdone. The valuation is appealing at current levels.
Turning to the charts, the upward dynamic by Gold Road off the primary uptrend and key historic support at the $1.30 level is very encouraging. The pattern of holding primary support is long established with Gold Road. Each successive pullback towards the lower end of the range in the past five year has been shallower, which is positive. Following numerous retests of resistance at $2, the shares could now return for yet another attempt to break through over coming months.
Trading Update – FY23 Results
Starting from the top, Gold Road achieved record revenue from gold sales, totalling $472.1 million, compared to $382.9 million in the previous year. This increase can be attributed to both a higher volume of gold sales (161,472 ounces) and a higher average realized gold price ($2,924/oz) compared to the previous year ($2,448/oz).
Fully unhedged gold sales increased to 161,472 ounces, with an average realized price of $2924/oz.
The image below summarises performance for the FY23:
Source: Gold Road (ASX:GOR) FY23 Filing
In terms of profitability, Gold Road Resources (ASX:GOR) recorded a record EBITDA of $250.1 million, with an EBITDA margin of 53%. This is a significant improvement from the previous year’s EBITDA of $180.8 million and an EBITDA margin of 47%. The increase in EBITDA reflects the company’s ability to generate higher operating profits from its gold sales.
Despite ongoing production issues at the Gruyere mine, located 160km north-east of Laverton, the company saw significant financial improvements.
The net profit after tax for the 2023 financial year also reached a record high of $115.7 million, compared to $63.7 million in the previous year.
In terms of the company’s financial position, Gold Road Resources (ASX:GOR) ended the year with cash and short-term deposits of $143.8 million, indicating a strong balance sheet. This is an increase from the previous year’s cash and short-term deposits of $74.4 million.
In light of the results, the Board has announced the issuance of a fully franked final dividend of A1.0¢ per share for the six months to December 31, 2023.
Despite financial successes, production guidance for 2024 was set at 300,000oz-335,000oz, lower than previously aimed for due to operational challenges. We do note that the Gruyere mine continues to pose persistent issues which have been impacting Gold Road’s ability to meet production targets. We intend to closely track developments here to see if there would be improvements – success here should result in sustainable long-term growth.
Summary
Gold Road Resources’ financial performance in 2023 reflects robust growth in revenue and profitability despite ongoing operational challenges at the Gruyere mine. The significant increase in net profit after tax, revenue from gold sales, and other financial metrics underscores the company’s ability to navigate production issues and capitalize on favourable gold prices.
The increase in fully unhedged gold sales and the higher average realized price /oz contributed to revenue growth, while improvements in EBITDA margin indicate enhanced operational efficiency. The substantial rise in operating cash flow and free cash flow demonstrates strong financial management and cash generation capabilities.
On the valuation front, Gold Road (ASX:GOR) is currently trading at a premium to peers with forward price-to-earnings at 14.7x versus the peer median of 1.3x while on a price-to-book basis, Gold Road is at 1.64x versus the peer median of 1.19x
However, despite the financial success, the company’s production guidance for 2024 fell short of previous targets due to continued operational disruptions. Challenges with mining contractor MACA and issues with fleet availability highlight ongoing operational risks that need to be addressed to sustain production levels and drive further growth. We continue to believe that Gold Road (ASX:GOR) represents attractive value for investors with a medium-term investment horizon at current levels.
We retain a BUY rating on the group.
