Buying back the south Yamarna that is
Gold Road Resources (ASX:GOR) while in the midst of building a mine in the northern part of the Yamarna Belt has moved to acquire the interest that it does not already own in the southern part of the Yamarna Belt. The acquisition brings the whole of the Yamarna Belt back under the control the company. The following figure shows the location of and geological setting of the Yamarna Belt:
Source: Gold Road Resources (ASX:GOR)
The company has acquired the 50% interest in the Southern Yamarna Belt for A$7.0 million. The company farmed out a 50% interest in the Southern Yamarna Belt to Sumitomo Metal Mining Oceania (Sumitomo) back in 2013. Sumitomo has since been exploring the region at no cost to Gold Road Resources and has enjoyed some success from its endeavours. We certainly have no concerns over the deal to acquire the Southern Yamarna Belt.
The acquisition is subject to various conditions around mining in and the selling of any part of the southern portion of the Yamarna Belt. We consider these conditions will not be onerous on any future activities conducted in the Southern Yamarna Belt.
The joint venture partnership through Sumitomo did have success in exploring across Southern Yamarna Belt. The following figure shows a regional view of the Southern Yamarna Belt, its geological setting and regions of interest:
Source: Gold Road Resources (ASX:GOR)
The Smokebush Camp Yalffler South prospect returned assays of 13 metres graded at 0.54 grams per tonne (g/t) gold from 142 metres and included a sweet zone of two metres graded at 2.10g/t gold from 152 metres and a second drill intersection of 13 metres graded at 0.45g/t gold from 226 metres and included a sweet zone of two metres graded at 1.88g/t gold from 227 metres. These are results that would warrant further exploration to determine the further potential of the camp.
Success was also had at the Spearwood Camp at the Kingston North prospect with intersections of 12 metres graded at 1.60g/t gold from 60 metres an included a sweet zone of four metres graded at 4.63g/t gold from 60 metres. Again, these are results that warrant further follow-up.
Exploration at the Beefwood camp is in its early stages with aircore drilling of 97 holes completed. The best of the results returned four metres graded at 0.38g/t gold from 48 metres. This result will require more supporting evidence to determine the potential of the Beefwood site.
The company plans to spend A$1.6 million in 2018 to follow-up on and explore for new targets across the Southern Yamarna belt. Planning for the next exploration programme in the southern portion of the Yamarna Belt will get underway post the company completing its annual targeting and prioritisation exercise across the whole of the Yamarna Belt.
Turning to the mine development work now underway at the Gruyere project (Gold Road’s interest 50%), the company indicated that it remains on budget and schedule. The following figure shows the progress to date of the processing plant:
Source: Gold Road Resources (ASX:GOR)
The five-year, A$530 million project is 72% complete for engineering and 32% complete for construction.
The company had a cash hoard of A$235 million at 31 December 2017 and expects cash outflows for the current quarter to be around A$60 million. Earmarked for exploration is A$4.0 million and for advancing the Gruyere development A$53.3 million. The company is well sourced to spend on exploration, and with that spend success has not been far behind.
The Yamarna Belt is a substantial geological structure, which Gold Road Resources (ASX:GOR) is, through its systematic exploration of the structure; been successfully revealing its potential. There continues however, to be a greater portion of the northern belt yet to be explored which adds significant blue-sky exploration into the valuation equation. We firmly believe that the next stage of exploration has the potential to open the region up. Now the company owns the whole of the Yamarna Belt and is well cashed up to explore right across the complete belt. Moreover, the company is in joint venture with Gold Fields a renowned gold producer and explorer, so perhaps a change of partner in the Southern Yamarna could be a real value proposition.
We believe the substantial funding the company has and the funding behind the joint venture, will allow the company to fully explore the Yamarna belt. With future production now assured, as the Gruyere deposit advances firmly toward commercial production, there may be considerably more for the Yamarna belt to reveal. Importantly, the company has the funds to now get out and give the whole of the Yamarna Belt a real exploration work over. Duplicating this success at Wadderin and Lake Grace could add significant blue sky potential to an already fast de risking gold explorer/developer.
Consequently, we continue to recommendation Gold Road Resources (ASX:GOR) as a buy for Members who do not have any exposure to the stock.
Disclosure: Gold Road Resources (ASX:GOR) is held within the Fat Prophets Mining and Resources portfolio.
