Gold Road Resources Ltd (ASX:GOR) (OTCMKTS:ELKMF) (FRA:E6Q) is on the highway to gold as it recorded its highest-ever quarterly gold production in the June quarter and remains on track to meet its 2020 annual guidance.
In its June quarterly report, the company said it delivered at an all-in-sustaining cost (AISC) of A$1,233 per attributable ounce. AISC for 2020 is now anticipated to be between A$1,150-$1,250 per ounce, from its previous guidance of A$1,100-$1,200 per ounce.
The increase is due to higher royalty payments attributable to an appreciating gold price, increased maintenance costs, tailings dam expenditure and some COVID-19 costs.
Its gold sales during the quarter totalled 28,700 ounces at an average price of A$2,498 per ounce.
Gold dore and bullion on hand at the end of the quarter totalled 5,330 ounces.
In the quarter, Gold Road generated free cash flow of $23.8 million, excluding unsold dore and bullion.
The company said it ended the quarter in a strong position, with cash and cash equivalents of $109.1 million, resulting in a net cash and cash equivalents position of $84.1 million.
Following the quarter-end, Gold Road became debt-free after it repaid the remaining $25 million debt on 21 July 2020, while retaining liquidity in excess of $85 million.
In April, Gold Road joined the GDX ETF, an exchange-traded fund that hosts the world’s largest listed gold producers.
In the quarter, a total of 23,249 metres of aircore, 6,775 metres of reverse circulation and 1,968 metres of diamond drilling was completed across Yarmarna over seven targets.
Gold Road said the results received across a number of these targets have several anomalies identified requiring follow-up work.
Drilling through the rest of 2020 is scheduled to continue the first-pass assessment of highest ranked targets and to follow-up on anomalies generated by current exploration activities.
Gruyere 50% joint-venture
Gold Road's 50:50 joint venture with Gruyere Mining Company Pty Ltd, a member of the Gold Fields Ltd Group, celebrated its first 12 months of gold production on 30 June, delivering at an average AISC of A$1,155 per attributable ounce to Gold Road since commercial production was attained on 30 September 2019.
In the June quarter, Gruyere delivered record production of 71,865 ounces of gold on a 100% basis versus 59,595 in the March quarter at an AISC of A$1,233 per attributable ounce to Gold Road against A$1,135 per ounce in the March quarter.
The joint-venture completed a 6,505 metre AC program along the Dorothy Hills Shear Zone at the Toto prospect. Initial observations from drilling identified variable host rocks and the presence of sulphide minerals in end of hole rock chips.
Assays from this programme are pending with assessment due to be completed in the September 2020 quarter.
The targeted follow-up diamond and RC drilling are scheduled for the September and December 2020 quarters, based on targets already generated, and incorporating any new information from the recent programme.
Cygnus joint venture
The company said it met its earn-in requirements to secure a 75% interest in the Lake Grace joint venture during the quarter.
Drilling has confirmed at least eight discrete gold targets, with best results returned from the Gunsmoke, Lakeside and Hammerhead prospects, including:
➢ Gunsmoke: 12 metres at 0.78 g/t gold from 30 metres, including 8 metres at 1.06 g/t gold from 30 metres;
➢ Hammerhead: 1 metre at 0.16 g/t gold from 39 metres (end of hole sample) and 3 metres at 0.24 g/t gold from surface and 2 metres at 0.15 g/t gold from 32 metres;
➢ Lakeside: 6 metres at 0.59 g/t gold from 49 metres and 3 metres at 0.20 g/t gold from 25 metres.
The company said drilling was suspended in March in line with the Western Australian government’s COVID-19 initiatives but have restarted in the June quarter. The programme will be completed in the September 2020 quarter to provide first-pass bedrock drill results under the multiple anomalies so far identified.
Exploration Incentive Scheme
Gold Road was successful in all five of the state government co-funded exploration incentive scheme (EIS) drilling applications that were applied for either its 100%-owned tenements or through its joint-ventures.
The $560,000 funding received will go towards advancing greenfields exploration and geological understanding.
During the quarter, it delivered 3,700 ounces into its hedge book at an average of A$1,782 per ounce.
To mitigate COVID-19 production risks and a potential need to cash settle gold forward sales contracts, it rolled forward 10,000 ounces of near-term hedges to 2022 delivery dates.
It said it may continue to offset near-term forward sales delivery obligations by holding bullion inventory, in line with the assessment of COVID-19 risks.
As at end June, its hedge book stood at 87,800 ounces at an average contract price of A$1,847 per ounce – about 20-25% of production for delivery from July 2020 until November 2022.
New board member
During the quarter, Maree Arnason joined the board as a non-executive. She also serves on the Australian Securities and Investment Commission (ASIC) Corporate governance consultative panel and is a member of the committee for the economic development of Australia (CEDA) WA State Advisory Council.
Her focus on risk, strategy and sustainability will support the company’s growth and reputation as an ASX200 gold producer.
The company said Gruyere and Gold Road did not face any material production impacts from the COVID-19 crisis.
It, however, cautioned that the risk of a second wave of community transmission and disruption to global supply chains remains and could evolve quite rapidly, given the situation in eastern Australia and internationally.