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UBS Global Resources 30 Oct 2024
Gold Road Resources
Frustrating cheese

2024 guidance a stretch
GOR reported Gruyere (100%) Sep-Q production of 69koz marginally below
expectations with ore mining not keeping up with milling requiring low grade stockpiles
to feed plant. This also drove higher AISC of A$2,552/oz. After a challenged start to
2024 with a guidance downgrade, the mine is struggling to catch up in time and we still
see risk to the 290-305koz target as total material movements only now near the
targeted 65-70Mtpa rate. We forecast 286koz of gold in 2024, shy of the lower end of
guidance despite modelling a record 90koz in Q4. It's been a frustrating period for
GOR and Gruyere not fully capitalising on these record high A$ gold prices but the
operation looks better placed into 2025 to produce at 350kozpa. We look to an
improved 2025 and studies (Gruyere underground in particular) alongside even higher
gold prices as key catalysts. Our NPV-based Price Target is lowered to A$2.25/sh and we
retain a Buy rating.

Material movement near the 65-70Mtpa target
The Q3 mining rate of 57Mtpa was +38% q/q but still shy of the targeted 65-70Mtpa.
With rates in October still around these levels, Q4 should improve as mining shifts to the
shallower and more productive Stage 5. Q3 mill grade was disappointing at 1.05g/t, well
below mined grade of 1.29g/t as 0.80g/t stockpile ore supplemented ROM feed. We
forecast 1.28g/t plant feed (primarily from mined ore) in Q4. However, Gruyere needs
94.4koz production in Q4 to reach guidance lower end (+6% vs the mine's quarter
record). While year-end rates lift, we forecast only 90koz in Q4, falling short of guidance
at 286koz (vs 290-305koz). The improving rates from Gruyere will setup the next several
years for a ~350kozpa run-rate with potential to go beyond as throughput nears 9.8Mtpa.

Project updates next year
Concept level studies for underground mining at Gruyere will be delivered to the
JV in Dec-Q. This will drive ongoing exploration and higher level studies ahead. We think
the market does not sufficiently consider upside/longevity to this operation from
underground life extensions. The other key project GOR are pursuing is the Yamarna
project (6.4Mt at 2.44g/t for 510koz) with an update (resource, reserve and permit
applications) in Mar-Q 25.

Valuation: A$2.25/sh Price Target; Buy rated
Our PT is 1x NPV using long-term real US$1,950/oz gold and 70c AUD:USD. We lower
our PT on a more cautious medium-term production outlook but EPS lifts +35%/+26%/
+11% over CY24/25/26E as we assume more mining waste is capitalised.

Valuation Method and Risk Statement
We value Gold Road Resources with Discounted Cash Flow (DCF) approach. Our target price
is set based on a US$1,950/oz long term gold price and our NPV using a 6% discount rate.
Investment risk inherent in the resource sector includes, but is not limited to movement of
commodity price and currency which may differ materially from the assumptions used in this
report. Furthermore, the sector is subject to political, financial and operational risks, each of
which has the potential to significantly impact industry performance.