From: * Newsletter 14th March
Gold Road Resources (ASX:GOR) has joined CapricornMetals (ASX:CMM), issuing a warning on production as WA’s big wet strikes its mid-tier gold miners.
Both have maintained guidance, though Capricorn said on Monday its March would slide to 26,000oz after 150mm struck its Karlawinda gold mine in recent days.
Combined with 133mm in January it’s lost eight full mining days.
Gold Road and Gold Fields have suffered 140mm of rain so far this month at their Gruyere joint venture, resulting in periods of mining suspensions and road closures.
Low grade stockpiles have delivered much of the mine’s output so far this month, with GOR expecting Gruyere to produce 68-73,000oz in the March quarter. It has left annual guidance of 300,000-335,000oz (100% basis) at all in sustaining costs of $1900-2050/oz unchanged.
Miners commonly project strong second halves, with Gold Road reporting on a calendar year basis, meaning it will have plenty of time to make up the shortfall. But after downgrading guidance last year, the Laverton gold miner will be closely watched.
RBC’s Alex Barkley, who has an underperform rating and $1.30 price target on GOR, thinks while stockpiles will make up the difference early doors, the mine’s temporary closure will delay access to higher grade gold expected in the second half.
He said March guidance was 6% below RBC and 7% below consensus estimates.
“Achieving total material mining rates (ore & waste) were an issue in CY23, and a considerable increase is required in CY24 plans. GOR has maintained its CY24 guidance,” he wrote in a note.
“Positively, some issues around mine contractor staffing appear to be resolved and GOR find total tonnage movements were strong before the rainfall event.”
Goldman Sachs is more bullish, keeping a $1.95 price target and buy rating on the gold miner. They say GOR is pricing in a massive discount to peers with no major growth spend on the horizon and long term gold priced in at US$1575/oz, compared to US$1930/oz across its Aussie gold coverage.
“Bench turnover of the stage three and four pits to improve access to ore remains the priority focus at Gruyere, where mining and production is guided to continue to ramp up through the first half of the calendar year with stronger production performance expected for the second half of the year,” Hugo Nicolaci and other Goldman analysts said.
“We reiterate that a slower recovery of mining operations (either from rain or now resolved workforce issues) likely has lower gold production risk than perceived, where on an exaggerated scenario, processing only stockpiles and pausing mining for the duration of the year would lower our CY24 production from 325koz to ~210koz but preserve >60% of CY24 FCF.”
Goldman thinks Gruyere will produce 325,000oz, but said they continue to see its 300-330,000oz calendar year guidance as ‘conservative’.
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