Gruyere ticking along nicely

JOINT venture partners Gold Fields and Gold Road Resources have declared commercial production at the A$621 million Gruyere gold mine in Western Australia.
Gruyere ticking along nicely Gruyere ticking along nicely Gruyere ticking along nicely Gruyere ticking along nicely Gruyere ticking along nicely

Gold Fields executive vice president Australasia Stuart Mathews (left) with Gold Road managing director Duncan Gibbs at Gruyere in August

Commercial production was reached at the end of September, slightly ahead of target and midway through the previously stated six to seven-month ramp-up period.

Gruyere is expected to produce 300,000 ounces per annum at average all-in sustaining costs of $1025 an ounce over 12 years.

Management declared commercial production based on a pre-determined minimum total process plant throughput rate of 70% of nameplate capacity, and a minimum average gold recovery of 85% of expected life of mine metallurgical recovery, measured over a month, with the expectation that these metrics will continue to be met or exceeded in the future.

The operation will now start reporting AISC. Costs up until the end of September have been capitalised.

As throughput rates and gold recoveries during ramp-up have been above expectations, the JV now anticipates gold production for 2019 to be at the upper end of guidance of 75,000-100,000oz of gold.

AISC for the December 2019 quarter is estimated to be $1050-1150/oz, slightly higher than forecast life-of-mine average as the ramp-up continues.

RBC Capital Markets is forecasting 2019 production of 83,300oz at December 2019 AISC of $1209/oz.

"Whilst we see this announcement as one of the catalysts that removes some of the inherent risk associated with the Gruyere ramp-up, we believe this is largely factored into current [Gold Road] pricing," RBC analyst Paul Hissey said.

"Commercial production is more of an accounting principle and we believe investors will need to see successive quarters of demonstrated production to reduce the associated risk.

"As the project continues its path towards steady state, we expect exploration news flow to provide potential additional catalysts for the stock in the interim."

RBC maintained a sector perform rating and $1.40 price target for Gold Road.

Shares in Gold Road were up 0.4% to $1.215.