UBS begins coverage of Gold Road with Buy rating: 16.2% upside potential

By Market Index
Tue 08 Mar 22, 5:51pm (AEDT)
A representation of gold mineralisation in-situ
Source: iStock

Key Points

  • UBS initiates coverage with Buy rating on Gold Road
  • Upgrade comes after 70% resource estimate upgrade at miner’s Yamarna project
  • Management guided to FY22 gold production of 300k-340k ounces at all-in sustainable cost (AISC) of $1270-$1470 per ounce

UBS has initiated its coverage of Gold Road Resources Ltd (ASX: GOR) with a Buy rating and a target price of $1.94, citing the long life of the miner’s biggest asset - the 50%-owned Gruyere gold mine - and low levels of capital expenditure going forward as among the reasons.


The broker upgrade came after the Perth-based miner revealed a 70% increase to its gold mineral resource estimate for its 100%-owned Yamarna Project, and gold production during FY21 at its Gruyere mine of 246.5k ounces, which was slightly below the 250k-260k guided.

Gold Roads operates Gruyere, which entered production in June 2019, as a 50-50 joint venture with South African-listed Gold Fields.

The mine’s low costs, its 10-year projected life span and its relatively low levels of ongoing capital expenditures were the main reasons for UBS’ upgrade, the broker said.

It also cited Gold Road’s forecast of a 9.4% compound annual growth rate in gold production over the next five years.

Gold Road sets site on further exploration around Gruyere and Yamarna

Gold Road on January 31 announced a 70% increase in mineral resources at its Yamarna project, of 6.4m tonnes at 2.44g per tonne, totalling 0.51m ounces in gold mineral resource.

The company announced an exploration budget for FY22 of $30m, with the highest-priority targets in its Southern Project Area, south of Gruyere, in Western Australia.

Exploration in the FY22 will include reserve circulation and diamond drilling targets.

Gold was trading today at about US$1990 per ounce, up 10% since the start of the year amid elevated economic uncertainty and war in Ukraine.


Gold Road share price: A three-month snapshot.

What the brokers think

Three major brokers cover Gold Road.

The consensus is a Buy rating with a $1.74 target price (4.6% upside).

Ord Minnett notes a delay in opening up higher-grade zones as the main reason Gold Road missed its 250,000 ounces production target.

The broker was mainly concerned about lower-than-expected FY22 guidance of 300k-340k ounces. Buy rating retained with reduced target price of $1.60.

Macquarie: December quarter production result was -8% lower than Macquarie’s forecast, but the FY22 production guidance was in line with the broker’s estimates.

The broker retained its Outperform rating, with a 10-cent rise in the target price, to $1.70.

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