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Gold Road Spikes 10% On South Africa-Australia JV - Emerging Markets Daily - Barrons.com

Monday, 7 November 2016

A subsidiary of South Africa’s Gold Fields (GFI) is acquiring a 50% interest in Gold Road Resources (ELKMF)’s Gruyere Gold project in Western Australia.

Gold Road’s over-the-counter U.S. shares had jumped 10% in recent trading. Otherwise, gold is taking a tumble in a risk-on world, and Gold Fields shares were down 1.3%, while the SPDR Gold Trust (GLD) fell 1.8% today.

Gruyere has reserves of 3.5M ounces and total resources of 6.2M ounces, according to a prepared release. Gold Fields will pay A$350 million (US$270 million) in cash and a 1.5% royalty on its share of production after total mine production exceeds 2Moz with an approximate value of A$15 million. The rationale, from the release:

“Australia is a key part of our business and our largest cash generator and this deal enhances our portfolio and expands our exposure to a new and emerging goldfield in Western Australia. Gruyere will add life, margin and cash flow into what is already a strong region for Gold Fields and which has proven its ability to integrate new operations with ease.”

UPDATED: Here’s RBC Capital Markets Analyst Richard Hatch on the deal:

” … The initial deal values Gruyere at A$700 million, well above RBC’s published NAV for the project of A$427 million. Metrics include values of US$153 per ounce (reserve) and US $86/oz (resource); this compares to our calculated 2016 average of US$179/o (reserve). Given the strong equity valuations seen over the course of 2016, we had always expected M&A to come with a relatively hefty premium. However, as RBC’s Paul Hissey noted in his initiation of GOR, Gruyere has the potential to establish a new gold province in Western Australia …”

Gold Fields, based in Johannesburg, explores for gold in South Africa, Ghana and Australia, and has a copper exploration business in Peru. Gold Fields shares are up 49% this year, while Gold Road stock is up 56%. The SPDR Gold Trust is up 20% this year. Peru gold-and-silver miner Compania de Minas Buenaventura (BVN) is up 195% this year — you read that right.

Gold Road Spikes 10% On South Africa-Australia JV - Emerging Markets Daily - Barrons.com

Monday, 7 November 2016

A subsidiary of South Africa’s Gold Fields (GFI) is acquiring a 50% interest in Gold Road Resources (ELKMF)’s Gruyere Gold project in Western Australia.

Gold Road’s over-the-counter U.S. shares had jumped 10% in recent trading. Otherwise, gold is taking a tumble in a risk-on world, and Gold Fields shares were down 1.3%, while the SPDR Gold Trust (GLD) fell 1.8% today.

Gruyere has reserves of 3.5M ounces and total resources of 6.2M ounces, according to a prepared release. Gold Fields will pay A$350 million (US$270 million) in cash and a 1.5% royalty on its share of production after total mine production exceeds 2Moz with an approximate value of A$15 million. The rationale, from the release:

“Australia is a key part of our business and our largest cash generator and this deal enhances our portfolio and expands our exposure to a new and emerging goldfield in Western Australia. Gruyere will add life, margin and cash flow into what is already a strong region for Gold Fields and which has proven its ability to integrate new operations with ease.”

UPDATED: Here’s RBC Capital Markets Analyst Richard Hatch on the deal:

” … The initial deal values Gruyere at A$700 million, well above RBC’s published NAV for the project of A$427 million. Metrics include values of US$153 per ounce (reserve) and US $86/oz (resource); this compares to our calculated 2016 average of US$179/o (reserve). Given the strong equity valuations seen over the course of 2016, we had always expected M&A to come with a relatively hefty premium. However, as RBC’s Paul Hissey noted in his initiation of GOR, Gruyere has the potential to establish a new gold province in Western Australia …”

Gold Fields, based in Johannesburg, explores for gold in South Africa, Ghana and Australia, and has a copper exploration business in Peru. Gold Fields shares are up 49% this year, while Gold Road stock is up 56%. The SPDR Gold Trust is up 20% this year. Peru gold-and-silver miner Compania de Minas Buenaventura (BVN) is up 195% this year — you read that right.


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