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Gold Road Resources : Gruyere Project - Updated Mine Plan - Market Screener

Thursday, 6 December 2018

Gruyere Project - Updated Mine Plan

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Highlights

Gold Road Resources Ltd Level 2, 26 Colin St

  • Gruyere confirmed as a global Tier 1 gold mine1 with a long life and forecast high margins

    West Perth WA 6005www.goldroad.com.au perth@goldroad.com.au

  •  Life of mine average annual production plan has increased to approximately 300,000 ounces per annum (2016 Feasibility Study: 270,000 ounces per annum)

    T +61 8 9200 1600 ASX Code GOR

  •  Average All‐in Sustaining Costs (AISC) over the life of mine forecast at A$1,025 per ounce (US$738 per ounce2)

    Gold Fields

  • Mill processing throughput lifted from 7.5 Mtpa to 8.2 Mtpa resulting from previously announced and fully funded scope changes

    Level 5, 50 Colin St West Perth WA 6005 www.goldfields.com

  • Attila and Alaric Ore Reserves now incorporated into the production schedule

  • First gold production remains on target for June 2019 quarter

    T +61 8 9211 9203 JSE:GFI NYSE: GFI

  • As at 30 November 2018, all major equipment and materials are on site with overall Project and EPC construction (process plant and associated infrastructure) 85% and 77% complete respectively

Gold Road Resources Limited (Gold Road) and Gruyere Mining Company Pty Ltd, a member of the Gold Fields Limited group (Gold Fields), provide an Updated Mine Plan and construction update following final designs and updated cost information for the Gruyere Gold Project (Project), which is being developed as a 50:50 Joint Venture approximately 200 kilometres east of Laverton in Western Australia.

The Updated Mine Plan is based on updates and enhancements to the Feasibility Study (FS) completed in October 2016. The FS was completed by Gold Road prior to entering into a 50:50 Gruyere development joint venture with Gold Fields in November 2016.

Construction of the Gruyere process plant and infrastructure continues to progress as expected, with on‐schedule commissioning of the power station completed and mining operations commenced.

Gold Fields Executive Vice President Australasia, Stuart Mathews, said: "With first gold remaining on target for the June 2019 quarter, we have the confidence in Gruyere to be able to provide this update to the life of mine plan for this world‐class project. The Updated Mine Plan indicates an increase in annual average gold production to 300,000 ounces per annum. This update also provides more clarity around Gruyere's AISC and gold production forecasts."

Gold Road Managing Director and CEO, Duncan Gibbs, said: "It has been an incredible journey for Gold Road, since discovering Gruyere in 2013. For Gold Road the Updated Mine Plan means an attributable forecast share of approximately 150,000 ounces of gold on average per annum over the 12 year mine life. The cash flow Gruyere will produce from 2019 will be substantial and allow us to deliver tremendous value for shareholders, many of whom have backed us since before we made the discovery. Gold Road continue to work closely with Gold Fields, to safely and successfully conclude construction and commissioning of this world‐class gold operation."

1 Tier 1: greater than 10 year mine life; greater than 300,000 ounces per annum; greater than 3.5 million ounce Ore Reserve and costs at the lower end of the cost curve

2 Exchange rate A$1.00 : US$0.72 (2016 FS: A$1.00 : US$0.73)

Mine Plan

The Gruyere Joint Venture (Gruyere JV) has approved the Updated Mine Plan. This is the first update to the Gruyere mine plan since the FS was completed by Gold Road in October 2016, prior to the establishment of the Gruyere JV with Gold Fields. The new life of mine plan is based on the knowledge and confidence gained from the advancing construction at Gruyere, and preparation for commissioning ahead of a planned safe and efficient start‐up.

The Updated Mine Plan reflects a new staged pit design, which aims to provide lower risk delivery of ore supplies to Gruyere's processing facilities, while maintaining a similar grade and strip ratio profile to the 2016 FS.

The ore for the first two years of production has been subject to a grade control drilling programme, mostly completed as part of the FS, which provides confidence in the Ore Reserve in the early years of production.

The Gruyere JV has committed significant investment into growth projects with ongoing exploration on the Gruyere JV tenement areas and pre‐feasibility studies on the Golden Highway deposits (located approximately 25 kilometres from Gruyere). The Updated Mine Plan now includes 3.6 Mt at 1.55 g/t Au for 178,500 ounces of Ore Reserves from the Attila and Alaric deposits on the Golden Highway.

Gruyere JV will provide 2019 production guidance in the March 2019 quarter. The operations team has developed strategies to ensure a smooth production ramp‐up. The team's efforts have resulted in the Gruyere JV planning a six to seven‐month ramp‐up to full production from the time of first gold in the June 2019 quarter.

The forecast life of mine production now averages approximately 300,000 ounces per annum. The increase from an average of 270,000 ounces per annum in the FS is driven by the opportunistic purchase of larger SAG and Ball Mills lifting processing throughput to 8.2 Mtpa in fresh rock from 2021, slight improvements to expected metallurgical recoveries and the addition of the two Golden Highway deposits.

Business Plan Gold Production and AISC Outlook 2020-2030

Figure 1: Gold Production and AISC Outlook 2020 ‐ 2030

A modest increase in costs from the 2016 FS occurred in line with general inflation rates, with average AISC over life of mine forecast at A$1,025 per ounce (US$738 per ounce3) (Figure 1).

Figure 2: Waterfall chart showing AISC variance between 2016 FS and 2019 Updated Mine Plan

As illustrated in Figure 2 above, labour costs, rising diesel costs, increased prices for key mine supplies and equipment, and sustaining capital expenditure over mine life are partly offset by a favourable contracted gas price for the powerhouse and reduced plant reagent costs.

The projected AISC is further increased by exploration expenditure and higher gold royalties (due to updated gold price assumptions which increase life of mine revenue above the FS estimate).

Minimal growth capital is anticipated therefore AIC is projected to be marginally higher than AISC averaging A$1030/oz over mine life.

3 Exchange rate A$1.00 : US$0.72 (2016 FS: A$1.00 : US$0.73)

The Gruyere orebody continues at depth below the current A$1,600 per ounce Reserve pit design, with an additional 2.3 million ounces in Mineral Resource based on a A$1,850 per ounce pit optimisation. At a higher gold price, or more importantly, with potential improvements to operating costs and optimisation of technical parameters gained through operations, there remains potential to further expand the final pit stage in the future.

Key outcomes of the Updated Mine Plan are summarised below:

Key Outcomes Updated MinePlan   Feasibility Study 2016   Variance  
Project Processing Life (years) 12   13   ‐8%  
Life of Mine Ore Mined (Mt) 96.6   91.6   5%  
Stripping Ratio (waste:ore)1 2.85   2.77   3%  
Gold Mined (Moz) 3.75   3.52   6%  
Gold Recovered (Moz) 3.47   3.21   8%  
Life of Mine Average Annual Throughput (Mtpa)2 8.2   7.5   9%  
Life of Mine Head Grade (g/t) 1.21   1.20   1%  
Annualised Gold Production (average koz pa) 300   270   10%  
All In Sustaining Cost (A$/oz) 1,025   945   8%  
Gold Price assumed (A$/oz) 1,600   1,500   6%  

Notes:

1 Updated Mine Plan strip ratio includes Gruyere at 2.7:1 and Attila and Alaric at 5.8:1
2 Average fresh rock throughput after 2021

Construction Progress

The Gruyere process plant and associated infrastructure is being constructed under an Engineering Procurement and Construction (EPC) contract with the ACJV, a joint venture between Amec Foster Wheeler (now a subsidiary of the Wood Group Plc) and Civmec. With engineering design at 97% and procurement of major equipment completed, the remaining works are largely on a fixed price basis. The contract includes milestone performance incentives, liquidated damages for late delivery, and is guaranteed by performance bonds.

The ACJV continues to deliver plant construction to a high quality. At 30 November 2018, overall Project and EPC construction was 85% and 77% complete respectively.

All civil and concrete works for the process plant are complete with structural steel, plate steel and tankage nearing completion. The major equipment and materials required to complete construction are on site. Remaining works are focussed on piping, electrical and instrumentation and delivery of plant systems for commissioning which commences in the March 2019 quarter.

Limited work to complete the process water supply bore fields and associated pipelines is ongoing. Civil works on the tailings storage facility and installation of the tailings decant recovery pipelines have been completed. All other infrastructure construction is complete, and the power station is now fully commissioned.

Construction remains on schedule for first gold production in the June 2019 quarter.


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