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Investors are concerned about Gold Road Resources

Investors are concerned about Gold Road Resources

Gold Road Resources (ASX:GOR) found itself in hot water as investor concerns were sparked by a series of disappointing updates regarding the performance of their 50% owned Gruyere gold mine in Western Australia.

The company’s quarterly update in January revealed a decline in gold production at the mine, leading to a sharp drop in shares by over 9% in a single day.

Investors were displeased with the explanation provided by Gold Road Resources, which cited delays in mining higher-grade ore areas and “Labour availability” issues. Furthermore, the update omitted crucial data on costs per ounce, raising further concerns among investors.

The decline in production and lack of transparency regarding costs led to a revision in Gold Road Resource’s 2024 guidance. The company predicted a decrease in output and an increase in costs for the current year, following a cost overrun in the three months leading up to December. This news caused shares to initially plummet by over 19%, before gradually rebounding to a decline of approximately 13%.

Gold Road Resources jointly owns the Gruyere gold mine with Gold Fields of South Africa, and it appears that there have been significant issues with the mining operation and cost controls. The All In Sustaining Cost (AISC) for the Gruyere mine in the December quarter surged to $A1,973 per ounce, marking a significant 17% increase from the September quarter. This rise in AISC has raised concerns about the company’s ability to manage costs effectively.

In 2023, the Gruyere mine produced a total of 321,984 ounces of gold, barely meeting guidance and representing a 12% increase in AISC compared to the previous year. Unfortunately, the guidance for 2024 output from the Gruyere mine has been revised downward to a range of 300,000 to 335,000 ounces.

This revision comes with an increase in AISC ranging from $A1,900 to $A2,050 per ounce, signifying a substantial 24% increase in cost per ounce compared to 2023.

Gold Road Resources explained the lower guidance and higher cost estimates for 2024, stating, “2024 will see increased material movement as per the life of mine plan, and also as a result of the operation needing to catch up on missed movement in 2023.

AISC costs are modelled for the 2024 inflationary environment and contain the capital cost associated with increased waste movement and the remaining portion of the tailings dam lift which commenced late last year.”

The disappointing updates and downward revisions have left investors concerned about the prospects of Gold Road Resources and the Gruyere gold mine.

The company will need to address the issues with mining operations, labour availability, and cost controls to regain investor confidence and ensure the long-term success of the mine.

In conclusion, Gold Road Resources is facing investor concerns following disappointing updates regarding the performance of the Gruyere gold mine. The decline in gold production, lack of transparency on costs per ounce, and downward revision of guidance have led to a sharp drop in shares. The company must address the issues at hand to restore investor confidence and secure the future of the mine.