Additionally, Gold Road expects attributable production to range between 162,500 and 177,500 ounces per year at an All-in Sustaining Cost (AISC) of between A$2,400 and A$2,600 per ounce. The company targets plant throughput in 2025 to be approximately 9.5 Mt, while the average strip ratio is expected to be approximately 6:1 over the outlook period (2025-2027). Thereafter, Gold Road expects waste stripping to drop off from 2029 onwards, with an average life-of-mine strip ratio from 2025 to 2032 of 4.5:1.
Incorporated in 2004, Gold Road Resources Ltd. (Gold Road) is a mid-tier gold producer and exploration company based in West Perth, Australia. The company commenced its operations as a private entity, Faulkner Resources Pty Ltd, which later transformed into a public entity in 2006, rebranding itself as Eleckra Mines (EKM). Further, in 2010, Eleckra again changed its name to Gold Road to better reflect its focus as a gold mining company. The company is engaged in mining operations through a joint venture, the sale of gold, and the mineral exploration of gold properties in Western Australia. Gold Road manages more than 17,450 square kilometres of exploration tenure across Western Australia and northeast Queensland.
The company operates through three segments: Development & Production, Exploration, and Investment. As of the latest full-year 2023 results, the Development & Production segment generated 100% of the company’s revenue, as revenues from the “Gruyere joint operation with Gold Fields” represented all of the group’s total revenue.
Record gold sales drive financial
Over the last 3-year period, Gold Road’s sales revenue grew at a CAGR of 17.0% to reach A$472mn in 2023, compared to A$295mn in 2020. This growth was driven by an 8.5% CAGR in gold sales volumes (ounces) and a 7.9% CAGR in the average price of gold, which stood at 161,472 gold ounces and A$2,924 per ounce in 2023. EBITDA increased by 18.3% CAGR during the last 3-year periods to reach A$237mn. This growth led to an EBITDA margin expansion of 65 basis points (bps) in 2023.
Furthermore, Gold Road’s net income stood at A$116mn in 2023, a CAGR of 12.7% over the 3-year period. Consequently, the company’s EPS was A$10.73 cents in 2023, up from A$9.19 cents in 2020.
Additionally, the company generated a cumulative FCF of approximately A$240mn over the last three years. However, total debt increased marginally to A$129mn from A$116mn in 2020, but its leverage ratio, Debt/Equity, improved to 0.14x in 2023 from 0.28x in 2020, driven by total equity which more than doubled to A$942mn in 2023.
Comparatively, Gold Road’s regional peers, Westgold Resources and Ramelius Resources, also demonstrated revenue and EBITDA growth over the last 3-year period, albeit at a lower rate. WGX revenues and EBITDA grew at a CAGR of 7.8% and 3.6% to A$716mn and A$265mn in FY24, respectively, whereas RMS registered a CAGR of 11.7% and 11.5%, reflecting sales of A$883mn and EBITDA of A$439mn, respectively.
Impressive 4Q24 performance
Gold Road recorded impressive gold sales of 47,745 ounces in 4Q24 at a record average sales price of A$4,093 per ounce. Furthermore, the company’s attributable operating cash flow from Gruyere grew sequentially to A$141.7mn, up from A$88.7mn in 3Q24. This helped quarterly FCF to jump approximately 4.0x sequentially to A$76.2mn.
For the full year 2024, Gold Road’s annual production from Gruyere totalled 287,270 ounces (143,635 ounces attributable), slightly below the annual guidance of 290,000 to 305,000 ounces. The average AISC per ounce for 2024 was A$2,211 per attributable ounce, representing a slight miss on the annual guidance of between A$2,050 and A$2,200 per attributable ounce.
Positive analyst sentiment
Gold Road’s valuation looks attractive compared to its historical averages, despite a 26.1% YTD run-up in its share prices. The stock is currently trading at a lower P/E multiple of 18.0x based on estimated 2024 EPS of A$14.54 cents, compared to its 4-year historical average of 24.2x. However, it looks expensive when compared to its local peers, such as WGX with a P/E multiple of 6.4x and RMS with a P/E multiple of 8.7x.
Furthermore, the company’s EV/EBITDA multiple yields a valuation of 9.1x based on the projected 2024 EBITDA of A$302mn, trading in line with the 4-year historical average of 8.9x. On the EV/EBITDA front, the company looks expensive when compared to regional peers WGX with an EV/EBITDA multiple of 3.5x and RMS at 3.5x for FY25.
Out of the total 11 analysts covering the stock, 6 have given a ‘Buy’ rating, 1 has given an ‘Outperform’ rating, and 3 have given a ‘Hold’ rating, with an average target price of A$2.53. The stock was up around 80% in the last 12 months. The recent rally in Gold Road’s share prices means that the target has already been reached. However, any correction in prices could provide a decent opportunity for investors to evaluate the company.
The positive sentiment on the share price is also supported by analysts' estimated growth over the next 3 years. Analysts predict revenue to grow by a 16.4% CAGR, reaching A$745mn, while EBITDA is projected to grow at a CAGR of 21.5%, with margins of 60.3% in 2026.
Gold Road’s growth strategy is to deliver new, value-adding, economic gold deposits to be developed as stand-alone mining operations. The company expects to benefit from higher gold prices, fuelled by recent tariffs, growing demand from retail investors, and central bank purchasing strategies, particularly Russia and China buying up the metal due to geopolitical tensions. However, investment risks include delays in regulatory approvals, especially related to environmental licenses and approvals, underestimation of development costs, and fluctuations in gold prices.
