Gold Road Resources Shares At 81% Discount

Gold Road (ELKMF) has identified 22 new high-priority gold targets from Airborne Sub-Audio Magnetic (SAM) survey within the Sumitomo JV tenements at the Breelya-Minnie Hill Gold Camp conducted in July 2013, adding to 13 new targets announced last week at the wholly owned Pacific Dunes-Corkwood Gold Camp north of the Central Bore deposit, which augurs well for the gold-producing potential of the broader tenement portfolio.

Sumitomo JV adds 22 new high-priority targets
The 22 gold targets were identified over an area spanning c 85km2 using the SAM survey in July 2013 by Gap Geophysics Australia, with almost all aligning with gold anomalies reported from previous sparse and widely spaced drilling. Follow-up drilling at Breelya-Minnie Hill is expected to commence by end-2013. Under the terms of the JV agreement, Sumitomo will spend a further c A$1.3m by December 2013, with a further c A$1.75m by 2014 to fund exploration of the JV tenements. The option to fund up to A$5m or $8m by December 2016 allows the JV partner to earn up to 30% or 50% interest respectively in the project.

Pacific Dunes-Corkwood Gold Camp adds 13 targets
On 15 August, Gold Road also announced it had identified 13 gold targets using the SAM survey at the Pacific Dunes – Corkwood Gold Camp, 65km north of the 100%-owned high-grade Central Bore deposit. Completion of the Central Bore project’s pre-feasibility study (PFS) is now expected by mid-November 2013.

Valuation: Shares at 81% discount
Our 37.4c/share sum-of-the-parts valuation, up from 33c/share, reflects both the impact of a lower AUD (previously US$/A$0.9979), coupled with the shorter time to assumed start of production underpinning our NPV calculation, whereby small-scale production commences at Central Bore by end-CY14. We have added 27.9c/share for the remaining resources, derived by benchmarking forecast residual levels against the global average EV/in situ values for measured, indicated and inferred ounces for the Australian market (see our sector report Gold: New benchmarks for old), which is then discounted back into current money terms. At 7c/share, the market is applying an 81% discount to Gold Road’s EV/in situ values for measured, indicated and inferred ounces compared to global average benchmarks, which, when applied, generates a valuation of 5.2c/share for the remaining resource and an overall sum-of-the-parts-valuation of 14.7c/share. Our revised forecasts reflect net cash of c A$8.9m at end-June 2013, pending the release of complete FY13 financials expected in September 2013.

To Read the Entire Report Please Click on the pdf File Below.