Gold Road Resources (GOR) has reported December Q production from the Gruyere JV in Western Australia. Production of 70.0koz at $1,102 AISC in the first quarter of commercial production (vs September Q 29koz, no costs reported). CY19 production of 99.1koz was at top end of guidance (guided at 75-100koz). CY20 guidance is expected in the March Q. GOR generated revenues of $75.4m (including spot and hedge sales) on sales of 37.1koz at an average realised price of $2,033/oz. GOR generated $64.3m operating cash flows and $30.2m free cash flow, holding $101m in cash and cash equivalents at the end of December Q. Given the significant cash generation, strong gold prices and expected expansion of near surface Reserves, we believe GOR will consider a plant expansion to  ~10Mtpa at Gruyere. This would have a substantial valuation impact, adding 65% upside to our current NAV of $1.13/sh. We downgrade GOR to HOLD with a $1.35 target price.

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