Gold Road (GOR) recently announced a revised capital cost estimate of A$621m for the Gruyere Project in Western Australia. It’s the second time the capital cost has been revised since the original $507m capex announced in the 2016 Feasibility. The increases have been partly due to scope changes associated with larger infrastructure as well as force majeure and overall project design modifications. Whilst the cost blow-out was disappointing, the net exposure to GOR was relatively minor at ~$20m. Investors are discounting the stock on the premise of further capital cost blowout and extension to timelines to first production. Our recent site visit to Gruyere re-affirmed our view that the project is likely to produce first gold around the end March Q/early June Q and we have comfort that costs are likely to come in within the updated guidance.
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