APA Group to power Gruyere

APA Group will construct a new $180 million gas pipeline and power station to provide energy to Gold Road Resources’ Gruyere gold project near Laverton.

APA Group will build what will be known as the Yamarna Gas Pipeline, and a 45-megawatt gas-fired power station to supply power to Gruyere

The 198-kilometre Yamarna pipeline will connect to three other APA interconnected gas pipelines, with the gas to travel about 1,500km to reach Gruyere.

APA Group will invest and own about $180 million in the new infrastructure, with Gold Road to pay a minimum of $215 million and up to $585 million to APA over 15 years through a gas transportation and electricity supply agreement.

Under a related condition of the deal, revealed by Gold Road, natural gas will be procured and paid for separately by the project’s joint venture partners (Gold Road and South Africa-based Gold Fields) for power generation, meaning this component has not been included in the $585 million forecast cost.

The pipeline and power station is expected to be commissioned in the fourth quarter of next year, ahead of first production which has been earmarked for the first quarter of 2019.

“I am very pleased to announce this organic growth project; it ticks all the APA boxes in terms of demonstrating our capability in energy solutions and construction, leveraging APA’s interconnected energy infrastructure, and long-term contracts with highly credit-worthy counterparties,” APA managing director Mick McCormack said.

“This is another example of where we have been able to deliver a compelling energy solution for a customer using both our pipeline and power generation capabilities.

“We built and commissioned the Eastern Goldfields Pipeline 18 months ago, and the Gruyere JV will be the third customer to take advantage of our interconnected pipelines in this region to provide a safe and reliable energy solution – as an infrastructure, you want to see your assets worked hard.”

The news came as Gold Road announced an $18 million increase in the development cost of Gruyere to $532 million, following recent reviews of the project’s feasibility study.

It also accounted for the project now complying with the International Cyanide Management Code, the costs of which will met by Gold Fields.

Gold Road shares were 1.4 per cent lower to 67 cents each at 10am.

APA Group shares were 0.2 per cent lower to $9.61 each.