Gold Road in $350m JV deal for Gruyere

Gold Road Resources has entered into a joint venture agreement with South African mining giant Gold Fields for its Gruyere project near Laverton, in a deal worth $350 million plus royalties.

Perth-based Gold Road announced after the close of the market today that it would retain a 50 per cent stake in the Gruyere gold project, with Gold Fields to pay $250 million on completion of the deal and $100 million to fund initial cash needs during the project’s construction phase.

Gold Fields will also pay a 1.5 net smelter royalty to Gold Road once total production passes 2 million ounces, and has also committed to fund up to 10 per cent of cost overruns on the project’s development budget.

A feasibility study was released on Gruyere last month, which revealed a $507 million cost to bring the project into production.

The joint venture plans to begin construction work at Gruyere early next year, with first production targeted for late 2018 or early 2019.

Under the terms of the deal, Gold Road will continue to manage the project during a six-month transition period, at which point Gold Fields will become manager.

The two companies will also form a management committee comprising three representatives from each company. The committee will be chaired initially by a Gold Road representative.

“We are very pleased to have concluded a highly accretive transaction for shareholders, and to have Gold Roads as our chosen joint venture partner, and with who we look forward to having a long and successful partnership,” Gold Road managing director Ian Murray said.

“The highly experienced owner’s team that we have established over the past 18 months will be the team that will develop Gruyere under the guidance and leadership of Gold Fields.

“This partnership further strengthens our strong balance sheet, allows us to significantly de-risk Gruyere, and enable us to pursue our growth plans much sooner than we may have under alternative funding options.”

Gold Fields chief executive Nick Holland said the group was excited to be partnering with Gold Road.

“We are hopeful this is the start of a multi-decade, mutually beneficial relationship and see significant potential synergies in resourcing, intellectual property, procurement and technical skills,” Mr Holland said.

“Australia is a key part of our business and our largest cash generator and this deal enhances our portfolio and expands our exposure to a new and emerging gold field in Western Australia.”

Treadstone Resource Partners acted as strategic and financial adviser to Gold Road, while Corrs Chambers Westgarth was engaged as legal adviser.

Law firm Gilbert + Tobin advised Gold Fields on the due diligence investigations principally in relation to land access and native title issues during the bidding phase and in the negotiation, drafting and finalisation of the sale and joint venture documents. 

The Gilbert + Tobin team advising on the transaction was led by partner Claire Boyd, and assisted by special counsel Jennifer Hart and lawyer George Salter.  Partner Marshall McKenna advised on the Aboriginal heritage and native title implications of the transaction, while James Lewis, Partner, assisted on financing and security aspects and Adam Musgrave, lawyer, on the indirect tax aspects of the transaction.

Gold Road shares were locked in a trading halt all day, and last traded at 63 cents each.