Gold Road Resources Shares Up on Profit and Dividend (ASX:GOR)
The Gold Road Resources Ltd [ASX:GOR] share price is up 6.9% at time of writing as investors show support following its inaugural profit and dividend update.
Gold Road announced last week it would pay a maiden dividend after posting a consolidated net profit after tax for the 2020 financial year of $80.8 million.
In 2019, the company posted a $9.8 million loss.
The fully franked final dividend of 1.5 cents per share will be paid on 14 April 2021 for the six months to 31 December 2020.
The dividend represents a half-year dividend yield of 1.42%.
The positive announcement has seen GOR shares up 5% over the last month and up 11% over the last week.
Gold Road is a mid-tier Australian gold producer with a Tier 1 mine and exploration projects in Western Australia.
It also owns 50% of the Gruyere Gold Mine, developed in a joint venture with Gold Fields. The Gruyere mine produced its first gold in June 2019.
Gold Road’s FY2020 highlights
Gold Road was no doubt pleased to reveal a positive FY2020 performance:
- Revenue from 126,434 ounces of gold sales totalled $294.7 million, up from $75.4 million.
- EBITDA margin increased to 58%.
- EBITDA for the 12-month period totalled $170.6 million, up from 2019’s $9.8 million loss.
- Consolidated NPAT of $80.8 million, up from 2019’s $4.7 million loss.
- Operating cash flow for the 12 months to 31 December 2020 came to $142.7 million, up from 2019’s $34 million.
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In terms of balance sheet health, Gold Road reported cash and short-term deposits of $126.4 million, up $25 million from 2019.
Importantly, GOR revealed it became debt free after fully repaying borrowings on 21 July 2020. For comparison, borrowings at 31 December 2019 totalled $78.5 million.
Gold price slump
With low interest rates, stimulus spending across the world and pandemic fears peaking, gold surged in 2020.
Now, according to Bloomberg, it is 2021’s ‘worst performer in the Bloomberg Commodity Index.’
Speaking to Bloomberg, senior vice president at Zaner Group in Chicago Peter Thomas commented:
‘With rates going higher and inflation expectations peaking out, we’re seeing a lot of profit-taking in gold and people going from gold into industrial metals such as copper.’
Goldman Sachs, on the other hand, noted in late January that with the prospect of further US stimulus and Federal Reserve holding off interest rates, gold ‘remains a compelling investment for the medium-to-long-term investor.’
What’s next for gold and GOR share price?
In terms of outlook, Gold Road announced that it seeks to lift the operation at its Gruyere mine from 258,173 ounces in 2020 to 350,000 ounces by 2023.
The company stated that Gruyere is a ‘Tier-1 gold mine and we are only beginning to unlock its potential.’
The company also provided guidance on its attributable All-In Sustaining Costs (AISC).
Gold Road forecasts its attributable AISC to be between $1,225/oz to $1,350/oz.
Has gold reached its bottom and are gold investors set for rosy times ahead?
It is difficult to say but I would think that investors who hold gold stocks should be mindful of further spot market declines in the near term.
That said, with gold scaling back in recent months, bullish investors might find that Australian gold stocks are looking cheap compared to the August 2020 highs.
For instance, see this S&P/ASX All Ordinaries Gold Index, which includes companies in the gold sub-industry of the All Ordinaries Index. The index serves as a useful broad market indicator for the gold industry.
If you think there’s an investment opportunity here but aren’t certain of your next move, then I’d suggest reading this free report on why Australia is set to become the next ‘gold epicentre’ — which could result in a big spike in Aussie gold stock prices further down the track.
For The Daily Reckoning Australia