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Why the Gold Road share price is racing 10% higher today

The Gold Road Resources Ltd (ASX: GOR) share price is the best performer on the S&P/ASX 200 index on Thursday.

In early afternoon trade the gold miner’s shares are up a sizeable 10% to $1.48.

Why is the Gold Road share price storming higher?

Investors have been fighting to get hold of Gold Road’s shares following the release of its quarterly update.

That update revealed that Gold Road had a strong quarter in respect to both production and cash flow generation.

According to the release, throughput rates and gold recoveries exceeded ramp up expectations at the Gruyere operation. This led to gold production of 70,023 ounces during the quarter and 99,130 ounces for 2019. The latter was at the upper end of guidance of 75,000 to 100,000 ounces.

Pleasingly, Gold Road also delivered on its cost guidance. Its all-in sustaining cost (AISC) came in at A$1,102 an ounce during the quarter. This was within its guidance range of between A$1,050 and A$1,150 for the quarter.

These low costs mean its operations are highly profitable. During 2019 the company sold 49,565 ounces of gold at an average of A$2,038 an ounce. This implies a margin of A$988 an ounce.

And after accounting for corporate and exploration costs, Gold Road generated group free cash flow of A$30.2 million during the December quarter.

In light of this better than expected cash generation, the company was able make a considerable debt repayment of A$38 million in January. This has reduced its overall debt position from A$80.4 million at the end of the December 2019 quarter to A$42.4 million today.

What’s next?

It looks set to be a big 12 months for Gold Road and its Gruyere operation after the strong finish to 2019.

However, management won’t be providing its 2020 calendar year guidance until later in the March quarter following the approval of the 2020 mine plan.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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