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Gold Road’s Canadian ambitions stir concerns

Investors delivered a big thumbs down to Gold Road Resources (ASX:GOR) after it confirmed ambitions to try to buy a mining company in Canada. The shares fell more than 7% on Monday after the company revealed its interest in acquiring a “potential interest in the Greenstone Gold Mines in Canada.” The mine is located in the Canadian province of Ontario.

“Gold Road confirms its participation in a sale process conducted by Orion Resource Partners (USA) LP for Greenstone Gold Mines,” Gold Road said.

Media reports claimed Gold Road was looking at buying Greenstone Gold Mines for a reported $A1 billion and was preparing a big equity raising and debt issue. (This would see Gold Road buying both partners’ shares – Greenstone Gold Mines is a 60/40 partnership between Equinox Gold and Orion Mine Finance for the joint ownership and development of the Greenstone Project and the Kenogamisis, Brookbank, and Viper prospects).

“This participation remains ongoing, and Gold Road has not entered into any definitive acquisition agreements with respect to Greenstone Gold Mines.

“Gold Road continues to evaluate strategic opportunities and will only pursue acquisitions if they are in the best interests of its shareholders. The Company will keep the market informed in accordance with its continuous disclosure obligations,” Gold Road’s statement ended.

Gold Road’s only major operating asset is a 50% stake (with Gold Fields) in the Gruyere mine in WA, which is currently battling to recover from the heavy rain across the WA goldfields through the March quarter, especially in March.

Its best asset is a near 20% stake in De Grey Mining, which controls the biggest gold strike in Australia in recent years – the multi-prospect Hemi project in WA’s Pilbara, with more than 10 million ounces of resource.

The media reports about Gold Road’s possible Canadian adventure knocked the share price of De Grey down by more than 4.5% on Monday. Sometime in the next year, Gold Road will be asked to help finance the $A1 billion-plus cost of bringing the first part of the Hemi mine online (which is planned to produce first gold in 2026).

Work is almost complete to bring the mine online by the middle of this year with a projected annual production of 400,000 ounces a year. Greenstone’s website says the mine has reserves of more than 5.5 million ounces – which makes it half the size of the Hemi project of De Grey.

Another point is that Gold Road is looking while world gold prices are at record levels.

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