PERTH (miningweekly.com) – ASX-listed Gold Road Resources has partnered with gold mining major Gold Fields to develop the Gruyere project, in Western Australia.

Under the joint venture (JV) agreement, Gold Fields will buy a 50% interest in the project for A$350-million in cash, comprising A$250-million payable on the completion of the transaction, and a further A$100-million to fund Gold Road’s initial cash calls during the construction phase.

A 1.5% net smelter return royalty will also be placed on Gold Field’s share of production from the JV tenements, once total gold production exceeds two-million ounces.

Further, an assumed liability will be undertaken by Gold Fields for up to a 10% overrun on the Gruyere initial development programme and budget of A$507-million, subject to certain exceptions such as overruns owing to a force majeure event.

Gold Fields will also provide funding support for any project-level bonding or guarantee requirements.

Gold Road MD and CEO Ian Murray said on Monday that the partnership with Gold Fields further strengthened the company’s balance sheet. He said it allowed Gold Road to significantly de-risk the Gruyere project and enabled the company to pursue growth plans much sooner than under alternative funding options.

A feasibility study into the project had previously estimated that the project could deliver some 270 000 oz/y over a mine life of 13 years. The project will be developed as a single large openpit mine with a plant capable of handling 7.5-million tonnes a year of fresh ore, and up to 8.8-million tonnes a year of oxide ore.

The JV is hoping to start construction at Gruyere in early 2017.

Gold Fields CEO Nick Holland said on Monday that Australia was a key part of the company’s business and its largest cash generator, with the Gruyere JV expected to enhance the company’s portfolio and its exposure to a new and emerging gold field in Western Australia.

“We are excited about partnering with Gold Road and 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.”

Gold Road will continue to manage the project during a transition period of up to six months post the completion of the transaction, after which Gold Fields will become manager.

Gold Road for its part will continue to manage exploration activities on the JV tenements on all projects, up to a development decision.

The JV tenements include the Central Bore, Attila and Alaric deposits, and the YAM14 and Toto prospects, which combined comprise some 144 km² of tenement area.

Gold Road will retain full ownership in the North Yamarna and 50% interest in the South Yamarna belts.