Geordie Mark Focuses On Miners Making Money At $1,200/oz Gold

TGR: So you were impressed by the economics of the phase 2 expansion announced May 14?

GM: Certainly. Asanko looks to utilize the synergies inherent in the project given the proximity and characteristics of the deposits to be exploited in a phase 2 operation, as well as the infrastructure already being built for phase 1 (e.g., processing plant footprint, tailings dam). These synergies greatly improve on the economics of phase 2 rather than it being a standalone operation. We are looking forward to the full feasibility report due next year, so we can review other potential the company has been able to squeeze out through further optimization.

TGR: What other near-term gold project do you follow in Africa?

GM: Orezone Gold Corporation (ORE:TSX) and its Bomboré project in Burkina Faso. This company has a very experienced management team that discovered and put into development the Essakane mine that was sold to IAMGOLD Corp. (IMG:TSX; IAG:NYSE).

The Bomboré feasibility study was released in April. The feasibility outlined a capex of $250M and an after-tax internal rate of return of 24.4%. Bomboré is a low-grade deposit, but it contains more than 5 Moz gold, of which the aforementioned project only touches the surface in exploiting a portion of the oxide material and leaving the underlying larger sulphide resources. The company has developed an elegant processing approach that would employ integrated heap-leach and carbon-in-leach (CIL) processing where scrubbing of the ore material would result in the fines material (containing ~50% of the gold) going to the CIL plant, whereas coarse-grained tails report to the heap leach pad for processing. This processing plant is expected to lower the risk to gold recovery, and significantly reduce average recovery times versus employing a simple heap leach processing model only.

Operating costs on a per-ton basis are expected to be relatively low given the aforementioned processing plan and a low mining strip ratio of just over one. I think there's potential for additional resource growth within the oxide profile, which could add to mine life. All together the Bomboré presents as quite a decent project.

TGR: How stable a jurisdiction is Burkina Faso?

GM: It is in a state of political flux at the moment. It doesn't have an elected government, but it is looking at an election in Q4/15. Despite the uncertainty, a number of companies have recently gone into construction. Roxgold Inc. (ROG:TSX.V) was the most recent operator given a decree for mining, and True Gold Mining Inc. (TGM:TSX.V) has just announced that it is back in construction mode. Orezone submitted a mine permit application for Bomboré in May, and this could be approved before the election. That would be very positive for Orezone management.

TGR: What are signs investors should be looking for to indicate an upward shift in market sentiment?

GM: Fundamentally gold price is a significant determinant on sector sentiment, so we look for development of pricing stability to improve sector sentiment on the equity side. In addition, success breeds success, where pricing support is also expected to be aided by the improvement in operational performance from the producers, as well as continued consolidation in the sector. Together these factors could foster renewed interest in the sector.

TGR: Geordie, thank you for your time and your insights.

Geordie Mark Geordie Mark is the co-head of mining research at Haywood Securities. Prior to this, he was an analyst with Passport Capital and was vice president of exploration for Cash Minerals. Before joining the exploration industry full-time, he lectured in economic geology at Monash University, Australia, and served as an industry consultant. He holds a Ph.D. in geology from James Cook University.

1 2 3 4
View single page >> |

Disclosure:

1) Kevin Michael Grace conducted this interview for Streetwise Reports LLC, publisher of more

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.