African Gold Group extends mineralization at Kobada

Northern step out holes drilled at the Kobada gold project in southern Mali will have a positive impact on a revised resource estimate due later this year, African Gold Group (AGG-V) says.

Eight near-surface step-out holes were collared up to 200 metres north of Zone 1. Highlights include hole 6, which returned 70 metres of 1.83 grams gold per tonne and ended in mineralization and hole 3, which cut 84 metres of 1.26 grams gold and also ended in mineralization. Other notable intercepts were 21 metres of 1.07 grams gold in hole 4 and 21 metres of 1.15 grams gold in hole 5.

In November last year the company released the first set of northern step-out holes collared up to 100 metres north of Zone 1, highlights of which included 112 metres grading 2.14 grams gold including 1 metre of 90.19 grams gold that ended in mineralization in hole 189 and 88 metres of 1.66 grams gold including 2 metres of 25.60 grams gold in hole 192.

The company has recently completed a 25,000-metre drill program that is expected to take the strike length of the deposit from 1.7 kilometres to 3.2 kilometres, says Michael Nikiforuk, African Gold’s president and director.

Currently the deposit has an inferred resource of 41.8 million tonnes grading 0.64 gram gold per tonne for 1.1 million ounces of gold based on a bulk mining model and the company plans to release an updated resource estimate in September.  

“It will be upgraded to indicated from inferred and a percentage of that will go into measured,” says company founder Nikiforuk. “We also anticipate a meaningful increase in grade.”

And “the blue sky is in no way, shape or form constrained,” he continues. “We have not delineated it either to the north, south or at depth.”

A preliminary economic assessment completed last year evaluated the potential of an open pit, bulk mining model utilizing a gravity recovery process plant and included drill data up to the end of December 2010. (No drill data from 2011 was incorporated into the PEA.)

The findings of the PEA estimated an after-tax net present value of US$216.9 million and an after-tax internal rate of return of 90.57% using a base case of US$1,100 per oz. gold and a discount rate of 5%. It also indicated that the project would produce gold at a cost of US$470.90 per ounce, processing 20,000 tonnes per day for a total of 7 million tonnes a year.  Average annual operating costs were estimated to be US$8.27 per tonne for the first five years with capital expenditure of about US$122.5 million.

The Kobada project is in the Kangaba region of Mali on the Birimian Greenstone Belt about 125 km or a four-hour drive to the south of Bamako, the country’s capital. The western boundary of the 41 sq. km concession is marked by the Niger River and the eastern boundary is marked by the Fie River. To the south is Mali’s international border with Guinea. Kobada is situated about 50 km from a hydroelectric dam.

African Gold already has a fully constructed pilot plant on site that is in the commissioning stage and is forecast to be operational by the end of the month.

Nikiforuk, a former director at Banro Resource Corp. (BAA-T, BAA-X) who represented Banro in three rounds of equity financing totaling about $30 million, also notes that African Gold benefits from the deep knowledge of career geologist Pierre Lalande, who spent much of his forty years of field experience in West Africa.

Lalande worked in West Africa as chief geologist for Iamgold (IMG-T, IAG-N) (1994-2001) and as a technical advisor to Orezone Resources (OZN-T) (2001-2005). Among the West African projects he has worked on are Sadiola (Mali), Yatela (Mali), Siguri (Guinea), Kiniero (Guinea), Samira-Libiri (Niger), and Essakane and Inata (Burkina Faso).  

At press time in Toronto African Gold was trading at 36¢ per share within a 52-week trading range of 29.5¢ and $1.00 per share. The junior has about 115 million shares, fully diluted.