Building a mine on time and within budget is a tough feat to pull off, but it’s something Africa-focused junior Roxgold (TSXV: ROG; US-OTC: ROGFF) is close to achieving.
On April 12, Roxgold reported overall construction at its Yaramoko gold project in Burkina Faso was 84% complete.
“Yaramoko is going well. We are 90% built and we’re on track to pour our first gold bars in June,” Roxgold president and CEO John Dorward said in an interview.
The junior broke ground at its 90%-held project — sitting 200 km southwest of the capital Ouagadougou in Balé province — last April. This was three years after it published an initial resource estimate on Yaramoko’s 55 Zone deposit. The Burkina Faso government has a 10% carried interest.
At the end of March, Roxgold had spent US$78 million of the US$110.8 million preproduction budget. It has more than enough funds to cover the remaining US$32.8 million in expenses.
CIL processing facilities at Roxgold’s Yaramoko gold mine under construction in Burkina Faso. Credit: Roxgold
With all going to plan, Raymond James analyst David Sadowski writes that he sees “no major obstruction to the company reaching its goal.”
Once in full swing, the 750-tonne-per-day underground operation at the 55 Zone should deliver 99,500 oz. gold annually for over seven years. An April 2014 feasibility study pegs all-in sustaining costs at US$590 per oz.
“That is our life-of-mine feasibility study estimate, and everything we see to date gives us confidence that we will be able to meet that target,” Dorward says.
The largest contributor to the low costs is the high resource grade. The mine plan is based on an indicated resource of 15.8 grams gold per tonne. The life-of-mine head grade drops to 11.6 grams per tonne after accounting for dilution, Dorward notes.
Inclusive of reserves, the 55 Zone deposit contains 810,000 oz. in indicated (1.6 million tonnes at 15.8 grams gold) and 278,000 oz. in inferred (840,000 tonnes at 10.26 grams gold), using a 5-gram-gold cut-off.
A mill at Roxgold’s new Yaramoko gold mine in Burkina Faso. Credit: Roxgold
Reserves total 759,000 oz. from 1.99 million tonnes at 11.8 grams gold. The reserves start at surface and extend to 430 metres deep.
The company’s underground contractor African Underground Mining Services (AUMS) has completed 2,450 metres of decline and lateral development. The ramp has advanced 610 metres from the portal and opened up four levels for ore extraction, with more than 23,000 tonnes placed on the run-of-mine pad.
BMO analyst Andrew Breichmanas notes that the “current stockpiles represent one month of mill feed and appear adequate for start-up.” Stoping will begin in the third quarter.
Dorward estimates there should be more than 40,000 tonnes stockpiled before production starts, adding that the company should keep the stockpile at 20,000 to 30,000 tonnes afterwards.
Roxgold is using engineering, procurement and construction (EPC) contractor DRA-Group Five Joint Venture to build and commission a 270,000-tonne-per-year processing plant and infrastructure.
The plant, which is more than 90% complete, started crushing ore in March.
More recently, Roxgold initiated an 11,000-metre, two-rig drill program to target resource expansion opportunities in the upper 430 metres of the 55 Zone deposit.
“We are targeting some really low-hanging fruit in terms of where we don’t have enough drilling data in our database,” Dorward notes.
A crusher at Roxgold’s new Yaramoko gold mine in Burkina Faso. Credit: Roxgold
The program could result in a “15–20% increase in indicated resources, so anywhere around 100,000 to 150,000 oz.,” he says.
Over the next six to nine months, Roxgold plans to delineate enough additional resource to outline an annual 150,000 oz. producer with an eight- to 10-year mine life, Dorward says. “That might not all be in reserves and it might not all be in indicated resources. But we certainly would like to have at least the bones of that plan and credibly display that to people and people say, ‘OK, I can see how Roxgold is going to produce that increased level of production and maintain their mine life.’”
The drill results will be included in an updated life-of-mine plan in late 2016.
In May, Roxgold intends to report a maiden resource estimate for the QV1 target at the Bagassi South zone, 1.8 km away.
Raymond’s Sadowski forecasts Bagassi South could host a 300,000 oz. global resource and contribute 20,000 to 30,000 a year to the 55 Zone mill by 2019, or earlier.
Dorward says he is comfortable with “some” of Sadowski’s estimates and is optimistic that Roxgold can bring Bagassi South into the mine plan.
“We have quite a straightforward project,” he says. “It is not technically complex in any way. It has good metallurgy, good ground conditions and good grade. Adding to the mix, we have an experienced team.”
Dorward and his team have been involved in several mines in West Africa, including financing and building the Sabodala gold project in Senegal, operating the Edikan gold mine in Ghana and advancing the Tengrela gold project in Côte d’Ivoire.
“We have quite a straightforward project. It is not technically complex in any way. It has good metallurgy, good ground conditions and good grade.”
John Dorward
CEO, Roxgold
Dorward adds that Roxgold has strong partnerships with its underground mining contractor AUMS and EPC contractor DRA-Group Five.
While the US$10-million shares-for-services arrangement with AUMS remains in place, Roxgold does not plan to use it.
The junior has US$27 million in cash, US$15.5 million undrawn on its US$75-million project finance facility and a restricted US$15-million cost overrun account.
Roxgold shares closed April 20 at $1.10 apiece, up 59% year to date.
Sadowski points out that gold developers on average see an 18% increase in their share prices some 75 days ahead of first production, and expects Roxgold should have a “similar — if not more impressive — rise in the immediate term.”
Sadowski has bumped his $1.30 target price to $1.50 per share, while BMO’s Breichmanas has a $1 target price.
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