Orezone trumpets world-class deposit at Bombore

VANCOUVER — Just three months after finalizing a US$27-million deal with Cluff Gold (CLF-L, CFG-T) for its Sega gold project in Burkina Faso, Ottawa-based explorer Orezone Gold (ORE-T) looks to have another West African success story on its hands with a world-class resource estimate at its 100%-owned Bombore gold project 85 km east of Ouagadougou, Burkina Faso’s capital.

The updated resource makes Bombore the largest undeveloped gold deposit in Burkina Faso, with 125 million measured-and-indicated tonnes averaging 1.03 grams gold per tonne for 4.13 million contained oz. Bombore holds an additional 32.1 inferred tonnes grading 1 gram gold for 1.03 million contained oz.

Orezone completed 215,000 metres of additional drilling to upgrade its total resource by 49% to 5.2 million oz. contained gold, while also boosting Bombore’s average grade by 16% to 1.02 grams gold on the back of more conservative cut-off levels. Cut-offs for oxide resources increased from 0.3 gram gold under a 2010 model to 0.45 gram gold under the 2012 estimate, while transitional ore cut-off grades jumped from 0.35 gram gold to 0.45 gram gold.

Metallurgical tests have established carbon-in-leach recoveries of 94% for laterite and oxides, 92% for transitional ore, and 92% for fresh material.

“The pit shell optimization parameters approximate current operating costs in Burkina Faso and represent significant increases in the mining and processing costs as compared to those parameters used in the 2010 resource estimate and 2011 [preliminary economic assessment],” stated senior vice-president exploration Pascal Marquis. “Most importantly the deposit is scalable and leveraged to the gold price.  Any increase in the gold price or drop in costs yields significantly higher contained ounces.”

Orezone’s resource lies in a 6.2 sq.km conceptual open-pit shell based on a US$1,400 per oz. gold price. Bombore’s deposit now covers 11 km by 1 km and is open along strike and at depth. The majority of the resource lies within 120 metres of surface, with an estimated strip ratio of 2.7 to 1. Discovery costs at Bombore to-date have run Orezone roughly US$10 per oz. gold.

Orezone succeeded in expanding its oxidized ore ratio in a bid to develop Bombore as a two-stage mine, with the first phase involving an oxide-only processing plant that would carry a lower start-up capital expenditure (capex), as well as better recovery rates and lower operating costs.

Oxidized measured and indicated resources increased by 70% to 1.76 million oz. gold at an average grade of 1.03 grams. Bombore’s gold mineralization is contained within a shear zone associated with silica, sulphide and carbonate-albite-tourmaline-biotite alteration, in addition to arrays of quartz veins.

The resource announcement had limited impact on Orezone’s market value, as shares dropped 1.6% or 3¢ during the Aug. 27 and Aug. 28 trading periods. The company has been on a run over the past two weeks, however; with shares jumping 54% or 65¢ since Aug. 13 en route to a $1.85 presstime close. Orezone has 86 million shares outstanding for a $158 million market capitalization.

A successful 2012 drill season has led Orezone’s board of directors to approve a US$10 million in-fill and expansion drill program that will run from September through June 2013. The company had originally budgeted US$16 million for exploration at the property over 2012. An additional 35,000 metres of drilling was completed during the second quarter, with results expected in the next three weeks.

Orezone remains in a comfortable cash position with US$31 million — including 11 million shares in Cluff it received in the Sega deal — which should allow the company to complete a feasibility study on Bombore in the first half of 2013 without risking further equity dilution.

Canaccord Genuity analyst Nicholas Campbell maintains a “speculative buy” rating on Orezone and increased his price target by 25¢ to $4.25 following the release of the updated resource.

“We continue to value Orezone based on a discounted cash flow (DCF) of the Bombore project with an in situ valuation on the resources excluded from the DCF to account for reserve expansion. We note that we have not adjusted our model to reflect the two-stage development approach or the [sixteen-percent] increase in the average grade for the mine,” Campbell wrote in an Aug. 27 research update. “The lower capex associated with an oxide only plant has the potential to significantly reduce the dilution associated with financing the project.”