Resolute Mining to invest $21M in Orca Gold

African-focused gold miner Resolute Mining (US-OTC: RMGGF) is investing nearly $22 million in Orca Gold (TSXV: ORG: US-OTC: CANWF) in a two-tranche deal that Orca expects will close this July. Orca will spend most of the money to continue drilling and developing its 2,170 sq. km Block 14 gold property in Sudan, 900 km north of the capital, Khartoum.

Resolute, which has its producing Syama gold mine in Mali, completed the first $11-million tranche on May 30.

“What we were really looking to do with this deal is show the world that gold-mining companies in Africa are now prepared to invest in Sudan,” Orca Gold CEO Richard Clark says in an interview with The Northern Miner.

Orca will also issue Resolute a special warrant that would allow Resolute to buy another 1.8 million Orca shares at 67¢ apiece, once Orca closes a prior deal with Kinross Gold (TSX: K; NYSE: KGC).

“We did this deal in January 2017 on Kinross’ assets in Côte d’Ivoire,” Clark says. “It involved two subsidiaries of Kinross. Our deal is that Kinross has to deliver clean companies to us.”

Orca is still waiting for Kinross to sort out paperwork relating to the properties. When it does — and Orca expects it will in the coming months — that deal will finally close.

In 2017, Orca agreed to pay Kinross 10 million shares, valued then at 9.9% of the company, for its Côte d’Ivoire properties. But Orca has completed several financings in the interim, and Kinross’ position has been diluted.

“Resolute wanted 15% of Orca on a fully diluted basis,” Clark continues. “We said, ‘OK, but we can’t issue 15% of Kinross’ 10 million shares, because they haven’t been issued.’ So we created this special warrant that effectively grants to Resolute the right to get more shares of Orca, provided and when the Kinross deal closes.”

Orca is working on a feasibility study at Block 14 that it hopes to deliver by the end of October. It is finishing metallurgical variability test work and a 25,000-metre drill campaign to extend resources below the current pit shells.

The Sudanese government and its Mining Police moved artisanal miners from a small portion of Black 14 several months ago. Credit: Orca Gold.

Orca has released a steady stream of drill results from Block 14 since the start of 2018, and reinterpreted the geology. Recently, the company intercepted 1.86 grams gold over 123 metres from 41 metres downhole and 8.36 grams gold over 12 metres from 112 metres downhole.

The company says drill results like these confirm its new geological interpretation. Clark says Orca previously had problems drilling Block 14 mineralization at oblique angles, was missing it entirely. The company turned its drilling orientation to a different azimuth, and says it has since had more success intercepting the orebody.

“When we looked at our block model, we’d sit there and we’d go, ‘that area is blank, or that’s a waste, and we don’t think that should be the case,’” Clark says.

The company boosted its indicated resource at Block 14 by 24% in January to 72.7 million indicated tonnes grading 1.3 grams gold for 3.05 million oz. gold and 1.71 grams silver for 3.99 million oz. silver, as well as 19.8 million inferred tonnes at 1.2 grams gold for 750,000 oz. gold, and 1.6 grams silver for 1.05 million oz. silver.

The January resource is based on 99,000 metres of drilling in 688 holes, including another 12,500 metres in 34 holes over the previous resource.

The Sudan government granted Orca its water permit in February, and the company expects to file its environmental impact study by July. It will then look to obtain its environmental permits by the end of October.

In early April, the Sudanese government and its mining police came in and removed all the artisanal miners from Orca’s mining leases. The affected area was 32 sq. km, or less than 2% of the overall concession.

Orca then used its equipment to backfill the artisanal workings.

Drill core from Orca Gold’s Block 14 gold project in Sudan. Photo by Richard Quarisa.

“It’s just another example of a good place to be working,” Clark says. “The government understands what our rights are, they understand the rights of the artisanals, and they want a balance because they want the artisanals to keep mining gold. They’re balancing it well in terms of the corporate interest versus the artisanal interests.”

The company is also drilling up to 3,000 metres at its Morondo gold project in Côte d’Ivoire — one of the properties in the Kinross deal.

The company has begun new metallurgical test work based on core from two holes recently drilled at the property, and expects results in July. Clark describes the upcoming drilling as step-out drilling that is “semi resource expansion and semi exploration,” adding that it will continue for two months.

“We’ll then make a decision based on those results, and the metallurgical results, what we do next,” Clark says. “My guess is we make the decision to go to a preliminary economic assessment.”

He says Orca would aim to have a maiden resource and preliminary economic assessment for Morondo by the end of 2018.

Orca shares are trading at 58¢ apiece within a 52-week range of 36¢ to 78¢. The company has a $93-million market capitalization.

“By the middle of July we’ll have $22 million, and we’ll be able to do everything we need to do and be reactive to the market,” Clark says.