Roxgold eyes Yaramoko expansion

VANCOUVER — African miner Roxgold (TSX: ROXG) has plans to boost production at its Yaramoko gold mine in Burkina Faso by adding resources from its Bagassi South project, 1.8 km south of the underground mine site.

The company says Bagassi South could deliver 30,000 oz. gold per year, assuming 350 tonnes per day over a five-year mine life.

“If it all goes according to plan, we’ll access the ore by the second half of next year, and produce gold by 2019,” Roxgold’s president and CEO John Dorward said during a presentation at The Northern Miner’s Canadian Mining Symposium in London in May.

Dorward said the goal is to increase annual production at Yaramoko to 150,000 oz. gold, up from 105,000 to 115,000 oz. gold, as stated in the company’s 2017 production guidance.

Location map of Roxgold’s Yaramoko gold mine. Credit: Roxgold.

The expansion would require increasing Yaramoko’s capacity of 750 tonnes per day to 1,100 tonnes per day, which could cost Roxgold US$32 million.

“By 2019 we should run at a higher rate, so the challenge now is to keep drilling out Bagassi South and grow our resource base,” he said.

Roxgold recently completed a 29,000-metre drill program targeting structurally controlled gold mineralization at Bagassi South’s two main deposits, QV1 and QV Prime, where resources total 563,000 inferred tonnes of 12.14 grams gold per tonne for 220,000 oz. gold.

The program had a dual approach: convert QV1’s inferred resource into indicated, and test the extent of high-grade ore shoots at QV Prime. (Mineralization at QV Prime is less understood, accounting for only 10,000 oz. gold of the project’s total resource.)

And there’s room for both deposits to grow, Dorward noted. At QV1, the drill campaign extended mineralization to 425 metres deep, with intersections of 13.1 metres of 13.5 grams gold.

Roxgold’s CEO John Dorward addresses attendees at the Canadian Mining Symposium at Canada House in London, U.K., in May 2017. Photo by Martina Lang.

Drilling at QV Prime — 100 metres north of QV1 — was designed to follow up on previous intercepts of 4.5 metres of 36.7 grams gold. Results included 0.8 metre of 290 grams gold, and 3.2 metres of 11.4 grams gold.

“We’re quite comfortable with extending the envelope of mineralization and we expect to add ounces,” Dorward said. “QV1 and QV Prime should be open to common access for underground development, so all in all, they provide an incremental growth platform.”

The recent drilling will underpin a resource update in the third quarter of this year, followed by a feasibility study at year-end. Permitting the project should also be straight-forward, he noted.

“A lot of what we’re seeing is similar to what we see at Yaramoko, so we’re not anticipating any surprises as we advance towards feasibility. Most of the work has already been done,” he said. “We’ve started the permitting process, but it’s just an extension to our existing exploitation permit, so it’s nothing new either.”

Bagassi South isn’t the only success Roxgold has enjoyed over the past year. The company has been raking in profits and paying back debt since achieving commercial production at Yaramoko eight months ago.

In the first quarter, Roxgold produced 35,594 oz. gold at average head grades of 17.3 grams gold, and all-in sustaining costs of US$720 per oz. gold. The company generated cash flow of US$23.7 million, or 9¢ per share.

With US$53 million on hand, and having made an early repayment of US$15 million under its US$75-million credit facility (which is lowered quarterly and not due until 2021), the company is in good financial shape.

“What we always wanted to do with the company was build a cash machine,” Dorward said. “We focus more on high-quality ounces than the number of ounces produced.”

Yaramoko’s deposit, the 55 Zone, is also open to expansion. Drilling has outlined mineralization to 1,000 metres deep with intercepts of 23.8 metres of 20.1 grams gold, and 2.1 metres of 6 grams gold.

“Infill drilling from surface is quite inefficient, the resource is too deep,” he said. “At the end of this year we’ll be in a position to have underground drilling platforms, so we’re looking forward to upgrading our resource … and there’s potential that this orebody could get dramatically thicker at depth. We’re designing a drill program to test that thesis, so hopefully there’s more excitement coming down the pike.”

Macquarie Research analyst Michael Gray said in a report that Yaramoko’s “exceptional grades” and “encouraging resource growth” could be catalysts for the company. He rates shares of the company as “outperform” and has a $3-per-share price target.

Shares of Roxgold have traded in a 52-week range of $1.07 to $1.76, and closed at $1.15 at press time. The company has 371.4 million shares outstanding for a $428-million market capitalization.