True Gold making Karma a reality in Burkina Faso

True Gold Mining (TSXV:TGM) is gaining market momentum, as it gears up to build its flagship Karma gold mine project in north–central Burkina Faso.

The company ordered a mining fleet for the heap-leach operation after building its freshwater barrage at the site. 

True Gold expects the fleet to be ready by December, and would  start on pond and leach-pad earthworks a month later. 

This means the company is on track to meet its target to start mine construction in the fourth quarter.

True Gold says pre-production mining should account for 8 million tonnes of material moved during the construction period and that heap-leaching operations should start in 2015.

With US$60 million in the bank and a debt-financing deal in the works, the financing picture is also coming into focus. 

Project bank debt and alternative debt options will make up the US$90-million project financing package it expects to close by September.

A feasibility study on Karma estimates it would cost US$131.5 million to build a mine that would produce 97,000 oz. gold per year for 8.5 years at all-in sustaining costs of US$720 per oz. 

Using a US$1,250 gold price, the study estimates a $178.2-million net present value (NPV) and a 43.1% after-tax internal rate of return.

True Gold is also in the midst of a preliminary economic assessment that considers increasing throughput on the back of the resource additions at North Kao.

North Kao now has in-pit inferred resources of 47.8 million tonnes grading 1.08 grams gold for 1.66 million oz. gold.

Haywood Securities analyst Tara Hassan says that including such an expansion would affect her assessment of the company.

“This scenario in our valuation could increase our project NPV by 10–25%, depending on resource conversion and additions and capital-cost requirements,” she wrote in a research note to clients.

Hassan rates True Gold stock as a “buy,” with a price target of 70¢ apiece.

Scotiabank analyst Ovais Habib is slightly more bullish on the expansion’s impact. 

He believes that incorporating North Kao into the mine plan at a higher overall crushing rate of 5.8 million tonnes per year for $30 million in extra capex, plus $1.5 million of sustaining capex per year, would boost the NPV by 28% to a total of  $202 million.

Investors can make their own assessment once the PEA comes out next quarter.

Other drivers behind the company’s stock price going forward according to Habib include: results from drilling priority targets at Karma; getting exploitation permits for the Kao and Nami deposits, which should come in the second quarter; and progress on the debt-financing deal.

Habib rates the stock as a “sector outperform,” with a 50¢ price target.

At press time True Gold’s stock traded for 35.5¢ per share, within a 52–week trading range of 21¢ to 49¢. 

The company has a $141.4-million market capitalization, and 397.6 million shares outstanding.