TSX-listed gold miner Teranga Gold Corporation (Teranga) is a shining example of how to build a strong and solid portfolio of producing and exploration assets in the West African region.
Having successfully brought its Burkina Faso-based Wahgnion mine online in H2, 2019and then completing the acquisition of Senegal-based project Massawa in March 2020, the company remains committed to keeping its growth plans on track with a COVID-19 management plan effectively in place, CEO RICHARD YOUNG tells LAURA CORNISH.
“It is undoubtedly a real challenge for small cap companies to grow in a cash-strapped environment. Developing assets without blowing your balance sheet is no easy feat, but Teranga has done so thanks to our focus on capital allocation and ability to retain highly skilled and experienced people who contribute significantly to the success of our business,” Young starts.
This more recently required the company to implement a management plan to best withstand the COVID-19 pandemic while continuing to produce gold, which stands the company in good favour considering given that the gold price is at a seven year high (as of April 2020).
“Both of our gold mines are in operation and we are doing all we can to ensure the virus does not impact our operations,” the CEO continues.
Pandemic aside, Teranga poised for growth
Teranga is ultimately focused on raising its gold production to reside within the 500 000 ozpa gold mark. This is well within reach when combining the annualised production from what is now known as the Sabodala-Massawa complex and its Wahgnion mine.
While the Wahgnion mine added upwards of 130 000 ozpa of gold (over the first five years) to Teranga’s production profile, it is the recent US$380 million Massawa acquisition that will breathe new life into the Sabodala operation, which after 11 years of production has produced over 2 Moz of gold and retains the title of Senegal’s largest gold producer.
Teranga entered into a definitive agreement with a wholly-owned subsidiary of Barrick Gold Corporation and its joint venture partner, Compagnie Sénégalaise de Transports Transatlantiques Afrique de l’Ouest SA (CSTTAO) in December 2019 to acquire a 90% interest in the undeveloped Massawa project. The government of Senegal will retain the remaining 10% interest.
At nearly 4 g/t, Massawa is one of the highest-grade undeveloped open-pit gold reserves in Africa. It is located within trucking distance of Sabodala (~25 km), creating the opportunity for significant capital and operating synergies.
The proximity of the projects and the combination of Sabodala’s +4 Mtpa mill and Massawa’s high-grade is are expected to scale Sabodala into a top tier asset.
“Massawa is a transformational deal for Teranga with tremendous synergies. We anticipate that production from the Sabodala-Massawa complex, together with production from Wahgnion, will increase our targeted consolidated annual gold production and reposition Teranga as the next multi-asset, low-cost, mid-tier gold producer in West Africa, one of the world’s premier gold mining regions.”
Processing the Massawa ore using the Sabodala plant delivers a significant reduction in start-up costs – in the range of $5 – 10 million to bring the first of four open pits into production (expected in Q3 this year), and another $20 – 30 million to complete retrofits and upgrades to the Sabodala plant to increase its current processing capacity, Young outlines.
The Massawa feasibility study completed by Barrick projected building all phase 1 and phase 2 infrastructure for approximately $333 million.
In essence, Sabodala’s remaining lifespan has increased from 12 years to more than 20 years with the addition of high-grade ore from Massawa.
“With much higher grade ore being processed through the Sabodala mill commencing in the third quarter of this year, our cost per ounce metrics will decline ultimately leading to an increase in our margins,” Young expands.
Consequent to the above, Teranga intends to mine and process Massawa’s high-grade reserves on a priority basis and it is anticipated that by 2021, more than half of the ore processed through the Sabodala plant could potentially be sourced from the Massawa deposits.
Working with Barrick, the company has invested significant resources in due diligence to gain a better understanding of the technical details of the Massawa ore bodies to support the development of an optimised, integrated mine plan for four of the two properties.
This includes detailed resource modelling for the mineralogical characterisation, the chronology of metallurgical test work to determine BIOX as the process of choice for the refractory ore in a retrofitted Sabodala plant and a revised life of mine plan that optimises annual operating and capital costs, as well as the timing of the Sabodala and Massawa ore bodies for processing.
This detailed due diligence work will form a basis for the pre-feasibility study that the company plans to complete for the integrated Sabodala-Massawa complex within six months of the acquisition close in March 2020.
In advance of an integrated definitive feasibility study, the company will embark on a drill programme to expand the resource base of the Massawa project.
The definitive feasibility study, which is expected to be completed in 2021, will assess the optimal size of the retrofit and the timing of implementation for processing of the refractory components of the Massawa ore.
“BIOX is a well-recognised technology for processing refractory ore and with input from both consultants and members of our team with extensive BIOX operating experience, we are confident we will process these portions of our ore body without difficulty,” Young notes.
Turning to Wahgnion, Young notes the success that has been realised at this operation since its start-up, which was achieved ahead of schedule and under budget.
“Wahgnion is operating well, with throughput above nameplate capacity. Already we are looking at the potential of increasing production above its 130 – 140 000 ozpa capacity.”
The company will implement a reserve development programme in an effort to extend the mine’s lifespan up to about 15 years in total.
The longer-term future
Massawa hosts historical mineral reserves of 2.6 Moz from 20.9 Mt at 3.94 g/t gold and Sabodala’s mineral reserves sit at 2.4 Moz from 55.7 Mt at 1.35 g/t gold. “The potential that resides within both properties is significant,” Young highlights.
As such, the company is embarking on a significant drill programme at both properties and believes there is considerable upside in terms of depth and along strike through additional targets that the former Randgold Resources had identified. The Sabodala property also offers organic growth opportunity, including the potential to move underground.
But the potential for further significant growth lies well within Teranga’s reach. The company is looking to its next project – Golden Hill – to be the project that could lift its gold production well above 500 000 ozpa.
Teranga acquired Golden Hill as an early-stage exploration project in 2016 as part of the company’s acquisition of Gryphon Minerals. Formerly part of a joint venture, Golden Hill is now 100% wholly owned by Teranga.
It is located within the central part of the highly mineralised Houndé Greenstone Belt, and is surrounded by an area known for gold discoveries, including the Siou, Houndé (contiguous with Golden Hill) and high-grade Yaramoko deposits.
Exploration is advancing rapidly. In just three years, Golden Hill has produced a series of excellent grade, near surface and deeper drill results at a variety of prospects.
Currently there are over a dozen prospects and deposits, the majority of which are located within 10 km from a central point on the property.
“Further to this we have also put together a very attractive portfolio of properties in Côte d’Ivoire – with a number of good results. This will be the company’s next west African country focus and next leg of our growth strategy, which in the longer term will take us close to the 1 Moz mark,” Young concludes.
Read more about Teranga Gold Corporation