Few mining companies in Africa, or even further afield, can boast a challenge-free existence, but TSX-listed Roxgold can.
On the back of its highly profitable Yaramoko 55 Zone gold mine in Burkina Faso, the company aims to turbo charge its production profile with the imminent delivery of an ultra-high grade satellite mine situated a stone’s throw from its flagship operation, says president and CEO, John Dorward.
Bagassi South a pit-stop on a journey of greater growth
The delivery of a second gold operation will deliver on the first tier of Dorward’s growth strategy for Roxgold. “Our ambition in the medium to long term is to be a multi-mine, multi-jurisdiction company,” he states.
The introduction of Bagassi South, located 1.8 km from the Yaramoko gold mine, will tick the multi-mine objective box and financially position the company to move into its next phase of growth as it plans to explore organic growth opportunities in and around its mines as well as external prospects which will fulfil its ambition to expand its footprint beyond Burkina Faso.
This article first appeared in Mining Review Africa Issue 9 2018
The establishment, and more importantly, execution of a well thought out growth strategy, which Dorward outlines at length is impressive considering his primary objective is delivering Bagassi South as a fully functioning mine.
Having surrounded himself with an experienced team who have already proven their worth with Yaramoko, it’s easy to focus on the company’s strategic direction.
Organic growth opportunities lie first and foremost in expanding Yaramoko and Bagassi South’s existing resource.
“Both operations are open at depth and we will invest in drilling further to determine the greater potential at both mines. Beyond this we will also focus on looking for additional ore bodies within our land package which share similar structural zones to the 55 Zone. I am confident in uncovering greater gold potential from this area and developing multiple deposits/mines. This is making good use of our funds.”
Evaluating opportunities outside of Burkina Faso is on the growth strategy radar and Dorward is excited to apply the company’s capital and its team’s expertise and experience to growing the Roxgold production profile through smart investments and in turn delivering what its shareholders enjoy – cash flow and return on investment.
While the CEO did not specify a timeframe to deliver on this, he did highlight that the company’s view to future growth is not linear. “We will explore all of these avenues simultaneously and exploit our potential for growth as quickly as possible while retaining our ability to be robust and highly profitable – even in a weaker gold price market much like what we are experiencing at present.
“We have one of the best single asset portfolios in the world, with an excellent margin, excellent cash costs and excellent all-in-sustaining-costs as well. No other company in this space offers similar results.”
Bagassi South update
Although a small operation (relatively speaking), Bagassi South is another example of Roxgold’s ability to deliver a mine quickly and efficiently. Construction started early in 2018 and remains on track to deliver first gold in the fourth quarter of the year.
It will boost the company’s overall production profile by 40% (estimated average of 40 000 ozpa) to around 160 000 oz in 2019 – “and will increase our cash flow quite dramatically.”
Importantly, there are no legislative challenges standing in the way. The Bagassi South mining decree was recently approved by the Burkina Faso Council of Ministers. The decree is an extension of the existing 2013 mining convention currently in place at the 55 Zone and carries the same terms.
It offers similar grades to the 55 Zone of around 16 g/t and although only offers a five-year lifespan remains open at depth, so will likely extend beyond this as drilling verifies additional resource in the future.
Like Yaramoko, Bagassi South will be a shallow underground mine – no deeper (for now) than 400 metres below surface. Australia’s African Underground Mining Services (AUMS) will deliver the full suite contract mining service to operate the mine for Roxgold. The boxcut and portal to date are complete and development is on track to access ore in Q4.
Conveniently, because the new mine is so close to the Yaramoko processing facility, it does not require its own plant. An expansion of the existing plant however is necessary and through engineering expert DRA (in joint venture with Group Five), is currently underway to grow its 750 tpd design capacity to 1 100 tpd. Dorward mentions that the plant will likely deliver beyond the new tonnage considering the existing mill was operating north of 900 tpd thanks to optimisation initiatives implemented since its start-up.
Upon the successful implementation of the first phase (for Yaramoko), the DRA/Group Five JV was approached to design and implement the expansion of the processing plant.
The plant expansion involves the installation of a new secondary crusher, expansion of the carbon-in-leach (CIL) circuit from six to eight tanks, the addition of a new tailings thickener and tails line, and gold room processing capacity expansion.
“We spent considerable time planning and designing the constructability of the expansion to ensure minimal interference with ongoing operations,” says Philip de Weerdt, DRA project manager.
At present, the plant expansion is on track to be completed and delivered according to schedule. As of August 2018, civil construction has been completed and SMPP erection has commenced.
“We are very excited to be part of this expansion for Roxgold. Building on lessons learnt and the previous phase, the DRA/Group Five partnership is again working well to deliver a valuable EPC service to Roxgold,” De Weerdt highlights.
Yaramoko performance continues to shine
55 Zone has excelled in every performance parameter since it produced first gold in May 2016. In Roxgold’s recent three and six month financial results, the mine continued to showcase outstanding accomplishments, of which some of the highlights include:
- Achieved production of 35 828 oz in Q2, 2018, compared to 27 970 oz in Q2 2017;
- Achieved production of 76 280 oz in the first half of 2018 compared to 63 564 oz in the first half of 2017;
- Realised a record quarterly processing throughput of 75 417 t – 12% above nameplate capacity;
- Increased gold sales by 27% with 35 320 oz of gold sold totalling $45.8 million compared to 28 788 oz of gold sold for $36.2 million in gold sales during the second quarter of 2017;
- Incurred cash operating cost of $424/oz produced and AISC of $718/oz sold and $401/oz produced and $686/oz sold for the three and six-month periods ended 30 June 2018 respectively;
- Generated cash flow from mining operations totalling $25.7 million ($56.5 million for the six-month period)
- Generated a mine operating margin of $813/oz compared to $705 in the same period in 2017, an increase of 15% while the average realised gold price increased by 3% during the same period;
Based on a known resource to 1 100 m, 55 Zone has a 10-year mine life taking it from around 350 m below surface at present to that depth (based on current reserves and resources).
As always, the mine is on track to deliver between 120 000 and 130 000 oz for the full 2018 financial year and similarly for the 2019 financial year.
“While our success can be attributed to the nature of the deposit which comprises good, competent rock and a single 3 – 4 m wide vein with unparalleled grades and continuity along strike, our team plays a pivotal role as well, led by our brilliant interim COO Iain Cox. Working in a country that is pro foreign investment and offers working infrastructure has made ‘getting the job done’ so much easier as well.”
To shareholders and potential investors…
“We are a robust company with a strong balance sheet delivering good returns on our investments. If you want exposure to gold but you are concerned about the gold price, we remain profitable in a weaker market – meaning we offer long-term growth from an extremely prospective patch of Greenstone belt in Burkina Faso,” Dorward concludes.