Should this momentum continue as planned, West African Resources could move into construction late in 2018 and will produce first gold approximately 18 months later in H1, 2020.
The wholly owned Sanbrado gold project is located approximately 90 km east-southeast of Burkina Faso’s capital Ouagadougou.
The project covers an aggregate area of 116 km², comprising one granted mining permit and one granted exploration licence.
The government of Burkina Faso is entitled to a free-carried 10% interest in the project on commencement of mining.
Moving forward quickly
West African Resources has made rapid progress at what was originally known as the Tanlouka gold project after acquiring it in 2014.
In fact, a year of drilling and exploration work conducted in 2015 resulted in the discovery of a high grade pit around March 2016 that immediately saw the company abandon its original aspirations to build a small ~50 000 ozpa heap leach on what is known as the M5 deposit.
“The discovery of the nearby M1 deposit (M1 North and M1 South) saw us quickly shelve our heap leach direction to focus on a larger and more robust CIL development,” says West African Resources CEO Richard Hyde.
Just 11 months later West African Resources had completed an open pit feasibility study confirming a robust, project capable of producing more than 150 000 ozpa of gold.
“From high-grade discovery to delivering a robust feasibility study in less than 12 months is an outstanding achievement, and a credit to our dedicated in-country team and independent consultants.
“The recent discovery of high-grade gold at M1 South is the driving force behind the new project, which currently represents a high-margin, but high strip ratio open pit,” Hyde highlights.
It is likely to be most cost effective to mine M1 South with a smaller open-pit followed by underground mining.
This is the focus of current development work and will be reported in an optimised definitive feasibility study in the first half of 2018.
West African Resources has significantly improved the value of its Sanbrado gold project and tripled its forecast production profile from its original plans in the space of just one year.
“With US$26 million cash on hand we are well-funded to carry out work programmes, including the optimisation study, which is likely to drive mining costs significantly lower.
“Drilling programmes will also focus on converting existing inferred resources within and beneath reserve pit-shells, and drilling ‘open at depth’ extensions at M1 and M5.
“The open pit feasibility study as it currently stands demonstrates very strong early cash flow, rapid payback of capital and allows us to advance discussions with project lenders while completing optimisation work and further drilling, in order to commence early site works including camp construction,” explains Hyde.
The feasibility study for Sanbrado ‘paints’ an economically attractive project.
The project is forecast to produce 150 000 oz of gold over the first three years of its life and 93 000 oz gold per year over the current nine year mine life.
Recent drilling has added further high grade mineralisation beneath the reserves delineated in the February 2017 study.
All-in sustaining costs are low at $708/oz over the first three years and $759/oz over the life of mine.
Additional economics include a pre-tax NPV5% of $143 million (IRR 27%) and post-tax NPV5% of $100 million (IRR 21%).
Importantly, all mining and environmental permits are approved.
The project has of 894 000 oz in probable reserves (16.8 Mt at 1.7 g/t) and 1.3 Moz in indicated resources (29.57 Mt at 1.4g/t gold using a 0.5 g/t cut-off), which is likely to be increased significantly as a result of further diamond drilling success post the February 2017 study.
The mine plan
The Sanbrado project will comprise three deposits; M5, M1 and M3.
The majority of the defined mineral resources at the project are within 200 m of the surface and are of lode style mineralisation.
The excavated material will be predominantly free-dig from surface with blasting required deeper in the oxidation profile.
150 000 oz: the amount of gold Sanbrado will produce annually for its first three years of life
Given these conditions, conventional open pit mining techniques using drill and blast with material movement by hydraulic excavator and trucks will be employed.
The West African Resources project scale suits 120 t to 200 t class excavators in a backhoe configuration matched to 95 t class mine haul trucks.
Potential exists for some of the higher grade mineral resources, particularly at the M1 deposit, to be more profitably exploited by underground mining methods.
M5 pit is 2 km in length with an average width of 300 m and depth of 170 m at the southern end.
The pit has been designed to enable the southern higher grade portion to be mined independently of the northern portion of the pit.
Both the northern and southern pit will be mined in two stages (an initial starter pit and then a cutback to final limits) in order to target higher grade earlier in the schedule and defer waste movement until later in the mine life.
The M1 deposit will be mined in two pits, a North and a South pit.
The M1 South pit is approximately 540 m long, 360 m wide and 180 m deep. The M1 North pit is 350 m long by 240 m wide and 90 m deep.
The M3 deposit has two small, predominately oxide pits less than 40 m in depth.
Mining will be undertaken by an experienced contractor with West African Resources retaining responsibility for technical services comprising of mine planning, production scheduling, grade control, surveying, supervision and management of contract mining operations.
The process plan
The Sanbrado process plant will have a nameplate throughput of 2 Mtpa, with an availability of 8 000 hours per annum and a nominal capacity of 250 tph.
The plant will be located to the south-west of the M5 pit, adjacent to the water storage facility and tailings storage facility.
The plant will be fed from the M1 and M5 pits with only some small amounts of material from the M3 pit.
The plant design proposed is simple but robust and broadly comprises the following:
- Primary jaw crushing
- Crushed ore stockpile and reclaim system
- SAG mill grinding and classification with pebble crushing
- Gravity recovery
- Leaching and adsorption
- Tails thickening; and
- Elution and electro-winning
Expanding the resource
A diamond drilling programme remains underway at the M1 South body as part of the overall optimisation study which will also determine the potential to extend the operating lifespan beyond nine years.
Results announced from the drilling programme in June 2017 revealed high-grade mineralisation at depth from M1 South:
- 1 613.41 g/t gold over 0.5 m and 530.38 g/t gold over 0.5 m within 21 m at 53.13 g/t gold from 408.5 m; and
- 16 g/t gold over 4.5 m within 14.5 m at 38.27 g/t gold from 459 m.
High-grade mineralisation extends to more than 350 m vertical depth, double the average depth of the current reserve, and still wide open at depth as well.
The path to development and production
“Following the excellent drilling results we have obtained since feasibility study completion, we will focus on targeted drilling for the remainder of 2017, particularly at M1 South and M5 deposits, aimed at maximising the project value,” Hyde explains.
The completion of an upgraded definitive feasibility study will be completed in mid-2018, ahead of a decision to mine.
Once the optimisation studies including an underground mining study, focusing on M1 is completed, project finance will commence and following statutory approvals, construction will start.
Early site works have however already started and focus on on-permit water storage and camp construction.
Full-scale construction is expected to begin in late 2018 with an 18 month construction schedule leading to targeted gold production in the first half of 2020, following which West African Resources will employ about 200 people, largely Burkinabé nationals.
The estimated project capital cost is $131 million, inclusive of a $12 million contingency.
The West African Resources project is accessed via a sealed highway which runs between the capital and Koupela.
An existing gravel road intersects the highway near the village of Zempasgo and crosses through the south-eastern corner of the Sanbrado tenement.
2 km of the access road requires upgrading to install multiple flood crossings and road re-profiling.
Beyond the existing access road, new gravel access roads will be constructed to access the accommodation camp, process plant and mining contractor’s area.
West African Resources will construct a fully supported 172 person accommodation camp, located 1.5 km south-east of the process plant.
While the feasibility study outlines the inclusion of a heavy fuel oil power station to power the process plant, Hyde says West African Resources is considering a grid power option.
“There is an HV power line 15 km south of the project and grid power is becoming more stable in Burkina Faso, as hydro-power is sourced from both Ghana and the Ivory Coast.
SEMAFO (Mana), Roxgold (Yaramoko) and Endeavour Mining (Houndé) have all recently connected to the grid in Burkina Faso,” reveals Hyde.
Operating in Burkina Faso a plus
“Burkina Faso has been a stable West African country for many years, especially following a peaceful transition of power in 2015 with successful independent elections where Roch Marc Kabore was proclaimed the new president,” notes Hyde.
Kabore served as prime minister and head of the National Assembly under former president Blaise Compaore, who was toppled by an uprising in October 2014 after 27 years in power.
Kabore split with Compaore early last year and formed an opposition party.
The well-established Mining Code was updated in 2015 which provides clarity and structure around ownership and government participation.
It replaced 12 year old mining regulations which were among requirements set by the World Bank for the release of $100 million in budget support for the country.
Under the new regulations, companies with exploitation permits will pay the normal tax rate on profits of 27.5%.
Firms with industrial mining licences pay 1% of monthly turnover excluding taxes or 1% of the value of extracted minerals into a local development fund.
The state pays 20% of its mining revenues into the fund.
The code includes a fund to rehabilitate artisanal mining sites and prohibits the use of harmful chemicals, and another to finance geological research and support education in earth sciences.
Funding in place
During the last quarter, West African Resources entered an agreement with Sprott Capital to act as lead underwriter on a private placement of 46 875 000 ordinary shares at a price of C$0.32/share for gross proceeds of C$15 million.
Sprott later exercised its option to acquire up to an additional 7 031 250 ordinary shares for additional gross proceeds of C$2.25 million with total gross proceeds increasing to C$17.25 million.
Funds from the sale of the shares will be used to advance the West African Resources Sanbrado gold project, including on-going exploration, advancement of an updated resource study, a revised feasibility study and working capital purposes.
As at 30 June 2017, West African Resources had US$10.6 million cash at bank.
After payment of fees associated with the issue, the company had approximately $26 million.