Canadian-junior Roxgold (TSXV: ROG) jumped another hurdle in its pursuit to become a gold miner in Burkina Faso with approval of its environmental and social impact assessment of the Yaramoko gold project.
It’s not a shocker but nonetheless importantly pushes Roxgold closer to construction of its Yaramoko gold project in Burkina Faso, where near 10 mines have been approved and built in as many years.
Yaramoko increasingly looks like it will add another notch to Burkina’s pro-mining permitting performance in the past decade or so.
John Dorward, Roxgold President and CEO, told Mineweb that so long as it wrapped up an agreement for Burkina Faso’s right to a 10-percent free carried interest in the project and got its exploitation permit in the coming months it would as long planned break ground by year end, possibly in November.
“We still think we’re on track for breaking ground in the forth quarter,” Dorward said.
Roxgold is in a healthy cash position. With about $30 million at hand, and also a $75 million debt mandate, it looks to have basically covered expected capital costs of the Yaramoko project.
In a recent feasibility study Roxgold estimated pre-production capital costs of $107 million to build and develop Yaramoko as an underground mine forecast to produce about 100,000 ounces gold a year from a high-grade gold deposit with reserves of 759,000 ounces gold @ 11.83 g/t gold.
It seems reasonable to expect Roxgold to bolster its finances with a cash cushion, however. Dorward said if Roxgold raised cash it wouldn’t be much, and it wasn’t looking at funding sources such as gold streams or royalties.
“Taking some of the cream and giving it to another party is inappropriate for us at this stage,” Dorward said, noting he believes the Yaramoko property has the potential to yield more ounces gold for possible mine feed. For example, Roxgold is expanding a gold discovery in the Bagassi South zone, also on its Yaramoko property.
Roxgold shares are in a strong position relative to its peers and considering a harsh market for juniors, albeit one that favours near production gold stories like Roxgold’s. It’s easy to see that were it too want to, Roxgold could build a cash cushion through a share issuance without heavy dilution. It’s marketcap is C$191 million, which is very notable among pre-production juniors, and at current pricing it could raise, for example, ~C$20 million with around 10-percent dilution (which is not to say it is planning to do so, only that it likely could do so quite easily).
Dorward expects an 11-month mine build, putting possible first gold next year.
The deposit is a high-grade vein deposit hosted in granite. The average width of the vein is about four metres and it extends to some 900 metres below surface. Reserves are within 400 metres of surface.
The economics of mining the deposit – using primarily long-hole stoping – give a net present value of $250 million, after taxes and discounted at five percent assuming $1,300/oz gold, and a 48.4 percent IRR.
Total cash costs are set at $467 an ounce gold or $167 a tonne, life of mine, with the bulk of that accounted for by underground mining.
In this it will be interesting to see if, assuming Yaramoko goes to production, Roxgold can tease out more juice from project economics by managing dilution. The reserve includes 21 percent external dilution – that is essentially rock either of the gold mineralized vein.
Of course the less it takes of this near waste rock (there’s some gold in it), the better cash costs will be, all other things being equal.
Dorward struck a balanced position on this possibility, saying he was “comfortable where we are.”
But he did note that the contact, as you would expect, between granite and gold-bearing quartz vein was stark and that given differential strength between granitic host and gold bearing vein, “We anticipate we’ll have a nice preferential blast.”
That is, ore will separate from wall rock nicely.
But, cognizant of the bumpy nature of most all mine ramp-ups, especially underground ones, Dorward emphasized caution and gave no promises.
“We need to learn to crawl before we walk.”