Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
TrueGold Mining (CVE:TGM) popped higher on Tuesday in heavy volume, after releasing a preliminary economic assessment of the North Kao deposit at its Karma Gold Project in Burkina Faso.
During lunchtime trade the Vancouver-based junior was trading at $0.34, up 6.2% on the Toronto Venture Exchange, its high for the day. More than 730,000 shares in the $133 million company changed hands. Like most if its peers True Gold has had a tough year – the counter is down 16% year to date.
TrueGold said in a statement North Kao, which was advanced from blind discovery to PEA-status in little over a year, will generate an additional $118 million in after-tax free cash flow to Karma which is fully permitted.
As a result of high gold grades, low capital costs, and future infrastructure sharing, North Kao yields an after-tax IRR of over 200% according to the company and would add $70 million to Karma’s after-tax net present value.
“The North Kao PEA provides us with a blueprint on how to expand our mine life and production profile at Karma as we look to the future of our district,” said Mark O’Dea, True Gold’s Executive Chairman.
Highlights of the PEA include:
• Gold price: US$1,250/oz
• Inferred Resources*: 9.9 Mt @ 0.98 g/t containing 312,000 oz Au
• Production Rate: 118,000 oz Au/year on average over 2.5-year mine life
• Initial CAPEX: US$17.7M (including contingency)
• Cumulative After-tax Cash Flows: US$118.6M
• NPV @ 5% (after tax): US$69.6M (discounted from 2022-2026)
• IRR (after tax): 213%
• Payback (after tax): ~5 months
• All-in Sustaining Cash Costs1: $652/oz
The pre-North Kao feasibility study for the Karma project released in December calls for a $130 million mine at Karma which is 90%-owned by TrueGold with the Burkina Faso government holding the remainder. Karma’s probable reserves are pegged at 949,000 ounces (33.2mt at 0.89 g/t) and the operation could produce 97,000 ounces on average annually for 8.5 years starting end-2015.
What makes Karma stand out are all-in sustaining costs of $720 and direct cash costs of $591 thanks to shallow pits and proposed heap-leach extraction and what the company characterizes as “strong gold grades, excellent infrastructure, low power and water requirements, strong recoveries from simple metallurgy and soft, free digging material.”
TrueGold also owns 100% of the Liguidi gold project in Burkina Faso.
Burkina Faso with a population of 16 million people, is the continent’s fourth largest gold producer after Mali and has commissioned eight new mines over the past six years.
2 Comments
miket
Any Ebola in BF ?
Hondatrix
None reported..yet.