Amara Mining (TSX: AMZ; LSE: AMA) has expanded resources at its Yaoure project in the Ivory Coast from 2.7 million oz. gold grading an average of 1.1 grams gold per tonne to 6.3 million oz. gold averaging 1.3 grams gold per tonne, and claims it’s the largest gold resource reported to date in the West African nation.
“According to the Intierra website, Yaoure makes up 41% of the country’s total known gold resources,” Katharine Sutton, Amara’s head of investor relations, confirms in an email.
Broken down into its component parts, the mid-grade deposit now contains indicated resources of 20.3 million tonnes grading 1.20 grams gold for 780,000 contained oz. gold (an increase over the previous estimate of 73.3%), and inferred resources of 133 million tonnes grading 1.29 grams gold for 5.52 million contained oz. gold (an increase of 150.8%).
The updated resource uses a cut-off grade of 0.5 gram gold per tonne. It is constrained within a pit shell to a maximum depth of 260 metres, and based on a long-term gold price of US$1,500 per oz.
Amara says it chose the cut-off grade due to the availability of low-cost power at the project, but also argues that Yaoure looks “robust” at higher cut-off grades.
The project is 5-10 km from a 150-megawatt power station near the Kossou dam, and is close to a number of towns. The project has a mining licence and environmental permits that should cut the time it takes the company to advance it to production.
Headquartered in London, Amara plans to complete a preliminary economic assessment in the first quarter of 2014.
So far metallurgical test work has shown that the mineralization “is simple” and non-refractory, and there are three potential processing options for the material: leaching whole ore, froth flotation and heap leaching.
The most recent test work evaluated lower-grade samples of between 0.38 gram gold and 1.27 grams gold with an average head grade of 0.65 gram gold. The studies showed that overall leach recoveries were high even with the lower grades, averaging 92.7% after 24 hours via carbon in leach, compared to 91% for the original higher-grade samples.
Studies have indicated that the material has an average bond ball mill work index of 14.4 kilowatts per hour and low cyanide consumption of 0.2 kg per tonne. As a result, Amara contends that the cost of ball milling the deposit’s sulphide material will be US$36 per oz., which it argues compares favourably to other projects in West Africa that do not have access to low-cost power.
The geology is quite simple, Amara says, noting that the majority of the area is underlain by mafic volcanics, predominantly both massive and pillow basalts. The north part of the area is intruded by a massive grandiorite that locally has a subtle porphyritic texture. There are numerous porphyry sills — largely associated with the main Yaoure zone — and a volcaniclastic unit, mainly of epiclastic origin, is situated near the grandiorite contact.
Mineralization is contained within two shallow-dipping, gold-bearing north–south trending packages controlled by a thick zone of brittle-ductile shearing. One of the packages is a 200-metre thick, lower-grade mineralized zone with higher-grade lenses and cross-cutting, high-grade, sub-vertical quartz veins, while the other package is a relatively continuous 20-metre thick zone 140 metres above the other.
Dmitry Kalachev and Peter Mallin-Jones of Canaccord Genuity in London comment in a research note that the scale of the resource, its straightforward metallurgy that is amenable to different processing options and a meaningful oxidized part of the resource (400,000 oz. at 1.3 grams gold) offers “substantial optionality for future development.”
“Today’s update increases Amara’s total attributable resource to 9.3 million oz. [using a 90% ownership for Yaoure], meaning that the company is trading at only US$3 per oz. of resource, which is substantially below the average of US$20 per oz. for African developers and explorers,” the analysts note. “It is also way below the valuation achieved in recently announced deals (for example, Centamin agreed to buy Ampella Mining for US$13 per oz.).
At press time in London, Amara Mining was trading at 12 pence a share. Canaccord has a price target of 32 pence a share, and BMO Capital Markets analyst Andrew Breichmanas has a target price of 15 pence a share.
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