VANCOUVER — West African-focused Orezone Gold (TSX: ORE; US-OTC: ORZCF) is closing in on a development decision at its advanced-stage Bomboré gold project, 85 km east of Ouagadougou, Burkina Faso. Orezone took a step towards a 2018 production target with a new feasibility study, and assuming the company can score its mine permit in the next nine months, it should be on track to meet that goal.
Bomboré hosts one of the largest undeveloped gold resources in West Africa, with total measured and indicated resoures of 140 million tonnes grading 1.01 grams gold per tonne for 4.6 million contained oz. In order to tailor the project for current markets, however, Orezone has taken a step back and outlined a mine plan that focuses on in-pit oxide reserves of 60 million proven and probable tonnes grading 0.76 gram gold for 1.47 million contained oz.
The company has contemplated three unique development options at Bomboré since 2011 — including a $705-million, multi-phase operation and a heap-leach mine — but settled on a processing circuit that combines heap leaching and carbon-in-leach (CIL) without any grinding to process soft, and mostly free-digging, oxidized ores.
The result is a mine plan that carries a $250-million price tag, and limits stripping ratio by maximizing life-of-mine head grades. The operation is projected to recover 1.47 million oz. gold over an 11-year life at an average grade of 0.76 gram gold, with a 1.07 strip ratio. Annual production is expected to total 116,000 oz. gold at all-in sustaining costs of US$678 per oz.
The mine plan, based on reserves using an US$1,100 per oz. gold price, is designed to deliver higher-grade ore in the early years. Average gold grades are expected to total 0.88 gram over the first eight years of production at a strip ratio of roughly one. Lower-grade stockpiles would be processed in the last three years.
The company’s metallurgical testing, along with reviews of historic data, indicates a 87% recovery rate from the combined heap leach and CIL processing method. The circuit separates fine ore from coarse ore in a cyanide solution via a rotary scrubber, screen and classifiers, before slurried fine ore is pumped to a CIL circuit for gold recovery without grinding.
“The results of the study are compelling and the project benefits from size, location, low reagent consumption, rapid leaching kinetics and low all-in operating costs,” Orezone CEO Ron Little said in the release.
“Bomboré is one of the largest and most advanced undeveloped gold deposits in the region that lends itself to phased development. The initial phase requires less capital and has lower operating costs to process the shallow and softer oxidized ores. A second phase, at slightly higher gold prices, could expand the CIL circuit with the addition of grinding to process the well-defined sulphide resource,” he added.
Based on a US$1,250 per oz. gold price, Orezone’s plan has an after-tax net present value of US$196 million at a 5% discount rate, along with a 24.4% internal rate of return (IRR). Bomboré would produce 135,000 oz. gold annually over its first eight years, which would result in a 2.7-year payback period.
BMO Capital Markets analyst Andrew Breichmanas noted on April 28 that “the combination of optimized pit designs and mining equipment selection resulted in a significant reduction to the strip ratio and improvement to the sequencing of higher-grade ore.” As a result, Bomboré’s economics have exceeded BMO Research estimates, which model a 19.6% IRR.
“The study enhances the development prospects of the project and should allow permitting to rapidly proceed while funding options are evaluated,” Breichmanas concluded. BMO Research has a stock “market perform” rating on Orezone and a 75¢-per-share price target.
In terms of financing, BMO Research assumes $100 million in equity and $100 million in debt, but has now included $50 million in equipment financing to account for higher capital costs.
Orezone has traded within a 52-week window of 37¢ to $1.07, and closed at 40.5¢ per share. The company reported $3.9 million in cash at the end of March, and has 96 million shares outstanding for a $39-million market capitalization.