Since its discovery in September 2020, the Koula deposit at Roxgold’s (TSX: ROXG; US-OTC: ROGFF) Seguela gold project in Cote d’Ivoire, 240 km northwest of Yamoussoukro, has “blown all our expectations for the project out of the water” says the company’s president and CEO John Dorward.
“The latest drill results from the deposit continue to build our confidence that Koula has the potential to significantly extend the mine life at Seguela through a high-grade underground mining operation,” he said in an interview.
Highlights from the latest drilling at the deposit included drillhole SGRD1084, which intersected 16 metres grading 26.5 grams gold per tonne from 233 metres, including 2 metres of 115.3 grams per tonne. Drillhole SGRD1088 returned 15 metres grading 18.5 grams gold from 256 metres, including 5 metres of 24.2 grams gold and 3 metres grading 45.1 grams gold.
“These holes were the first to be drilled down-plunge and outside what is considered the current resource shell,” said Dorward, who joined the company as interim CEO in September 2012 and was appointed president and CEO later that year. “They demonstrate that Koula is not only a high-grade deposit but that the mineralisation also extends to depth.”
Roxgold’s geologists found the deposit during field reconnaissance and mapping in an area considered a lower exploration priority.
Initially, Roxgold thought Koula was a satellite of the main Antenna deposit, one kilometre to the southwest. But the team’s thinking has changed since then. “We now believe that Koula has the potential to become the most important deposit to be defined on the property.”
In addition to the Koula and Antenna deposits, the 36,300-hectare property contains three other known deposits: Agouti (2.5 km northeast of Antenna); Boulder (1.5 km southeast of Antenna); and Ancien (five km south of Antenna). There are also more than 28 exploration targets on the property that offer the potential for near-surface ounces.
In December, Roxgold was granted a mining permit for Seguela. The permit is valid for ten years and there is potential to renew the license as Roxgold grows the project.
The company plans to complete a feasibility study for Seguela in the next couple of months that will show a “dramatic improvement” in the project’s economics compared with a preliminary economic assessment (PEA) tabled in April 2020.
The PEA envisioned a series of open-pit mines at Antenna, Ancien, Boulder, and Agouti feeding a central gold processing facility. The early stage study estimated a mine life of 8.2 years producing a total of 841,000 oz. of gold, or about 103,000 oz. annually at all-in sustaining costs of US$749 per ounce. In the first three years, average annual production is higher at about 143,000 oz. at AISCs of US$600 per ounce.
The study pegged pre-production capex at US$142 million, with US$36 million budgeted for sustaining capital. Based on a gold price of US$1,450 per oz., the study forecast an after-tax net present value at a 5% discount rate of US$268 million, an internal rate of return of 66% and a payback of just over one year.
“After the discovery of Koula, we quickly decided to defer the feasibility study [on Seguela] to include the drill results from the deposit,” Dorward said. “We’re likely to see a very high conversion rate from inferred to measured and indicated resources with high-grade material of around seven to eight grams per tonne.”
In November, the company updated the resource estimate for the project and outlined 12.78 million measured and indicated tonnes grading 2.5 grams gold per tonne for 1.04 million oz. contained gold. Inferred resources stand at 2.4 million tonnes grading 4.8 grams gold for 370,000 oz. of gold.
Roxgold acquired Seguela from Newcrest Mining (TSX: NCM; ASX: NCM) in 2019 for US$20 million.
“Our original thesis for the project was that we’d be able to extend some of the initial deposits that Newcrest had outlined,” said Dorward, noting that at the time, Newcrest had only reported an inferred resource for Antenna of 430,000 ounces. “We felt that Antenna could be incrementally grown out as well as some of the satellite feeder projects like Agouti, to build out a nice project in the 700,000-800,000-ounce range.”
Since the acquisition, Roxgold has expanded the project dramatically, Dorward said, adding that he believes Ancien and Koula will be “two of the highest grade open pit deposits not just in West Africa, but the world.”
“In hindsight, Seguela is now looking like a great deal for us,” he said.
Roxgold plans to make a construction decision for Seguela by the middle of the year, with the first gold pour expected by the end of 2022.
The company has already begun initial work on the project, including upgrades to the access road, building accommodation for workers, and has also started engineering designs for the processing plant.
Currently, four drills are turning at the project focused on extension and infill drilling at Koula, extension drilling on Ancien, and drill testing other targets on the property.
Seguela benefits from existing infrastructure, including a high-voltage powerline that runs across the property, connecting it to low-cost hydroelectricity. The project also has access to water resources, is near a road, and sits just 20 km from an airstrip at the town of Seguela.
Dorward, who first started working in West Africa as CFO of Mineral Deposits Ltd. in 2006, points out that working in Cote d’Ivoire offers many advantages. “The economy has been doing extremely well over the past decade and is a very welcoming jurisdiction for foreign investment. There is considerable engineering, construction, and mining capacity within the country, and there is direct access to a port, unlike in Burkina Faso, which is land-locked.”
In addition, the time from discovery to production can be remarkably rapid in West African countries, he said, noting that Yaramoko, its underground mine complex in southwestern Burkina Faso, poured its first gold within five years of the initial discovery. “There are very few jurisdictions where you can do that.”
With about US$62 billion in the bank, Dorward said he hopes to build Seguela without raising additional capital.
Elsewhere in West Africa, Roxgold plans to finish the first resource estimate before the end of the year for its advanced-state Boussoura gold project in Burkina Faso. Boussoura is about 180 km south of Yaramoko.
Significant shareholders include Appian Capital, which holds a 13.3% stake in the company; Ruffer LLP (9.2%); 1832 Asset Management (5.1%); Van Eck Associates (4.3%); and insiders and management (2.3%).
At presstime in Toronto Roxgold was trading at $1.66 per share within a 52-week range of 56¢ and $1.92.
Mining analysts Geordie Mark and Alvin Islam of Haywood Securities have a buy rating on Roxgold and a price target of $2.40 per share. The company is “a preferred name” in their coverage of the junior mining space, they noted in a recent research note, and “ongoing positive news flows may help drive the company’s shares higher over the near- to mid-term.”