VANCOUVER — Vancouver-based TrueGold Mining (TGM-C) has received a capital shot in the arm and a vote of confidence from Teck Resources (TCK-T, TCK-N) in the form of a $10-million non-brokered private placement that sees Teck take down 30 million shares of the Burkina Faso-focused gold explorer.
The placement makes Teck the largest shareholder in TrueGold with a 15% stake, and gives the junior — which is the product of last year’s merger between Riverstone Resources and Blue Gold Mining — more money to pursue exploration and development activities at its gold projects.
According to TrueGold executive chairman Mark O’Dea, the relationship with Teck has roots that extend to a joint-venture with O’Dea-led Fronteer Gold in 2004, which led to a $2-million investment in Fronteer spin-off Pilot Gold (PLG-T) in late 2012. O’Dea notes that Teck had a previous earn-in agreement on TrueGold’s Liguidi project — 125 km southeast of Burkina Faso’s capital city, Ouagadougou — but dropped the option.
“They have that history of supporting our group of companies, and while this latest investment is partly relationship driven, it is largely technically driven,” O’Dea says during an interview. “This is a means of regaining some exposure to the portfolio that TrueGold has in Burkina Faso. In the meantime, Karma has advanced tremendously to the point where there is a real scoped-out project there. We’re moving through feasibility as we speak, and the complexion of that appealed to Teck, as well.”
TrueGold started the year with $16 million in cash, and Teck’s investment gives the company even more ammunition to advance feasibility activities at its development-stage, 856 sq. km Karma gold project, 25 km northeast of Ouahigouya, as well as to dive deeper into exploration at Liguidi.
The company is wrapping up an 11,000-metre drill program at its two properties, with $3 million budgeted so far this year.
O’Dea says that TrueGold will be prudent with its capital due to the state of equity markets, and that the current program will largely dictate target priority and just how much the company will spend on drilling later this year.
“We have two reverse-circulation rigs turning right now: one at Liguidi, and the other at Karma. We’re testing a variety of high-priority targets at each, which is our exploration focus,” O’Dea says. “The feasibility work we have underway is quite comprehensive, and we have everything across the spectrum underway, from metallurgy to geotechnical and heap-leach design. There is always opportunity to improve things like strip ratio and recoveries.”
At Karma, the focus is on lower-cost, heap-leachable material that carries reduced technical risks for the company.
In August 2012, TrueGold outlined a US$125-million mine plan that focuses on oxide and transitional material within 100 metres of surface totalling 29.3 million tonnes from its global measured-and-indicated resource base that averages 0.88 gram gold per tonne for 828,000 contained oz. gold. Over a 10-year mine life, the operation would crank out 728,000 oz. gold at average costs of US$525 per oz., assuming 88% recoveries and a 2.5 stripping ratio.
“The two objectives this year are to find more oxide ounces at Karma to increase the resource base at the known deposits, and to test new high-priority targets at Liguidi,” O’Dea says. “Karma is a large land package and it is target rich — there are dozens and dozens of drill-ready targets within trucking distance of the proposed mine site. What [the financing] does provide us with is the ability to accelerate exploration and really demonstrate the sort of resource potential we believe is at Karma.”
TrueGold is on track to deliver its feasibility study by year-end, and O’Dea says it should coincide with the company getting key exploitation permits.
In late March, the company received approval from Burkina Faso’s government to build a freshwater reservoir and holding pond. The two-phase build will initially support TrueGold’s water needs during exploration, with a second phase planned that should meet water demand for a future mine.
Shares of TrueGold were on the rise following news of Teck’s investment. On May 9 the company gained 28%, or 7.5¢ per share, before closing at 34¢ at press time.
After the financing closes TrueGold will have 213 million shares outstanding, which would equate to a $73-million market capitalization at its current market valuation. At press time, the company had 181 million shares outstanding and a $46-million market capitalization.