Thursday 27th October 2016

Resource Clips

One Out Of Two Ain’t Bad

Orezone Sees 2015 Burkina Faso Gold Production

By Ted Niles

The 2008 acquisition of Orezone Resources Inc by IAMGOLD Corporation TSX:IMG was, in President/CEO Ron Little’s view, less a takeover than it was “a take-under.” The junior mining company was within reach of production at its Essakane gold project in Burkina Faso when the market crash dealt it a decisive blow. “We were about a third of the way into Essakane in terms of construction when it hit,” Little laments. “We got it fully permitted on our own; we had a debt facility approved; it was the biggest capital investment ever in Burkina Faso.”

But all was not lost. While Orezone needed cash, IAMGOLD needed reserves. The urgency of the situation was such that the transaction wasn’t entirely to Orezone’s disadvantage. Little explains, “We said, ‘Look, we’ll keep everything else, and you take Essakane. We’ll carry on with $10 million in cash and these other assets.’ IAMGOLD was happy to short-circuit their due diligence. They never did get a look at the Bomboré gold project because we never showed it to them. They were just happy to get Essakane for a steal.”

Orezone Sees 2015 Burkina Faso Gold Production

Thus, in February 2009 the $139-million deal saw Orezone Resources Inc spun into Orezone Gold Corporation TSX:ORE—not yet a gold producer, as Little had hoped, but still in possession of the West African country’s largest undeveloped gold resource. And as Little adds, “We’ve already done the waltz with all the players. It will be even easier to do it the second time around.”

The 168-square-kilometre Bomboré low-grade gold project has an NI 43-101 mineral resource estimate of 1.6 million ounces gold indicated and 1.9 million ounces gold inferred, 80% of which occurs within 80 metres of surface. Moving through the southern to the northern portions of the project, Orezone has completed about 60% of its 2011 drill program of 170,000 metres and has increased the average depth of its drilling to 120 metres.

Little explains, “Pushing your geology down another 60 metres in this kind of an ore body is not really much of a technical reach. As we infill we’re actually getting 45% better grade, and the widths are roughly the same. As we drill below 60 metres in the fresh rock, we’re hitting 35% better grade, but the widths are slightly narrower. Net, we’ve got the same metal, and the ore body is just a little more compact. That might be better anyway for processing because your mining costs are much cheaper than your processing costs.”

September 12 assays of the least-explored southern portion of the Bomboré project include

  • 6.35 grams per tonne gold over 11 metres
  • 1.51 g/t over 40 metres
  • 6.53 g/t over 9 metres
  • 1.41 g/t over 34 metres
  • 2.22 g/t over 19.5 metres
  • 1.36 g/t over 31.5 metres.

May 26 assays included

  • 2.02 g/t gold over 10.5 metres
  • 2.34 g/t over 24 metres
  • 2.57 g/t gold over 14 metres
  • 1.34 g/t over 39 metres
  • 1.56 g/t over 22 metres.

Little says of these assays, “It’s just another vote of confidence. We’ve proved that there’s a lot of continuity and that the grades are better. But what we’ve really done here, in our minds, is de-risk the project. More than I think the market appreciates. Even though it’s half the drilling, it was the most risky drilling. Now we’re moving into the area we know the most. Odds are if we see an incremental increase to the north, it’s going to be even better because we’re starting from better grades.”

What we’ve really done here, in our minds, is de-risk the project. More than I think the market appreciates —Ron Little

Bomboré is moving forward quickly. This year’s drill results are expected to be in by January 2012. Add to that two months to update the resource as well as the preliminary economic assessment. Simultaneously, Orezone is working on a feasibility study. “We’re doing detailed metallurgy, and we’ve got a full environmental impact study underway which should be done by yearend,” Little reports. “It’ll be a very short timeline between the final model and the definitive feasibility study because we’ve done all this work already.” He anticipates that feasibility should be completed by 3Q 2012. On the basis of the PEA Orezone released June 2011, Bomboré is expected to start production by 2015.

Essakane is clearly the standard by which Little measures Bomboré’s progress and, in his view, it is not wanting. “Even though our target is to get Bomboré over five million ounces with the next resource calculation, all the drilling is showing that it’s wide open below 120 metres. Our next target is going to be seven million or 7.5 million ounces. This is going to turn into a project that, in terms of its scale and the amount of tonnes we’re going to move and process, is the same as Essakane.”

“The location,” Little emphasizes, “makes it an even better scenario.” Situated on a highway, 85 kilometres from Burkina’s capital, Bomboré has an unusual advantage in West Africa. “That’s what kept us hanging in there when we were getting taken over by IAMGOLD. If we need parts, if we need people, we have access to Ouagadougou. Everything is just cheaper and better closer to town. And we’re five hours closer to the coast than Essakane, so costs are less to bring materials in.”

Canaccord Genuity included Orezone on its September 2 list of potential acquisition targets. (Notably, Grayd Resources Corp TSXV:GYD—which was acquired by Agnico-Eagle Mines Limited TSX:AEM September 19—was also on Canaccord’s list.)

Little believes his company is considerably undervalued. At press time, Orezone had 83.4 million shares trading at $4.29 for a $357.9 million market cap. He concludes, “Our June PEA was conservative, which didn’t do us any service. We used a $1,000 gold price in the pit shell, with very conservative recoveries. At today’s gold price, this thing is hugely robust and people aren’t doing the math. And given that we did the study using the 3.5-million-ounce number, of course it’s going to be dramatically different when we’re over five.”

Orezone has two other gold projects in Burkina Faso, Sega and Bondi, with combined resources of approximately 1 million ounces gold. It also has an early stage uranium project in Niger.

One Response to “One Out Of Two Ain’t Bad”

  1. [...] projects funded by Canada will be implemented in Bangladesh, Burkina Faso more… One Out Of Two Ain't Bad – Resource Clips (blog) – 09/21/2011 Resource Clips (blog)One Out Of Two Ain't BadResource [...]

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