Market smells big resource increase coming at West African
Investors are bracing for a significant resource upgrade at West African Resources’ Burkina Faso gold project. The result is expected to underpin a revised development scenario, including higher production rates and lower costs. Plus, Great Boulder sets pulses – and shares – racing with wide sulphide hits at Mt Venn copper-nickel project.
It’s no big deal to find a couple of million ounces of low grade gold in West Africa.
But it’s another thing altogether if the resource base comes with seriously high-grade shoots that can sweeten head grades to make a project a real money spinner.
The latter is the position West African Resources (WAF) finds itself in at its Sanbrado gold project in sunny Burkina Faso courtesy of the game-changing high-grade results from the M1 South shoots.
The discovery of exceptional grades across three sub-vertical lodes which remain open at depth compelled WAF to hold back on its original development planning which envisaged an open-cut capable of producing more than 150,000oz in the first three years of a nine-year mine life.
But that February 2017 open-cut feasibility study was sidelined when drilling at M1 South (part of which was captured in the open-cut scenario) started to return bonanza hits like 1,613g/t over 0.5m and 21m grading 53g/tonne beyond what was considered in the FS.
Now work at Sanbrado is focussed on resource and extensional drilling to upgrade the resource estimates for the deposits which make up the project, ahead of re-thinking the best development scenario in the first half of 2018.
A resource update is likely next week and the market is expecting M1 South alone to more than double from the current 288,000oz to more than 600,000 ozs, with both open-cut and underground resources to be reported at an impressive grade.
Ahead of next week’s upgrade, Hartleys and Euroz operatives headed off to Burkina Faso for a look-see.
Hartleys came back with 70c price target on the stock, and Euroz was at 60c. Both are kind of interesting given WAF was trading on Thursday at 40c for a market capitalisation of $230m.
Hartleys said that the introduction of M1 South as an open pit and high-grade underground ore source sweetens the anticipated open pit base feed from the M5 deposit, with opportunities to lift blended head grades above 3.4g/t in the early production years.
“We see potential for annual production of plus 200,000oz for the first couple of years, well above the 150,000oz annual target in the interim open-pit FS,” Hartleys said.
“Production at these levels should lower costs substantially, and on our preliminary modelling we see potential for an AISC of below $US600 an oz, which will be a vast improvement on the open pit FS AISC of $US708/oz over the first three years.”
Euroz is also now forecasting annual production of more than 200,000 ozs in the first couple of years at an AISC of $US630/oz.
So what was an interesting enough project has become a whole lot more interesting thanks to M1 South’s bonanza hits.
And given the growth ambitions of cashed up gold miners in Canada and Australia, it has got to be wondered if WAF will get to develop Sanbrado riches as a standalone company.
Euroz for one thinks maybe not. “We believe WAF is a potential corporate target,” the firm said.
Mt Venn excites for Great Boulder
The jury is out until the assay results are in for Great Boulder Resources (GBR) at its Mt Venn copper-nickel-cobalt prospect within its Yamarna project, east of Laverton in WA.
But there is no doubt there is a bit of a buzz around last year’s float on the basis of the company’s visual inspection of its first RC holes into Mt Venn.
Six of the seven holes drilled into a modelled conductor plate intersected stringer, semi-massive, and massive sulphide mineralisation over varying widths of up to 40m.
“The visually-logged sulphide mineralogy is pyrrhotite dominant with chalcopyrite (a copper-sulphide mineral),” GBR said.
It was interesting stuff but with assay results a couple of weeks away, it’s hard to say much more, in the normal course of events anyway.
But getting to this point has not been normal.
The actual “discovery” hole on the prospect was drilled in 2015 by Gold Road (ASX:GOR), which is developing the Gruyere gold deposit at a cost of $532 million some 30km from Mt Venn.
Even then it was a bore hole for Gruyere’s water needs, and it was only this year that the pulverised sample, which had indications of copper and nickel mineralisation, was sent off by GBR for assay.
It came back with peak results of 1.7 per cent copper and 0.2 per cent nickel, with cobalt, gold and silver values.
Importantly, when GBR said the visually-logged sulphide mineralogy from its own holes was pyrrhotite dominant with chalcopyrite, it also said that was consistent with what was in the 2015 discovery hole.
Again ahead of the assay results, GBR has been encouraged enough to expand the scale of the drill from a planned 18 holes to as many as 23, given the “extensive sulphide mineralisation encountered to date”.
The expanded program should be finished in about two weeks so it is not long now to know if GBR is on to something special. Some bets have already been made, with GBR shares moving up from 15c at the start of the month to 25c, valuing it at $17m.
One of the beaut things about being a newcomer to the lists is that GBR has bugger all shares on issue meaning there will be a leveraged response if the assay results come in with some decent grades over decent widths.
Having said that, GBR is really only starting out to unlock Mt Venn’s potential. There is a 9km EM conductor and geochemical trend to work over.
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One of Australia’s leading business journalists, Barry FitzGerald, highlights the issues, opportunities and challenges for small and mid-cap resources stocks, and most recently penned his column for The Australian newspaper.