Orbis Gold is trying to develop a mine in Burkina Faso it says will produce $639 million in free cash flow

John Robertson

PortfolioDirect

Orbis Gold is trying to develop a mine in Burkina Faso it says will produce $639 million in free cash flow. Canadian listed Burkina Faso gold miner SEMAFO Inc has foreshadowed a A$162 million bid for Orbis Gold. Orbis, still two years from production, is targeting average annual production of 224,000 ozs over 6.7 years similar to the SEMAFO production guidance for 2014. Orbis is expecting all-in costs of US$619/oz. SEMAFO costs are running at $840-890/oz. SEMAFO has a market value today of C$1,043 million. Orbis directors would like a similar value for themselves but SEMAFO itself was re-rated in 2009 only after its main Burkina Faso mine began producing. Until Orbis can also produce, investors could face the prospect of dead money. Orbis is just one example of investors not being rewarded for incurring early stage risks until well after development has occurred. Orbis is cheaper today than it will be in the future but not cheap relative to the way other companies in the sector are being priced.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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