Sarama Resources acquires Orezone’s Bondi

Andrew Dinning, a founder and the president and CEO of Sarama Resources (TSXV: SWA), made a name for himself in Africa while working in the Democratic Republic of the Congo for Moto Goldmines.

As part of the management team at Moto, he oversaw the development of the Moto gold project from a 4 million oz. gold deposit to a more than 22 million oz. deposit. That deposit — now called Kibali — was bought by Randgold Resources (NASDAQ: GOLD) and AngloGold Ashanti (NYSE: AU) in October 2009.

Dinning set up Sarama Resources the next year and focused on West Africa, and finally southwestern Burkina Faso.

“We didn’t think at that point in time that the Congo was the right jurisdiction for a start-up,” he says in a telephone interview. “It’s definitely elephant country, but you need a big balance sheet to work there, and starting as we were with a blank sheet of paper, it wasn’t really the best option for us.”

Since this decision was made, Sarama has quietly expanded its footprint in the West African nation.

The junior’s flagship asset, South Houndé, is situated in the Houndé greenstone belt, a region known for gold deposits. The project — 260 km west of the capital of Ouagadougou — sits 130 km southwest of Semafo’s (TSX: SMF; US-OTC: SEMFF) Mana gold mine and Roxgold’s (TSXV: ROG) Yaramoko gold mine, and 60 km south of Endeavour Mining’s (TSX: EDV; US-OTC: EDVMF) Houndé gold project.

Sarama also holds a 32% stake in Karankasso, a joint-venture project with Savary Gold (TSXV: SCA), which is next to the South Houndé project, and in May announced plans to acquire a third property, Orezone Gold’s (TSX: ORE) Bondi gold deposit, 30 km from Sarama’s other two assets.

“Bondi is trucking distance to our main resource area at the South Houndé project, and that’s what makes it highly accretive for us,” Dinning says. “We view Bondi as a nice little asset, and we always have.”

The model, Dinning says, is to develop a project with multiple open-pit gold deposits within trucking distance of one another, and have all the material feed into a central processing facility.

“Bondi is not a big enough project to be a stand-alone,” Dinning says, adding that “the name of the game in that area is trying to work out how it all fits together, and Bondi is the first piece of the puzzle.”

Bondi — about 75 km from Burkina Faso’s second-biggest city, Bobo-Dioulasso — is linked by a paved highway that transects the property. Orezone and others have explored the property since 1998 with 80,000 metres of reverse-circulation and diamond drilling. Metallurgical test work commissioned by Orezone concluded that the mineralization at Bondi could undergo cyanidation. Altogether Orezone and other companies spent an estimated US$9 million on the property.

In 2009, Orezone published a resource of 4.1 million tonnes grading 2.1 grams gold per tonne for 282,000 oz. gold in the measured and indicated category, and an inferred resource of 2.5 million tonnes averaging 1.8 grams gold for 149,700 contained oz. gold at a cut-off grade of 0.5 gram gold. The historic measured and indicated resource included a large component of higher-grade material reported at a cut-off grade of 2 grams gold per tonne (1.4 million tonnes grading 4.2 grams gold for 186,000 oz. gold.)

Under the agreement, Orezone will receive 9.6 million common shares of Sarama valued at $1.4 million (at 15¢ per share); 3 million warrants for common shares of Sarama exercisable for two years at 19.5¢ per share; 2 million warrants for common shares exercisable for three years at 24¢ per share; and a production royalty of US$20 per oz. sold on the first 200,000 oz. gold sold from the property.

Dinning says the first steps at Bondi will be to close the deal and transfer the permits to Sarama’s name, which “could take months.”

“Then we’ll go back and run the ruler over things. Orezone did a pretty thorough job on the Bondi permit … the recent drilling to the east got interesting intercepts that open up potentially a different spot in a different setting to what Bondi is, so we’ll investigate that and look at how it fits together with Sound Houndé.”

At the South Houndé project, meanwhile, Acacia Mining (LSE: ACA) — formerly African Barrick Gold — is earning up to a 70% interest by funding US$14 million of exploration over four years, and can acquire another 5% stake by declaring a reserve of at least 1.6 million oz. gold.

Dinning notes that Acacia Mining brings real value to the project. “One of the benefits of having Acacia as a partner is that we get access to a bunch more pretty good exploration minds, which means quite of bit of thinking is going on about what we’re doing, which is good.”

He also views the deal as a “‘heads we win, and tails we win’ arrangement, as Acacia has a high threshold for project size, given the East African mines produce 250,000 oz. gold per year each.” He also noted that “if we land on a project of that size with a smaller interest but no balance sheet risk for the project, it is a pretty good outcome, and if Acacia choose not to go the full earn-in, with the addition of Bondi, we are in a position to look at possible development routes.”

The inferred resource at South Houndé stands at 43 million tonnes grading 1.5 grams gold per tonne for 2.1 million contained oz. gold. The resource includes 13.5 million tonnes grading 1.2 grams gold of oxide material for 0.5 million contained oz. gold, and 12.1 million tonnes grading 2.7 grams gold for 1.1 million oz. gold, reflecting higher-grade shoots within the mineralized system, the company says.

The South Houndé resource extends 10.2 km along strike within a lithological and structural corridor that is 1.3 km wide. Preliminary metallurgical test work has shown viable processing routes with 85% extractions for oxide using heap leaching, 93% for oxide using conventional cyanidation and 91% for fresh rock using an oxidation stage before cyanidation.

Dinning notes that 70% of Sarama’s ounces at South Houndé sit within 100 metres of surface, “so there’s scope downdip and down-plunge … if we can drill down a bit that will add ounces quite quickly.

“At the moment the model in my mind is your classic West Australian model, with a series of pits feeding a central plant, and every now and then you have a pit with a high-grade shoot that you can decline off the pit and chase underground,” he says, “which would be a sweetener for the project.”

Meanwhile, at the company’s Karankasso joint-venture project, Savary Gold completed an inferred open-pit constrained resource late last year of 9.2 million tonnes grading 2.28 grams gold per tonne, for 671,000 contained oz. gold.

Savary Gold kicked off its latest drill campaign at the project in April. The drill program will total 6,500 metres in 45 to 55 holes, and is designed to follow up on four of the six zones that contain resources, and test new targets.

Tara Hassan of Haywood Securities notes that “unlike some of its peers, Sarama’s exploration story is a fresh face to the market, with assets that are underexplored and have limited historical activity.

“With extensive property packages in Burkina Faso, Sarama is sitting on prospective ground that it is only beginning to unlock the potential of through its exploration activities.”