Roxgold finances Yaramoko

Drillers at Roxgold's Yaramoko project in Burkina Faso. Credit: RoxgoldDrillers at Roxgold's Yaramoko project in Burkina Faso. Credit: Roxgold

Roxgold (TSXV: ROG; US-OTC: ROGFF) has de-risked its Yaramoko project in Burkina Faso with a US$75-million debt-financing package from several European banks, and a US$15-million equity investment from its underground mining contractor in Africa. That will leave the company nearly fully financed to build the 100%-owned gold project, and break ground in this year’s fourth quarter.

Roxgold has awarded a four-year mining services contract to a subsidiary of African Underground Mining Services (AUMS). Under the agreement AUMS will make an initial US$5-million investment in the junior. The contract gives Roxgold the option to issue another US$10 million of its shares in exchange for pre-production underground development work.

Roxgold has also signed a commitment for a US$75-million senior project debt facility with Société Générale Corporate & Investment Banking and Credit Suisse AG. The facility also includes a US$20-million equity-funded cost overrun account and a hedging component (65,000 oz. gold, or 8.5% of Yaramoko’s current reserves over the life of the six-year loan).

In a prepared statement, company president and CEO John Dorward describes the debt-financing package’s interest rate (London interbank offered rate, plus 4.3% to 4.75%) as “very competitive,” and noted that other than the standard Burkina Faso government royalty, the project is not weighed down by third-party royalties, and doesn’t hold streaming arrangements. 

“The ability of management to secure funding from multiple sources in an uncertain gold-price environment appears to underscore the quality of the Yaramoko project,” Andrew Breichmanas of BMO Capital Markets said in a research note, after the financings were made public.

At Haywood Securities, Roxgold is one of mining analyst Tara Hassan’s favoured development names. “In a market that is increasingly focused on asset quality, we believe Roxgold is likely to attract attention given its ability to deliver high-margin ounces for a lesser capital outlay and at reduced execution risk, relative to some peers,” she said in a research note on Oct. 1.

“With Roxgold delineating some of the highest-grade rock in West Africa, a solid team in place to develop the project and attractive exploration upside remaining at the project, we believe it is a name to focus on — even in a challenging gold-price environment.”

Based on a feasibility study completed in April, the planned underground operation would run at 750 tonnes per day and produce an average of 99,500 oz. gold a year over its 7.4-year mine life at all-in sustaining costs of US$590 per oz., which is a 17% decrease from estimates in the preliminary economic assessment. Average total cash costs including royalties are pegged at US$467 per oz. — 12% less than the PEA.

The faesibility study is based only on the project’s flagship 55-zone’s indicated resource, which, at a cut-off grade of 5 grams gold per tonne, stands at 1.6 million tonnes grading 15.80 grams gold for 810,000 contained oz. gold.

Elsewhere in Burkina Faso, Roxgold is exploring its Bagassi South target — part of its Yaramoko permit and just 1.8 km from the project’s 55-zone.

Ron Stewart and Mohamed Abo Daff of Macquarie Research believe there’s room to grow. “We see a possibility for ROG to roughly double its resource base to 1.5 million to 2 million oz., with an associated 50% mill expansion that could cost as little as $10 million,” they say in a research note. “This growth potential is driven by: 1) the downdip potential on the 55-zone; 2) Bagassi South, which could add 200,000 to 300,000 oz. to the existing resource at similar grades; and 3) Haho, a large anomalous and highly prospective target area, located in the Boni shear zone.”

The Macquarie analysts have a $1.40-per-share target price, while Sadowski of Raymond James has a $1.20-per-share price target and Breichmanas of BMO Capital Markets a $1-per-share target.

Over the last year Roxgold’s shares have traded within a range of 39¢ to 93¢ per share, and at press time traded at 72¢.

Print

Be the first to comment on "Roxgold finances Yaramoko"

Leave a comment

Your email address will not be published.


*


By continuing to browse you agree to our use of cookies. To learn more, click more information

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.

Close