Teranga’s Wahgnion mine processes ore ahead of schedule

Teranga Gold’s (TSX: TGZ; US-OTC: TGCDF) Wahgnion open-pit gold mine in Burkina Faso started processing ore in August, two months ahead of schedule, and is expected to produce 30,000 to 40,000 oz. gold in 2019.

The company poured 1,700 oz. gold during commissioning in August.

Throughput and grade will ramp up during the commissioning process, the company says.

During the first five years (2020–2024) of its 13-year mine life, Wahgnion is expected to produce 132,000 oz. a year at an average mill grade of 1.83 grams gold per tonne, at all-in sustaining costs of US$761 per oz. gold.

Wahgnion, 510 km southwest of Burkina Faso’s capital city of Ouagadougou, is Teranga’s second mine after its flagship Sabodala open-pit mine in Senegal.

“It is wonderful to bring a new mine on, in this type of gold-price environment, where you have got gold prices at a six-year high, so we are thrilled,” says Richard Young, president and CEO of Teranga Gold. He adds that Wahgnion could generate $60 million per year in free cash flow for the first five years, based on $1,250 per oz. gold. “It is a small, but a very profitable mine for us.”

Teranga acquired Wahgnion, of which the Burkina Faso government owns 10%, in October 2016, as part of the company’s all-share purchase of Gryphon Minerals.

Major plant construction started in 2018, after the company secured $165-million in debt financing. “We were able to complete the drill program, update the feasibility study that had been done on the project, finance, move into construction and [have] first pour in less than three years,” Young notes.

The company plans to produce doré on-site. The plant’s design is based on a conventional carbon-in-leach gold process flow sheet. Throughput would range between 2.2 million and 2.5 million tonnes per year, depending on the blend of soft and hard ore. The average predicted plant gold recovery is 92%, with soft (oxide) material recoveries from some zones reaching as high as 95%.

According to an updated technical report filed in October 2018, measured and indicated resources stand at 50.5 million tonnes grading 1.51 grams gold per tonne for 2.4 million contained oz. gold. Inferred resources add 5.25 million tonnes grading 1.41 grams gold for 240,000 contained oz. gold.

Wahgnion’s 13-year mine life is based on proven and probable reserves of 31.1 million tonnes grading 1.61 grams gold per tonne for 1.61 million contained oz. gold. The reserves include only four initial deposits on the mine licence— Nogbele, Fourkoura, Stinger and Samavogo.

Processing facilities at Teranga Gold’s Wahgnion open-pit gold mine in Burkina Faso. Credit: Teranga Gold.

Next year, Teranga will embark on a multi-year exploration and drilling program that was put on hold during Wahgnion’s construction. The initial exploration program will focus on shallow drilling and more than a dozen open-pit targets, within 5 km of the mill.

“These targets have been previously identified by the previous owner,” Young says. “We have not focused on those targets during construction, but we will turn our attention to those targets, beginning next year.”

Exploration could extend Wahgnion’s mine life from its current 13 years to 15 or 20 years, he adds.

Now that Wahgnion is up and running, Teranga is turning its attention to other assets, such as its wholly owned Golden Hill project in the central part of the Houndé greenstone belt in southwest Burkina Faso. “Golden Hill is actually our most advanced exploration project, so we are just currently in the process of moving that into the feasibility stage of development,” Young says. “That could be our third mine.”

In February of this year, Teranga announced an initial resource estimate for the Golden Hill project, which has indicated resources of 6.4 million tonnes grading an average 2.02 grams gold per tonne for 415,000 contained oz. gold. Inferred resources host 11.95 million tonnes grading an average 1.68 grams gold per tonne for 644,000 oz. gold.

In July, the company started a 27,000-metre drilling and exploration program to support a preliminary economic assessment and convert Golden Hill from an exploration licence to a mine licence. Young says the company can make a development decision as early as 2021.

Young describes Burkina Faso as a mining-friendly jurisdiction with a trained workforce. “There have been over 10 mines built over the last 10 years,” he says.

Carey MacRury, director of metals and mining with Canaccord Genuity Group (TSX: CF), says Wahgnion appears to be a decent mine, as it is under budget and on time. MacRury adds that “it looks like everything is going well at this point, but we still need to see a couple of quarters.”

Teranga has been a single-asset gold producer since acquiring the Sabodala mine in 2010, MacRury notes. With the expected ramp up of gold production in the fourth quarter of 2019, and the Golden Hill project’s potential to become the company’s third mine, “there is potential for Teranga’s valuation to rerate, as the company gains the benefits from operating, financial and geopolitical diversification, as it transitions into a multi-asset producer,” he said in a research note in July. “African single-asset producers are trading at a significant discount to multi-asset producers.”

Teranga has also entered into two joint ventures in Côte d’Ivoire, where it has six exploration licences and a mine licence. “We have used the opportunity over the last three or four years when the sector has been out of favour to acquire assets, entering joint ventures that we would not have been able to enter into or acquire in a different gold-price environment,” Young says. “So we have developed an organic growth pipeline — a pipeline that we can develop over the next 10 years.”

MacRury has a “buy” rating and $7 target price for the company’s shares.

Teranga’s shares traded at $5.40 apiece, within a trading range of $2.97 to $5.71 at press time. The company has 108 million common shares outstanding for a $580-million market capitalization.