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Teranga Gold reports positive feasibility study for Banfora Project

Published 07 September 2017

Teranga Gold Corporation has announced positive results of the feasibility study on its permitted Banfora gold project (the Banfora Project) in Burkina Faso, West Africa.

The Banfora Project is comprised of a mine license of 89 km2, and a regional exploration land package of nearly 1,000 km2.

Based on initial gold reserves of 1.2 million ounces, the Feasibility Study's base case demonstrates solid project economics with a 15% internal rate of return at $1,250 per ounce gold for a 2.4 million tonnes per annum carbon in leach ("CIL") processing facility modeled after the plant located at the Company's Sabodala gold operation ("Sabodala") in Senegal, West Africa. 

"Development of the Banfora Project is an important step towards attaining our goal of becoming the next multi-asset, mid-tier gold producer in West Africa. It will diversify our production base and add significant scale by increasing our consolidated annual gold production by 50% to between 300,000 and 350,000 ounces1,6," stated Richard Young, President and Chief Executive Officer of Teranga.

The Company expects an improvement in the Banfora Project economics following completion of an infill drill program aimed at converting inferred resources to reserves to be completed later this year, with a reserve update expected in the first half of 2018.  The infill drill program is targeting inferred resources located adjacent to the current reserve pits. Overall, the Company anticipates achieving a conversion rate of between 25% and 50% of the inferred resources.

As at June 30, 2017, Teranga had cash and cash equivalents of $80 million2. As outlined in the updated technical report for Sabodala filed on August 30, 2017, the Company anticipates cash flows from Sabodala of more than $80 million3 over the next two years and a total of $230 million3 over the next five years. With cash and cash equivalents, anticipated cash flow and indicative term sheets for a project debt facility of up to $150 million, the Company is in a solid financial position to develop and fund construction of the $232 million4 Banfora Project. 

Mr. Young continued: "Our strategy is to grow the Company responsibly by being prudent and disciplined in our capital allocation. The initial Feasibility Study economics of the Banfora Project are solid. They are expected to improve in the first half of next year following a reserves update, which may lead to a larger or lower-cost project debt facility. As a result, we are deferring plant construction by approximately a quarter to allow us to develop an optimal financing plan for the Banfora Project as well as our other growth initiatives. Construction readiness activities will continue to move forward and the scope of work will expand in the lead up to plant construction."

Upside Potential with Anticipated H1 2018 Resource and Reserve Update

  • Initial gold reserves base of approximately 1.2 Moz is derived from four deposits (Nogbele, Fourkoura, Samavogo, and Stinger) within the Banfora mine license, and is anticipated to increase in the near-term based on significant potential within existing resource shells
  • A large portion of the initial resources estimate that was not converted to reserves is located in near proximity to the feasibility study design pits based on the initial reserves base, both along strike and at depth
  • An extensive 65,000 metre infill drilling program, already 50% complete, is increasing drill hole density in the in-pit areas currently classified as inferred resources
  • Given the demonstrated continuity of the mineralization adjacent to the zones of inferred resources, the Company anticipates between 25% and 50% of the inferred resources will be upgraded to the indicated category and converted to reserves, extending the mine life beyond the current 9 years
  • Beyond the initial four deposits included in the Feasibility Study, Teranga has initiated a multi-year exploration program on over a dozen other priority targets on its regional exploration land package, all within trucking distance of the proposed mill site

"The Banfora Project is off to a solid start with an initial after-tax rate of return of 15% and economics that are anticipated to further improve once the current infill drill program is complete and reserves are updated in the first half of 2018," saidPaul Chawrun, Chief Operating Officer of Teranga. "Additionally, we are undertaking a multi-year exploration program covering more than a dozen regional targets. The objective of the regional program is to identify additional deposits beyond the initial four included in the Feasibility Study to feed the central mill at Banfora."

Project Overview

As part of its acquisition of Gryphon Minerals in 2016, Teranga acquired the Banfora Project, located in the southwest corner of Burkina Faso. It is less than 10 kilometres from the border of Côte d'Ivoire and within the north-northeast trending Paleoproterozoic Birimian Senoufo Belt, which also hosts Randgold Resources' Tongon deposit in Côte d'Ivoire.

The Banfora Project is 90% owned by Teranga with the Government of Burkina Faso holding a 10% free carried interest. It includes exploration licenses covering more than 1,000 km2 and a permitted mining license that covers 89 km2.  As well, the property is easily accessible by road in close proximity to the regional town of Banfora and the major city of Bobo-Dioulasso. Under its Mining Convention with the Government of Burkina Faso, the Banfora Project benefits from fiscal stability guarantees that stabilize certain tax rates such as corporate income and customs duties in effect prior to the adoption of the 2015 Mining Code.

Over the last 12 months, the Company has completed follow up drilling across the defined deposits at the Banfora Project to augment and validate historical drilling and, in turn, support the resource estimate conducted independently by Roscoe Postle Associates Inc. Additionally, an independent metallurgical testwork optimization program was conducted to determine the processing plant design criteria and gold recovery values for the mine design and project economics.

Open Pit Mineral Resources and Reserves Summaries

Teranga completed a resources and reserves confirmatory drilling program at the four initially identified Banfora Project deposits in 2016:  Nogbele, Stinger, Samavogo and Fourkoura.  Based on this additional drilling and geologic modeling undertaken as part of the Feasibility Study, the open pit measured and indicated resources estimate is 1.8 Moz gold, with an additional 0.7 Moz of inferred resources, pit constrained at $1,450 per ounce gold.

Mining

Mining will be by way of conventional open pit mining techniques using drill and blast with material movement by hydraulic excavators and trucks. The project scale suits 110 to 140 tonne class excavators in a backhoe configuration matched to 50 tonne class mining haul trucks operating at five-metre bench heights. Following operating procedures similar to Sabodala, an extensive reverse circulation ("RC") drill program is planned to supplement the production blast hole sampling as part of the grade control strategy. The mine operations will emulate Sabodala, with multiple near-surface pits feeding the process plant.

The process plant will be located adjacent to the Nogbele deposit, which contains approximately 50% of the initial reserves. The Fourkoura, Stinger, and Samavogo deposits are located 6, 15, and 25 kilometres, respectively, from the process plant. The haul trucks selected have the ability to haul ore directly to the process plant. This is expected to reduce re-handling costs and minimize waste movement through optimized pit designs for the near-surface ore bodies. The Company will operate its own fleet.

The Banfora Project is expected to benefit from lower operating costs and reduced operational risk as a result of Teranga's experience as an owner-operator at Sabodala.

To maximize the value of the Banfora Project, the primary aim of the mine schedule is to supply the processing facility with the best value material first and stockpiling low-grade ore.

Metallurgy and Processing

The process plant design is based on a conventional CIL gold process flowsheet consisting of primary crushing, SAG and ball milling, with a pebble crusher, CIL tanks, elution, electro-winning and gold smelting to produce doré onsite. Throughput is expected to range between 2.2 and 2.5 million tonnes per annum, depending on the blend of soft and hard ore. The average predicted plant recovery is 92%, with soft material recoveries from some zones reaching as high as 95%.

The process plant design is based on a robust metallurgical flowsheet designed for optimum recovery and minimum operating costs. The key criteria for equipment selection are suitability for duty, reliability and ease of maintenance, and synergies with Sabodala, including same-sized crusher, mills, feeders and CIL tank agitators. The process selected is based on industrially proven equipment and sizing, resulting in additional operational flexibility and lower technical risk.

The tailings storage facility ("TSF") will be developed as a high density polyethylene geomembrane lined paddock type facility in a two-cell arrangement. The TSF embankments will be constructed in annual raises to suit storage requirements, using downstream raise construction methods.

Transport and logistics for mining projects in the region are well-established with eleven mines built in Burkina Faso within the past decade. Goods will be containerized and transported by liner services to the Abidjan port in Côte d'Ivoire or the Tema port in Ghana.

A construction readiness program is underway for initial engineering, site infrastructure and preparation of large vendor packages. The engineering, procurement and construction management ("EPCM") scope is currently in a tender process amongst several EPCM service providers with construction experience in West Africa and Burkina Faso. An award decision is expected shortly. Plant construction is expected to commence in Q2 2018, with first gold pour following within approximately 18 months of the construction start date. 

Operating Costs

Operating costs include all direct costs for the production of gold doré. The estimates are based on annual rates determined in the mining schedule with ore delivery from the Nogbele, Fourkoura, Samavogo and Stinger deposits.

Mine operating costs were determined using first principles estimates and input provided by equipment quotations, supply providers and costs at Sabodala where applicable. The average mining costs are $1.73/tonne mined for soft material and $2.65/tonne mined for harder material. The mining costs include rehandle and haulage of ore from the satellite pits and stockpiles to the process plant.

Processing costs are based on metallurgical test results, quotations from suppliers and consultant recommendations and using a rate of 338 tonne per hour for soft material and 250 tonne per hour rate for hard material.  The average processing cost are $9.38/tonne milled for soft material and $12.18/tonne milled for harder material.

General and administrative costs average $4.31/tonne milled and consist of site office costs, insurance, financial costs (banking charges, legal fees, etc.), refining and transportation costs and personnel costs.

Pre-production and LOM Capital Costs

The Company plans to replicate the first phase of the Sabodala process plant layout which is expected to lower construction and operating risk and, in turn, pre-production project capital and operating costs. The capital cost to construct the Banfora Project is estimated at $232 million4, including processing plant, infrastructure, an owner operated mining fleet, owners cost, contingency, taxes and duties. The Company is evaluating opportunities to optimize and reduce capital costs that may improve the IRR. 

Owners costs have been captured in the capital estimate, including the management team, project expenses, pre-production costs, first fills, opening stocks, plant mobile equipment, project spares, vendor representatives, training and initial resettlement costs. The Company has hired Metifex Pty Ltd ("Metifex") to form part of the owners team for the project. Metifex has worked on a number of projects with the Teranga management team, including most recently the mill optimization project at Sabodala.

Pre-production capital costs exclude acquisition costs and reserve development costs incurred from acquisition through the end of 2017.  It also excludes construction readiness activities of $12 million, which will be spent prior to major construction.

Life of mine sustaining costs for the Banfora Project total $105 million and include mobile fleet upgrades and replacements, road construction, TSF lifts, resettlement costs and general sustaining capital in support of mining, processing and general and administrative functions.

Social and Environmental Impact Assessments

The current resources and reserves for the Banfora Project are permitted and the environmental impact assessment study is complete.

The resettlement action plan is progressing well, strongly supported by the local communities. Under the resettlement action plan, approximately 500 households in the villages of Zegnedougou, Nangueledougou, Djondougou, Katolo, Nadjengoala will be relocated over the next five years, with a further 350 households compensated for agricultural land impact. The resettlement and livelihood restoration process for the project is being managed by an experienced team from the global sustainability firm, ERM, building on work completed under the previous project ownership. 

Resettlement sites have been identified, and the physical planning, design and approval of future resettlement communities is underway. Construction of the first resettlement households is expected to begin in the first quarter of 2018. Employment opportunities and sustainable development initiatives supported by Teranga will provide further support for socio-economic growth in the area.



Source: Company Press Release