In the space of a year, Alecto Minerals (LON:ALO) has gone from exploration junior with some promising acreage to one with big name partners and the near-term prospect of gold production.
The step-change has been impressive against the tough backdrop for the sector.
Twelve months ago the big news was the initial non-JORC code resource of almost a quarter of a million ounces of gold at the Kerboulé project in Burkina Faso.
Now all attention is on Zambia and the Matala project.
Matala on a fast track curve
At one time owned by Aussie miner Luiri Gold, Matala found its way into the Alecto portfolio at the end of last year.
In April, Alecto announced an agreement in principle with Yantai Xinhai Machinery under the terms of which an estimated US$14.4mln in funding will be provided for the construction of the mine, 125 kilometres west of Lusaka.
True, the cost was 943mln shares, or approximately 25% of the enlarged share capital, but with the Zambian government looking favourably on the country’s first major standalone gold mine supports for Matala are stacking up.
Production on schedule for next year
Mark Jones, Alecto’s managing director, says it is a realistic target for production to have started to by the second quarter of next year.
The stars will have to align quite nicely for that to happen, but it’s not unimaginable.
“With cash costs envisaged at around US$780 and a projected internal rate of return of 52%, this project has plenty going for it,” he said.
Alecto’s plans are for a 400,000 tonnes per year open pit while a recent feasibility study indicated a life of around four years 8 months at $1,200 per ounce gold and NPV of US$28.6mln.
Its interest in Zambia comprises two licences, Matala and Dunrobin, with a JORC-compliant 760,000 oz.
Costs to get Matala into production are estimated at US$18mln with cash generated once it is up and running to fund development of a mine at Dunrobin.
Joint ventures and more
Matala is plenty for a junior to be going on with, but Alecto is keeping other irons in the fire through joint ventures with some well-heeled neighbours.
Post December, the group secured joint ventures with Randgold and Cora Gold for two projects in Mali.
Cora Gold owns tenements adjacent to the Alecto’s Karan project. Cora, a subsidiary of Kola Gold, will pay all of the exploration and development costs.
Funding a scoping study will entitle Cora to a 65% stake, with a further 15% to follow on completion of a bankable study.
At that point, Alecto can decide if it wants to maintain a stake and pay its share of mine development costs or hand it all to Cora.
Randgold meanwhile can take a 65% stake at Kossanto West in Mali with Alecto retaining a 35% participating interest.
An initial work programme will involve further mapping with potential follow up reconnaissance drilling anticipated to be undertaken by Randgold in the first 12 months.
In August, meanwhile, Alecto agreed a farm-out of a third property in Mali with Canadian junior Ashanti Gold Corp to take a 65% stake in the Kossanto East in return for funding the project to pre-feasibility level.
And to come full circle there is still the opportunity at Kerboule, where Alecto is currently looking for a partner.
And there's still Kerboule
Kerboulé lies just 20 metres along strike from the 5mln ounce Inata gold mine owned by Avocet Mining.
The resource estimate by Wardell Armstrong comes in at 6.2 mln tonnes, grading at 1.16 grams per tonne (g/t) gold for 230,758 ounces of gold, at a cut-off 0.5 g/t.
The resource implies an initial acquisition cost of around US$2.25 per resource ounce of gold, substantially lower than the industry-standard cost, said Jones.
Kerboulé may also be combined with the 247,000 ounces of gold at Kossanto East in Mali as part of a plan to make a sizeable gold distrint in Mali.
The mineralisation at Kerboulé starts from surface, with around 70% contained within the oxide and transitional layers.
-- updates for Kossanto East farm-out --