Azumah Resources Ltd (ASX:AZM) has primed its Wa Gold Project for development, positioning the asset to be Ghana’s next commercial-scale gold mine.
Last week the company posted a 65% increase in the project’s ore reserve, raising the number of contained gold ounces to over 1 million.
A feasibility study update based on the new ore reserve outlined an 11-year operational life producing an average of 107,000 ounces of gold a year in its first six years.
The study details a pre-tax net present value of US$177 million at a 5% discount, an internal rate of return of 35% and a pre-tax net cash flow of US$270 million inclusive of government royalties.
Mining will take place across eight open pits with most production occurring at the Kunche, Bepkong and Julie deposits.
The total mineral resource estimate is 49.2 million tonnes at 1.6 g/t containing nearly 2.5 million ounces of gold.
Speaking to Proactive Investors, Azumah managing director Stephen Stone said the ore reserve was the culmination of many years of exploration.
He said: “The project has got a really strong foundation for development.
“There are several areas where we will need to do some more work, but we believe we can add even more value.”
The project will have a low established capital intensity of US$114 per ore reserve ounce and an all-in sustaining cost (AISC) of US$886 an ounce.
This underpins strong operating margins that will see the US$117 million establishment capital paid back in 1.6 years.
The average grade of ore processed over the first eight years of operation will be 2.06 g/t gold, the average life-of-of mine gold recovery 91% and average life-of-mine plant throughput 1.6 million tonnes per annum.
READ: Azumah Resources increases gold reserves to more than 1 million ounces at Wa project
Stone added: “What’s been really exciting recently is we’ve had a succession of really good drilling results underneath where our open pits are planned.
“This study – and million ounces – is only based on shallow open-pittable material so it doesn’t include any consideration of going underground.
“All indications are we’ve got some very good numbers and we’re vigorously drilling out that underground now … to see if underground mining is a real option.
“The project now has an 11-year life of which eight is mining and we fully expect those eight years of mining to expand as we do more and more exploration.”
Key operational information
READ: Azumah Resources drilling extends high-grade gold mineralisation deeper
The prospect of underground mining and Wa’s 2,400-square-kilometre tenure provide multiple opportunities to complement the project’s production growth.
Azumah’s current feasibility study is based on the mining of a series of relatively shallow open pits.
If underground mining is proven viable at any of these, it would add considerable value to the overall project.
Stone continued: “We’ve identified countless strong anomalies … and we’ve got years ahead of testing those.
“When you do get these strong anomalies there’s usually mineralisation there, it’s just a matter of how big it’s going to be.
“Outside of that, Azumah itself, separate from the joint venture with Ibaera, has a 13% interest in a neighbour called Castle Minerals Ltd (ASX:CDT).
“That’s a strategic holding and Castle has another 10,000 square kilometres of ground.”
READ: Azumah Resources confirms gold discovery with step-out holes
Recent deep drilling results from Wa’s primary deposit at Kunche have extended Kunche’s mineralisation 75 metres deeper than previously identified.
Intersections include 5 metres at 6.02 g/t from 214 metres and 1 metre at 140.49 g/t from 208 metres, which together extend the high-grade mineralisation to 200 metres below surface.
Bepkong, one of Wa’s three main deposits along with Kunche and Julie, is now being drill tested for depth extensions.
Kunche hosts 846,000 ounces of JORC resources and is constantly mineralised over its 1.5-kilometre north-south strike.
Azumah is planning to build its carbon-in-leach (CIL) gold processing facility at the Kunche deposit and haul ore from surrounding areas.
Stone added that Ghana was a very safe jurisdiction and a good place to operate, with a supportive government and long history of mining.
He said: “We’ve actually already got in place our mining leases and well on our way to get our environmental protection agency (EPA) permit done.
“The project is really primed for development now.
“The next few months is just a matter of finishing off the study … looking at options for upside then delivering the full feasibility study and hopefully moving to a development decision quickly.
“We’ll start talking to financiers pretty soon and we’ll be doing that in conjunction with our joint venture partner Ibaera.
“All being well we would expect to be in production in 2020.”
READ: Azumah Resources makes high-grade lode discovery at Wa Gold Project
In September 2017, Azumah entered into an earn-in agreement with Perth-based private equity group Ibaera Capital GP Limited, which aimed to deliver a revised feasibility study to support the funding and development of the initially-proposed 90,000-ounce a year operation.
Stone told Proactive Investors’ Stocktube channel: “The purpose of the joint venture is to increase the reserves from the current level to a level where they will underpin the financing and development of the project.”
The earn-in agreement with Ibaera allowed the private development company to obtain up to 47.5% interest in Azumah following two stages of expenditure worth about $17 million.
Ibaera's owners, principals and management are all highly-experienced geologists, engineers and financiers, and are currently managing all facets of the Wa project under the earn-in agreement.
READ: Azumah Resources commences 40,000-metre drill program in West Africa
The private equity-funded mineral investment and development company is backed by international investment funds and invests in emerging copper, nickel, zinc and gold projects from exploration and early development.
Founded in 2012 by executives from the development teams at Fortescue Metals Group (ASX:FMG) and WMC Resources Limited, Ibaera provides in-field expertise and manages projects from exploration through to construction.
Ibaera has 12 geologists and engineers who are collectively and individually recognised for their contribution to the discovery and development of world-class mining ventures.
READ: Azumah Resources’ Ghana joint venture leveraged for transition to gold producer
Touching on upcoming financing for the project, Stone said that Ibaera was well-funded and would not have an issue financing its share of the development, but Azumah had to go out and fund its share.
Stone continued: “Traditionally it would be a combination of debt and equity and I’ve got no doubt with these numbers there’ll be quite competitive interest in providing finance for the project.
“Indications now, from conversations I’ve been having, are that people are starting to look back into West Africa.
“The level of [financing] interest is coming from all over but it’s good to see some of the North American, particularly Canadian, showing interest again after a long absence.”