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Azumah Resources Ltd: DEEP DIVE

Azumah Resources expects Ibaera Capital’s revised Wa study this year

The JV partners also plan to make an investment decision on the Ghanaian project this year.
A map of the Wa project in far northwest Ghana along the border with Burkina Faso
OVERVIEW: AZM The Big Picture
The Wa project is in far northwest Ghana, along the border with Burkina Faso
  • A revised feasibility study is expected in about the September quarter
  • A funding package is a hoped-for inclusion
  • The final investment decision is expected by the December quarter
  • Ghana's government is supportive and has already granted the project a 15-year mine licence

What does Azumah Resources do?

Azumah Resources Limited (ASX:AZM) (FRA:A6Z) specialises in exploration and development in the West African nation of Ghana. It is run by Stephen Stone, a geologist who has more than 30 years project evaluation, executive management, corporate development and operational experience in the international mining game and boasts a stint in Zambia’s open pit and underground mines on his CV.

What does Azumah Resources own?

The key asset is the Wa Gold Project in Ghana’s Upper West Region, near the Burkina Faso border and just 10 kilometres from regional capital Wa.

The 2,400 square kilometre project has a number of tenement blocks.

These include the 2,177 square kilometre Wa-Lawra block in the west and the Wa East block which includes the Josephine and Julie- Collette licence blocks.

Ore reserves at the project are 18 million tonnes grading 1.77 g/t gold for a 1 million ounce contained ore reserve. Contained resources are 2.5 million ounces.

A sum of 34,800 ounces of inferred material in the mine design was not able to be included in the ore reserve.

Another 156,000 ounces of inferred material in the pit shells could be added to ore reserves at a later date if sensitivity analysis can be employed during pit optimisation work.

An updated feasibility study for open pit operations at the joint venture project is being worked on this year, with an activities report released in January revealing the study had modelled an 11-year operation producing about 107,000 ounces of gold a year in its first six years.

Now valued at US$177 million ($249.9 million) with a before-tax and post-government royalty net present value (NPV5) calculated at a 5% discount, the project has a before-tax and after government royalty internal rate of return (IRR) of 35%.

Expected net cash flow before-tax and after government royalty is US$270 million.

The expected grading in the first eight years is about 2.06 g/t gold, while average life-of-mine gold recovery would be 91% and average life-of-mine plant throughput 1.6 million tonnes a year.

Establishment capital is US$117 million while capital payback is a short 1.6 years.

Viewed as a compelling development opportunity by the company, the project is expected to have a low cost of US$114 per ore reserve ounce and an all-in sustaining cost (AISC) of US$886 an ounce.

Spot gold is trading for about US$1,303.95 an ounce.

A 15-year mining licence has been secured for the Wa project.

Azumah’s project manager and joint venture partner on the project is Perth-based private equity-funded exploration and project development company Ibaera Capital Advisers Pty Ltd.

PE group fund Ibaera Capital Fund LP is funding exploration and development studies funded for up to a 47.5% interest in the Wa project, backed by the more than US$1 billion fund-of-funds.

Ibaera came on board as a joint venture partner in October 2017 and has an accomplished multi-disciplinary team that is managing all work.

The fund’s team come from backgrounds at major Australian players Fortescue Metals Group Limited (ASX:FMG) (FRA:FVJ) (OTCMKTS:FSUGY) (OTCMKTS:FSUMF) and BHP Billiton Limited (ASX:BHP) (LON:BHP) (NYSE:BHP) and its acquisition WMC Resources Limited.

Successful West Australian geologist Dr Jonathan Hronsky leads the technical team.

Ibaera and Azumah’s feasibility study for the project will be finalised over the course of the first nine months or so of this year as the partners prepare to make a development decision later in the year.

The Perth fund hopes to deliver a revised blueprint for funding and development of Wa project with the study pencilled in for finalisation in the September quarter.

Before Ibaera completes the feasibility study, a number of opportunities to improve operational and economic performance may be explored.

These include assessing the option for further underground mining underneath the Kunche and Bepkong pits and evaluating and incorporating results from further exploration at the project into the study.

A drilling program of more than 40,000 metres is underway at Wa project.

Azumah had $1.4 million (US$1.1 million) cash at the end of the December quarter and expects $350,000 of cash outflows this quarter as it directs $50,000 of its own funds to exploration in this period.

Ibaera agreed to pay for all exploration and development studies for two years as part of its two-stage US$13.5 million project earn-in.

Inflection points

  • Delivery of viable feasibility study and supporting study work around the September quarter

  • Funding package proposed in the December half-year

  • Final investment decision in the December quarter

  • Construction approvals and progress in 2020 and beyond

  • Gold market sentiment during key decision-making points and development decision milestones

Managing director Stephen Stone confident of value in Wa opportunity

“The Wa Gold Project is now transformed into an extremely compelling development opportunity, without even considering the evolving prospect of underground mining presented by the recent discovery of high-grade below-pit mineralisation at Kunche and Bepkong,” managing director Stephen Stone reported in late January.

“Full-credit to our joint venture partner and project manager Ibaera Capital which has increased ore reserves by 65% to over 1 million ounces and redefined the project with operational and financial metrics that unequivocally reposition it up with its peers.

“The Wa Gold Project is now well primed to be Ghana’s next commercial-scale gold mine, with mining leases already granted, EPA permits well advanced, grid power to site and the strong support of the Ghana government.”

Azumah managing director Steve Stone will be at the final day of the March 3-6 Prospectors & Developers Association of Canada (PDAC) convention in Toronto, manning booth 3316. For a one-on-one briefing on the Wa project during #PDAC2019, email [email protected]


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