Tietto Minerals Limited (ASX:TIE) recently upgraded the overall gold resource at its Abujar project in central west Côte D’Ivoire, West Africa, by 40% or 870,000 ounces, to 3.02 million ounces with further resource growth likely due to continued strong drilling results.
The overall resource now stands at 81.2 million tonnes at 1.2 g/t for 3.02 million ounces, an increase from the previous estimate of 2.15 million ounces, and the all-in exploration cost is just US$5.20 per additional ounce.
Most of the increase comes from the Abujar-Gludehi (AG) deposit gold resource which has grown by 490,000 ounces to 2.3 million ounces at 1.5 g.t gold.
Canaccord Genuity, the global capital markets division of Canaccord Genuity Group Inc (TSE:CF), has retained its speculative buy recommendation and price target of 90 cents per share for Tietto following the resource upgrade.
The following is an extract from Canaccord’s research update:
Exceeds 3Moz at Abujar
Tietto Minerals (TIE-ASX) has published an updated resource for the Abujar Gold Project in Côte d’Ivoire. The company has delivered a 40% increase in term of contained ounces, which has exceeded our total size expectation. The resource is now 3.02Moz @ 1.2g/t Au (versus CGe of 2.8-2.95Moz @ 1.4-1.6g/t Au and previous resource of 2.15Moz @ 1.5g/t Au from November 2019).
Higher confidence Indicated Resource grows by 44%
TIE has lowered the overall grade of the project, which may disappoint the market to some extent (now 1.2g/t Au from 1.5g/t Au); however, the higher confidence, Indicated component of the resource has grown 44% for only a 0.2g/t loss in grade. Total Indicated resource for AG now stands at 1.24Moz @ 1.6g/t Au. What the market should also be focussing on is that the higher-grade core of AG has grown to 1.6Moz @ 2.18g/t Au from 1.4Moz @ 2.2g/t Au, and will underpin the PFS in the MarQ'21.
Where has the lower grade come from?
The lowering of resource grade has come from a substantial increase to the APG satellite deposit (100% increase in oz), which will offer low-cost, low strip feed into a 3.5Mtpa plant late in the mine plan. For us, the lower grade does not materially affect the first five years of a future operation at Abujar. TIE has also delivered a maiden resource for the SG deposit: 200koz @ 1.4g/t Au.
The resource has been reported at 0.3 g/t Au cut off within pit shells (previously 0.4g/ t Au); and 0.8 g/t Au cut off below the pit shells for AG, and 0.3 g/t to a depth of 120m and 0.8 g/t below 120m for APG (previously 40m), and 0.3 g/t to a depth of 120m for SG (maiden).
Model changes
We have updated our model for FY20 financials and adjusted our Abujar production scenario to account for the lower overall grade seen in the resource update. We now model a nine-year scenario (previously eight years) producing an average of 156kozpa (previously 171kozpa) for average LOM AISC of ~US$900/oz (unchanged). Our modelled LOM recovered gold has increased from 1.36Moz to 1.41Moz, and we have also increased our assumed capex for a 3.5Mtpa plant to US$215m.
Valuation and recommendation
We maintain our SPECULATIVE BUY recommendation and price target of A$0.90/share. Our NPV12% valuation is on a fully-diluted basis and risked 80% to account for the predevelopment study status of the project. Our base case centres around the higher-grade core of the AG deposit (now 1.6Moz @ 2.2g/t Au) and TIE demonstrating a high-grade starter pit opportunity here (note our modelled LOM total recovered gold is 1.41Moz).
TIE is now embarking on a 70,000m program to deliver yet another resource increase in mid-2021. PFS is due MarQ'21.