Tietto Minerals Ltd (ASX:TIE) is on track to become West Africa’s next gold miner after delivering a "compelling" pre-feasibility (PFS) study for its flagship Abujar Gold Project in Cote d’Ivoire.
The PFS is targeting 200,000 ounces of gold in the first year of production and estimates production of more than 168,000 ounces of gold annually for the first six years of operations.
Abujar project now has maiden open pit probable reserves of 15.7 million tonnes run-of-mine (ROM) gold ore at 1.7 g/t for 860,000 total ounces, representing a 65% conversion of the indicated resource estimate.
West Africa’s next gold mine
Tietto managing director Dr Caigen Wang said investors could look forward to a healthy stream of news flow on the 3.02-million-ounce gold project and pointed to upgrades on the base case.
“Delivery of this maiden JORC 2012 open pit ore reserve and supporting PFS is a milestone for Tietto and our shareholders, as it moves us closer towards realising our goal of developing West Africa’s next gold mine,” he said.
“The PFS metrics are compelling and clearly suggest that the development of Abujar will transform Tietto into a substantial West African gold producer.
“Abujar is shaping up as a robust, long‐life project based on the open‐pit mine development, and we believe there is considerable upside to the base case PFS, with a scoping study of the APG open pit and AG underground deposits demonstrating considerable value remains to be unlocked for our shareholders.”
PFS economics highlights
Beyond the actual gold production forecasts, the fundamental signs for a long-life producing gold mine are sound.
The company holds life-of-mine ore reserves of 22.9 million tonnes ROM at 1.5 g/t for 1.1 million ounces at average all‐in sustaining costs (AISC) of $839/ounce.
Tietto expects to pay back the costs of development, estimated at $230 million, in less than three years.
The PFS delivered strong economics of pre‐tax net present value (NPV) of $363 million, internal rate of return 53%, and post‐tax NPV of $266 million, IRR 42%, based on an average gold price of US$1,506/ounce.
That should lead to free cash flow of more than $509 million (pre‐tax) over the first 10 years, with substantial upside to the project to be considered in the definitive feasibility study (DFS), which is expected to be completed next quarter.
The company has already secured all the requisite mining and environmental approvals needed for the project with negotiations with the Ivoirian Government on Abujar Mining Convention underway and expected to be ratified this quarter.
APG heap leach to add ounces
Early-stage metallurgical test-work has demonstrated the amenability of transitional and fresh material from the Abujar‐Pischon‐Golikro (APG) deposit to heap leaching, which has the potential to add ounces to the production profile.
Four 10-kilogram closed-cycle column leach tests were conducted on two transitional and two fresh composite samples from APG and excellent recoveries have been achieved from the sighter program.
The initial landform analysis by Knight Piésold indicates potential for first stage 40Mt heap leach (4 by 10 metres lifts).
Test-work is expected to be completed in 2021 with a preliminary economic assessment of the feasibility of heap leaching the lower grade material to follow.
Expanded project
The substantial upside to the PFS base case has been shown by scoping study assessments of APG open pit and Abujar‐Gludehi (AG) underground mine.
The expanded project has the potential to deliver increases in NPV, gold production and mine life with gold production growing to 1,436,000 ounces of gold recovered over 12 years of operation.
Mineral resource update
Dr Wang said the next mineral resource update was expected to be delivered towards the end of the second quarter of 2021, allowing Tietto to complete a DFS for Abujar in the third quarter of 2021.
“Our six diamond drill rigs operating at Abujar are now delivering around 11,000 metres of diamond core per month at what are industry-low costs of US$35/metre.
“This means that despite having one of the most aggressive exploration diamond drilling programs among companies on the ASX, our drilling has a very low drawdown on the company’s cash reserves, giving us flexibility to implement mine pre-development at Abujar.”
DFS due in third quarter 2021
The DFS will consider the additional throughput potential and operating costs of processing the oxide and transition material in the mine plan.
This should serve to lower the processing cost per tonne of ore particularly in the first two to three years of operations, where the oxide and transitional material make up a significant portion of the feed to the processing plant.
Tietto will investigate the optimum processing rate to ascertain the correct mill size during the DFS to potentially process some of the lower grade stockpiles earlier, reducing the stockpile inventories on site.
This has the potential to increase the “realised value” from mining operations earlier in the life of mine
The DFS, which is due in the third quarter of 2021, aims to:
- Optimise mining schedule and mill throughput with focus on reducing scale of pre-production mining; and
- Model throughput of ox/trans material through mill (currently treated same as fresh).
COO with proven track record
The company has appointed Matt Wilcox to the role of chief operating officer, tasked with progressing studies, followed by construction and ramp-up of Abujar.
This appointment received the stamp of approval from Canaccord, which said: “We see this as an excellent appointment, given Wilcox has a proven track record of building gold mines in West Africa.
“He was most recently responsible for building West African Resources’ (ASX:WAF) Sanbrado mine in Burkina Faso, ahead of schedule and under budget, and has also held senior roles with Nordgold over a 20-year career.
Funding
The production and economic outcomes in the PFS are sufficiently robust to provide confidence in the company’s ability to fund the development of the project through conventional debt and equity financing.
Early-stage discussions with a number of potential financiers are already underway.
The company has significant cash reserves of A$52 million, in addition to the potential conversion of up to 77 million options, which are exercisable at various prices between now and January 2023.
If fully exercised, the options would provide up to A$17 million cash.
These funds, in addition to cash reserves, could be applied directly to project funding or to future debt reduction payments.
Pipeline of prospects
Tietto is well advanced with over 25,000 metres of infill drilling completed.
The drilling program is designed to target inferred resources within and beneath current ore reserve pit design, as well as follow-up extensional drilling at AG and APG.
Tietto’s six diamond drill rigs operating at Abujar are now delivering around 11,000 metres of diamond core per month, at what are industry-low costs of US$35/metres.
The company’s geologists have identified more than 20 exploration prospects within 10 kilometres of the proposed Abujar Plant.
Diamond drilling to define mineral resources at these prospects will continue throughout 2021.