- Advancing two high-value gold projects in West Africa
- Nigeria has had very little exploration over last 60 years due to focus on oil
- Segilola has nameplate capacity of 650,000 tonnes per annum
What Thor Explorations does:
West Africa-focused mining group Thor Explorations Ltd (TSX-V:THX, AIM:THX, OTC:THXPF, FRA:T2X) (CVE:THX) (LON:THX) is advancing Nigeria's first large-scale gold mine, namely its flagship Segilola project.
The Vancouver-based company is fully funded, in construction and on track for the first gold pour at the wholly-owned project in the second quarter of 2021, the company has said.
Thor Explorations also has the Douta exploration project, where it holds 70% and has an opportunity to increase that to 100%, in the south-east region of Senegal. The mining lease lies within 5 kilometres (km) of Senegal's largest undeveloped gold resource, namely the 4.4 million ounce (Moz) Massawa deposit, which was recently sold by Barrick Gold Corp (NYSE:GOLD) to Teranga Gold Corp (TSE:TGZ) for up to US$430 million.
Elsewhere, Thor Explorations is also in a joint venture with major Barrick Gold on the Central Houndé project in western Burkina Faso. Barrick has a 51% stake, while Thor owns 49%.
Barrick is earning up to 8% by funding a minimum of US$2 million and completing a pre-feasibility study (PFS) on the property, which lies in the prospective Houndé belt, which has seen 10 Moz worth of gold discoveries.
Back to the firm's main project, and construction at Segilola started on the mine early last year. It has a 15 month build timeline for the high-grade open pit project and all approvals are in place.
Segilola has a 25-year mining licence and the NI-43 101 open pit probable reserve stands at 405,000 ounces of the yellow metal at a grade of 4.2 grams per ton (g/t). The higher confidence indicated resource is 469,000 ounces at 4.7 g/t of gold.
A definitive feasibility study showed a robust project, to be mined by a contractor, with a five-year mine life, which offers excellent leverage to the gold price.
Capital expenditure for the mine was put at just US$87.5 million, while the all-in-sustaining-costs (AISC) are put at a competitive US$662 per ounce, which is in the lowest quartile on the global cost curve.
Based on a gold price of US$1,300 per ounce, the post-tax net present value (NPV) comes in at US$138 million with an impressive 50% internal rate of return (IRR) and a payback in under 1.4 years. With the current reserve, at a US$1,600 gold price, Segilola shows a post-tax NPV of US$238.1 million and at a US$1,800 gold price shows a post-tax NPV of US$305 million
In April, 2019, Thor signed a term sheet for a US$78 million financing with the Africa Finance Corporation (AFC) for the construction and ramp-up of the project. The package included a US$54 million senior secured credit facility, a US$9 million gold stream pre-payment and a US$15 million equity investment from AFC, which will become a 20% shareholder in Thor.
How is it doing:
On August 9, Thor Explorations revealed that it had discovered a 'Bridge' mineralization during further drilling near the southern Makosa Tail zone at its Douta Project in Senegal. The 1,600-meter (m) program, which targeted a previously untested gap between Makosa to the north and the Makosa Tail, is being called Makosa Bridge.
The test results for the bridge zone indicate that gold mineralization is developed within sheared sedimentary and gabbroic host rocks over the strike length, connecting the Makosa Tail and Makosa.
Significantly, in late July, the company announced that it had completed its first gold pour at its Nigerian Segilola mine. The gold miner plans to ramp-up production steadily ahead of commercial output slated for September this year. The anticipated processing rate is 715,000 tonnes per year, targeting around 85,000 ounces of gold annually.
When announcing earlier in July expectations for the first gold pour at Segilola, Thor also said it was targeting publication of a maiden resource at Douta in Senegal by the end of 2021. Exploration programs focused on the company's exploration licences running along the Ilesha Schist belt in Nigeria are also continuing, it added.
The company said its strong pipeline of organic opportunities is supported by low-cost production at Segilola, with a target of 40,000 ounces this calendar year and forecast of over 100,000 ounces in 2022.
In a March 29 update, Thor had reported an improved resource and reserve for Segilola, improving the asset's economics Notably, the new probable reserve of 517,800 ounces at 4.02 grams per tonne (g/t) is a 28% increase over the definitive feasibility study issued in March 2019. That report two years ago considered an open pit and building a new 625,000 tonnes per annum (tpa) processing plant.
Following further resource definition drilling, design optimisation and positive industry sentiment in the gold price, Thor reviewed the process plant design capacity and optimum pit design, which has resulted in a larger pit design and an increase in production plant capacity to 715,000tpa.
And on February 2, Thor announced an encouraging first set of drill results from the northern extensions of the Makosa Discovery at its Douta Project, with mineralisation confirmed over 1,000 metres (m) of strike length in a number of parallel lodes at Makosa North.
The group noted that the drilling program was designed to test the mineralisation along strike and down dip from the mineralisation delineated from previous drill programs on Makosa. The results received to date confirm the continuation of the Makosa mineralised system along strike to the north, it said.
Thor Explorations also reached another company milestone with the admission of its shares on the AIM market of the London Stock Exchange on June 22, 2021. The move was aimed at offering wider access for investors as it progresses through a transformational period in its development.
Inflection points:
- Further news on 'Bridge' mineralization near the southern Makosa Tail zone
- Maiden resource at Douta by the end of 202
- Further ramp-up for Segilola
What the broker says:
In response to Thor Exploration's announcement disclosing the discovery of a 'Bridge' Zone connecting the Makosa Tail and Makosa targets at its Senegal property, Hannam & Partners issued an overview of the company and maintained its C$0.08 share target on the stock.
The firm's analysts noted that the company displays 4Q upside potential through the bridge discovery as well as the gold production ramp-up at its flagship Segilola project in Nigeria.
“We maintain our C$0.80/sh (per share) target for now, noting the significant upside a maiden resource estimate at Makosa or commercial production at Segilola, expected in September, could have on the stock. We still believe the market has yet to recognise Thor’s robust near-term profitability and cash flow, as well as its outstanding potential to add value through resource expansion in Nigeria,” the Hannam analysts said.
Thor anticipates commercial production will commence at Segilola in September.
“We derive an end ‘21E DCF for Segilola of US$648m, using $1,950/oz gold and a 10% WACC, to which we apply a blended target P/NPV of 0.72x. We see scope to raise our P/NPV target once commercial production is achieved at Segilola,” the analysts added.
“Combined with a conservative estimate of C$25m (just CAD 4 c/sh) for Douta and other assets, and after adjusting for net debt and other items, our risked SOTP for Thor is 47p or C$0.80/share, >2x the current share price, offering significant upside to an increasingly de-risked project," they concluded
What the boss says:
Commenting on the Makosa Bridge news in August, Thor Explorations CEO and president Segun Lawson said: "The initial drilling results from the newly discovered Makosa Bridge prospect are very encouraging. Importantly, the results have established that continuous gold mineralization is developed over a strike length of nearly 7.5km extending from Makosa Tail in the south to Makosa North."
Lawson added: “From these reconnaissance drill results it appears that the Makosa system is developing in scale and Makosa North is not yet closed off to the north. We are looking forward to receiving the last set of results aimed at extending Makosa North, after which we will be working towards a maiden resource at Makosa."
Contact the author at georgia@proactiveinvestors.com
