Thor Explorations Ltd (TSX-V:THX, AIM:THX, OTC:THXPF) has unveiled another milestone at Nigeria's first large-scale gold mine - the Segilola asset - namely that the project has reached commercial production.
The first gold was poured in July this year, and the mine is now operating at its targeted daily production rate with the process plant in-line with its design throughput capacity of 715,000 tonnes per year.
"I am pleased that the Segilola gold mine has achieved commercial production and also pleased to report that the mine is running smoothly at design throughput capacity," Thor Explorations CEO Segun Lawson told investors in a statement. "The team has worked tirelessly through the unprecedented Covid-19 pandemic and have done an excellent job overcoming various teething issues during the commissioning of the plant."
READ: Thor Explorations says new drill results from the Makosa North prospect in Senegal extends mineralization further north than expected
"This is a significant achievement and marks the start of an exciting growth phase for the company through the combination of stable high-grade gold production and exploration potential in the region around Segilola and progress on our Douta project in Senegal," he added.
Up to the end of the third quarter, Segilola had mined around 90,000 tonnes of material, while two more ore zones have now been prepared for a higher-grade direct tip operation in October.
"The mining fleet has been fully commissioned and mine production has continued through the wet season, with particularly heavy rainfall in September, which is now subsiding as we approach the dry season which typically runs from late October to early March," the company noted.
In terms of processing, during the ramp-up at the plant, a number of minor faults were identified, including a faulty heat exchanger at the mill and supply chain issues. All faults have now been rectified by the EPC contractor and supply chain issues resolved, Thor added.
In August this year, Thor Explorations said it had completed a 4,000-metre drill program at Segilola with results expected in the fourth quarter. The company is focused on mineral properties in Nigeria, Senegal and Burkina Faso and has 100% interest in the Segilola gold project in Osun State of Nigeria and a 70% economic interest in the Douta gold project located in south-eastern Senegal.
Canaccord Genuity (TSX:CF, LSE:CF) repeats 'Buy'
In a flash note commenting on the latest news, analysts at Canaccord Genuity (TSX:CF, LSE:CF) repeated a C$0.70 (41p) NPV-based target price and 'Buy' rating on Thor Exploration stock.
The analysts said: "The key potential bottleneck was always going to be the ramp-up of the processing plant, and pleasingly, THX has reported that the plant is now operating in line with its 715ktpa throughput capacity. No details were provided in today's release on grades or recoveries, but we remind investors that THX updated FY21E production guidance only a month ago to 30-35koz.
"We note that our estimates currently expect high-grade (~5g/t) material to be mined and processed in the near term, which underpins out expectations free cash flow yield in 2022E of ~45%. We believe the completion of ramp-up and announcement of commercial production should bring improved market confidence that these figures are achievable."
They added: "We expect Segilola to produce ~80-115kozpa Au over each of the next ~5 years, with upside potential to the resources base, in our view. For further details on Segilola, we direct investors to our initiation report published in May. When comparing THX to Canaccord Genuity (TSX:CF, LSE:CF)’s global gold junior coverage, we note that it stands out on a number of metrics (based on our estimates), including 2022E FCF yield of ~45% vs the peer group at ~7% and 2022E EV/EBITDA of ~1x vs the peer group at ~2.4x."
-- Adds Canaccord Genuity (TSX:CF, LSE:CF) comment --
Contact the author at giles@proactiveinvestors.com