Pasofino Gold (VEIN) - Technical Analysis

Pasofino Gold Ltd. is a Canadian mineral exploration company. It has an agreement to earn a 49% interest in the Dugbe Gold Project in Liberia. The company is also earning a 50% interest in the advanced-stage Roger Gold-Copper Project located in Quebec’s prolific Abitibi Greenstone Belt. 

Merlin Marr-Johnson caught up with John Sanders, COO, and Director, along with Dr. Daniel Limpitlaw, VP Projects, Pasofino Gold. 

Mr. Sanders is an exploration and mining geologist with 36 years of experience having served in operational, senior, and executive roles within the industry. This includes both the delivery of mineral resources and as part of the team in mine builds/development, with multi-commodity experience. John was formerly Exploration Manager, east and west Africa for Anglo Gold Ashanti, VP Exploration at Uramin Inc. and thereafter COO and subsequently MD of Elemental Minerals (now KORE Potash), VP Exploration at LSC Lithium Corp., GM Africa for the ASX-listed lithium developer Infinity Lithium Corp, and the COO for Helium One, a privately-owned company exploring for helium in Tanzania and more recently ARX Resources. 

Dr. Daniel Limpitlaw is a project mining engineer and an environmental scientist, specialising in mine closure and the assessment of mining impacts. He previously served as the Technical Services Manager at Vatukoula Gold Mines Ltd. and the Director of the Centre for Sustainability in Mining and Industry at the University of Witwatersrand. He has a niche consulting practice specialising in the analysis and resolution of problems with sustainability in the mining and minerals sector. 

Company Overview

Pasofino Gold Ltd. is a mineral exploration company. It was founded in 2010 and is headquartered in Toronto, Canada. ARX Resources Limited, and Bethlehem Iron Ore Corp. are the company’s subsidiaries. The company is listed on the Toronto Stock Exchange (TSX-V: VEIN), The OTC Markets (OTCQB: EFRGF), and the Frankfurt Stock Exchange (FSE: N07).

Pasofino Gold runs is running an exploration and development play in southern Liberia. It is currently in the Feasibility Study stage which is expected to conclude by the end of April. 

Ian Stalker, the company’s CEO, along with John Sanders and Daniel Limpitlaw formed the core technical team for Pasofino Gold to work on various projects. Ian Stalker proposed the potential to invest and develop the ore body in Liberia, featuring Tuzon and Dugbe F deposits. After thorough data analysis, the company decided to invest in the Dugbe Gold Project. 

The Dugbe Gold Project features a nearly 4Moz resource that is open-pittable. The company realised that this resource would require a fair amount of work to update the technical work and the MRE (Mineral Resource Estimation). It began working on the project in September 2020 and is looking to publish the Feasibility Study within the next 2 months. 

The Dugbe Gold Project currently has a 3.3Moz M&I (Measured and Indicated) resource. The project features grades of about 1.34g/t. The mine also has 1.58g/t high grades that can provide a 5-year mine life with a 170,000oz-180,000oz annual production. The project benefits from consistent grades of fine-grained, nugget-like material. 

The company anticipates that the deposit is higher-grade metamorphosed. It has modelled the project to the point of very high confidence and plans to include it in the DFS (Definitive Feasibility Study). 

Underlying Geology

Pasofino Gold has 2 major deposits the Dugbe F and the Tuzon deposit that are located 4km apart. The project benefits from a strong infrastructure. The Dugbe deposit is a shallow dipping sheet of mineralized orthopyroxene gneiss. It is gently-dipping and has a thickness between 3m-10m. 

The Tuzon deposit is a fold deposit that goes to F3 3 phases of deformation. The deposit reaches a depth of 350m to the nose of the fold and strikes in the north, northeast, south, and southwest directions with the final hinge in the sub-vertical. Here, two limbs run up the ore body.

The Dugbe deposit is fairly low, with a gentle dip while the Tuzon deposit is highly-folded. This allows for a much smaller pit footprint. The company’s technical team and consultants are currently working on establishing a grade control and the resultant dilution. The degradation at the deposit is slightly transitional. The rocks rank very high on the hardness index. A highlight for both the ore bodies is that they feature intrusives coming through which have been modelled. 

Pasofino Gold found that the actual deportment of the Gold is relatively fine-grained. The ore body is pegmatitic and easy to model. This enables the company to model the majority of the ore body in the MRE. Both the Dugbe and Tuzon deposits feature orthopyroxene gneiss. From a structural perspective, the company believes that the 2 deposits are on the same horizon, despite the 4km distance between them. Moving from the east into the granite is a relatively flat line, leading to the assumption that it is a quite late post-depositional granite. 

Based on the magnetic surveys, the company has observed that the eastern side has a lot more folding. The south side of both the deposits has a regional shear zone that influences the geometry. Coming off the main shear zone leads to mineralization. In essence, both deposits feature fairly-similar grades and offer quite similar recoveries along with the same metallurgical results.

Determining the events responsible for the hardness and the primary crystalline structure has been challenging. This is because the original fabrics have been obliterated to a point where it’s difficult to determine. However, the company is confident that the deposit was certainly a ductile environment. These deposits do not have brittle shearing. Additionally, it does not have large displacements from the brittle structures running through the deposits. 

Pasofino Gold is currently carrying out infill drilling to convert the resource into Measured and Indicated in the southern portion of Dugbe F, a relatively flat line slightly dipping ore body. The company drilled a recumbent fold in the southern area of about 800m-900m strike length that has a 40m-50m width. This helped in the reduction of the strip while also duplicating the orebody. 

The structural domain for the Dugbe F deposit features a relatively gentle flatlining that hasn’t observed a lot of disturbance. The major difference between the two deposits is that the Tuzon deposit features slightly higher grades on average than the Dugbe F deposit. 

The company anticipates that the folding has had an impact on the grades. It has found a concentration of mineralization of the fold. Based on 3D modelling, the company identified that mineralization is sitting on the extension, and as a result, both the orebodies are open on strike or on the periphery. Once the mine is operational, the company will have expansion opportunities. Currently, the project has a 14 years mine life. 

Material Grades 

Pasofino Gold’s asset has the potential for slightly higher grades in the first 5 years of the mine life. Both the Dugbe F and Tuzon deposits have higher-grade zones. The company has modelled these zones for the Feasibility Study. 

At the Tuzon deposit, the central core area is higher grade. The average grades here are between 1.58g/t-1.6g/t. However, the overall average grades are in the mid-1.35g/t. The company is looking to take out the high-grade zone through proper scheduling and then take the low-grade material. It has set a 1g/t cut-off for the resource and is looking to target grades between 0.5g/t-1g/t to stockpile the low-grade material in the back end. This has enabled the company to achieve an average grade of 1.4g/t-1.5g/t. Currently, the company is looking to determine whether to mine both bits at the same time or mine the Tuzon deposit first. 

Each deposit comes with its own set of pros and cons. However, if it starts with Tuzon, the upfront capital on roads and the fleet is lower. The company is very close to making a decision. In a scenario where the company mines both the deposits simultaneously, the strip ratio will suffer as a trade-off. 

Ongoing Operations

Hummingbird Resources PLC has historically carried out high-quality work in terms of environmental studies and ESIA (Environmental and Social Impact Assessment) on the project. Hummingbird Resources is currently in the project’s PFS (Preliminary Feasibility Study) phase. This has enabled Pasofino Gold to forego much of the trade-off studies. However, the company continues to engage in significant trade-off work. 

When the project commenced, the company had a partial Feasibility Study before conducting a PEA (Preliminary Economic Assessment). Due to this, the company didn’t opt for a PFS. 

Since the MREs have been firmed up, the company has been able to carry out detailed scheduling and optimization. In a scenario where a PFS had been conducted, the lack of geological resolution 1-2 years ago would serve as a hindrance. 

Pasofino Gold updated the historical MRE earlier this year and delivered the converter in November 2021. It was able to convert 90% of the inferred resource into indicated on both the Dugbe F and Tuzon deposits. This was delivered late last year. 

The company has set an April-end target timeline for announcing the outputs and project economics through the Feasibility Study. It is working hard to ensure that the deadlines are met. Following the completion of the Feasibility Study, the company has plans to submit on SEDAR (The System for Electronic Document Analysis and Retrieval) within 45 days. 

Pasofino Gold had to rehabilitate 70km of the road before initiating operations. This is because the region has one of the highest rainfall environments in Africa. In addition, the company put 24 bridges in, which was followed by exploration. Notably, the company has past experience in building projects from zero in a set timeframe. 

The company’s site is 70km from the service port in Greenville. The Dugbe Gold Project is located east of the Greenville port. The port has a 50% utilisation and is located close to the project. This allows for significant savings in logistics, bringing down the project costs. This has resulted in highly-favourable costs per 10 km for the company.

The Mineral Development Agreement 

Prior to Pasofino Gold’s arrival at the Dugbe Gold project, Hummingbird Resources signed a Mineral Development Agreement. This agreement encompasses a host of items that a company would need to negotiate with the government post the exploration phase. 

Once the mineral resource estimate, the Feasibility Study, and the ESIA have been submitted, the agreement provides a 15-year financial stability period. It offers a 35% tax rate along with a 10% tax break similar to other regions in Africa. The tax break includes duty reduction on oil, fuels, and more. The agreement serves as a continuum into the Feasibility application. It takes the all-in negotiations out of the process while also playing a major role in project de-risking. 

Cost Considerations

The project CapEx (Capital Expenditure) in the PEA is slightly over $400M. The covid pandemic has posed challenges as it has had an adverse effect on the prices of shipping, fuel, reagents, and more. The company anticipates that as it comes closer to building the project, the costs will normalise. It seeks to include realistic numbers into its financial model. 

There has been an increase in inflation and the company is working on ways to accommodate it into the project CapEx and OpEx (Operational Expenditure). In the OpEx, the key inflation was seen in the fuel and reagent costs that saw a sharp spike in prices towards the end of 2021. There are indications that the prices may come down to reasonable levels, and the company is determined to represent these metrics accurately in the financial model. 

However, since gold pricing has also observed a positive trend in recent times, it negates the impact of the increased commodity prices while maintaining healthy margins. Additionally, the geopolitical tensions in Europe also have an influence on gold and commodity prices. 

Pasofino Gold has achieved a reduction in energy costs by utilising a mix of LNG (Liquified Natural Gas) and solar energy. This has brought a significant drop in the company’s per-kilowatt cots. 

As a result of technological advancements, the cost curve of renewable resources has come down significantly over the past 10 years. This has helped in the reduction of the company’s energy costs while simultaneously contributing to the ESG (Environmental, Social, and Governance) component. 

Currently, Pasofino Gold has 2 highly competitive process flowsheets, one being complex with better recoveries and the other being simple with slightly lower recoveries. The company is running final optimization tests this month and is looking to finalise the process flowsheet over the next 2 weeks. It plans on announcing the final process flowsheet through an interim press release or alongside the Feasibility Study. 

Pasofino Gold has received interest from a very large Turkish mining outfit with a $1.5Bn annual turnover. This company has taken a 20% stake in Pasofino Gold and also has a member on the Board. The company anticipates that once the Feasibility Study is published, it will get a lot more interest from investors and other market entities. This would also result in share price growth, ultimately leading to a significantly higher market cap. 

Mineral Processing

The ore is hard from a milling perspective. The deposits benefit from favourable pit slope angles. The rocks here are convenient to mine from a slope stability perspective, however, the milling process requires a lot of effort and power. As per the current flowsheets, the company is looking at either a 75-micron mill or a 53-micron mill based on which flowsheet is finalised. The 53-micron mill will operate with a SAG (Semi-autogenous grinding) mill or a ball mill followed by a straight CIL (Carbon In-Leach) process. 

The rock’s bond index is around 15-17 and does not feature a lot of abrasions. The company isn’t designing circuits for highly abrasive ore, instead, it is focused on the comminution energy required. Since the mineralogy is relatively consistent, the company hasn’t observed significant refractory components. It is focused on attaining a fine enough grind and ensuring that various species can be dealt with. The company is currently running optimization tests on one of the circuits that features an intensive leach component. 

The geology features a number of arseno species along with a bit of pyrrhotite, which is expected in the Birimian arsenopyrite. However, it isn’t particularly refractory in nature. The company continues to run test work on the underlying mineralogy and determine the extent of actual contained gold and whether it’s worth extracting or not. This is the reason why one of the company’s flowsheets has an intensive section. It will help the company choose between the 2 flowsheets and work out the project economics. 

In terms of CapEx, Pasofino Gold is optimising all other aspects of the infrastructure to ensure that the numbers are as close to the PEA as possible. So far, the company has made significant progress on this front.  The company is close to delivering a robust Feasibility Study. It is confident that the study will be published as per schedule, leading to really strong economics. 

To find out more, go to the Pasofino Gold website