Roxgold (ROXG) - African Gold Story That Keeps On Giving and Building

Roxgold is a Canadian-based gold mining company with assets located in West Africa. The Company owns and operates the high-grade Yaramoko Mine Complex located on the Houndé greenstone belt in western Burkina Faso and is also advancing the development and exploration of the Séguéla Gold Project located in Côte d'Ivoire.

The Yaramoko gold mine consists of 2 high-grade underground gold mines: the 55 Zone and Bagassi South. Annual gold production in 2020 is expected to be between 120,000oz and 130,000oz.

We caught up with John Dorward, President & CEO of gold-producer, Roxgold for an informative update of the multi-asset, multi-jurisdictional company since we last spoke in June. 

Company Overview 

Roxgold is a Canadian Gold mining company, listed on the TSX. They discovered, built, and are operating the Yaramoko Gold mine in Burkina Faso and that was their only asset for a number of years. But they now have a new project in Côte d’Ivoire, which is coming along very quickly and have just made a new discovery in Burkina Faso so are now heading towards being a 3-mine company, multi-jurisdictional. The intention is to use the cash flow from the flagship mine at Yaramoko to build the portfolio and to provide their investors with accretive, non-dilutive growth during the process.

History & Development of Roxgold

The Yaramoko project was discovered in 2011 and Roxgold went through the traditional milestones of an exploration company turning into a producer. For a single-asset company, a junior developer like Roxgold, the Yaramoko asset was ideal as it was high-grade, with a relatively modest capex up front, around C$120M which made it imminently financeable and they were able to raise equity and debt as they needed it.

Roxgold attracted good, strong, solid shareholders. Appian Capital is one of their long-term shareholders, a PE fund out of London. They were able to attract patient, long-term capital, put the debt together, put the team together, and build the project. It's been a really good small mine for the company who have now completed a new reserve and resource update in 2020. Roxgold has been operating the Gold mine for 6-years, producing nearly 700,000oz, and the reserved and resource update shows the same measured and indicated resource base, or a slightly higher measured and indicated resource base, than when they started. Yaramoko is an exceptionally good underground Gold mine with a much longer mine life than originally thought and now that Roxgold has become a multi asset, multi-jurisdictional company people are starting to become very interested in the story.

Economics VS Sustainability: Lessons Learned Mining in West Africa

Yaramoko currently has an 8-year mine life in reserves. Then there is a good inferred component on top of that. The target is to convert that inferred to indicated and measured which is an infill drilling exercise which they have started doing. There are currently 3 underground drill rigs turning about 600m below surface. The main aim of that exploration programme is to infill, grade control drill plus as a little bit of inferred conversion. In 2022, they will have another drilling platform about 750m below surface, with the idea to continue to extend the mine at depth. Over the next 18 to 24-months, Roxgold will continue to test the down plunge-extent. It is a high grade mine so the economic limit at Yaramoko is probably 2,000m, and they are mining around 500m - 600m at the moment. Bagassi South is another open area that's open for expansion.

At Yaramoko they have wrapped reserves around an open-pit concept at 55 Zone. So at the end of the 55 Zone underground mine life which could be 15 or 20-years from now, everything will fall into the big open pit. There's over 200,000oz of very high-grade around 5g/t - 6g/t open-pittable material. It is expected that Yaramoko will be a 15-year+ mine life. And they think the same can be done at Bagassi South which is a focus for some drilling at the moment. 

As part of the underground drilling programme they are also testing the footwall structures by drilling into the footwall to see if there are parallel zones. They're drilling on the other side of the Yaramoko sheer, which has been interpreted as cutting off mineralisation, but there's really no necessary reason for that being the case and now they can test over the other side of it. The systems are powerful and very rich and given the nature of how the deposit was put in place, it’s entirely possible and very plausible that there will be additional structures. Roxgold thinks it is highly unlikely that there won't be other Gold deposits found around Yaramoko.

Plans & Potential of Boussoura

Roxgold also has the Boussoura asset in Burkina Faso which is a home-grown discovery by the company. It was started about 4-years ago and was prospective at the southern end of the Hounde Belt in Burkina Faso, and up to the border of Côte d’Ivoire. Roxgold has done some fairly high-level fieldwork and reconnaissance drilling over recent years at Boussoura and really got serious about it in the second half of 2018 and anticipate it being a much bigger project ultimately than Yaramoko. Boussoura is a little more typical of a West African open-pit project with multiple structures, parallel zones, over multiple kilometres.

Roxgold aims to have a maiden resource for Boussoura by the end of 2021 which is the first step. There will be several years of drilling at Boussoura in exploration work to develop the project into the third Gold mine for the company.

The Séguéla Gold Project: Guidance for 2021

The guidance for the Séguéla Gold Project for 2021 is around 120,000oz - 130,000oz of Gold produced and in 2020, they produced just over 133,000oz. On a growth spend, Roxgold is looking at around C$15M - C$20M, which is the same amount as 2020 which will be spent on exploration at Séguéla and Boussoura. They spent more in Séguéla than Boussoura in 2020 because they discovered Koula where they implemented an infill drilling programme and Séguéla will probably take the most money again this year. 

Roxgold is confident they will be able to deliver their guidance, subject to Covid not having an undue change in its impact. They are very committed to becoming a multi-mine, multi-jurisdiction company and are comfortable working in West Africa. The company has had some of their employees for about 15-years who have a good career path at Roxgold. The company has a lot of bank strength now in both operations and development.

Control Over Timing: Relations in Country & ESG

ESG is becoming such an important part for institutions, it's more than a tick box exercise now, it's got to be meaningful. Roxgold has made investments into local communities, planting trees, and working with the community, ensuring 91% of their employees are local which is all very good for the company. 

There are lots of reservations regarding political risk and jurisdictions for potential investors. In Burkina and Côte d’Ivoire, Roxgold has had a good experience with the government and the local communities. It means a lot for the Burkina government to have foreign investment in the country and to have a new Gold mine enter into the formal economy, pay taxes, pay their employees, pay their employee's taxes, pay into the social security fund, and have the resources for Covid.

Roxgold is very happy working where they are. There were concerns on the security front a few years ago and the company has responded to that. Both countries had elections in November and December 2020 and typically elections can be problematic but both went very well and now they are over for the next 5-years. People have their own perspective on West Africa, but the countries are all different and the operating environment for investment has always been excellent for Roxgold.

Roxgold is aware that they are operating with a pandemic but if the current operating situation continues and doesn't get any worse, they are confident they will be able to deliver their Feasibility Study next quarter. They would have delivered the Feasibility Study before the end of the year but for the discovery of Koula where they discovered 300,000oz in an open pit at 8g/t, so were keen to work that into their numbers. The mining permit has already been awarded and the ESAA has been approved and they are now in the advanced stages of negotiating the mining convention which are the fiscal stability arrangements. So the mining convention will be completed and the Feasibility Study will be published in Q2/21 and Roxgold is looking to finance the project and will look to increase their debt facilities. They are talking to a range of different counterparties about the finance. 

Roxgold had a very straightforward project finance facility for a number of years which they built Yaramoko with. That is being converted from a restrictive project finance type facility to a less restrictive corporate debt arrangement. They hope to be able to enhance that to the C$150M range. Roxgold finished the year with about C$62M in cash at the end of 2020 and is generating cash as we speak throughout 2021/2022 so are comfortable with that increased debt facility of C$150M and are not looking to raise any equity.

Delivering Share Price Growth & Means to do it

Roxgold is focused on per share growth and they have scaled up human resources, they have a new mining manager, processing manager, and general manager at Yaramoko who will take some responsibility for Séguéla. They have increased their technical services capacity and have managed multi-mine companies in the past. They are experienced and have built projects in this part of the world and are much better financed than when they built Yaramoko.   

Numbers Coming from Séguéla; Time to Change the Approach? 

Roxgold closed on the Séguéla asset in April 2019 and what they bought as a published resource from Newcrest was just over 400,000oz of inferred at 2.5g at Antenna. They paid C$20M cash with an additional C$10M due upon first production to repay Newcrest their investment as they'd spent about C$20M exploring at Séguéla. Newcrest has a very successful exploration-driven company and has found the majority of their Gold mines. When Roxgold bought Séguéla, they got a large regional package as well and they saw the ability to grow the project to 800,000oz - 1Moz over a few years. 

The company had modest expectations to start with but now with the exciting results at Séguéla they think that eventually it will be a multi-million ounce Gold project in a series of pits, some of which are likely to go underground as they have such high grades. One of the headline holes was 14m at 46g/t at Koula but there is also consistency across the asset. There are real high-grade deposits that look like they've got deep roots down-plunge which is where the current drilling programmes are focused to see if they can extend Ancien and Koula in the first instance into underground operations.  

The exploration is a planned, methodical process where targets have been generated and then tested. If the results are good there then they go back and infill. The drilling programme is paying off and the company has matured in their exploration and geological capacity.  

It was great to have an update with Roxgold who are a company with a good portfolio of assets and an exciting future ahead as a multi-asset, multi-jurisdictional company. We hope to speak to the company more regularly during the course of this year as they're building something good in the right way and are looking after the cash too which is really good news.  

To Find out more, go to the Roxgold website