Thor Explorations Positions for Strong Production, Cash Flow, and Growth in 2024

• Thor Explorations expects to deliver 95,000-100,000 oz of gold production in 2024 while paying off debt and building cash flow
• The company overcame higher costs and lower production in 2023 due to waste mining to prepare for future years
• Exploration drilling aims to extend the mine life at Segilola beyond 2028 by targeting additional resources at depth
• The Douta gold project in Senegal is progressing with an updated resource and PFS expected after metallurgical studies
• Lithium exploration drilling is also set to resume in Q2 2024 after target generation work

Poised for a Thunderous 2024

Thor Explorations CEO Segun Lawson provided an update on the company's progress and future plans in a recent interview. As a West Africa-focused gold producer with assets in Nigeria and Senegal, Thor navigated challenges in 2023 but sees opportunities ahead to deliver value for shareholders.

The company's flagship project is the Segilola Gold Project, located in Osun State, Nigeria, in which Thor holds a 100% interest. Mining and production at the Segilola Gold Project commenced in 2021, marking a significant milestone for the company. In addition to its Nigerian operations, Thor also holds a 70% interest in the Douta Gold Project, situated in south-eastern Senegal.

Interview with Chief Executive Officer, Segun Lawson

Overcoming Challenges

2023 was admittedly Thor's most difficult year to date. The company had to conduct significant waste stripping at its Segilola Gold Mine in Nigeria to prepare for mining in future years. This resulted in production of around 85,000 ounces, lower than the prior year. All-in sustaining costs were also elevated due to the stripping and process plant upgrades.

However, this investment sets the stage for improved performance going forward. Lawson explained, "Last year's activity was a lot of waste mining to have access and flexibility to high quality ore for subsequent years. We're through that and 2024 is a year of deleveraging from our debt, strengthening our balance sheet and delivering on production."

2024 Production Outlook

For 2024, Thor is guiding for gold production of 95,000 to 100,000 ounces. This includes processing 10,000-11,000 ounces that are held up in the plant from 2023 as operations normalize. All-in sustaining costs are forecast at $1,100-$1,200 per ounce.

At a $1,900 gold price, this implies robust margins of around $750 per ounce or $70-75 million for the full year. The company expects to generate significant free cash flow that will allow it to completely pay off its $22 million in outstanding debt. A large debt repayment of $8 million has been ready at the end of March, cash flow beyond that can be directed to funding exploration and growth initiatives.

"Pulling down that gold in circuit and producing, paying back the senior debt, strengthening our balance sheet, that leaves us very well positioned for 3-4 years of strong free cash flow from the existing mine, even without considering exploration upside," said Lawson.

Extending Mine Life

A key focus for Thor is extending the life of the Segilola mine beyond its current plan to 2028. The deposit remains open at depth, so the company is allocating exploration drilling to target resource growth that could support a pushback of the open pit or an eventual underground mining scenario.

Two drill rigs are being mobilized for this deeper drilling in Q2. Another rig will test satellite targets around the mine. The exploration budget for this program is $4 million, which is expected to complete 5,000-8,000 meters of drilling.

While recent drilling at satellite targets hasn't yielded a major discovery yet, Lawson sees potential to add incremental ounces to the mine plan. Demonstrating a longer mine life is a priority this year.

Douta Project Progress

At Thor's Douta Gold Project in Senegal, an updated preliminary feasibility study (PFS) has been slightly delayed due to metallurgical testing taking longer than anticipated, particularly for the fresh rock material. Recovery rates have varied and required sending samples to labs in Australia. However, oxide material has demonstrated excellent recoveries over 90%.

The company is mobilizing a rig to drill oxide targets in Q2 that could enhance the project economics. Once the PFS is delivered, which is now expected shortly after Q1, Thor will look to rapidly progress to a definitive feasibility study to reach a construction decision.

Lithium Exploration

In addition to its gold assets, Thor has prospective ground for lithium in Nigeria. Initial drilling generated encouraging results, but the company has taken time to conduct soil sampling and build targets for a more comprehensive drill program.

This work is now complete and drilling is set to resume in Q2. The goal is to establish steady news flow from this drilling and continue to build the scale of this potential lithium resource.

Conclusion

With a difficult 2023 in the rear-view mirror, Thor Explorations is focused on delivering in 2024. The company is positioned to generate significant cash flow from its Segilola mine while paying down debt. Exploration success could extend the mine life and add substantial value for shareholders. Meanwhile, the Douta project continues to advance and lithium exploration adds another avenue for growth. At its current valuation, Thor appears to offer a compelling risk-reward proposition for investors.

The Investment Thesis for Thor Explorations

• Significant free cash flow generation potential in 2024 with 95-100koz of production at $1,100-1,200/oz AISC
• Aggressive debt paydown to strengthen balance sheet and position for growth
• Exploration upside to extend Segilola mine life through deeper drilling and satellite targets
• Douta PFS and oxide drilling to highlight value of second development asset
• Lithium exploration resuming with potential for steady news flow and growth of the resource base
• Modest market cap relative to near-term cash flow outlook

Key Takeaways

Thor Explorations offers investors direct exposure to an emerging West African gold producer at an attractive valuation. With a challenging 2023 behind it, the company is poised to deliver a significant increase in production and cash flow in 2024 while continuing to pay down debt. Exploration success at Segilola could drive a re-rating as the market gains confidence in the long-term potential of this asset. The Douta project and lithium exploration provide additional upside optionality. Meanwhile, the macro backdrop appears highly supportive of gold prices and gold equities. As the company executes on its plans, Thor appears well-positioned to close the valuation gap to peers and generate meaningful returns for shareholders.

Macro Thematic Analysis

The current environment appears highly supportive of gold equities like Thor Explorations. The persistence of high and sticky inflation has continued to pressure central banks to raise interest rates. At the same time, the recent turmoil in the banking sector stemming from the failure of Silicon Valley Bank and uncertainty around Credit Suisse has reignited concerns about financial stability and a potential credit crunch. This macroeconomic backdrop bodes well for gold prices as the market grapples with the potential economic fallout of tighter monetary policy.

From a fundamental perspective, the gold mining sector is arguably the healthiest it's been in decades. Years of underinvestment have constrained supply growth at a time when demand is robust. Margins are strong and balance sheets have been repaired, allowing companies to return cash to shareholders while also investing in their assets. While the sector's performance has lagged the rise in gold prices year-to-date, it appears poised to play catch-up as generalist investors rotate capital to gold equities as a portfolio hedge.

As Segun Lawson aptly put it:

"Just from the initial exploration we've done, we know we can extend this mine life and we're quietly optimistic and confident of extending it further. We think there's a huge value proposition as a base case, but a lot of our focus now is demonstrating that upside potential."