Thor Explorations (THX) - Africa's Latest 100,000oz Gold Producer

Thor Explorations Ltd. is a TSX-V as well as AIM-listed West African-focused gold producer. The Segilola Gold mine of the company is located approximately 120 km northeast of Lagos. The project currently has an open-pit life of mine of five years, and commenced production in Q1 2022 after a ramp-up period. The Segilola Gold mine is set to produce 80,000 ounces to 100,000 ounces of gold in 2022, with its open-pit resource holding 517,800 ounces of gold in the probable category and 532,000 ounces of gold in the indicated category. The project’s underground resources further hold 76,000 ounces of gold in the indicated category.

The company on the 30^th November 2022, released its financial and operating results for Q3 2022 and the period ending 30 September 2022. The update includes highlights such as the company producing 26,523 ounces of gold in Q3 at the Segilola Gold mine. The production exceeded the company’s production guidance of between 23,000 to 25,000 ounces. Thor Explorations Ltd. was able to produce 71,651 ounces of gold at the Segilola Gold mine for the first 9 months of 2022. The average grade of the ore mined for Q3 2022 was 4.43 g/t of gold with the company selling 67,617 ounces of gold and 4,204 ounces of silver up to September 2022. The financial highlights include producing revenue of USD$ 55.7 million in Q3 2022 and total revenue of USD$ 121.9 million by 30 September 2022. The company was also able to reduce its senior debt facility to USD$ 28.9 million and was able to have a cash position of USD$ 2.4 million by 30 September 2022.

Thor Explorations Ltd. plans to produce between 25,000 ounces and 27,000 ounces of gold in Q4 2022, with the full-year production guidance remaining between 90,000 ounces and 100,000 ounces of gold. The full-year all-in sustaining cost (AISC) for the operation is between USD$ 850 and USD$ 950 per ounce of gold produced. The operating highlight further included the company acquiring additional exploration licences within the Osun State and Kwara State in Nigeria.

The company aims to expand the mineral reserves of its Segilola Gold mine and as such the mine’s operational lifetime. Thor Explorations Ltd. also conducted an initial 1,280 m of reverse circulation drilling as well as diamond drilling at its Segilola Gold mine in 2022.

First gold pour and company value

Thor Explorations Ltd. entered into commercial production at its Segilola Gold mine in December 2021 and was able to produce 26,523 ounces of gold in Q3 2022 at the operation. The production exceeded the company’s production guidance of between 23,000 to 25,000 ounces for the period, with it further being able to produce 71,651 ounces of gold at the operation in the first 9 months of 2022. Segun Lawson, the President and CEO of Thor Explorations Ltd. explains that the company has only been improving quarter upon quarter throughout 2022.

“We poured first in July last year, and then obviously had the ramp-up. A couple of teething issues, but since December last year, we’ve been producing commercially. We had a great first quarter this year, and encouragingly for us, there have been improvements quarter upon quarter since Q1. We should hopefully end up at the upper end of our guidance, which is between 95,000 ounces and 100,000 ounces this year.”

The cost fluctuations within the commodity market throughout 2022, saw various operations especially those with smaller profit margins experience difficult financial periods. Thor Explorations Ltd. was able to mitigate the price fluctuations of the commodity market through alternative energy sources such as natural gas and decreasing costs by purchasing reagents and spares well in advance and in larger volumes.

“Look, we’ve been exposed to the costs as well. One thing I have to say is our mine is quite unique in a number of ways. It’s the only gold mine in Nigeria. In Nigeria, you have a lot of compressed natural gas, which is an alternative source of fuel. We switched from diesel to compressed natural gas. That brings our costs down in terms of energy prices. In terms of reagents, we’ve been very fortunate with the orebody. About 70% of our recovery is just from gravity alone, which brings the reagents cost down as well. And then also, forecasting forwards, we’ve been purchasing ammonium nitrate and spare parts in larger volumes 7 months in advance, just to avoid the volatility in those several months of the price shocks.”

The financial, operational and cost-mitigating endeavours however have not had the impact on the company share price as expected. Lawson accredits the side-ways trading of the company’s share price to the commodity sector as a whole which is experiencing a downturn as well as the company not existing for a long time and the Segilola Gold mine being rather unique as it is one of the few gold mines within Nigeria, a country more known for its natural gas reserves.

“I think, first of all, it speaks about the market and the sector as a whole. Everyone’s going through it, undervaluation. But secondly, we’re also a new name, having built a first-of-its-kind project in a jurisdiction where it’s never happened before. And thirdly, I think if we keep delivering, at the end of the day, and we keep producing the numbers we’re producing and rapidly paying down our debt and transitioning to free cash flow, I think a re-rating will happen at some point. Particularly when the cyclical business of commodities goes into an up-cycle.”

Life of mine

Thor Explorations Ltd. aims to expand the mineral reserves of its Segilola Gold mine and as a result the mine’s operational lifetime. The company has conducted an initial 1,280 m of reverse circulation (RC) drilling as well as diamond drilling at its Segilola Gold mine in 2022.

“Yeah, so we have a life of mine currently of about 5.5 years. We’re quite confident we can extend that because we have a larger resource than reserve. “

The company’s exploration initiatives consist of both exploration underneath the open pit of the Segilola Gold mine as well as regionally. Lawson explains that the company’s exploration initiatives consist of two programs with 4,000 m of drilling designated for regional exploration with 3,000 m of drilling aimed at expanding the mineral resources beneath the open pit.

“We have the first pass of about 7,000 m, so it’s 2 programs, 1 is 4,000 m and 1 is 3,000 m. The 3,000 m program is dedicated to going underneath the pit and extending the underground. We’ve only drilled down to about 280 m. We have identified a number of high-grade chutes. We’re doing infill drilling around that. We think there’s a high potential of extending the mine life by introducing underground ounces to supplement the open pit. That underground drilling has actually started.”

The exploration initiatives at the Segilola Gold mine will enable the company to expand the open pit and as such extend the operation’s lifetime. The company will be able to carry the expansion initiatives according to Lawson, with the preliminary date for the expansion set to be Q1 2024.

“From the studies we did in our Preliminary Economic Assessment, the capital requirement is USD$ 12 million to put a decline in from the bottom of the pit. We can fund that from our own cash flow. We’re hoping to do that as early as 2024 and supplement the open pit from then onwards.”

Lawson further explains that should the exploration initiatives the company is currently underway conducting at satellite deposits be fruitful, it will be able to extend the operational lifetime of the Segilola Gold mine at a lower Capital cost.

“We obviously have lower-hanging fruit in terms of Capex requirement, which is hugely dependent on the success of the drilling of the satellite targets. Any satellite targets we find are hugely materially beneficial to the company’s NPV because there’s no real Capex requirement.”

Douta Gold project and future plans

The Douta Gold project is a 58 km² exploration permit located within the Kéniéba inlier of Eastern Senegal. The project holds a mineral resource estimate of 730,000 ounces of gold at an average grade of 1.5 g/t of gold. Lawson believes that the company’s endeavours at the project thus far have shown to be successful.

“We got to our first major milestone last year, which was a maiden resource. We were very happy with where we landed, 730,000 oz grading at 1.5 g/t. We noticed in that program, there were a number of high-grade structures within the resource, which we felt if we drilled around and got some grade, we could pick up the ounces and the grade. It’s been very successful so far.”

Thor Explorations Ltd. on the 20^th of December 2022, announced assay results from its ongoing 26,000 m reverse circulation (RC) drilling campaign at the Douta Gold project. The exploration results included values such as 4.66 g/t of gold over 26 m as well as 11.74 g/t of gold over 9 m. Lawson explains that the company intends to update the resource of the project by the end of Q1 2023, with the company proceeding directly towards an economic study of the project thereafter.

“We’re getting intersections up to 13 g/t, 8 m wide and 9 g/t. We’re very happy with that and we’ve got more results coming in. We would have liked to, as we said to the market, update the resource this year, but every time we’ve drilled, it’s been a good dilemma to find more gold, so we’ve extended that program. We’re drilling through to the end of the year, and we will update our resource in Q1 next year. The plan, straight after updating the resource, we’ll do our first economic study there. That’ll be the first time the market can really start putting a value on this project.”

Lawson explains that the company is underway with the rapid advancement of the Douta Gold project due to it having the correct experience, the correct partners and the access to capital, should it be required, to be able to successfully set the project into production.

“We see ourselves in a situation where we have the mine-building experience, we’ve just successfully built a mine in Nigeria, and we have an EPC contractor who is also a shareholder that we get on very well with. Our target shareholders are Africa Finance Corporation, so there’s access to capital if required for Capex. Why not repeat what we’ve done in Nigeria in Senegal when it’s not too far away?”

The future may hold further acquisitions should the opportunity arise. Lawson explains that even though the company is not actively searching for any properties, it is open to it should it reach its current milestones.

“We have a real focus on paying back our debt, delivering to shareholders, and extending the mine life. That’s the priority of what we do. And then after that - that’s not too far away, I’m just talking over the next 6 months, the next 2 quarters. After that, the cash then starts building up very quickly and then I think that’s when we’re in the strongest position to look at deals.”

Regarding the future valuation of the company, Lawson believes that the market will recognise the true value of Thor Explorations Ltd. as the company continues to meet its milestones and deliver on its promises.

“At the end of every quarter, we’re generating US dollars. It’s only a matter of time before that re-rating happens. All we can do is continue to say what we intend to deliver and deliver it and show the growth in Nigeria and in Senegal. I also think in addition to that, we’ve had some long-term shareholders who’ve been in for 7 or 8 years who are taking the opportunities”

To find out more, go to the Thor Explorations website