Toubani Resources (TSX-V: TRE) - New High Leverage 3.5Moz Gold Developer

Toubani Resources Inc. (Formerly African Gold Group Inc.) is a listed Canadian gold company with expansive holdings in West Africa’s prolific Birimian Greenstone Belt including more than 460 square kilometers across Mali and Burkina Faso. The company is focused on the development of the Kobada Gold Project located in Southern Mali, a low capital and low operating cost gold project with the potential to produce more than 100,000oz of gold per annum along with a 16-year mine life.

Matt Gordon caught up with Phil Russo, CEO, Toubani Resources. Mr. Russo is an experienced mining and finance professional with more than 18 years of experience in corporate, project development, and capital markets function. Mr. Russo has deep, long-standing relationships within the precious metals sector globally. His past experiences include various executive roles within corporate development, strategic direction, investor relations, and project development at Barrick Gold, Dacian Gold, and Perseus Mining both in Perth and Toronto, as well as several years at a North American investment bank. Mr. Russo holds a B.Sc. in Applied Science from the Curtin University of Technology and an MBA from Curtin Business School, Western Australia.

Company Overview

Toubani Resources is a Canadian exploration and development company focused on developing a gold platform in West Africa. The company has a highly experienced board and management team with a proven track record in the African mining sector, operating mines from development through to production. The company was founded in 2002 and is headquartered in Toronto, Canada. It is listed on the Toronto Stock Exchange (TSX-V: TRE) and the Australian Stock Exchange (ASX: TRE).

Toubani Resources has the Kobada Gold Project in southern Mali, a 3.1Moz asset with a 100,000oz yearly production in the DFS (Definitive Feasibility Study) over a 10-year period. Phil Russo recently joined the company as CEO. Previously, he was working with Perseus Mining Limited in corporate development and capital markets. He also worked with Barrick Gold as a mining analyst and on project development.

The company recently got listed on the Australian Stock Exchange. The former CEO, Danny Callow, has stepped down to an Executive Chair role in the company. In a few months, he is expected to be appointed as Toubani Resources’ Chairman.

Phil Russo, the current CEO brought his team to the company. The team has extensive experience operating in West Africa. The team was working with Morila Gold mine just before joining Toubani Resources. Bill Oliver will be heading the exploration side of the operations, while Kerry Griffin will be leading the resource development. The Kobada project has a strong exploration upside. The company also has a larger project in its portfolio. It is looking to advance both assets in parallel.

Toubani Resources is looking to build awareness in the market around its 3.1Moz resource. Part of the strategy is to educate the market on the size of the asset. Currently, the company has a single open pit that is 4.5km long. An open pit with such a scale is a rare find.

The company has a current market cap of AUD$15M. It is cognizant that rushing into development is not a wise decision as the market cap won’t support it. Instead, the company is working on making the project even better. It seeks to demonstrate the project’s exploration upside. The Kobada asset has a large open with high grades. Currently, the pit is going down deep and is pulling the sulphides in. In a case where the company finds more oxides on the other structures, it won’t require a deeper pit. This would also improve the project economics, offering a lower strip ratio while simultaneously improving the overall costs. The company is looking to increase the yearly production from 100,000oz while also working on reducing the technical risk and simplifying the asset. This is on top of the Mali discount.

To achieve this, Toubani Resource is planning an aggressive marketing strategy for the next 6 months. In Australia, the company has 100M outstanding shares, supportive shareholders, and an investor base that is yet to hear the story. It is looking to publish the new presentations and strategies in the coming week.

Drill Operations

Toubani Resources’ current strategy is to drill shallow holes at a depth of 100m-150m and space it out. It is planning to drill 7,000m out of the 10,000m drill program. The company has already drilled 1,000m so far. The program started on the southern extent of the property, however, the new CEO and his team made a decision to pivot the strategy. The company is prioritizing the drilling of structures where it does not have a resource. It is looking to step out 6km-7km from the strike length and focus on the area that has seen past artisanal mining activity without any drill holes below.

The company is cognizant that exploration is often risky. However, it believes that past artisanal mining serves as a good indicator for finding additional ounces. Interestingly, the past artisanal mining activity on these structures turned out to be bigger than previously anticipated. The Gosso and the Kobada structures have similar levels of artisanal mining activity. The company is looking to chase the mineralization here. It is important to note that there aren’t any previously drilled holes in these structures. The company is looking to target the big system as a starting point for the drill program.

In the near term, the company is looking to find additional ounces. At the same time, it is working on re-educating the market in terms of Kobada’s potential. The company is looking to reach a point where it’s trading at $30 an ounce, similar to its peers. Following the ASX listing, the company gained good institutional shareholders. It is excited to move ahead and generate additional value for the Kobada project. Toubani Resources has a current stock price of $0.20. Based on the compensation structure, the CEO won’t benefit until the stocks are $1 or $1.20. The CEO shares the Board’s vision and both parties are well-incentivized to grow the asset and generate additional value.

Targets 2023 and Beyond

Toubani Resources does not intend on cutting any corners in order to achieve the desired outcomes at the Kobada asset. The asset would need to stand the scrutiny of the market, the investors, and the corporates. If the company continues to work on the asset, it will increase the likelihood of a positive outcome.

The company is positioning the asset to be built. It intends on preparing the asset to the best of its abilities. The DFS for the Kobada project was completed last year. The company is looking to build on that and position the asset as a gold mine. It is open to a potential M&A (Mergers and Acquisitions) if it is beneficial for the shareholders. The company considers this a standalone project.

Toubani Resources is actively seeking oxide ounces. In the 1.2Mt reserves, the company has a sulphide component with 900,000oz of oxides. It also has 700,000oz of oxide sitting outside the reserve. It is looking to bring 700,000oz in as well, which is being considered the second leg of the challenge.

The ounces here are inferred, and the company’s strategy is to find new oxides near the surface by way of shallow drilling. The company seeks to find new oxides on the new system and new structures. It is looking to bring the oxides that are outside the resource. In a case where the company can successfully create a solid 10-year technical simple oxide project, pushing 150,000oz a year, the asset will be irresistible for the market.

Notably, the project CapEx (Capital Expenditure) was $170M a year ago, and based on the last study, it currently stands at AUD$250M. As a result, the company has a modest capital program that can be used to monetize the asset.

According to the company, the Kobada Gold Project does not require a lot of money to understand the scale of the asset. Near-surface shallow drilling at 100m can help in finding additional ounces with a much lower capital cost. The company is positioning the asset so that it is fundable by the market. It is looking to simplify the project as much as possible, which, in turn, will also benefit the overall economics. If the company finds additional sources, it can improve the payback times while simultaneously improving the overall project. In the later years of operation, the company can generate capital through the sulphides. Mining soft ore would lead to lower costs, as the cost margins are expected to be sub-US$1000.

Based on the success with a drill bit, the company will decide whether it can upgrade the resource. Gosso, Kobada East, and Kobada North have multiple kilometers of extended strike with artisanal mining. Over the coming months, the company is looking to carry out exploration in these areas. Based on the results, the company will reassess the amount of drilling that needs to be carried out. It is trying to determine whether there is a material change in the ounces available and the oxides present in the other structures. The company has a new Board and Management in place that is excited to work on the asset.

To find out more, go to the Toubani Resources website