African Gold Delivers Robust Definitive Feasibility Study for its Kobada Gold Project in Mali

African Gold Group, Inc. (TSX-V: AGG) (“AGG” or the “Company”) announced updated mineral resource and reserve estimate and results of the definitive feasibility study (“DFS”) for the Company`s Kobada Gold Project (the “Kobada Gold Project”) located in southern Mali.  

Highlights include:

  • Average annual production of 100,000 ounces of gold per annum for the first 5 years of operation.
  • Total gold production of 728,654 ounces over 9.4 years life of mine, based on current reserves.
  • Average total operating cash costs US$704/oz for the Life of Mine (“LOM”).
  • LOM All-In Sustaining Cost (“AISC”) of US$782/oz.
  • Pre-tax NPV5% of US$283.9 million with an IRR of 45.5% and a post-tax NPV5% of $226 million with an IRR of 41.1% at US$1,530/oz gold. 
  • Kobada Gold Project capital expenditure of US$125 million (plus a contingency of US$11 million).
  • Total project capital expenditure payback of 3.82 years from start of production, based on a US$1,530 per ounce gold price.
  • Total project net cash flows after tax and capital expenditure of US$327 million.
  • A separate standalone 11 MW Hybrid Solar/Thermal Power Plant to supply power to the Kobada Gold Project will be funded by an independent power producer with power purchased at a very competitive kWh rate and significantly reduced greenhouse gas emissions.
  • Total proven and probable mineral reserve has increased to 754,800 ounces of gold, a 48% increase from the mineral reserve estimate in the 2016 feasibility study of the Company with respect to the Kobada Gold Project (the “2016 Feasibility Study”).
  • Pit constrained mineral resource estimate in the inferred category increased to 1,138,810 ounces of gold with an average grade of 1.33 g/t Au, representing an 11.2% increase in resource and 37% increase in average grade.
  • High measured and indicated resource to reserve conversion rate of 84%.
  • Updated 2020 mineral reserve estimate represents, an increase of 48% in ounces and 114% in tonnes compared with the 2016 Feasibility Study.
  • Further potential remains to significantly increase the resource and reserve along strike and depth at the Kobada Gold Project.

“We are very excited to deliver this DFS update, which shows a marked improvement over the 2016 Feasibility Study. We are pleased to announce significantly improved project economics on the back of a large jump in mineral reserves, based on a solid foundation of additional drilling, an updated resource model and a comprehensive test work program,” comments Danny Callow, Chief Executive Officer of AGG. “We have worked tirelessly, despite the impact of COVID-19 to deliver this study on time and 20% below budget. Our flagship Kobada Gold Project has been increased to a 100,000 oz per annum operation. Based on the limited exploration drilling on only 4 km of the 30 km of identified structural shear zones on the property, we believe there is significant potential to improve the resources and reserves further with limited additional exploration. We have an advanced process plant design, we are fully permitted, and we are ready for the next phase of construction.”

Kobada Gold Project Overview

The Kobada Gold Project is located in southern Mali, approximately 125 km in a straight-line south-southwest of the capital city Bamako, and is situated adjacent to the Niger River and the international border with Guinea.

The Kobada Gold Project is based on one mining exploitation permit of 136 kmand one exploration permit of 80 kmwhich are wholly owned by AGG Mali SARL, the local Malian Company, 100% owned subsidiary of African Gold Group. 

AGG completed 116,870 metres of diamond, reverse circulation, air core and auger drilling between 2005 and 2012. In 2015, AGG completed a further 1,398 metres of diamond core drilling over 136 diamond drill holes. The current AGG exploration re-commenced in August 2019 and an additional 11,428 metres of diamond core have been drilled.

Gold mineralization is present in the laterite, saprolite, and quartz veins that comprise the project, and in the sulphidic hard rock underneath. There are also placer style deposits in the region.

Mineral Reserve

This updated mineral reserve and resource estimate at Kobada Gold Project, as summarized in Table 1 and Table 2, was prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum “CIM” (2014) Definition Standards incorporated by reference in NI 43-101, and is the result of 11,428 meters (67 drill holes) of drilling completed by the Company between H2 2019 and H1 2020 in addition to the historical drilling completed in previous years.

Table 1: Kobada`s Mineral Reserve Estimate

Reserve ClassificationTonnage 1
(Mt)
Grade
(g/t)
Contained Gold
(kg)
Contained Gold
(oz)
Proven 211.040.9510,460336,300
Probable 216.090.8113,017418,500
Proven and Probable 2,3,427.130.8723,476754,800

Mineral Resource

Table 2: Kobada`s Mineral Resource Estimate

Resource ClassificationTonnage
(Mt)
Grade
(g/t)
Contained Gold
(kg)
Contained Gold
(oz)
Measured24.630.7918,379590,910
Indicated22.020.9518,673600,350
Measured & Indicated46.660.8637,0521,191,270
Inferred31.541.3335,4211,138,810
Figure 2
Drill holes location.

Financial Analysis

The Kobada Gold Project financial analysis was prepared using the discounted cash flow model. In preparing this model there have been several assumptions and material factors that have been employed which are presented in Table 6.

Table 6: Financial Model Assumptions

DescriptionUnitAssumption
Revenue
Gold PriceUS$/oz1,530
Refining Losses%0.08%
Discount Rate%5.0%
Fuel Prices  
Diesel PriceUS$/L0.557
HFO PriceUS$/L0.428
Fiscal  
Government Royalty%3%
Government Free Carry Equity%10%
Tax HolidayYears3
Tax Rate (after tax holiday)% of profits30%
Tax Rate if there is loss% of annual turnover1%
Dividend Tax%10%
Depreciation%10% over 10 years
Conversion Factors  
Grams to Ouncesg/troy oz32.1505
Diesel SGt/m30.85
HFO SGt/m30.97
Other Charges  
Bullion Transport & Refining CostsUS$/oz7.59
Exchange RatesZAR/US$17.00
US$/€0.92
US$/£0.80
US$/A$1.55
US$/C$1.35
CFA/€655.72
CFA/US$604.66

The findings of the model are summarized in Table 7.

Table 7: Summary of Financial Findings

DESCRIPTIONPRE-TAXAFTER TAX
LOM Tonnage Ore Processedt (000)27,13427,134
LOM Feed Grade Processedg/t0.8730.873
Production Periodyears9.49.4
LOM Gold Recovery%95.7%95.7%
LOM Gold Productionoz (000)728.7728.7
LOM Payable Gold After Refining Lossesoz (000)728.1728.1
Gold PriceUS$/oz1,5301,530
RevenueUS$ million1,1141,114
Total Initial Capital Cost (including contingency)US$ million136.1136.1
LOM Operating CostsUS$/oz704704
AISCUS$/oz782782
NPVUS$ million284226
IRR%45.5%41.1%
Discount Rate%5%5%
Discounted Payback PeriodYears3.823.82
Project Net CashUS$ million407.8325.7

Project Opportunities

The DFS has been completed based upon drilling of only 4 km of the main shear zone. Several other geologically similar shear zone structures have been identified on the concession and these are yet to be drilled. There exists a significant opportunity to increase the size of the measured and indicated resource through targeted limited infill drilling in the inferred resources which would be an opportunity to increase mine life.

The Company, with the assistance of SENET has advanced the engineering of the project past the level that is required for a DFS. A large part of the process plant is designed to a detailed engineering level, including earthworks and civil engineering drawings issued for construction. Ongoing schedule optimization may result in reducing the construction schedule and bringing first gold forward by a number of months.

Development Timetable

Construction of the process plant and associated infrastructure including Phase 1 of the TSF for the Kobada Gold Project is expected to take 19 months. First gold will be achieved where after the process plant will be ramped up to produce nameplate capacity within the following 2 production months. The mine is designed with ease of construction and operation as a priority. The simplified and compact process plant flowsheet minimizes the requirement for expensive and long lead process equipment, thereby substantially reducing the construction time.

“Utilising known technology to develop a robust plant flowsheet suitable for West African conditions, yet simple and flexible in design, has allowed us to fast-track the development of the engineering to a stage where much of the plant is now at detailed design level. This allows us to shorten the schedule significantly and save on engineering costs,” says Danny Callow, Chief Executive Officer of AGG.

The Company also intends to outsource key specialised components of the plant from the best in class providers, including a state-of-the-art hybrid, solar PV, thermal and BESS, fuel storage and supply, and the mining and TSF contract.

About African Gold Group

African Gold Group is a Canadian listed gold company on the TSX Venture Exchange (TSX-V: AGG) with expansive holdings in West Africa`s prolific Birimian Greenstone Belt including more than 460 km2 across Mali and Burkina Faso with a focus on the development of the Kobada Gold Project in southern Mali.

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