Teranga ahead of schedule at Wahgnion mine

Teranga Gold's (TSX: TGZ; US-OTC: TGCDF) Wahgnion open-pit gold mine in Burkina Faso started processing ore in August, two months ahead of schedule, and is expected to produce 30,000 to 40,000 oz. gold in 2019.

The company poured about 1,700 oz. during commissioning in August.

Throughput and grade will continue to ramp up as it continues to work the commissioning process, the company says.

During the first five years (2020-2024) of its 13-year mine life, Wahgnion is expected to produce an average of 132,000 oz. per year at an average mill grade of 1.83 grams gold per tonne and at all-in sustaining costs (AISCs) of US$761 per ounce.

Wahgnion, 510 km southwest of Burkina Faso's capital city of Ouagadougou, is Teranga's second mine after its flagship Sabodala open-pit mine in Senegal.

"It is wonderful to bring a new mine on in this type of gold price environment where you have got gold prices at a six-year high, so we are thrilled," says Richard Young, president and CEO of Teranga Gold. He adds that Wahgnion will generate roughly $60 million per year in free cash flow for the first five years, based on a gold price of $1,250 per ounce. "It is a small, but a very profitable mine for us."

Teranga acquired Wahgnion, of which the Burkina Faso government owns 10%, in October 2016 as part of the company's all-share purchase of Gryphon Minerals.

Major plant construction started in 2018 after the company secured $165-million in debt financing. "We were able to complete the drill program, update the feasibility study that had been done on the project, finance, move into construction and [have] first pour in less than three years," notes Young.

The company plans to produce dor?(C) on site. The plant's design is based on a conventional carbon-in-leach (CIL) gold process flowsheet. Throughput is designed to range between 2.2 million and 2.5 million tonnes per annum, depending on the blend of soft and hard ore. The average predicted plant gold recovery is 92%, with soft (oxide) material recoveries from some zones reaching as high as 95%.

Processing facilities at Teranga Gold's Wahgnion open-pit gold mine in Burkina Faso. Credit: Teranga Gold.

According to an updated technical report filed in October 2018, measured and indicated resources stand at 50.5 million tonnes grading 1.51 grams gold per tonne for 2.4 million contained oz. gold. Inferred resources add another 5.25 million tonnes grading 1.41 grams gold for 240,000 contained oz. gold.

Wahgnion's 13-year mine life is based on proven and probable reserves of 31.1 million tonnes grading 1.61 grams gold per tonne for 1.61 million contained oz. gold. The reserves include only four initial deposits - Nogbele, Fourkoura, Stinger and Samavogo - on the mine licence.

Next year, Teranga will embark on a multi-year exploration and drilling program that was put on hold during Wahgnion's construction. The initial exploration program will focus on shallow drilling and more than a dozen open-pit targets within a five-kilometre radius of the mill.

"These targets have been previously identified by the previous owner," Young says. "We have not focused on those targets during construction, but we will turn our attention to those targets beginning next year."

The exploration could extend Wahgnion's mine life from its current 13 years to 15 or 20 years, he adds.

Now that Wahgnion is up and running, Teranga is turning its attention to its other assets, such as its wholly owned Golden Hill project in the central part of the Hound?(C) Greenstone Belt in southwest Burkina Faso. "Golden Hill is actually our most advanced exploration project, so we are just currently in the process of moving that into the feasible stage of development," Young says. "We think that could be our third mine."

In February, Teranga announced an initial resource estimate for the Golden Hill project, which has indicated resources of 6.4 million tonnes grading an average 2.02 grams gold per tonne for 415,000 contained oz. gold. Inferred resources host of 11.95 million tonnes grading an average 1.68 grams gold per tonne for 644,000 oz. gold.

In July, the company started a 27,000-metre drilling and exploration program to support a preliminary economic assessment and convert Golden Hill from an exploration licence to a mine licence. Young says the company can make a development decision as early as 2021.

Young describes Burkina Faso as a mining-friendly jurisdiction with a well-trained workforce. "There have been over 10 mines built over the last 10 years."

Carey MacRury, director of metals and mining with Canaccord Genuity, says Wahgnion appears to be a decent mine as it is under budget and on time. "It looks like everything is going well at this point, but we still need to see a couple of quarters."

Teranga has been a single-asset gold producer since acquiring the Sabodala mine in 2010, MacRury notes. With the expected ramp up of gold production in the fourth quarter of 2019 and the Golden Hill project's potential to become the company's third mine, "there is potential for Teranga's valuation to rerate as the company gains the benefits from operating, financial and geopolitical diversification as it transitions into a multi-asset producer," he said in a research note in July. "African single-asset producers are trading at a significant discount to multi-asset producers."

Teranga has also entered into two joint ventures in C??te d'Ivoire where it has six exploration licences and a mine licence. "We have used the opportunity over the last three or four years, when the sector has been out of favour, to acquire assets, entering joint ventures that we would not have been able to enter into or acquire in a different gold price environment," Young says. "So we have developed an organic growth pipeline, a pipeline that we can develop over the next 10 years."

MacRury maintains a buy rating and $7 target price for the company's shares.

At press time, Teranga's shares were trading at $5.40 apiece with a trading range of $2.97 to $5.71. The company has 108 million common shares outstanding for a $580-million market capitalization.