Orbis Gold (ASX:OBS) has announced the results of its updated scoping study on the Natougou project in Burkina Faso. The outcome is much better than we expected as the after-tax NPV5% at a gold price of $1300/oz is $533M with an internal rate of return of 100% and even at a gold price of $1000/oz, the after-tax NPV is still $236M with an IRR of 52%. This excellent result is caused by a very high output in the first few years of the mine life, as Orbis is now planning to produce in excess of 400,000 ounces of gold in the first year of its mine life, followed by 290,000 ounces in the second year. As you can imagine, having a very high output in the first few years of the mine life significantly enhances the NPV and makes the Natougou project extremely attractive. With an initial capital expenditure of $234M and an All-In Sustaining Cost of $619/oz, Natougou remains one of the most attractive properties in Africa, and the share price has almost doubled since we initially reported on Orbis.
It didn’t surprise us the company received a buyout offer as Semafo (SMF.TO) offered A$0.65 per share in cash to acquire all of Orbis’ outstanding shares. The company has aggressively fought against this bid and has announced a share purchase plan, raising cash from its existing shareholders. This could be a strategy to raise the pressure on either Semafo or a white knight, and we’re looking forward to see how this story unfolds.
> Click here to go to the Orbis Gold website
Disclosure: The author holds a small long position in Orbis Gold. Please see our disclaimer for current positions.
