Cora Gold (CORA.L) will be putting its cash to work as the company has awarded an initial 22,000 meter drill contract to Capital Drilling. The drill program will have a dual focus on both resource expansion as well as upgrading the existing inferred resource to a category with a higher confidence level. This initial drill program should start any day now and may be expanded to 35,000 meters. Even if Cora upgrades the drill program to 35,000 meters, it still expects the drill program to be completed by the end of July where after all data will be used to complete an updated resource estimate on the Sanankoro gold project.
As a reminder, Cora Gold has a total resource estimate of 265,000 ounces of gold in the inferred resource category, of which about 233,000 ounces are part of an oxide resource estimate. The 4.5 million tonnes at 1.6 g/t gold was used as the starting point for an economic study and despite the relatively high strip ratio of 5.9:1, the total pre-tax NPV8% at $1500 gold is estimated at US$41.5M although only 138,000 ounces were expected to be recovered.
An increased resource estimate and incorporating the excellent recent metallurgical test results with a recovery rate of around 94% (in a combination of gravity and leaching of the gravity tails) according to the recent metallurgical update will very likely boost the outcome of an updated study. Adding more ounces to the production profile and recovering 90% of the gold rather than the 70% recovery rate used in the 2020 economic study should have a very positive impact on the NPV. Additionally, the reagent consumption rate was lower than anticipated which should further reduce the operating expenses down from the US$942/oz AISC outlined in the 2020 study. The combination of both could easily double and will likely triple the NPV at $1500 gold. Cora Gold already has signed a term sheet for a $21M financing package to fund the construction, but the term sheet is conditional on showing a minimum 6 year mine life at 40,000 oz/year with an IRR of 60% at $1400 gold.
And there’s a second possibility. The oxide zone at Sanankoro seems to be very amenable to use gravity and then ship the concentrated rock to another company or project for further processing. This means Sanankoro could be seen as a project with a dual approach: it could be developed as a standalone project or perhaps a nearby producer (Hummingbird, Endeavour Mining) or advanced stage explorer (African Gold Group) could see it as a satellite project to their own main projects.
Disclosure: The author has no position in Cora Gold. Please read our disclaimer.
