Cora Gold Ltd (LON:CORA) Chief Executive Officer Bert Monro caught up with DirectorsTalk to discuss the recent update to reserves and the definitive feasibility study for Cora Gold’s Sanankoro gold project in southern Mali.
Q1: Bert, could you tell us about Cora Gold and how the Sanankoro project, the subject of today’s interview, fits into your portfolio?
A1: Sanankoro is our primary asset, it’s in southern Mali and obviously an updated feasibility study on it today. In addition, we’ve also got an asset in Senegal called Madina Foulbe as well, but really Cora is obviously an AIM-listed West African focused gold company. Our primary focus is on bringing Sanankoro into production as quickly as we can.
Q2: Now your first DFS at Sanankoro was completed in 2022. Why have you updated this now and how does this updated DFS change the story for Sanankoro compared to your 2022 study?
A2: So, the reason for the update initially is obviously the passage of time. After we published our last DFS, which at the time the gold price was around €1750, there was a moratorium put in place for issuing new permits in Mali. Ultimately, the government made this decision to put in place a new mining code, which it’s now completed. It’s now relatively recently lifted that moratorium on issuing new permits.
Subsequently, with nearly three years having passed, we thought it was appropriate to update the study to make sure all the costs were accurate and up to speed. Also, we benefited from some additional work, both drilling on the ground, which helped increase the reserve, which we can talk a little bit more about later, but also improving the process flow sheet as well.
So, a combination of time and obviously looking to make improvements.
To answer the second part of your question, the project’s moved on significantly since 2022, which I’m really pleased about. The drilling we completed has led to a 26% increase in the reserve, which has given us a 10-year mine life now in the reserves, which is great. We also did, as I mentioned, some additional test work and plenty of optimisation around the flow sheet.
So, we are seeing a really strong project, which over the first five years is delivering to the 65,000 ounces of gold a year and averages over $65 million of free cash flow at a $2,750 gold price, which is well below where we’re at now, obviously.
Q3: Sanankoro now shows a 64.9% Internal Rate of Return (IRR) and a payback of just 1.1 years. What does that mean for potential investors and partners?
A3: Well, obviously, those are really, really strong economic fundamentals for the project. I think, importantly, a quick payback is great in terms of borrowing on the project, in terms of the lenders like to see a quick payback period. Obviously, for investors, the quicker you can pay back your debt, the quicker you can move into looking to pay dividends on a project.
So, for us, our focus has always been on Sanankoro being a quick payback project, on being a high IRR, high free cash flow generating project. Our view is that you want to have a manageable capex, one that can be paid off quickly and then, obviously, you can look to be delivering shareholder returns as quickly as we can.
Q4: Now, the DFS includes a solar hybrid power option. Can you tell us more about the impact this will have on both operating costs and the project’s carbon footprint?
A4: Over the 10-year reserve life, it’s going to save over 40 million litres of diesel being used, which is absolutely massive and obviously has a significant positive impact from an environmental perspective, the community health, and other factors.
Also, it does reduce the operating costs as well. Obviously, Mali’s a sunny place and obviously the solar generates plenty of power. So, for us, obviously, it’s really important. It does deliver a cost saving, obviously, that cost saving will vary over time, depending on the fuel price. It’s still envisaged that you’ll be using diesel generators overnight, probably, and then obviously, all through the day, you’re using solar.
So, something which we’ll continue to look to improve on and develop over the life of mine. I hope that as it stands at the outset, it’s a great hybrid solution, which obviously saves, as I said, 40 million litres of diesel over the life of mine and also brings cost savings as well as the significant environmentally positive impact.
Q5: With 19 new exploration targets and mineralisation open at depth, how important is ongoing exploration to the long-term future of Sanankoro?
A5: It’s really important. One fact, just to mention, one of the changes in the study is that we had to move the process plant about 500 metres to the east because we discovered that the old, proposed process plant had a nice gold discovery on it over the last three years. So, I guess it’s one of those things when you’re struggling to work out where to put your infrastructure because you keep finding gold is a good thing.
Obviously, as it stands, 10 years in reserve life is obviously really the magic number for gold so I don’t think we’re in an urgent need to drill out existing discoveries. Our focus very much is on financing and getting into construction and making sure that we deliver first gold as quickly as we possibly can. I think you’ve obviously got a significant amount of resources outside of reserve, and there’s obviously the management plan, which we talked about in the press release, which shows an extra 173,000 ounces potential to be produced from optimised inferred.
Our view has always been that Sanankoro will continue to grow. It’s extremely under drilled. Our focus has always been on trying to have a buildable ready product as quickly as possible and that’s probably been to the detriment of drilling out the ounces to their full potential.
So, for me, that’s a great positive upside to have to be developed and exploited in the future.
Q6: You’ve incorporated Mali’s 2023 mining code into the DFS. How has that shaped the economics and what does it mean for local stakeholders?
A6: In terms of the economics, obviously, it’s had an impact. We had to change aspects to the design, particularly around the tailings, to make sure that we were aligned with the 2023 code. I suppose that the bigger impact was probably in our OPEX. As we say in the press release, at a $2,750 gold price, it has around a $290 an ounce impact on the all-in sustaining cost, an increase that is from the old mining code, obviously due to increased taxes involved. Obviously, it impacts the project in that regard, but the gold price is up significantly from our last study and we’re in a much better place than we were before, which is great.
I think the big change in the new mining code is obviously the local content laws, which is a great thing for Mali and something which we were always very focused on our last study on anyway, which is really driven around making sure you’re hiring a very high percentage of local employees and also using a very high percentage of local contractors in the operation and construction. So, that’s something which actually we were already very focused on in 2022, making sure that we maximise the use of a lot of very high skilled Malian workers, which there are given they’ve had a commercial mining industry for over 30 years now.
So, for us, the local content law is really good that it cements that place and that cements the fact that miners need to focus on employing and using local people and companies. We’re all for that, which is great.
Q7: Finally, what are the key milestones for Cora Gold over the next 12 to 18 months as you move towards permitting and construction?
A7: I think the next two/three milestones is clearly permitting. As it stands, we need to go through the process of receiving our mining permit, we’re having a very regular and positive discourse with the government as it stands. I’m looking forward to moving that forward as quickly as we can.
Once we’ve got the mining permit in place, obviously we’ll be looking to complete the project finance of the project. We’ve had good indications on how that’s moving already and obviously looking forward to completing that as swiftly as we can once the mining permit’s in place.
Then it’s starting construction. I’m really pleased over the last two/three years we’ve built out a team led by Lourens Steenekamp as our project director. He’s got a wealth of West African experience working for the Resolute and Perseus in Mali and Ivory Coast on a number of construction projects over the last decade. So, having Lourens on board, who was on site for most of August, making sure we were as operationally ready as possible, engaging with contractors, consultants, and making sure we were ready to break ground as quickly as we can once planning and financing is in place.
