Oriole Resources plc (LON:ORR) Chief Financial Officer Bob Smeeton caught up with DirectorsTalk to discuss the newly signed Senala joint venture agreement, the funded exploration programme and the company’s wider gold portfolio in Senegal and Cameroon.
Q1: Bob, you’ve announced the signing of a joint venture agreement with your project partner, AGEM, a Managem subsidiary, on your Senala orogenic gold project, and that’s a process that began with Managem’s earn-in. What does this week’s announcement change in practical terms, and why is it such an important milestone for Senala?
A1: It’s worth remembering that Managem’s involvement came from their acquisition of IAMGOLD’s West African portfolio in 2023 and their focus to this point has been very much on the successful launch of the Boto Gold Mine, which is a few kilometres east of Senala.
However, we have been negotiating through that period, and we finally agreed the terms of the joint venture, which is a big milestone because it now means Managem will commit funding to start work at Senala. We have a significant work programme scheduled to start in early August.
This is great because we always believed Senala to be a very exciting project with significant potential and so we are very pleased the work to prove that potential is soon going to be underway.
Q2: Now, with Managem funding the next US$2 million exploration programme, how do you balance preserving cash through dilution against retaining exposure to what could become a much larger gold discovery?
A2: There are a number of features in the agreement that preserve our exposure to the Senala asset as work proceeds, even if we’re diluting. The contribute-or-dilute mechanism itself operates on a work programme-by-work programme basis so we can opt in or opt out as things proceed and as we start seeing the results that are coming through. So, there’s great flexibility there.
The actual overall amount needed to dilute us out to an NSR royalty is around US$30 million before we would fall below 10% ownership. So, that’s a long way to go, starting from now. As I say, even then, we end up with a 2% net smelter royalty, which gives great exposure to the asset, should it become an operating mine or drive revenues.
So, our priority has always been to use our cash on projects where we are the operator. Our geological team have really delivered in Cameroon, with over 1.2 million ounces of gold delivered at Mbe for less than 10,000 metres of drilling, which is a fantastic result. Ultimately, I believe that doing that, focusing on Cameroon, on things we control, gives us the best value for shareholders.
Q3: Now, Senala sits close to several multi-million-ounce gold deposits, including Managem’s Boto mine. How much confidence does that regional setting give you that the exploration target can ultimately be converted into additional resources?
A3: A lot of confidence. The licence sits within the Kédougou-Kéniéba Inlier on the Senegal–Mali border and it’s surrounded by deposits and mines. It’s just a great postcode for orogenic gold and we’ve already got an inferred resource at Faré South, which dates back to the historic drilling that we did when we were operating.
There’s also, as you mentioned, a 380,000-ounce to 650,000-ounce exploration target over the wider Faré prospect, which is based on drilling by the previous partner, IAMGOLD. We think there’s strong support for this to convert to an inferred resource and with 3,000 metres of diamond drilling at Faré being part of the work programme that starts in August, I think we have a very good chance this resource will a) be added to, and b) see some conversion into the resource categories.
Q4: Just looking across Oriole Resources’ portfolio. Investors now have Mbe, as you mentioned earlier, advancing towards a resource upgrade and JV, Bibemi moving towards an exploitation licence, and Senala entering a new drilling phase. How would you rank these projects in terms of value creation over the next 12 to 18 months?
A4: We’re delighted that Senala is now going to get the work it deserves and it’s always delivered really good results. So, we’re just excited to see that work going ahead.
The exploitation licence at Bibemi is going to be a major item. It’s a key focus for us at the moment and that will prove we can go from greenfield exploration to mining licence in a completely new jurisdiction. Cameroon is largely underexplored at the moment.
I think most eyes will remain on Mbe, where we’ve just delivered more good results on the southern target, which remains open in all directions, and have developed plans for more work at the southern target, more work at the northern target, and throughout other areas on that licence, which will get some attention as well. So, Mbe is looking like the potential multi-million-ounce resource we always felt it could be.
I’d also highlight the rest of the central licences, where we own 90% and they have the potential to deliver another Mbe. We’re very keen to see the results of the recent fieldwork and then plan the next field season’s work on those licences.
Q5: Just stepping back, Oriole’s assembled a portfolio where major mining partners have co-funded the exploration. Is this partner-led model now central to Oriole’s strategy and how does it help maximise shareholder value while limiting future funding requirements?
A5: We continually talk about how we feel the share price is not reflective of the underlying value of the company and the assets, and that’s even though the share price is up 60% over the last 12 months. We still believe that’s the case.
So, naturally, attracting partner-led funding coming in at the project level inherently allows us to achieve a better result for shareholders than diluting at the top company would. This is fully demonstrated by what we’ve achieved with BCM, our partners on Bibemi and Mbe, which has been a great success for everyone. Whilst we might be diluting at Senala now, we’re confident that the results Managem will achieve will maintain and enhance the value of that asset to our shareholders.
