Desert Gold Ventures Inc. just dropped three major updates that could seriously shake up the gold exploration game in West Africa.
Firstly, a newly announced PEA for their SMSZ project shows a post-tax NPV of US$24 million. That’s no small number. On top of that, they’ve locked in a 297 kilometer square option agreement on the Tiegba Gold Project, expanding their Mali footprint in a big way. And let’s not forget, previously unreleased drill data is now adding fuel to the resource potential.
We recently caught up with Jared Scharf, CEO of Desert Gold Ventures to break open what all of this means behind the ticker.
The following is a transcription of the above video, and The Market Online has edited it for clarity.
Lyndsay: Let’s kick off with today’s headline then. You know, that’s a US$24 million after tax NPV and a 34% IRR for the SMSZ Project. You know, with gold sitting at about US$3,300, that’s a serious signal. How did these economics really change the game for Desert Gold?
Jared: That’s a good question. I think what we wanted to do, the objective of the scope of this PEA was to look at mining at surface or near surface oxide minerals on the SMSZ Project. It’s our belief that this represents low hanging fruit from a near term cash flow perspective. And so, what started as a desktop study internally amongst management, advanced to a PEA. We wanted to basically publish an independent report that showed that even a small operation like this, or at least something that will start small, can be run profitably, can pay back capital within a reasonable period of time. But really it’s just the beginning for us.
This PEA encompasses less than 10% of the resources on the SMSZ Project at a little over a hundred thousand ounces of oxide really coming from just two starter pits. And so, from a broader perspective the real opportunity here is to expand the gold zones that are proximal on echelon to the starter pits. And it’s my belief, and I think it’s our Board of Directors belief that once we get started in this area mining, we just won’t stop there. There, there’s too much gold in the area.
Lyndsay: The PEA actually zeros in on Barani and Gourbassi. I mean, can you walk us through what makes these two deposits the backbone of the study, and why now was the right time to do that model?
Jared: It all boils down to oxide. And Barani East deposit itself is a fairly deep oxide pit. It goes down a little over 130 meters. And the grades are pretty good. They’re a little over two grams per ton. I think after dilution from the mine, it’ll be about 1.6 grams. And so for open pit oxide in this part of the world, those are very good grades.
But if you step back and take a look at the area that surrounds Barani East, the starter pit, there are about a half a dozen other gold zones, some are actually part of the same system at Barani East. Others are parallel lenses of mineralization.
The hope and the expectation is that with a bit more drilling as we get started, we’ll be able to incorporate additional zones of oxide.
And I think what’s going to end up happening is we won’t end up actually going to Gourbassi for a long time. I think the initial three or four years that are set out in the PEA to mine this little starter zone of oxide is really just the tip of the iceberg. In fact, the PEA is leaving out about 50% of the deeper oxide and transition minerals from the starter pit. So not to get too down into the weeds, but to answer your question, in the Barani East area alone, there are a half a dozen oxide targets.
I see an eventuality there where we could triple or even quadruple the oxide on that small scale mining license permit that incorporates Barani East and where that first plant will be built where the first mining will begin.
And Gourbassi West is the same story. We’ve got two sister deposits that sit along the same structure separated by 600 meters, Gourbassi West and Gourbassi West North. They’re shallower pits, but much broader. They have better open pit characteristics with much lower stripping ratios. So, even though the grades are a little bit lower at Gourbassi, the mechanics involved in the mining are so much easier. The mineralization’s more broadly disseminated. The stripping ratios are much lower, and the pits are much shallower. But taking a step back, those two deposits sit along a 11 kilometer long Northeast trend. It’s mineralized virtually the entire way. And that’s either the main trans current or a parallel feature of the main trans current, which is that Endeavour’s Sabodala – Massawa group of mines.
It’s all part of the same regional shear. So, again I think although we’re starting off somewhat modest in terms of size. It fits the size of the company, certainly the capital requirements that only $50 million is quite modest. And under our mining license, we can double production from what the PEA envisions. We’re looking at processing about 18 kilotons per month of ore. Our mining license allows us to process up to 36 kilotons per month. So, there’s a lot of room to grow under the existing license. And you’re talking about a fairly small operation from a footprint perspective; it would only take four or five months to construct and put into construction.
Lyndsay: What inquiring minds want to know though, with an IRR like that, investors are really wondering, are we looking at a fast track development scenario or partnerships or is this a launching pad really for something even bigger across SMSZ?
Jared: I think there are two broader strategies at the SMSZ Project. It’s a 440 square kilometer license. There’s over a million ounces of inferred and measured indicated resource that of those 30 zones, five of them contribute towards that million ounces. So, the exploration blue sky from the overall SMSZ Project is vast.
So, when you take into consideration that this little PEA only incorporates less than 10% of the resource, but the resource itself only incorporates a small amount of the exploration upside of the entire project you start to get a sense of what the bigger opportunity is here. And when you have assets like Sadiola adjacent to you to the north, 15 million ounces and some of these other monsters in the area, Barrick’s assets, Endeavor’s assets, it’s not improbable that a project like the SMSZ couldn’t yield something even 30% to 50% of that over time.
But we have to start somewhere. And I do like the idea of being in the business of production and generating cash flow, especially in such an elevated gold price environment. And I think the market in general is always a bit skeptical about small projects. Can they make the economics worth? And I think that skepticism is warranted. So that’s why we did this study.
And maybe to flesh that out a little bit, this study in many aspects, certainly the important ones, has been done at a level of confidence that far exceeds the requirements of a 43-101 PEA. The costing, the metallurgy, the plant equipment and design.
We’re not using bench marking in any of this. This is all direct quotations from OEMs who came and did site visits, whether it was to design the tailings facilities, plant and equipment, bulk testing for the metallurgical recoveries. So, for such a small project, this is likely the only study that we’ll need to do before we go directly into mining. And once we get going and ramp things up, perhaps we’ll do an updated study a couple of years down the road showing a much more significant scope.
Lyndsay: Let’s flip over here just a little bit. You’ve also got that historic drill data and new land added into the mix that you mentioned. How, did these pieces, layered into what we just saw in the PEA? Could we be underestimating the broader potential here?
Jared: So, with such a large land package in such a prolific area, it’s interesting because it’s both an underexplored area, in a lot of senses, certainly compared to districts like Canada or Nevada. But at the same time, there have been some monstrous discoveries made within the Kenieba Window of Western Mali, Eastern Senegal. So there have been a lot of companies that have looked over the years even if only superficially. We’re always gathering data in the field, whether we’re doing detailed mapping or investigating a new artisanal mining camp that’s popped up. That’s just part of the work that we do as an exploration company.
And we came into this new drill database that really opened up a lot of opportunity at some existing zones, one of which is called Mogoyafara, which is the largest gold system that we have in the property to date at a little over 400,000 ounces. And so, I think more broadly, it just in general demonstrates the proliferation of gold on this property package.
The key is putting it all together. And that’s what all the detailed work on the ground, the geology and the mapping and the modeling and making sense of everything. It’s not the sexy work like drill results, but oftentimes it’s the most important work. And so that’s what we’ve been busy doing this year.
Lyndsay: If we zoom out here, what’s the next key catalyst post PEA? Should we expect drilling or updated resource numbers, maybe even early project development milestones?
Jared: So the PEA itself, the document, the 43-101 will be filed with within 45 days of the press release as is required. That’ll be quite a substantial document. It will have an updated resource. The additional resource will be somewhat modest because we’re only adding some of the new oxide. But it will also have a lot of updated geology, which I think will point to some very obvious opportunity. But I think the real catalyst next is securing the funding to go build this thing. And in that sense, we’re actually having some pretty good discussions. What that might look like in its final version, I can’t say at the moment, but I think having a catalyst to develop the SMSZ and fast track it into production will be a major milestone for us.
And then with the new project that we got in Ivory Coast Tiegba, which is the 300 square kilometer, really fascinating project with a really nice anomaly on it right in Allied Gold’s Camp near Bonikro. We’re quite excited to get on that property. So, the rainy season, we’re in the middle of it right now in Ivory Coast. But as soon as things calm down there and ground conditions improve, we’ll get out there. And the order of business is to design a drill program as soon as possible, go make a first pass, hopefully make a discovery. And if we do, I think things will start to get really interesting in that area, given all the activity.
Desert Gold Ventures is trading on the Venture, under the ticker symbol V.DAU
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