Roxgold (ROG:TSXV) has become one of the most valuable TSX Venture companies on the exchange as its market cap surpassed $500 million today.
For years, the company has worked to advance its key asset in Burkina Faso, West Africa. The high-grade nature of Roxgold’s project, was likely key in securing financing for its Yaramoko Gold Project, located in the Houndé greenstone belt of West Africa.
In May of 2014, we highlighted insider buying in Roxgold and noted it as one reason its shares were performing well in comparison to its peers. Below is an excerpt from Roxgold enjoys price stability amidst insider buying:
“According to TMX Money, insiders bought $1.59 million worth of Roxgold recently which makes it the most heavily net bought stock by insiders on the TSX Venture of late.
Since April 11th, the reporting insider, ANRH Sarl has purchased 3,890,088 shares between $0.622 and $0.70 according to CanadianInsider.”
Click here to read the entire report.
Roxgold hit a high of $1.46 today.
Burkina Faso: gold trumps instability
Type in Burkina Faso into Google on any given day and the usual barrage of bad stories top headlines. For example, this morning’s headlines read:
While the condition for bakers might leave something to be desired (if you’re thinking of a career change), the environment for mining companies looking to produce an ounce of gold, has become quite favorable in recent years. There are dozens of companies developing assets in the region, and it has become a total hotbed as far as gold in Africa goes.
In respect to Roxgold’s asset, the project is fully funded and has fixed costs & all-in sustaining costs ofUS$590 / oz Au. In a historical sense and depending on what metrics you consider, it can be ‘riskier’ to develop an asset in Africa opposed to regions such as Idaho or Quebec; with that noted, the costs are cheaper and the profit potential can be much greater. High risk. High reward. It should be noted developing assets in Idaho and Quebec or other areas of North America carry their own set of risks and costs.
Roxgold’s market has been showing what that reward can look like as it has added hundreds of millions to its market cap in the past few quarters.
Roxgold – 1 Year Chart
Roxgold isn’t alone in Burkina Faso as the nation has quickly risen into one of Africa’s top gold producing regions.
Roxgold boasts, in respect to Burkina Faso on its corporate presentation, updated May 31st, 2016, that:
- “Fastest growing gold producer in Africa
- 4th largest gold producer in Africa
- 8 new mines commissioned over the past 6 years”
The gold markets remain on fire as capital flows back into the junior gold space and the TSX Venture. In preparation for this bull market we published an EBook in early 2015, where we reveal 50 leaders who took small-cap stocks to stunning multimillion and, in some cases, billion dollar buyouts. The companies these leaders run today are described in this one of a kind rolodex of some of the top entrepreneurs and business minds in the small-cap mining, technology and energy sectors.
Check out a snapshot of Roxgold’s assets:
Few companies in the world have margins anywhere near 50%. As gold flirts with $1,300 this morning, there is potential for margins to improve. This is the leverage gold stocks provide.
Roxgold is advancing the project through construction and in the company’s own words, “expects to commence production in Q2, 2016.”
On June 8th, the company confirmed this accomplishment by shedding light on recent production from the project:
“Since the start-up of the Yaramoko gold mine, 9,594 ounces of gold have been recovered to inventory, of which 3,564 ounces have been shipped. The processing plant has operated at an average of 759 tonnes per day (“tpd”), which is above its nameplate rate of 750 tpd,” explained John Dorward, Roxgold’s President and CEO.
Below are the highlights provided:
- Processing plant and associated infrastructure now complete
- 9,594 ounces of gold recovered since start-up (includes produced and inventory)
- Processing facility has milled 24,778 tonnes of ore
- Average throughput of 759 tpd since ore commissioning commenced (above nameplate of 750 tpd)
- 18,839 tonnes of ore on the Run of Mine (“ROM”) pad at a grade of 18.7 grams per tonne (“g/t”)
- Average gold recoveries of 97.2% – in line with design rate
- Electricity offtake agreement signed with Sonabel, the national electricity provider
- Stoping operations to commence in July as scheduled”
Click here to read the entire press release from June 8th.
Processing, Production and Money
Roxgold has two very key financial backers in Societe Generale and BNP Paribas who provided a US$75 million project finance facility. According to the company’s latest presentation, $8 million from US$75 million project finance facility has been drawn down.
It is obvious to me, Roxgold was able to continue to finance its asset and attract significant insider buying due to the high-grade nature of the deposit. The market and its financiers decided a long time ago, that, at some point the Yaramoko Gold Project would become a mine.
Here we are, past the mid-way point of 2016 and commercial production is knocking on the door. The all-important Processing Plant.
The company reported recently that, “Since completion, the plant has operated at or above its nameplate levels. Both plant operating time and unit throughput rates have met or exceeded design metrics of 91.7% and 34 tonnes per hour (“tph”) respectively.”
“Similarly, gold recoveries, averaging 97.2%, have met or exceeded the design rate of 96.9%. Carbon-in-leach (“CIL”), together with the gravity circuit performance have both been positive, with a gravity recovery contribution of 55% in May. Further improvements in this area are a focus for the processing team.”
Click here to read Roxgold Provides Operations Update at Yaramoko.
Roxgold has risen to the top of a growing number of success stories on the TSX Venture, particularly in respect to its market cap size. The market is pricing in a rising gold price for these companies as the gold price has not only found support, but is now putting together a sustained rally. Roxgold, like Kaminak Gold in some ways, continued to develop and move its project forward even in very trying times. While everything seems great now, it was the hard, long nights in 2013, 2014 and 2015 that this company’s management team proved its worth. The result is a well-positioned high-grade gold company set to begin commercial production at attractive all-in sustaining costs.
This article represents solely the opinions of Alexander Smith. Alexander Smith is not an investment advisor and any reference to specific securities in the list referred to in the article does not constitute a recommendation thereof. Readers are encouraged to consult their investment advisors prior to making any investment decisions. The information in this article is of an impersonal nature and should not be construed as individualized advice or investment recommendations.