Orezone Gold Corp. (ORE) – Single-Asset West African Gold Miner Somehow Manages To Impress

Orezone Gold Corp.
  • TSX-V: ORE
  • Shares Outstanding: 251M
  • Share price C$0.69 (18.06.2020)
  • Market Cap: C$173M

Interview with Patrick Downey, President & CEO of Orezone Gold Corp. (TSX-V: ORE).

Orezone Gold Corporation: a Canadian gold developer that holds a 90% interest in Bomboré, one of the ‘largest undeveloped gold deposits in Burkina Faso.’ The resource at Bomboré is a large oxide with an even larger, open sulphite resource beneath. The plan is to develop these two segments of the gold resource in two different stages by starting on the low-capital-intensive oxide resource, before moving onto the sulphite in year 3, all constructed out of cash flow. Smart. The management and the board own 5.4% of Orezone Gold and continue to buy on the open market.

Matthew Gordon talks to Patrick Downey, 18th June 2020

Bomboré is an advanced stage gold mining development. It’s “shovel ready” and “simple.” Orezone Gold has acquired a harmonised term sheet (debt) from banks for the build. What are the headline stats?

  1. An average 117,760oz pa gold production.
  2. A solid 13+ years mine life.
  3. Total throughput of 5.2mtpa (3.0mtpa oxide circuit – 2.2mtpa sulphide circuit).
  4. The CAPEX is US$155M, but all in will be closer to US$200M. Downey experts another US$30M in equity once the debt is in place.
  5. Total debt is around US$140M, having raised US$20M in January.
  6. IRR is over 60% – NPV (5) of around US$520M @ US$1,500/oz gold.
  7. The project is “wide open” for exploration.
  8. The AISC is a mightily impressive US$670/oz. This mine will be profitable even in a low gold price environment.

A company having a single project often results in a significant discount being placed on the company’s stock. However, Downey is in no rush to look at M&A for the time being. He is looking at it in the background and has no desire to be a single asset company in the future but, for the time being, developing Bomboré is the primary focus. He is a pragmatist and acknowledges that he doesn’t have unlimited capital. He is avoiding biting off more than he can chew, and I like that. He believes he has the team in place to give Orezone Gold shareholders share price growth once Bomboré is up and running smoothly, generating cash.

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As covered by a contributor several times on the Crux Investor platform, West Africa has been having a torrid time of things in recent years. Is the West African risk profile going to be detrimental to Orezone’s growth? Will it be operationally disruptive? Downey claims that Orezone Gold has not been affected by the security situation in the region. The company is in an area of Burkina Faso that is “extremely safe and secure,” 90km from the capital on a main highway. There is a significant military presence in the region too. However, when France recommitted its forces to combat the threat in West Africa, there has been a lot more cooperation between the various West African countries. Regional initiatives have allowed the area to deal with the threat of terrorist activity more effectively. We’ve heard similar things from several West African miners in the last few months, but would still remain cautious about investing in the region.

COVID-19 has been disruptive for all mining companies, and it is no different for Orezone Gold. The company has an incredible relationship with the local community, aided by local initiatives funded by the company. This includes 1,100 houses, plus churches, mosques, schools, clinics, shopping areas and roads. These are being built in 7 different villages. 95% of the work is done: 5 of them were complete, while 2 were almost complete before COVID-19 came into play. If COVID-19 didn’t exist, they would already be building the gold mine.

Orezone Gold has developed extremely well since we last spoke to the company over a year ago. While the share price has been fairly volatile, investors now appear to be cottoning onto the value proposition. Once the mine begins being constructed, this could well continue.

What did you make of Patrick Downey and Orezone Gold Corp? Comment below and we will respond.

Company Website: https://www.orezone.com/

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2 Replies to “Orezone Gold Corp. (ORE) – Single-Asset West African Gold Miner Somehow Manages To Impress”

  1. Downey is one sharp experience cat. The guy doing the interview is a bumbling incoherent whatever. Painful at times.

    Downey is the kind of guy that investors like me gravitate towards.

    I made a lot of money on Claude. One of my best.

    1. Thanks for watching and thanks for taking the time to share your insights. We hope you continue to enjoy the free content and if you ever have any useful thoughts or ideas we’d be delighted to hear them.

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