West African Resources (ASX: WAF, Share Price: $0.28, Market Cap: $135m) remains one of our favourite emerging African gold producers. Operating in Burkina Faso since 2007, it ranks as the largest ASX-listed acreage holder within the country and has accelerated its progress towards production status via aggressive exploration drilling, an enhanced gold resource position and positive PFS results.
WAF has advised that the Council of Ministers of the Government of Burkina Faso has approved its mining permit application for the Sanbrado Gold Project (formerly known as Tanlouka Gold Project). This is a major milestone that leaves the project on schedule for development by the end of calendar 2017.
Market Significance
After having surged from a 12-month low of $0.048 during February 2016 to a 12-month high of $0.445, WAF’s share price retraced during H2 2016 in line with overall consolidation in the gold sector. There is nevertheless growing market recognition of its high-grade Sanbrado project mineralization, reinforced by encouraging diamond and RC drilling results. This in turn has led to a significantly-enlarged resource base, which in turn will boost overall project economics. The recent $21m capital raising further reflects investor confidence, reinforced by resource growth, positive PFS results and a soon-to-be-released DFS.
Announcement Detail – Granting of Mining Permit
WAF has announced that the Council of Ministers of the Government of Burkina Faso has approved its mining permit application for the Sanbrado Gold Project (formerly known as the Tanlouka Gold Project).
The Sanbrado Definitive Feasibility Study (DFS) is nearing completion and will be reported along with a NI 43-101 technical report during Q1 2017.
Technical Significance
Receipt of the mining permit is another important project milestone that enables development of the Sanbrado Project to proceed on schedule. Construction activities are expected to begin in late 2017 following completion of project financing. The company retains $17 million in cash reserves so is well funded in terms of aggressive project appraisal activity
Other Recent Activity
M1 Prospect Drilling Update
WAF recently provided a detailed update with respect to the various drilling programs currently being undertaken on its M1 Prospect. The programs have generated more high-grade intersections that will likely enhance the overall resource position.
Shallow Resource Drilling
Full results have now been received for shallow resource drilling at M1. Drilling prior to the wet-season encountered difficulties with access due to open stopes and hummocks at surface, resulting in much of the near-surface mineralisation and remnant mineralisation being drilled on an irregular, wide-spaced pattern.
This resulted in much of the shallow portion of the August resource being classified as Inferred. These areas required extensive dozer work to be filled in and flattened, and subsequently tight-spaced shallow RC drilling on 25-metre centres has now been completed. Many of the shallow RC holes encountered open stopes and backfill from surface, however significant results were also returned from remnant zones.
Significant results include:
o TAN16-RC236: 5 metres at 4.98 g/t Au from 47 metres depth
o TAN16-RC242: 23 metres at 1.86 g/t Au from 8 metres
o TAN16-RC247: 3 metres at 16.52 g/t Au from 32 metres
Drilling at Depth
At the end of November, the company reported results for TAN16-DD077A, which is the deepest result to date – ending in mineralisation at 300 metres. This hole has since been extended to 399 metres and the final intercepts have returned 11 metres at 7.43 g/t Au from 279 metres and 10 metres at 4.93 g/t Au from 293 metres.
TAN16-DD077A represents a significant discovery, at depth, of new mineralisation within the M1 South system. Follow-up work is planned for early 2017 and new mineralisation will be included in the resource update that is currently in progress.
M3 Shallow Resource Drilling
Further resource drilling has been completed, aimed at upgrading shallow oxide mineralisation currently contained within the Inferred category to Indicated status.
Significant results for the RC drilling program include:
o TAN16-RC249: 5 metres at 5.0 g/t Au from 75 metres depth
o TAN16-RC255: 3 metres at 4.33 g/t Au from 22 metres
o TAN16-RC260: 11 metres at 2.1 g/t Au from 56 metres
Figure 1: Tanlouka Gold Project – Mineralised Trends and Prospect Locations
Technical Significance
These results represent the data cut-off point for current estimation studies for the M1, M3 and M5 deposits, feeding into the DFS due for completion during Q1 2017. Resource estimation studies are significantly advanced and will be reported during Q1 2017, along with the DFS for Sanbrado. The timeline for reporting the resource update was pushed back from Q4 2016 to include recently reported mineralisation.
Summary
We initiated coverage of West African Resources around $0.08 during September 2015 – representing a current gain of 250%.
Importantly, gold mineralisation at the M1 and M3 deposits lies less than 2km from the proposed heap-leach starter-pit at M5. The situation is enhanced by the high-grade nature of the mineralization being encountered, which should enhance project economics and boost overall mine life. The company has so far done relatively little work outside of the M5 resource area and the new gold discoveries at M1, M2 & M3 are likely to boost project economics – to the point that the company in now investigating a larger-scale CIL development scenario. The granting of a Mining Licence is a major milestone that allows WAF to proceed with project development on schedule.
