Toubani Resources (ASX:TRE) gets ready for the big time in Mali

Stuart Roberts Stuart Roberts, May 21, 2024

Toubani Resources (ASX:TRE) is another aspiring gold producer. What’s not to love about an aspiring gold producer right now? Its jurisdiction, perhaps.


Toubani Resources is being written off due to being in Mali, but is that fair?

Recently, we were asked by a resource-focused investor what countries we’re particularly bullish on when it comes to gold. We named several jurisdictions that he agreed with, but when we came to Mali, he raised both eyebrows. ‘Why in the heck should I invest in that West African basket case?’, he asked, adding to that description a term of opprobrium once used by a former US President. Because, we replied, Mali is far from being a basket case. It’s straightforward to develop a gold mine in Mali and the gold endowment in this part of Africa is almost too good to be true. There’s very few stocks with exposure to Mali, but Toubani Resources is one of them.


A new mining code

The reason this investor doesn’t like Mali isn’t so much because it’s been run by a military junta since 2020, but because of a change to the mining code the junta under interim President Assimi Goïta introduced last year. At that time the Malian government had the right to take a 20% stake in new mining projects. The 2023 changes increased this to 35%, comparable to the already existing mining codes of other West African nations. He also cited the recent dispute between Firefinch and the Malian government over its operation of the Morila gold mine, which Firefinch acquired from Barrick and AngloGold Ashanti in 2020. The government is alleging that the previous operators didn’t pay the correct amount of taxes and that has meant Firefinch hasn’t been able to develop the mine.

In our opinion neither of these issues takes the shine off Mali as an emerging gold producer with huge potential. All sorts of countries right now are making sure that new mining projects have some minority state ownership, so that the country itself benefits from the growth of its mining industry. And the Morila issue is specific to Firefinch, rather than an issue affecting other producers in the country, such as Barrick Gold, B2Gold Corp, Allied Gold, Resolute Mining and Hummingbird Resources. It is difficult to imagine Toubani Resources suffering the fate of Firefinch if all the other aforementioned companies have not.


Yes, Mali is like Tanzania…but not in the way you might think

Think of Mali as like Tanzania four years ago. At that time the Tanzanian government of President John Magufuli was looking to revise the mining code so the state could take equity stakes in the mines, and there was a dispute over Barrick’s gold mines in the country. In 2024 this dispute was settled and under new President Samia Suluhu Hassan, investors are comfortable with the new mining code.

Once the market can get past the perception that Mali is not investor-friendly, it will be more likely to appreciate the country’s emerging gold riches. Mali is now the third largest gold producer in Africa with output of more than 60 tonnes a year as against only 40 tonnes or so in 2016. The Birimian greenstone belts that crisscross West Africa tend to host very high-grade deposits close to surface and occasionally the deposits are monsters – Morila was sometimes called ‘Morila the gorilla’, because by the time it went to Firefinch it had produced more than 7 million ounces. And the gold tends to show up in the southern part of the country, a long way from the Badlands in the north that have been a hotbed of unrest in recent years.


Toubani has big ambitions with its appetising project

Toubani aims to be one of these new producers in the south of Mali in the not-too-distant future. Its Kobada gold project in Sikasso region, about 130 km south of the Malian capital Bamako, now covers a not insignificant 2.4 million ounce resource, 64% of which is indicated. The economics of Kobada, as per a 2021 Definitive feasibility Study now being updated, are enviable. That study modelled average gold production of 100,000 oz over the first 10 years of a 16-year mine life and came back with an All-In Sustaining Cost (AISC) for those first ten years of just US$972 an ounce. And no wonder, since around four-fifths of the resource are within 150 metres of surface and the metallurgical testwork has shown that the ore is free milling and a lot of it is oxide. The pre-tax NPV was $US506m and the Internal Rate of Return was a juicy 45%. The DFS is currently being revised to a larger scale project.


Severely undervalued

Now contrast that NPV with the current valuation the market is affording Toubani. At the current share price of 14.5 cents the market capitalisation is $24.3m. $4.4m of that is cash, so the Enterprise Value is $19.9m. That means today’s investor can buy Toubani’s 2.4 million ounce resource for a mere A$8/US$5 per resource ounce. That’s right – five US dollars an ounce when the yellow metal is now above US$2,400 an ounce. And Kobada is unlikely to stay at just 2.4 million ounces, because 40 km of the project’s 50 km of strike remains untouched by a drill bit. Sure, there’s a Mali discount in this stock right now, but we think that will change.

Look at a range of valuations for African gold projects in various M&A transactions going back to 2020. The average is US$54 an ounce for gold developers (i.e. pre-production assets). For example, Perseus (ASX: PRU) just bought Orecorp, owner of the Nyanzaga gold project in northwest Tanzania, for that price a few weeks ago.



We think more exploration success at Kobada and publication of the DFS update, alongside the M&A activity happening in West African gold plays, can turn a spotlight on what Toubani CEO Phil Russo and his colleagues have achieved in recent days. If you like gold and you like situations where it can mine at under US$1,000 an ounce, definitely look at Toubani and Mali.


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