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Sarama Resources (ASX:SRR): Interview with MD Andrew Dinning

May 26, 2023

Sarama Resources, SRR


Sarama Resources (ASX:SRR)

We spoke to Andrew Dinning, Managing Director of Sarama Resources (ASX:SRR), about SRR’s world-class Sanutura Gold Project in southwestern Burkina Faso. Sanutura’s current resource base is 600,000 ounces Indicated and 2.3 million ounces Inferred, and there is probably more where that came from.

Andrew spoke about the rich levels of oxide ore in the resource and how that makes getting started at Sanutura a relatively straightforward proposition. We also talked about how established miners, such as Canada’s Endeavour Mining, another gold producer in the prolific Houndé Belt, are operating successfully in Burkina Faso.

Full transcription below.


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Stuart: Hello and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of our service. And joining me today on the morning of Monday, the 22nd of May, 2023, is Mr. Andrew Dinning, who’s the CEO of Sarama Resources, ASX SRR. Andrew, good morning.

Andrew: Morning, Stuart, how are you?

Stuart: It’s a great day to be you, is the way I’d answer that question. We’ve got gold pushing up towards 2,000 an ounce. And in your Sanutura gold project in southwestern Burkina Faso, you’ve got 2.9 million ounces in your project, albeit a lot of that in the inferred grade, but it’s fair to say that a lot of that will translate over once you’ve put some more drilling in. How’s it feel to control a deposit that big?

Andrew: Yeah, look, it’s pretty good. It’s been a journey. We obviously very much love the deposit. We’ve been involved in it for quite a while. We actually think it’s gonna be a lot bigger than where it sits now. So, 2.9 is where the pin’s in at the moment. All our exploration work is focused on oxide, so we’ve just primarily been focusing on, you know, high value, you know, near surface material. That’s, you know, proximal to existing mineralization so that, you know, when we do start mining this thing it’s very accretive.

Stuart: Right. So, the deposits we need to talk about are Tankoro and Bondi are the two ones. We were joking before we pressed the button, did you name it after the beach in Sydney, and in fact, it’s named after the village, which is called Bondigui.

Andrew: Correct.

Stuart: But, you look, I’m from Sydney, so I’ll take Bondi any day, but we’ll call it Bondi for the purposes of this interview. Tankoro and Bondi, about a third of your endowment there. And as you say, it’s open in all directions, is turning out to be oxide. Now that’s gotten me quite excited, because you could basically get this company started just on some really low cost free milling oxide ore, and then spread out to the hard rock stuff, which doesn’t kick in until you get to the 80 meter mark. So, what’s not to like about this deposit, just in terms of the structures that you’re sitting on?

Andrew: Yeah, look, I think that the project’s very well positioned to give us a, you know, relatively speaking, like, capital startup, like, cost startup with a very quick payback. I think if you look at the grade profile across the deposit as well, when you apply a one grand cut, you still have 2.3 million ounces over two grams. So, yeah, there is a very good grade profile there that leads itself to, you know, having a fairly expeditious development that has, you know, low capital, low technical risk, and very rapid payback. So, that’s really been our focus, you know, in the last 12 to 18 months. We did 21,000 meters of drilling last year, and that was just all shallow near surface material. We really focused on the first five to seven years of the project, you know, making it inherently financeable.

We obviously, you know, we’re at a jurisdiction’s, not a tier one jurisdiction, so, you know, the better we can make the terms financing, the better it is for us, and the simpler we can make the project as well to remove as much execution risk as we can, you know, the better we think it’ll be as well. So, you know, we think, you know, with where the project’s at now, and where we think it can be longer term, we’re probably better off starting with a kind of mid-size project, get cash flowing. As you point out, there’s a lot of oxide material there, but there’s also a lot of pretty good grave material to establish a project on site. We’re doing quite a lot of work on that at the moment, and we hopefully, have something out for the market to have a look at it in the third quarter of this year.

Stuart: Right. So, you talked about not being a tier one jurisdiction. Okay, let’s just agree that Burkina Faso is not a tier one jurisdiction. On the other hand, I draw viewer’s attention to a Canadian company called Endeavor Mining, TSX EDV. 8 billion Canadian market cap, and they’ve got three mines in the very same belt, the Houndé Gold Belt that is gonna be your company maker. Seems to me like gold miners can operate reasonably freely in a place like Burkina Faso.

Andrew: Yeah, I think, you know, I’m probably not calling it tier one jurisdiction, that’s probably from a geopolitical point of view, but from a geological point of view, it’s definitely a tier one jurisdiction. If you look at Endeavor’s deposits, yeah, in the belt. Here in the North they have Mana, which is a 5 million ounce deposit or it’s plus 5 million. You have Houndé, which is about 80 kilometers from us. That’s a plus 5 million ounce deposit as well. So, it is a very well-endowed part of the world. Typically the discovery costed around there around $10 an ounce, so deposits typically come to surface as well. And I think when you look at the mines that operate there, I think there’s nine, eight or nine mines operating now. There’s normally a new mine built every year, so the most recent one is Ozone Gold, which is a Canadian company that’s just built the Bomboré mine that was built on time, on budget commission just before Christmas. I think they just put out their first full quarter. I think they did 40, I think 42 or 43,000 ounces at sub 1,000 bucks an ounce, it’s all-in sustaining, and that’s with a sort of sub one gram ore body. So, I think that gives an idea of what you can do in Burkina.

Stuart: I’d love to control a gold mine with that sort of all-in sustaining. That’s just beautiful.

Andrew: Well, I think it’s interesting. If you look at the two lowest cost gold producers on the ASX, and both operate in West Africa. And if you look at, you know, the mines mentioned just now, you have West African Gold, obviously, you know, big success story for the ASX, they operate around 1,000 bucks an ounce all-in sustaining. Ozone, just sub 1,000. The two projects I’ve mentioned of Endeavor, they’re both sub 1,000 bucks an ounce. And then Eskom, which is owned by IAMGOLD, which I think did 480,000 ounces a year. So, you know, in Australia people get kind of hyped up about the super pit, well that’s kind of super pit output kind of size. That operates right up in the north of the country, and I think that was a sub 1,000 bucks an ounce producer as well.

So, you know, there’s pretty good geology there. And they deliver, you know, pretty good deposits. And you know, we believe we’ve got one of them. Our main deposit Tankoro sits in a, I guess, middle of a big camp size system. So, if you look at Endeavor, which I think we just mentioned before, they’ve got a deposit probably 5 or 6 kilometers west of our Tankoro deposit that currently sits at 1.2 million ounces. So, just within a 5 kilometers or 6 kilometer radius there. You’ve got the best part of 4 million ounces, and most of that’s probably within 150 meters near surface. So, you know, we’re not chasing this stuff to 600 meters. It’s all shallow near surface material. So, I think, you know, when you start putting the whole picture together geologically, and just the sheer gold endowment now, and the amount of runway left, not only on our project, but you know, our neighboring projects, it’s a pretty well-endowed part of the world.

Stuart: Right. And you’ve actually got a joint venture ongoing with Endeavor as well at Karankasso. And that’s generated another 700,000 ounces. So, it’s fair to say things are looking up for you wherever you’ve gotten involved in this belt.

Andrew: Yeah, absolutely. The Karankasso project, we’ve entered some grounding to get our stake in that project, so it’s a non-contributing interest. But yeah, that’s all within trackable distance of the, you know, what we view as the center of gravity, which is our Tankoro deposit. Likewise with Bondi, that’s a high grade historical drilling on Bondi. Yeah, if you have a look at our website, or you know, our latest deck, yeah, we have, there’s historical drilling in there. So, we bought that from Ozone because it was a kind of stranded asset for them. Yeah, you’re talking kind of 50 odd meters at 5 grams from surface, 73 from surface. So, it’s a pretty nice little deposit that one. And once again, that hasn’t had a lot of drilling in it for quite a long time, so hopefully, we’ll get some holes in that very soon.

We remodeled all their data, and I think all their raw drilling data, I guess what was apparent to us was that, you know, it wasn’t very well drilled below 70 or 80, 70 to 100 meters. So, and it wasn’t very well targeted either. So, we can kind of send a long section where the block model’s sort of 2.5 to 5 grams. You can see underneath that at 100 meters there’s not a drill hole. So, we think there’s a bit of runway left there as well. So, I think, you know, the challenge for us is when to stick a pin in it, when to do development. So, what we are looking at now really is, you know, probably get into production, and then use funding to, I guess, grow the projects. We’ll design the project as a stage development, probably three or four stages to get it into, it’s fully into its straps, and use the cash flow to really hammer the area from an exploration point of view, which is really what it needs.

Stuart: And it’s fair to say that your PA will evaluate some of those options that you’re working on right now. The PA that is in the works will look at these options?

Andrew: Yeah, correct. We did quite a bit of internal work on project sizing. So, we looked at a larger stick-built project, and the CapEx involved in that for maybe 130, 140,000 ounce a year mine. Or doing it in a couple of stages, and exploiting the fact that we’ve got a lot of oxide, and a lot of that’s got good grade. So that’s, we did that work internally, and we kind of thought, well, you know, mid-size project startups, not a bad way to go when you looked at the numbers. Particularly if you optimize things on an everyday per share basis. Because obviously, you know, we need the equity fund to the point where we can put project financing. So, we kind of looked at that, the timeframes and accelerating development. And the PA will kind of look at the, you know, probably the best way to approach this, and lay out what the next steps are for us.

Stuart: All right. [Inaudible 00:10:14.771] handled this sort of thing. If we go back in time, the Kilo-Moto gold field in the east part of the DRC. Ultimately yielded a mine called Kibali, which followers of Barrick will know about, because it’s a big producer for them. That was you, developing that for Moto Goldmines, an ASX listed company way about 2008, 2009. Ren Gold paid a big $600 million price to get hold of that asset. That’s shareholder value that you hustled up.

Andrew: Yeah, correct. From when I got involved in that project, we took it from 2 million ounces of a pretty scrappy ounces in the jungle to, it was well over 20 million ounces when we were taken over. We took it through feasibility to pre-development, and we’d actually started, you know, resettlement planning, and everything when we were taken out. So, that’s the biggest gold mine in Africa now actually, did 800,000 ounces last year. So, we obviously don’t get a lot of credit for that, but yeah, we were the guys that found it, and took it through to pre-development. Yeah, we built 170 kilometer road in from Uganda, which we didn’t even think about it at the time. But I don’t know what distance that is in New South Wales, but that’s Perth to Bunbury in Western Australia, and we just did that. We didn’t even think about it, we just knocked it out. So, through the jungle in Northeast Congo, so. Yeah, that was a pretty stunning project that one.

Stuart: Is it true that you are actually Henry Stanley come back from the dead. And this is your new project, to develop goldmines in those parts that he used to stomp around it?

Andrew: Yeah, it appears like it. It’s, yeah, I’ve done a few interesting places. I was in Russia before the Congo, so. In Siberia, lived out there. So, yeah, from one extreme to the other,

Stuart: The one thing that’s not working for you right now, regrettably, is the share price. I can buy you for, I suspect a little less than $1 per resource ounce right now. On a project that’s got a reasonably good shot over the next couple of years, given the fact that Burkina Faso is open for business for new gold mines, of ultimately coming into production.

Andrew: Yeah, I think, you know, I think every jurisdiction’s got its challenges and Burkina has got its own. But I think if you look at West African, and you look at Ozone, you look at Endeavor, you know, they’re all getting things done. You know, I think Ozone is a single asset company, they finance that, and built that during Covid, so. And they brought in on budget on time, so. And it’s a, you know, 140,000 ounces, and they’re already looking at their next expansion, so I think they’re looking to take that to, I think around 250,000 ounces a year. So, that’s what they’re working on at the moment. So, it’s not a dissimilar approach to us, but I think our startup will be smaller than theirs. But it’s the same thing, it’s, I guess, get the runs on the board, take the shine off the ball, and get it moving ahead. And now WAFs, I think they’re fairly advanced in financing discussions for Kiaka as well, so.

Stuart: I mean, yeah, once that happens, that’ll, the knock on effect for you in terms of settlement, will be good, I suspect.

Andrew: Yeah, so that’ll take them to 400,000 ounces a year. So, I think even though, you know, there’s a lot of background noise, you can still get stuff done in Burkina. It is a well-established mining jurisdiction. You know, you just have to work through some of the challenges that you’ve got now, but I think every jurisdiction’s got that. It doesn’t matter if you’re in Mali, Ivory Coast, Ghana, every place has got its own idiosyncrasy, you know, it’s just like Australia, it’s, you know, I don’t know, with the way, you know, politics is developing in Australia and speaking to, you know, former workmates that run exploration and development companies in Australia, I don’t think life’s that simple from a land access point of view, and permitting timeframes and things like that. I think one of the things, yeah, and Canada’s the same. You know, particularly if you’re in the Yukon or BC. I think in Africa, particularly in Burkina, because the government does get a free [inaudible 00:14:15.286] interest. Once they get line of sight to a mine development, they tend to push that along pretty well because, you know, they see the cash flow. The biggest export in Burkina Faso is gold. Mining is 20% of its GDP, so it’s pretty important to the country and…

Stuart: And in the fiscal terms?

Andrew: What is that?

Stuart: We are talking reasonable fiscal terms, like 10% of the project will go to the Burkina government. And the royalties of what you’d expect of any emerging jurisdiction. There’s nothing that troubles me about the cost of doing business there.

Andrew: No, it’s pretty standard, is what I could say for that part of the world. You know, varies a bit between jurisdictions, but on balance, you end up with the government getting a similar kind of take through different means depending on the jurisdiction. So, yeah, it’s got a well laid out mining code. And, you know, it’s actually based on the WA mining code originally. And that was a catalyst for that industry to develop to the point that it has now. And I think, you know, the government, I was there last month and the government, you know, they definitely recognize the importance of the industry. You know, they’re like all governments, they’ve got economic needs, so they’re trying to find ways to get money whichever way they can. But they ultimately understand that, you know, their best source of revenue is mines and supporting them, and make sure they get into production.

Stuart: Right. Andrew Dinning, well done on what you’ve managed to achieve in Sarama to date. It’s been a long journey of battling your way through an old joint venture and then through Covid. But coming out the other side, things are looking up for you, so keep up the good work.

Andrew: Yeah, no thanks Stuart. We see the opportunity in the project, that’s why we stick at it. We’re seeing the numbers internally and they look very, very compelling. So, we’re looking forward to getting this PA done and out there, and you know, we would say the numbers that we put out in that really as a starting position because we think there’s also a lot of exploration runway left in this project. There’s a whole regional consolidation to consider with Endeavor, with their project next door, and now the joint venture we’ve got with them. You know, we’ve had a few discussions, but they’re pretty keen on drilling more on the ground next to us. But really I think longer term, probably the ultimate value plays, all of that comes together. But I think if, you know, the first company in production, they all end up controlling that part of the belt, and we aim to be that company.

Stuart: All right. Andrew Dinning, thanks for joining “Stocks Down Under.”

Andrew: Thanks Stuart. Thanks for your time.