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Toubani Resources (ASX:TRE): Interview with CEO Phil Russo
May 24, 2023
Toubani Resources, TRE
Toubani Resources (ASX: TRE)
We spoke to Phil Russo, CEO of Toubani Resources (ASX: TRE), about the high quality of its Kobada Gold Project in southern Mali in West Africa and its large resource base of 1.7 million ounces Measured and Indicated and 1.4 million ounces Inferred.
We also talked about the very favourable Definitive Feasibility Study for Kobada, which valued the project at US$355m on a 5% discount rate. And we talked about the potential to markedly lower the pre-production costs by just working the oxide zones of the Kobada deposit in the mine’s early stages.
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 firm. And joining me on Monday the 22nd of May, 2023 from Perth is Mr. Phil Russo, who’s the CEO of Toubani Resources, ASX:TRE. Phil, Good morning.
Phil: Morning, Stuart.
Stuart: Phil, you’ve got an interesting job. Toubani Resources has 3.1 million ounces [inaudible 00:00:34.466] 2012 in its Kobada Gold Project in southern Mali. Ordinarily, you’d pay middle of the range, you might pay $20 per resource ounce. At the moment I can buy you for a mere 17 million market cap, which translates to something like a dollar an ounce. So, one of the more undervalued gold plays I’ve seen just lately. But you’ve gotta plan to turn that around, right?
Phil: We do. We do. And we’ve been executing that plan since I joined in January. And yeah, there’s more activity ahead.
Stuart: Right. Let’s talk about you for a moment, then we’ll talk about Kobada. Time was when you were an analyst with Raymond James in Toronto covering, I think, I believe both gold and base metals were part of your remit back in those days. But you spent about 10 years in Toronto on the sell side before you came back to Australia to get your hands dirty on real-life gold mining.
Phil: Yeah. In Toronto, I was a mixture of, I worked at Barrick for a good eight years and from Perth and Canada. I spent a stint on the sell side there, and then subsequent after that, I’ve been back on the corporate side, which has led me to this juncture here where I’m leading the Toubani opportunity.
Stuart: Right, So, the board named you as their new CEO at the start of the year, Toubani had been traded in Canada. It’s now delisted off TSX, and it’s only available to trade in Australia. Let’s talk about the opportunity here. You’ve got a definitive feasibility study on Kobada where we’ll only mine about a third of that available resource over a 16-year mine life. We’re talking all in sustaining at 970 US an ounce. And when you run the numbers on 155 million in pre-production CapEx, we’ve got about 355 million US of post-tax NPV. That’s a pretty valuable project, and I suspect with the optimization you’re talking about, there’s more where that came from.
Phil: Yeah, that’s right. So, we inherited that… As a new manager and a technical team, we inherited a really solid piece of work in terms of the DFS that was done towards the end of 2021. But as a new team coming in, we’ve seen there’s several ways to optimize that project potentially here, and that’s the work we’re doing in the next month or so, and that’ll lead us into an update of the DFS in the second half of the year. But what we’re generally trying to validate here is whether there’s a project that can swing harder than 100,000 ounces a year. It’s a long-life project, low-cost project. That’s the we’re calling an option analysis study here. And we’ll talk about that next month is what we’re aiming for. And what we’re trying to create here is a project that doesn’t really exist in the market. So, a real oxide dominant project that can produce at scale, and at a low-cost structure, having been at Perseus before joining here, low-cost assets, generating lots of cash are really attractive in the market. And that’s what we’re focused on, is really creating an oxide-focused or dominant project…
Phil Russo: …of scale, which we don’t think exists.
Stuart: You and I were talking before I pressed the button. I gotta scratch my head and think, when was the last time I saw an oxide kind of project? Like, there was enough of oxides in the resource to warrant starting it just on that alone. It really happens. But you’ve stumbled across one of the few projects that where that’s a distinct possibility.
Phil: Yeah. The depth of the weathering profile here is something that is just not well understood in terms of the market. Like, it’s 100 meters, basically, 70 to 100 meters in depth of weathering profile here. And so, that’s pre-dig.
Stuart: A hundred meters of raw oxide? Wow.
Phil: Yeah. It’s impressive. And, you know, then the hard rock below us, which is all free milling material, it’s just a wonderful advantage to have as an asset. And that’s something we’re really leaning on as part of this near-term leg of work is to leverage the strengths of the oxides. Because in my mind, you know, not all grade is equal. If you have a strong oxide project, then, you know, that’s our grade of a gram is effectively like getting, you know, something higher than a gram. You know, and hazard a guess for you, it could be 1.3, 1.4, 1.5 grams a ton is what my oxide is worth to someone’s hard rock. So, wonderful advantage for the project. It’s something that’s gonna dominate our focus here as a company. It dominated our focus in the current drill program that we just completed, and it’ll dominate our focus in the engineering work that we’ve got coming up.
Stuart: Right. And I’ll tell you something else that, well not, and I’m telling you something you already know, but the viewers might be surprised at this. Everything at Kobada has been developed over only five kilometers of what is something like a 55-kilometer shear zone. So, a bit of step-out drilling beyond the core project area. And there could be more excitement where that came from.
Phil: Well, that’s exactly what we just did last week. We announced a new discovery, less than a kilometer from main resource, 3.1 million ounces on 5K of strike. We just stepped out where we had no drilling whatsoever before just some artisanal activity. And on 200-meter sections with 600 meters, we’ve got consistent grades and thicknesses, you know, less than a K from the pit. So, there’s more of that to be found. The more you drill, the more you discover that Kobada, it really is a district that’s, and the asset has just been flying under the radar for so long, and that’s why, you know, now that we’ve gotten the ASX listing here, new board, essentially new management team, new exploration focus, now a new engineering focus, like, all the upside is really ahead of us here.
Stuart: Let’s talk about that new board. Not long ago you announced a couple of additions to your board, and we’re talking rock stars here. Not every day that Mark Strizek agrees to lend his name to a new board, but, he’s come on board to your company a name that… So, obviously, the man who helped create Tietto Minerals. Many people might not know Scott Perry, but I learned from you a moment ago, he’s on the World Gold Council and has been involved in some pretty significant gold transactions in recent days. So, these are heavy hitters who’ve come and joined you.
Phil: Yeah. And it’s a testament to the asset, right? Like it’s, I don’t have to go and beg these guys to join. I show them the asset, and they see the vision and the strategy of the company, and they wanna be a part of it. And so, Mark, you know, he’s got a proven track record as a geologist, and so, we’re really excited for him to join. But someone like Scott Perry, you know, he’s a big name in the TSX market, right? He was a CEO of two gold companies there. They were multibillion-dollar companies, right? They were producing 500,000 ounces a year. So, he’s an ex-World Gold Council member. And you know, what more can you ask for a guy in terms of a proven track record at attracting capital, and advancing assets than Scott and Mark? And so, you know, we’re really, really lucky, but it’s about the asset. It’s about the strategy for the company that we were able to get these sorts of guys on board. And so, they’re just genuinely really excited about that.
Stuart: Right. A lot of investors are still getting comfortable with Mali as an investment destination. We’re talking, probably now the fourth largest gold producer in Africa, and a country that has rapidly increased its gold endowment with all of the big majors operating in the country. But it’s a country that’s perceived to have certain risks. A couple of coups in the last few years, and for a while, there’re sanctions from its West African neighbors, how has it been operating for you in Mali over the last few years?
Phil: Unaffected. Those things are, you know, starting to become in the rearview mirror. Next year they’re on their path towards elections next year. But, you know, Mali is a very mature mining industry, established mining code. We don’t have any expats on site. All the locals run our operation. And like I said, we’ve been unaffected. And so, you’ve seen Leo Lithium, they’re investing capital in Mali, building their mine. You’re seeing the allied group now come to market off the back of the Sadiola asset there. So, the Mali is underpinning, you know, some reinvestment in the space there, and you’re seeing everyone knows that the majors are there, and they’re investing capital and building projects. So, I’m quite comfortable in terms of the proposition in Mali at the moment, and if I’m an investor, you know, what’s your downside here where we’re trading essentially like we’re a free hit on those ounces I’ve just described? So, you know, Mali has shown itself not to be a basket case. I think, time will tell that, you know, it’ll be a stable country I’m hopeful of it, and so, yeah, you know, to me, it’s the risk-reward, and I think that’s heavily in the investor’s favor here.
Stuart: Right. Plus everything that’s come before, you estimate that something like 170,000 meters have been drilled into Kobada right now. That’s a pretty hefty exploration program. If you added up probably about 80 million of our dollars in exploration expenditure for a project that is now available to investors at about a quarter of that. So, we’re talking a great opportunity just in terms of the investment that got us to this point.
Phil: Yeah, that’s exactly right. So, it’s, again, we’ve got this platform to create something special here, and so all, it’s not like we have an under-drilled deposit, and that it’s, you know, highly speculative in nature. Here we’re talking about something that’s well-drilled, a continuous deposit of sort of four and a half kilometers, and all that infrastructure’s been that have come before us. And so, we’re gonna leverage that to create a lot of value here that, you know, a lot of my peers can’t say that they can do. So, yeah. It’s a real advantage of a position to be in that we’ve got, you know, that much investment preceding us.
Stuart: Right. Now I wanna go back to the DFS that we’ve been talking about from 2021. Now I realize that the next little while, we’re gonna come up with another optimization of that. But even on that DFS that your flow sheet was pretty plain and simple, right? There was nothing fancy you had to do to produce gold there in terms of, you know, you had free milling ore [SP] in the sulfide zones and everything else. Was there anything in that flow sheet that would’ve bothered you?
Phil: No. No. It’s a free milling operation through all mineralogy CSA, and the ore is incredibly soft in that, that weathering profile we barely need. I think we have one stage of crushing in that DFS, and then you add a couple more stages in year eight when the hard rock comes through. But otherwise, it’s CIO, recoverable material. But yeah, so we’ve got a free milling operation, which, and because we’re focused on the oxide, we think we can have a, you know, lends itself to a cheap operator, but also competitive on the CapEx. And we’re a pivoted project as well. So, that’s the other, you know, bit to this puzzle here is that we’re already pivoted. And so, as we go and execute further there, we’ve already done a lot in the first six months of this year, but in the second six months of the year, as we execute further, the timeline towards production isn’t as long as others, given all the work that we’ve been able to take advantage of.
Stuart: Right. So, Phil, if I look in the dictionary under the word lucky, am I likely to see your picture there? It feels like you’ve lucked into an amazing value-creation story. All you’re gonna do is execute now.
Phil: Yeah. And, you know, I ask people to just see the evidences in what we do, not what we say. And so far we’ve been doing things that we’ve said we were gonna do in a short amount of time. And so, you know, we’re just trying to do things as quick as we can, but also as thorough as we can, and so, we’ve been doing it, and we’re gonna keep doing it. And so, whether I’m lucky or not, I don’t wanna be lucky. I just wanna be, you know, the facts will speak for themselves in that respect.
Stuart: All right. Phil Rosso, thanks for talking to “Stocks Down Under.”