Teranga is a Canadian-based gold company which was created to acquire the Sabodala gold mine and a large regional exploration land package, located in Senegal, West Africa, along with shares held in Oromin Explorations Ltd. (“Oromin”) from Mineral Deposits Limited (“MDL”), collectively referred to as the Sabodala Gold Assets.
The Sabodala gold mine, which came into operation in 2009, is located 650 km east of the capital of Senegal, Dakar, within the West African Birimian geological belt in Senegal, and about 90 km from major gold mines in Mali. As of December 31, 2011, the Sabodala gold mine had proven and probable reserves of approximately 1.70 million ounces of gold included in measured and indicated resources of 2.14 million ounces of gold and inferred mineral resources of 1.51 million ounces of gold. In addition to the Sabodala Mine License, the Company holds one of the largest exploration land positions in south-eastern Senegal with a direct or majority controlling joint venture interest in eleven exploration permits currently permitting exploration activity on approximately 1,450km². Management believes that the combination of its operations and prospective land position provides the basis for growth in reserves, production, earnings and cash flow as new discoveries are made and processed through the Company’s existing mill.
Teranga means hospitality and friendliness in Wolof, the main local language of Senegal. The Company wanted a name that would reflect its actions.
Construction of the mill expansion to double capacity is complete, though some fine tuning will continue through the third quarter of 2012. In the third quarter the mill is expected to be operating at full capacity. The expansion project included: a partial secondary crushing facility and new stockpile/reclaim facilities; a second ball mill; additional carbon-in-leach capacity and expansion of the Sabodala power station with an additional 6MW unit to take the total to 36MW. With the higher throughput rate in the second half of the year, the Company is on track to meet its full year production guidance of 210,000 to 225,000 ounces of gold at total cash costs of $600-$650 per ounce.
Exploration Potential
Senegal passed a new Mining Code in late 2003. Since that time it has become clear that with the discoveries already made in such a short time – over 10 million ounces of gold resources – the West African Birimian geological belt in Senegal is developing into a world-class gold district for which Teranga holds one of the largest land positions on the belt.
The Company's extensive land package consists of a Mine License and eleven exploration permits comprising approximately 1,500km². Management believes its land package has significant prospective potential and therefore is pursuing an extensive multi-year exploration program, having spent US$46M in 2011, with a similar budget for 2012 for exploration on both its Mine License and Regional Land Package. Exploration results to date support management's belief of the potential to expand proven and probable reserves from 1.55 million ounces of gold to 2.5 - 3.5 million ounces of gold, from the 33km 2 Mine License alone over the next 9 to 15 months.
Growth
The Company’s objective is to increase reserves and production, which in turn should increase earnings and cash flow, through both internal exploration discoveries and strategic acquisitions. The Company is devoting significant resources to exploring its land package with a view of leveraging the existing infrastructure and processing plant which was recently expanded from a nominal capacity of 2 million tonnes per annum (“Mtpa”) to approximately 4 Mtpa. With the completion of the mill expansion, production for 2012 is expected to increase to between 210,000 to 225,000 ounces, an increase of 65 percent over 2011, while the total cash cost is expected to decline to between $600 to $650 per ounce in line with previous guidance.
Exploration results in 2011, as well as in the first half of 2012, support management’s belief of the potential to expand upon existing gold mineralization by an additional 20 to 30 million tonnes at grades between 1.5 and 2.0 grams per tonne (“gpt”) for a total inventory of 2.5 to 3.5 million ounces from the Company’s 33km2 Mining License (“ML”) by mid-year 2013 . This would increase the mine life to approximately 15 years at a production rate of about 200,000 ounces of gold produced annually and provide a solid production base to build on through the ML and Regional Exploration Program.
The larger gold inventory base is expected to result from the success of deepening the Sabodala pit to the north along the Main Flat Extension (“MFE”) and now to the south-west, extension of the Masato pit onto the ML, and conversion of Niakafiri resources to reserves. On the ML alone a minimum of 7 drill rigs are expected to be testing targets at an estimated cost of $20 million in 2012 to expedite reserve definition drilling and resource expansion.
In addition to the exploration program on the ML, the Company has interests in 11 exploration permits, collectively referred to as the Regional Land Package (“RLP”), in which active drill programs are underway on targets located on these exploration permits that management believes have strong potential for at least smaller high-grade or oxide deposits as well as the potential for world-class (+ 5 million ounce) discoveries similar to those found on the same gold belt in Mali approximately 90 km from the Sabodala mine. Therefore, management is pursuing an extensive multi-year exploration program designed to test over 60 anomalies, targets and prospects that have already been identified as requiring additional analysis, as well as identify new targets for testing. The Regional Exploration Program budget for 2012 is expected to total approximately $20 million for the year to continue the systematic drilling and evaluation program. The budget would likely increase if a discovery was made during the year. The first of the regional exploration targets, referred to as Gora, has moved, subject to receipt of all permits, from an exploration project to a development project, as exploration drilling has confirmed a small high-grade deposit. Management is targeting permitting of Gora to be completed in 2013. The Company expects the free cash flow from operations to self-fund the extensive exploration program and develop new satellite deposits.
There are currently 40 drill targets that have been identified on the Company’s approximately 1,450km² RLP, all within trucking distance of the mill. All 40 targets are expected to be drill tested in 2012-2013. A further 20 targets have been evaluated with surface sampling or trenching. There were 3 drill rigs on the RLP during the quarter ended June 30, 2012.
Beyond the current RLP, the Company is focused on acquiring additional exploration licenses in Senegal. The Company also expects to augment its internal growth by strategic acquisitions of companies or assets including operating assets that have growth potential or attractive exploration packages initially in Senegal but ultimately elsewhere in West Africa.
Experienced Team
The senior corporate, exploration and operating team have explored, discovered, built and operated gold mines in Africa, as well as North and South America and Australia for several large mining companies. Together this team brings the necessary experience, values and ethics to successfully achieve its goal: to create value for all its stakeholders through responsible mining.
