Teranga Gold Corporation, listed on the TSX, has entered into a definitive agreement which will see it acquiring a 90 % interest in the Massawa gold project from a wholly-owned subsidiary of Barrick Gold Corporation and its joint venture partner, Compagnie Sénégalaise de Transports Transatlantiques Afrique de l’Ouest SA (CSTTAO).
It is envisaged that the Sabodala processing plant, seen here, will treat ore from Massawa (photo: Teranga).
Massawa is one of the highest-grade undeveloped open-pit gold reserves in Africa. It is located within trucking distance of Teranga’s flagship Sabodala gold mine in Senegal, creating the opportunity for significant capital and operating synergies. The proximity of the projects and the combination of Sabodala’s mill and Massawa’s high-grade ore (the ‘Sabodala-Massawa Complex’) are expected to scale Sabodala into a top-tier asset.
“The Massawa acquisition is transformational for Teranga and – by creating a top-tier gold complex, the first in the country – an important milestone for the gold mining industry in Senegal,” said Richard Young, Teranga’s President and CEO. “We anticipate that production from the Sabodala-Massawa Complex, together with our Wahgnion gold mine in Burkina Faso, will increase Teranga’s targeted consolidated annual gold production and reposition Teranga as the next multi-asset, low-cost, mid-tier gold producer in West Africa, one of the world’s premier gold mining regions.”
Total aggregate consideration for the transaction is US$380 million upfront plus a gold price-linked contingent payment. The consideration will be in the form of cash and common shares of Teranga and, following completion of the transaction, Barrick will hold approximately 11,45 % of Teranga’s shares.
The historical mineral reserves base of the Massawa project is 2,6 Moz from 20,9 Mt at 3,94 g/t Au. This will augment Sabodala’s mineral reserves base of 2,4 Moz from 55,7 Mt at 1,35 g/t Au.
Massawa’s reserves are located within 30 km of the Sabodala plant, thereby reducing initial phase 1 and phase 2 capital costs included in the Massawa Feasibility Study previously undertaken by Barrick. Life of mine sustaining capital for Sabodala is expected to increase due to extension of the mine and processing life, mainly for mine equipment and additional tailings storage facility capacity.
Based on the historic Massawa reserves, with no changes to the existing mine and plant capacities at Sabodala, the Sabodala-Massawa Complex offers significant anticipated benefits, including targeting higher annual gold production with an optimised mine schedule that combines the existing Sabodala ore with higher-grade ore from the Massawa project. As a result, cash margins and free cash flows are expected to increase commensurate with the increased production.
Tablo Corporation, controlled by Teranga Director David Mimran, supports the transaction. Tablo is investing a further US$45 million with this transaction to retain an approximately 21,2 % ownership in Teranga.
“Since my initial investment in Teranga four years ago, I saw the opportunity to create a top-tier gold producer in West Africa,” stated Mimran. “I expect Teranga’s management team to quickly unlock the significant potential of Massawa’s high-grade reserves and deliver value to shareholders and our Senegalese stakeholders for years to come. This acquisition represents an opportunity to expand Senegal’s gold mining industry and contribute further to the development of the country and the communities we touch.”
Barrick President and Chief Executive Mark Bristow said the group had been pursuing the best means of bringing Massawa – discovered by its legacy company, Randgold Resources, 10 years ago – to account for the full benefit of all stakeholders. The agreement with Teranga, which will realise the full value of this asset and create a substantial new West African gold mining company with significant African ownership, is the outcome of this process.
“Teranga has the appropriate infrastructure and processing facilities approximately 25 km away from Massawa, and combining the orebodies and the geological prospectivity will add further benefits,” Bristow said.
The transaction is expected to close in the first quarter of 2020 and is subject to receipt of the Massawa exploitation licence and residual exploration licence from the Government of Senegal, as well as certain other acknowledgments and approvals from the Government of Senegal including Teranga’s integration plans for the Sabodala-Massawa Complex.
The Massawa Feasibility Study envisioned building all phase 1 and phase 2 infrastructure for approximately US$333 million and later adding a BIOX® circuit to process refractory ores in the later stages of the mine life for an additional US$80 million, for a total capital cost of US$413 million. The Massawa standalone operation was expected to produce an average of approximately 200 000 ounces of gold per year over the first 10 years.
Sabodala currently mines between 35 and 40 Mt of material and processes over 4 Mt of ore per year. Teranga plans to integrate the high-grade ore from the Massawa deposits into an optimised combined mine plan for Sabodala, leveraging its existing infrastructure, plant, mobile equipment and personnel.
Minimal changes are required to Sabodala’s existing CIL plant and infrastructure to process free-milling ore from the Massawa project. This reduces the initial phases of capital costs included in the Massawa Feasibility Study. Teranga is targeting to commence processing free-milling ore from the Massawa deposits at its existing CIL plant in the second half of 2020.
Teranga intends to mine and process Massawa’s high-grade reserves on a priority basis and it is anticipated that by 2021 more than half of the ore processed through the Sabodala plant could potentially be sourced from the Massawa deposits. Based on the Massawa Feasibility Study and Sabodala’s current mine plan, the Sabodala-Massawa Complex is expected to increase Sabodala’s existing gold production profile.
Teranga and Barrick have invested significant resources in due diligence to gain a better understanding of the technical details of the Massawa orebodies to help Teranga develop an optimised, integrated mine plan for the two properties. This includes detailed resource modelling for the mineralogical characterisation, the chronology of metallurgical test work to determine BIOX® as the process of choice for the refractory ore in a retrofitted Sabodala plant and a revised life of mine plan that optimises the timing of the Sabodala and Massawa orebodies for processing as well as annual operating and capital costs.
This detailed due diligence work will form a basis for initiating a pre-feasibility study that Teranga plans to complete for the integrated Sabodala-Massawa Complex within six months of closing of the transaction.