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Pasofino Gold (VEIN) - The 'A Team' Assembles to Build Liberian Giant

February 27 2021, 18:48 GMT

Pasofino Gold

  • TSX-V: VEIN
  • Shares Outstanding: 275.59M
  • Share price C$0.17 (09.01.2021)
  • Market Cap: C$47M

Pasofino Gold Limited is earning a 50% interest in the advanced-stage Roger Gold-Copper Project located in Quebec’s prolific Abitibi Greenstone Belt. Pasofino Gold has an agreement to earn a 49% interest in the Hummingbird Resources owned, Dugbe Gold Project in Liberia.  A 2020 In-Pit Mineral Resource Estimate for the Dugbe Project totals 2.3Moz of contained gold Indicated and 1.3Moz of contained gold Inferred. 

We met with Ian Stalker, President & CEO of Pasofino Gold to hear their story for the first time. Ian is a board member and advisor of quite a few companies who we speak to in addition to his work with Pasofino.

 

Company Overview

The Dugbe Gold project is a Liberian based Gold project with an estimated 3.6Moz of indicated and inferred mineral resources. A Definitive Feasibility Study is underway, and will hopefully be completed by the end of this year. That takes the board of Pasofino to a decision to construct sometime in 2022, so it's a pretty near-term production opportunity. Pasofino are seeking further exploration opportunities in Liberia.

Pasofino Gold (VEIN) - The 'A Team' Assembles to Build Liberian Giant

Team & Experience & Ian's Background

Ian Stalker left his native country of Scotland as a 21-year-old to go to Zambia and work in the Copper mines. He was there for 12 years to become metallurgical manager of Canada Vision, as it was known at that time, and then moved to Ghana where he spent a further 12-years with Ashanti Goldfields. During his time there, the company moved from a 120,000oz/year production level to 1.7Moz, and became a big name in Gold mining in Africa. Stalker then moved into the junior market and became CEO of a couple of companies, some of which have done well, K92 Mining in PNG for example. Earlier in his career, Stalker was involved with a Uranium story that also did very well and he has been involved in building a few companies up from start to finish.  

Mining in West Africa: Perception on Liberia

Despite its legacy perception issues, Liberia has been independent since the mid-1800s. The country elected the first female Head of State in 2006 who remained in power until 2018 when there was a transfer of power to the current president, ex-world Footballer of the Year, George Weah and the country is relatively stable.

It is good for Pasofino to be working in a country that has its own ports and coastline and they have the deep-water port of Granville only 70km from their site. The proximity to the port and the simplicity of one set of customs officials can save a significant amount of operating costs and capital costs for the company. 

Liberia is a relatively stable country in terms of security. The instability that we see in countries like Mali, Burkina Faso and Niger, is quite often driven by the divergence of some of the religious groups in the areas. Liberia, fortunately, has one predominant religious group, which is Christian, and certainly makes things a lot more stable.

Pasofino Gold (VEIN) - The 'A Team' Assembles to Build Liberian Giant

The government is proactive with Pasofino and understands mining which is helpful. Pasofino has a legal mineral development agreement with the government which clearly states that they have a 10% free carry, which is not dissimilar to most West African countries, so in the event the Gold price was to drop below USD$1,500/oz, they would reduce the import duties associated with the importation of fuels by 75%. Diesel is a significant part of the operating cost of the open pit, and Dugbe is an open pit opportunity, so by getting that cost offset it helps to make the mine more economically viable. 

Bought Deal with Hummingbird Resources: Why Choose This Project? 

Pasofino completed a deal with Hummingbird Resources who had worked on the project and spent over USD$70M on the project to date. It needed a lot of work but was a good, basic setup. Unfortunately for Hummingbird, the timing in the marketplace wasn't great and Gold was not something that was being talked about so they were unable to get the capital in place. Hummingbird then diverted to a project in Mali which was smaller, and more financeable in the short term which went well for the company. In 2019, the government of Liberia gave permission to start work at Dugbe which is when Pasofino took the opportunity with the project with 3.6Moz of compliant resources to start from.

Business Plan: Process for Growth & Timing the Market

Pasofino closed the agreement with Hummingbird in October 2020 and had already raised some money in September. They have a great resource with 3.6Moz which will give them a fast track opportunity with this project. Of the 3.6Moz, 2/3rds is in the Indicated category, at a grade of 1.51g/t which is great considering the location and infrastructure of the project.

The business plan and the projection going forward is two-fold. Pasofino Gold plans to take the existing resource with some infill to bring some of the inferred indicated to complete a Definitive Feasibility Study (DFS) based on a production rate of roughly 200-220,000oz of Gold per year. With a background of 3.6Moz, it's a 10-12 year life of mine after recovery, which is reasonable so they will get that moving. In this Gold environment, the company is looking to the future to see where the Gold price is going, but has based their calculations on a reasonably conservative USD$1,600. They plan to double the throughput compared to the previous project. The oil and gas costs are significantly lower today than they were in the 2014 study so the inputs are better. The grades are better, as Pasofino has increased the resource number from roughly 1.37g/t to 1.51g/t by removing the low grade material which makes it a much more robust model based on that higher grade. 

Pasofino Gold (VEIN) - The 'A Team' Assembles to Build Liberian Giant

People can see that cash flow isn't too far away if they build it in 2022, with a return coming out in 2023. This is the last underdeveloped part of the Burimian geological endowment that is West Africa. Ghana has around 500Moz of endowment compared to Liberia, which only has 16Moz. There is about 2,500 square km of ground and Pasofino plans to focus on the targets they already know. Dugbe is the main target, but there is further opportunity to grow the resource to add value to the overall company by adding a further 2Moz resource.

Pasofino Gold raised just over USD$10M in October which they have been using to develop and improve the existing infrastructure as the project was put into care and maintenance from 2016-2017. The camp had deteriorated, the bridges needed a bit of attention so that was the initial work. They have 3 rigs at site, 2 of them are working in the Dugbe area of known resources. The third one is looking at some of the exploration targets that would be generated.

There will be plenty of press releases coming out soon from the current drilling and there are plans to look at further exploration potential. They have to complete the DFS, which is essential in going forward in terms of information.

Pasofino Gold (VEIN) - The 'A Team' Assembles to Build Liberian Giant

Money Raises & Allocation: Terms of Agreement with Hummingbird

The USD$10M was raised in the marketplace as a bought deal and that money was identified to undertake best endeavours to establish the 2Moz resource with drilling which they hope will happen in the next 12-months. The company plans to complete the Feasibility Study by the end of this year and submit that to the Hummingbird board which completes the terms for the earn-in agreement. Once the DFS is complete, Pasofino will own 49% of the Dugbe project. There's an agreement between Hummingbird and Pasofino that, providing the project is economic, Hummingbird will have the ability to put their remaining 51% into Pasofino for a market-related equity. Then Pasofino will become the 100% owner of the project, which obviously then makes it a lot simpler.

After completion of the DFS, in a USD$1,600 Gold price environment, the project will be an attractive investment decision, so Pasofino will either go for equity, on the basis that the share price will be a lot higher than it is today which is a feasible expectation. Or, they might look at a debt/Royalty scheme to bring in the extra capital that they will need.

The Future: What to Expect & Where it Could Go Wrong 

The Pasofino Gold project in Liberia is a real opportunity and the country seems stable for the project to go ahead, but the company needs work harder to impart information to would-be shareholders and existing shareholders. It is a big resource and is likely to go up to between 5-6Moz, producing 200,000oz/year. It's an impressive merger acquisition target as well as being a development project in its own right and it will be a very interesting next 6-12 months for the company. We appreciate the chance to hear the Pasofino story which is a new one for us. We will keep an eye on the company to see how they're getting on and what they can do. 

Pasofino Gold (VEIN) - The 'A Team' Assembles to Build Liberian Giant

To Find out more, go to the Pasofino Gold website


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