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Roscan Gold (ROS) - Military Coup but Business as Usual

September 21 2020, 16:29 GMT+01:00

Roscan Gold (ROS)

  • TSX-V: ROS
  • Shares Outstanding: 244.59M
  • Share price C$0.35 (21.09.2020)
  • Market Cap: C$88.051M

Gold has retreated a little in recent weeks, but this bull environment is still undoubtedly exciting for gold investors throughout the investment sphere.

Roscan Gold is a gold explorer and developer with assets in Mali, West Africa. Mali isn't exactly the most secure mining jurisdiction, and there have been numerous articles released on the Crux Investor regarding the potential hazards of Malian investments.

Click here to check out one such article

The situation in the region did appear to be improving because of cooperation between countries and the involvement of the French and British security forces, but Mali suffered a military coup last week. Military coups tend to be reflective of the mood of the people who are tired of corruption in government. This seems to be the case. Discussions are only ongoing about the 3-year transition period and the feedback from the street is that the people welcome the change. Western investors are less sure and are playing a watching brief.

We really appreciated Sangmuah's candour on this issue. He was keen to articulate the company's path through the current geopolitical difficulties. He will be using the company's C$15M + warrants (available in December) to develop the company's gold assets with the aim of giving investors leverage to a favourable gold price.

We Discuss:

  1. 2:29 - The Situation in Mali: Outcomes and Implications
  2. 11:36 - Is the Political Situation Affecting Business in Mali?
  3. 13:44 - Business Plan and Strategy
  4. 18:36 - Team Experience
  5. 21:04 - Impact of COVID-19 and Border Closures
  6. 23:23 - Kandiolé Project: Numbers, Tech, & Timing
  7. 29:33 - Money: Order of Allocation & Focus
  8. 35:57 - Interesting the Market: Why Now, and Not 3yrs Ago?
  9. 37:23 - Shareholder Breakdown and Relations

Matthew Gordon: You're going to tell us a little bit about the project and what you're up to there, but we've getting an exclusive here. You're going to give us an update on what's going on in Mali. There was a military coup about a week ago. They have been in discussion with the economic community of West African States to work out a peaceful resolution.

Nana Bompeh Sangmuah: The transition discussions are ongoing. I was just informed here by my country manager that the military leader just refuted the sessions in the marketplace that he's looking for a three-year mandated rule for the transition. That has been refuted by him. And he's gone back to his initial mantra by saying that the transitional process is going to be dictated by the Malian people in consultation with the military and the ECOWAS body. It's going to be a much more consultative process rather than a dictatorial process coming from the military. This transition has had a lot of support from the Malian people, it has been very peaceful, and if it stays that way, I think it's ushering in a very good future for the country where we'll actually see a much more solid transition to a long-lasting democratic process.

Matthew Gordon: What are your hopes for the way that this negotiation is carried out? 3-year transition. It's going to be done in consultation with the Malian people. What do you think that actually means in reality?

Nana Bompeh Sangmuah: I think what that actually signals is it's not a system where you see in other places where a military junta comes in and outweigh and they dictate the pace and they keep and siphon off the country's resources forever and actually throws the State into further destabilisation. I personally have lived through this in Ghana as a young kid where we had military transitions come through and that ushered in the perfect, the best democratic rule in Africa for now. That's through the Flt. Lt and Jerry Rawlings days. It was also a popular uprising, and initially, there was some talks and opposition from the West, but eventually the transitional cared and we have one of the best stable democracies that can be boasted of in Africa to date. I think these people are working their way towards that direction.I think it's going to be really silly for them to think they can use their power and do whatever they want in Mali. Given the fact that Mali is a landlocked country, and nothing is produced there, and they depend a lot on exports. Their borders are sensitive and ECOWAS controls on these borders and they can put the screws on them to get them to do whatever is right for the people. But now it appears the people want this change. They want to transition. And the military has been used as a medium to get that process in place.

Matthew Gordon: What were they getting rid of? Is this about corruption?

Nana Bompeh Sangmuah: There are multiple issues. I think corruption is high on the agenda there. Government officials have been noted for lining their pockets and not looking at the interests of the common Joe below on the street. Social-economic harshness has been quite intense and people have not seen a lot of progress. And they have also not seen a lot of seriousness from the government to deal with the jihadist movements. And it's not been that clear. There's been a sort of dependence on the French and other foreign governments to help in that regard. It's sort of a change that the people want, they tried to do it themselves. It was tougher for them to do and the military has added their voice. And I would say, it's probably one of the most popular military uprisings I've seen for a while now. I think the military guys are also being very smart and so far, they've not flouted at any rules. Everybody has been kept safe until the ex-president is going to be allowed to be part of the country. There's no black shirt. It's pointing more towards a consultative framework to transition Mali to the next place.

Matthew Gordon: What do you hope is the outcome of that conversation?

Nana Bompeh Sangmuah: I think the tough stand is probably to signal to the military government is that ECOWAS, is not going to accept any games here and come up with a timetable and let's stick with it, which oftentimes becomes the issue with some of these interventionists governments, the come in and promise, we're going to do X, and it slips along the way at times. Once ECOWAS, shows his hand and communicates their seriousness in transition in every country in the block into democratic rule, I think they'll have that at the back of their mind that no games should be played here and whatever transitional timetables that be agreed to with ECOWAS, I have the utmost confidence that they're going to stick with it.

Matthew Gordon: Are they now going to deal with the issue of the terrorist infractions, which have been going on? This could be an opportunity for other interested parties to insert themselves.

Nana Bompeh Sangmuah: I think that's actually what's probably driving the urgency of these discussions because the last thing the West and ECOWAS, and all of us here want is to have a failed state because that is just for the ones that we don't want further down the line. It's a very intricate process so far. I'm very happy from what I read; the French are still well immersed in the country and still taking their military commitments seriously. I don't think a vacuum has been created for these guys to take advantage of, but clearly, if you don't have a proper transitional negotiation process or a timetable put down, then people might take advantage of that. The key is to see what the outcome of these negotiations are, and I think it's going to be a workable solution for all parties.

Matthew Gordon: In terms of some of the terrorist activity that has been going on in parts of Mali, has that affected mining companies’ ability to do business?

Nana Bompeh Sangmuah: Virtually we've not had any impact at all because the terrorists are a concentrated way to the North in that part of Northern Mali that wanted to succeed and before you even get to the centre part of Mali, there's a big military barracks, which has a lot of French installations so it prevents any widespread movement from the North coming down South. If you come to where the mines are located, Southwest, you're talking close to about 700km, 800km from the hotspots. It's been set up really calm business as usual. I think every mining company has, including ourselves. also, put down good security measures to keep the workers safe in coming in and out of the capital and wherever they live in the country.

Matthew Gordon: You're monitoring that situation because it's not just the North; there have been isolated incidents throughout the country, but that's the situation you continue to monitor?

Nana Bompeh Sangmuah: We have got security personnel who are highly experienced on our roster that watches out for all the developments and sounds any cautions if necessary, but there's been no need for any alarmist evacuation so far.

Matthew Gordon: What is a business plan? What is it that I, as an investor am buying into here? You've set out to do what? Where are you currently with that plan?

Nana Bompeh Sangmuah: What we set up to do is to pick up one of the prime exploration real estates that I've seen in Africa, plugged into the shadows of a lot of significant operating mines and projects. We've identified quite a number of targets there, and we want to make as many discoveries as we can on the real estate. That's going to drive up valuation and give significant returns to shareholders. In so doing, we've attracted the attention of a few other players in the industry that have expressed serious interest to follow what we're doing, even to the point of having on us. We are running the business to add value through the drill bit, make as many discoveries as possible so that if that should happen it actually happens at a much higher price.And basically, the alternative here is the team, we've assembled together with the likes of Sir Samuel Jonah, that's been able to build a lot of junior mining companies into many significant entities, as we get our valuation rerating going with the discovery of more deposits in this prolific land package, we get the currency to do some interesting things that could be valuable to shareholders as well.I think it's a very unique junior company where we wouldn't just be at the mercy of finding stuff and twiddling our thumbs and waiting for people to dictate the pace for us. Once we get to a point where we think we have something that could be very accretive, we would also pull the trigger and go for it.

Matthew Gordon: How much money have you raised to date?

Nana Bompeh Sangmuah: In total, we are north of USD$15M to USD$20M in the treasury, based on straight equity issues and warrants that are deeply in the money that's coming through. That's been very humbling because that signals a lot of support from our shareholders that have confidence in the team and what they can execute. We are well funded to execute the campaign that we have in front of us. Essentially, we expect another USD$10M to come in from the warrants, in March and next December.

Matthew Gordon: How much have you raised in total since this began?

Nana Bompeh Sangmuah: I would say, from before my time you might have another USD$10M or so that's been dropped into this.

You are an Explorer developer, is that what I should read into this? You are guys that are discovering value through the drill bit, but your explorer-developers. You're not mine builders and you're looking out for someone to step in either as a partner, JV or take you out?

I would say we are an explorer, and basically, we're doing the work that will get us into a developer status very quickly because we've just made one major discovery, but we are expanding out of about 11 targets to go. And we are actively drilling those targets as well. We should have a backlog of news coming through in the fall. Essentially, we would classify ourselves as an explorer-developer at this stage. I would highlight the fact that we have the ability, based on the team we've assembled, to transition ourselves into whatever adds more value to the company.

Matthew Gordon: Who has done this before? Who has made money for shareholders?

Nana Bompeh Sangmuah: To start with, our chairman, Sir Samuel Jonah, he started with AngloGold Ashanti of Boston mine and transitioned that into a 10-mine conglomerate out of Africa in general. Listed it on the New York Stock Exchange, made quite a number of people money during that process. He moved on to Equinox as well and helped them up the value chain as well, and helped people make money in that process. He was associated with Moto, which is now the Kibale mine that also made investors money. I think that's a very good figure to have as ahead here. The other groups that are associated with the company that has added value to shareholders in various aspects.

Matthew Gordon: Who are the guys on the day-to-day that are going to make you and make shareholders all this money?

Nana Bompeh Sangmuah: Sir Sam is very much involved in Roscan. For a company our size, we have weekly board meetings, where he drives to the process home. And he's as involved in every single decision that we make. At times I have more calls from him in the day than I do from my wife, depending on what we are discussing. It's not just a name rental out there. He saw the opportunity to be involved with us, he came to site the very next day after his appointment as chairman. And he walked all the priority targets that we currently drill with us. He was very excited about this ground. Actually, part of this ground was formerly owned by Ashanti, his initial company, that did some of the historical geochemical analysis on the ground.

Matthew Gordon: Coming back to those border closures and indeed COVID, how are those things restricting your ability to do business?

Nana Bompeh Sangmuah: Initially, we quickly put up the COVID protocols just to help the site become COVID proof once it hit. And we actually made a donation to the community that we operated in. I think we were the first mining company to give some PPE to that town, and the mayor was ecstatic about it. We've had no COVID-related issues on site, and we've not lost a single day of drilling. We executed one of the most aggressive drill campaigns in the company's history through the rainy season with about four rigs running right now and we just added a fifth week. It's been busy through this period, and we've not had any interruptions on that front. The part that has been a little bit of a challenge is some of our samples have to be sent from Bamako to Abidjan and then back to Bamako. The cross border, you get some delays in the mix. And we went to about 27-days turnaround up from about 10-11, which was the norm. So that was an issue that impacted our cycle of news flow.But the borders are being opened in most of West Africa. The military junta has opened the borders right now, I'm told that flights can get in. Goods and services have not so far been impacted and we still get some samples from our labs. One of our main labs is now full functionality in Bamako and can process everything internally. Going forward, we don't foresee a lot of disruptions in that regard to our sample and our results coming through.

Matthew Gordon: You've got 4 drills going even and you're looking at it at a fifth. How are you managing to do that?

Nana Bompeh Sangmuah: We planned hard for it; we knew that we would need a lot of good, skilled labour to man theses rigs, so we have consistently added to our team and the Malians are very skilled at this. We actually run this company for six months remotely. They delivered it to the T and attracted bonuses for doing exactly what we expected them to do. It's a very skilled team that we've got down there, and the technical team with the addition of David Reading and Greg Isenor have also not taken their eyes off the ball. We have periodic. We receive daily lots of drilling and we know every day what each drill is doing wherever on the project. And it's so flat a structure that anybody on the technical team can chime in if they want us to keep going, they want it to stop. It's up to debate very quickly. It's more hands-on there. And essentially, we also make sure that we delegate a lot of responsibility to them. They are free to take the actions they deem fit and it gets explained to us in our weekly calls, which have now been increased to 2-weekly technical sessions. There are lots of eyes on this, we are excited about what we have seen. We're excited about the new targets we are drilling, and we hope because I think the current valuation of the company is just reflective of one discovery and we are working hard to change that.

Matthew Gordon: What do you know about the drill program in terms of the way that you're planning it out over the next 12-months?

Nana Bompeh Sangmuah: Aside from South Mankouke, which the market knows very well, we started actually with some very interesting hits from the central Mankouke zone. The whole Mankouke is an 8km mineralised corridor, I'm not suggesting that the whole 8km is all mineralised, but we think there are some jewels in there. We're doing a lot of work in that corridor and we've got drills turning there. We got work also ongoing in another permit, which is actually a larger permit that has a bit of artisanal activity in there, Niala, which we are waiting to see results back. Quite a bit of drilling has been completed on that as well. We have got the ground that we acquired from Komet, which we thought was a very strategic acquisition because it gave us more ground on a structural corridor, up to 20km, very close to the targets that we are working on, and you can even see a potential extension of some of their targets into the ground, and we have got rigs turning on these targets as well.

Matthew Gordon: Tell me about the Komet deal: what was the thinking behind this? What were you hoping to achieve?

Nana Bompeh Sangmuah: We are constantly looking at ways to expand our footprint, and the more land that we can accumulate, the better. And we had done a desktop study where a technical team had established a structural corridor trail which has close to 400,000oz at 2g/t delineated, ready for running through South Mankouke into central Mankouke, running through Kandiole and further going up. The most extreme portion, we already had a permit, which we had drilled, which gave some interesting numbers: about 35g/t over 2m that weren't followed up. We quickly knew the importance of that corridor and our due diligence on the work that had been done on the zone they had already drilled and delineated as a resource made us aware that this was extremely shallow drilling at 60m vertical depth. There were a few high-grade trench results that I went and followed up - very promising AC results, like 8g/t over 40m that were never followed up. The opportunity to grow big system results, which was actually calculated at USD$1,350 Gold price was high. And then further doing our Google due diligence we actually saw that essentially, the artisanal activity had expanded the footprint that was there. We know for a fact that we are onto something there and it looks like some of the deep structures on the ground is coming into that. And it's interesting and exciting times, I would say,

Matthew Gordon: Why didn't Oklo step in there?

Nana Bompeh Sangmuah: Think that would be a question better suited for them, but it is in a competitive region, so we saw the opportunity and we jumped in as quickly as possible for it.

Matthew Gordon: You're expanding the footprint. How much money have you spent on that?

Nana Bompeh Sangmuah: On the acquisition?

Matthew Gordon: On the acquisition, any drilling that you've done subsequently?

Nana Bompeh Sangmuah: The acquisition was less than, I think, USD$3.2M - so not a whole lot. And with ounces on, we got it for $16 p/oz in-ground, which was very accretive. We are going to be put in some good number of holes on right now, actually the drills are mobilised on it. As part of a broader, expanded, regional activity, we should have quite a number of metres for a direct target.

Matthew Gordon: What's the order of play?

Nana Bompeh Sangmuah: The amount of money we have possibly gives us a run room until March, where we have our next tranche of warrants coming through, which is another USD$5M, and then we have another top-up in December. From what we've decided ourselves to do here, it's pretty much funded from the current resources that we have, and on top of that, we have initiated a helicopter airborne survey, which will give us even more targets, deeper-seated targets. We doing a lot of AC on anomalies right now, and we put it all together and the deep geophysics is going to really connect the dots much more succinctly for us and refine some of these targets that we are working on. Our hope is to basically have a good sense of where we should be devoting a lot of our sprints. And the goal is to have about two, three solid targets that have a lot of legs for them to run and move us into the resource delineation phase sometime in the second half of next year.

Matthew Gordon: Tell me about the significance of fresh rock, certainly in relation to some of the other deposits, Kekolo, Seko.

Nana Bompeh Sangmuah: I think the significance of Fresh Rock clearly establishes the root sources of the mineralisation, as you see on our regional map, you'll see that nobody can lie to you that there's no Gold there. There's definitely a lot of Gold all over the place. The question is, how do you connect them together, and it's their feed source and how it’s transported? Those are the questions that the street has. We are working with our current drill program to address and answer those. We are very confident because we've had some very good hits in the fresh rock already. And it answered the question that this is not supergene and we continue to do a lot deeper drilling to establish the dimensions of this resource area. It's good to continue to focus on the fresh, but I also would establish the economic importance of the oxides as well, because the oxide profiles are usually straightforward metallurgy, easy strip ratios, low mining costs, so you are pretty much printing money in this environment. The appeal of some of the oxide material to some of our sister projects around us would be quite significant because you blend some of the extensive oxide profiles here, particularly at the grades we are getting, you can enhance your throughput and production without putting any extra CAPEX in your plants.

Matthew Gordon: Tell me about how you're prioritising targeting in relation to you're spending your money in terms of AC/RC/ Diamond drill.

Nana Bompeh Sangmuah: What we do first and foremost is to detect the anomalies and if we have something of significance: handrail, PPB, anomalies, either by soils or by termites, that makes it something worth following up to see what is beneath them. Our first preference is to test these anomalies with AC, just to see if there's roots, we need them. And that's exactly what we did at Southern Mankouke. We saw the white section, we tested it with AC to connect then we followed up with RC and DD to establish the depth extent, and we continue to do that. So that's the methodical approach that we use across the board. It's good that way because the AC drilling is quick and not too expensive, and it can get us through a lot of these targets and establish the ones that we have to follow aggressively and some that need to be discarded.But I think there's a third layer to that process, that's why we are doing the geophysics, that is a deep geophysical technique where we can actually size targets as deep as 300m. Some of these will be lost to certain termite profiles. And once that is completed in September, October timeframe, we will have all our targets rejigged by a consultant that Barrack uses for the 3d target generation, and that gives us another layer. This story is going to get more exciting and interesting because we are trying to apply all possible techniques available to find the positives there. And we've got the team that can get us through that.

Matthew Gordon: What do you think they were missing or is it a case of you haven't delivered the grades yet?

Nana Bompeh Sangmuah: I think the market couldn't appreciate the quality of the asset package that the founder, Greg Isenor had put together, and this is not the first time he has done something like that. All that he's done has actually ended up as projects in the laps of major companies. We clearly devised a strategy to show the parallels and drill the holes and show that we've got the grade, we’ve got the widths that's comparable to some of our peers that were trading 4x our valuation. I think some people listened, and that valuation has closed up, but I think it's still worth highlighting that it's just been on one target that's being really well defined in the market, hopefully as we get more success on some of the other targets, we'll catch up with some of the discount left and probably move the story to even another high premium, because people will see that the execution of the exploration strategy is yielding results.

Matthew Gordon: There are some big names in there, but no big holders in there. Is that something you would like to address, get a cornerstone in there?

Nana Bompeh Sangmuah: I think we were happy to welcome some big names on the register in the last phase. That's Testament on people believing the potential there. I think actually, that creates more opportunities here because there are a lot of people sizing and trying to figure out how this plays out, and with continued success, I think we should be seeing a lot of these people jumping because it's a unique story; we have a discovery story where you actually have the best returns in mining and equity. You also have an exit strategy where a lot of people looking in our kitchen, trying to be part of the story. It's very compelling. We've been talking to a lot of these potential cornerstone investors. Obviously, most of them were trying to figure out the entry point where we needed money so that they could be part of the register. That's been a challenge because we virtually have funded our campaign right now, but who knows where the opportunities would be down the line, but there's potential for these to come in on market transactions or another form as we evolve.

Matthew Gordon: Do you feel compelled to spend your money to keep the market excited or do you feel compelled to actually do things the right way in terms of geologically, technically?

Nana Bompeh Sangmuah: All the money is going into the ground. I think that's the best marketing tool we have. The rocks will speak for us, and once we get more success on the ground, the rest becomes history. That's the company's management focus right now.

Matthew Gordon: Management has 11.8%. How much of that have you got?

Nana Bompeh Sangmuah: I'm up to about 1M shares that I purchased personally before coming on board. I would love to purchase shares on weakness, but we always have to respect the blackout policies. We see those as a great opportunity to add, and I got some exposure on all the performance options and all that. I'm clearly well-aligned to shareholders and the success of Roscan is going to have a personal impact on me as well. I take that very seriously.

Matthew Gordon: Thank you very much. Great to hear that story.

Nana Bompeh Sangmuah: Great. Thanks for having me. It's been a very fruitful discussion and stay tuned to the milestones as we get through them.

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