Yes true Kalenn , however ERX can not sell gold and has no capacity to hedge it currently at current POG , the only way it could monetise its insitu gold deposit currently is dealing with Barrick's Tongon mine 50 kms East or Persius's Sissingue mine 50 to 60km North .
To me ERX's Veronique deposit offers the most potential for an off take agreement , I estimate the deposit would run around 4 grams a tonne , for 150k ozs from what has been discovered to date , which is around twice the grade that the Tongon mine is processing ore at for around a $US 700 an ounce C1 cost (from memory) . There is plenty more potential at Veronique to as if you look at the last drill results the highest grades were along the last Fence to East so it is likely to strike further East .
If a new road was created then Haulage cost from Veronique to Tongon would cost around $o.03 a gram of gold1 so insignificant for OPEX but in effect the Veronique ore while processed doubles the Tongon processing grade from around 2 grams a tonne to 4 grams a tonne for about 6 months of processing
It would be interesting to know the CAPEX for a 50-60km road from Veronique to Tongon , to handle 30-60 tonne trucks , there looks to be no major rivers to cross with current bridges on streams being only around 30 meters wide at most , however there are numerous cocoa plantations where the govt and mining companies would need to negotiate with owners for temporary roading access and remediation.
The fall back option would be to use existing roads however there is no direct route to Tongon , and I doubt the current bridge crossings would be suitable for large heavily laden trucks.
Tongan has enough ore until early 2022 and guessing Sissingue has around 3 years life of mine left .
SO really only about a 2 year window of opportunity to bring together the government , local community and the respective companies to survey and lay down a road , from Exore's deposit to either the Tongon or Sissingue processing plants while those plants are still operational.
A possible scenario if previous C1 costs for Tongon are around US $700 an oz, costs would drop to around $370 an oz with ore sourced at double the grade from Veronique for 150k ozs , that would result in over $1000 an oz AISC margin thereofre for the 150k oz , from Veronique, the Tongon would get an extra $150M in profit before tax, and royalties and profit sharing , (the govt is entitled to 10% ) . Of course this is hypothetical on all the gears meshing with a 150K oz resource at 4 grams a tonne ore at Veronique being proved up , Tongan being able to make a deal with ERX and the Cote D'Ivoire govt coming to the party to get roading done in the 18 months .
The low equivalent per gram haulage cost for ERX's gold means ERX's northern Juliet and Antoinette prospects that are lower in grade but higher in total ozs could also be likely treated by mines in the area at a later date .
If ERX fails to make a deal with either Barrick or Pursius plus the Govt/community for roading very soon , I can only guess they will be left with having to build their own plant which would probably be over US$100M for a 1mtpa CIL plant designed to process fresh ore (similar to the Sissingue plant )
Across the border in Mali There is Persius's Tabakoroni plant and the Resoulute's Siama plant is a further 40kms North of Sissingue so probably twice as expensive to ship ore to ,plus is across the boarder. ,
Appendices
1. Using Ramelius's Tampa project as a comparison where trucking cost is around a$0.12 a tonne per km return (June 19 presentation page 12 "140kms one way distance" ) at a cost of 17 June 19 page 8 $16.95 a tonne :
$16.95 /140 = A$0.1211 a km = US $0.085 cents at a 0.7 exchange rate
At a US $1600 an oz gold price /31 = $51.6 a gram
Assuming a 65 km trip to Tongon mine from Veronique then 65km * $0.085 = US$5.52 a tonne
$5.52 / 4 grams a tonne Veronique ore = $1.38 a gram haulage cost
$1.38 /51.6 = 0.027 a gram cost of transport
ERX Price at posting:
4.3¢ Sentiment: Buy Disclosure: Held
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