Page 38 - pd309-Oct22-mag-web-Neat

ADU ReVIeW

WAF keeping costs in check

est African Resources Ltd (WAF) ex- of August] and about on guidance for costs, same methodology for the Sanbrado build in
Wecutive chairman Richard Hyde has however, we’re seeing increased fuel prices the development of Kiaka, including contract-
warned rising fuel prices will soon start to im- in West Africa which tend to lag the oil price,” ing Lycopodium Ltd to construct the process-
pact the cost of production from the Sanbrado Hyde said. ing plant.
gold mine in Burkina Faso. “We’re paying about $US1.35/L for diesel “We’ve sized the plant on 7 mtpa as a
AISC at Sanbrado averaged just $US947/ and it’s going to increase to about $US1.80/L nameplate, however, we did something simi-
oz over the first half of 2022, but Hyde ex- very soon, so we’ll start to see some of these lar with Sanbrado – I think initially that was
pects that figure to increase over the balance cost increases flowing through late this quar- about 2 mtpa – which we’ve now ramped up
of the year as fuel prices soar more than 30% ter and into next quarter.” to 3.2 mtpa,” he said.
above current levels. WAF has outperformed every plus- “Having that experience, we’ve designed
Despite the anticipated higher costs, WAF 200,000 ozpa producing gold company on Kiaka at 7 mtpa, but we can take that to 8.4
remains firmly on track to meet guidance of the ASX over the last three years, having mtpa just by processing up to the design ca-
220,000-240,000oz at $US1,040-1,100/oz switched the lights on at Sanbrado during the pacity of the plant. Then we’ve also got the
AISC. early stages of the COVID-19 pandemic in opportunity to expand that further to over 10
“We’re currently tracking slightly ahead of the beginning of 2020. mtpa through additional crushing or debottle-
guidance on production [circa 150,000oz end With a 10-year production target of 3.5 moz necking the plant, which we’ll be working on
in mind, WAF is now looking to add a second during this construction phase.”
operation to the mix following the release of a WAF has again appointed Orimco Pty Ltd
feasibility study on the nearby Kiaka project to lead the debt financing process for Kiaka,
acquired from B2Gold Corp and GAMS Min- having previously helped the company se-
ing F&I for $US100 million late last year. cure a now fully repaid $US200 million facility
Kiaka, about 45km south of Sanbrado, is from Taurus Asset Management to construct
forecast to produce 219,000 ozpa over 18.5 Sanbrado.
years. Capex for the proposed 7 mtpa opera- “We had 16 firm bids for the debt for San-
tion is estimated at $US430 million, to be re- brado and we’d expect a similar sort of ap-
paid in 2.5 years. proach,” Hyde said. “Another significant
Early works will begin at Kiaka over the investment of a similar size would see us
coming months before full construction starts probably debt funding the whole project with
early next year. The first gold pour is slated additional cash flow from Sanbrado or from
for May 2025. corporate.”
Hyde said the company would apply the
Richard Hyde – Michael Washbourne

Increase taxes at your peril

frican governments have been sound- zania (18.5%), Egypt (17.2%) and Zambia
Aed a warning about the consequences (12.8%). All five countries, excluding Zam-
of overzealous fiscal regimes with research bia which was not assessed in 2018, were
from PwC suggesting at least five countries down on their previously reported invest-
would struggle to justify construction of a ment returns. Olivier Marion
new mine. “This clearly demonstrates the impor-
For the first time since 2018, PwC as- tance of a balanced win-win scenario for est share of the revenue from the hypo-
sessed the tax regimes for five African both miners and governments,” Marion thetical mine, followed by Tanzania (73%),
nations – Ghana, Zambia, Egypt, Namibia said. Egypt (63%), Ghana (60%) and Namibia
and Tanzania – for development of a hypo- The PwC report noted both Tanzania (47%).
thetical 200,000 ozpa gold mine with a 10- and Namibia had undergone no major tax “Whilst the Zambian Government
year operating life. alterations since 2018, while Ghana had would theoretically get $US754 million of
Development capex of $US150 million introduced a number of levies which were the $US956 million of cash flow from this
is assumed, along with a real gold price of impacting returns. project, if the IRR threshold of 25% was
$US1,600/oz and AISC of $US945/oz. A Egypt’s IRR was found to have dropped a set even lower, let’s say at 20% instead of
minimum 25% IRR is required to justify an few percentage points due to a higher gold 25%...there would actually be no mine es-
investment decision from resource compa- price compared to four years ago, which re- tablished in Zambia and therefore no gov-
nies. sulted in a higher share of profit going back ernment revenue at all,” Marion said.
Presenting the findings at Africa Down to the Government. “If the fiscal regimes prove very challeng-
Under, PwC partner Olivier Marion re- An export levy introduced in 2019 was ing, no matter how good a particular mine
vealed that while Namibia (24.7%) again deemed to have a negative impact on min- or resource may be, a deposit left unmined
presented the best investment case, it was ing investment in Zambia. is of no value to the host government and its
short of the required benchmark. If the minimum 25% IRR is put aside, people, or to the miner.”
Ghana (21%) was next, followed by Tan- Zambia (79%) would command the great-
– Michael Washbourne

Page 38 OCTOBeR 2022 aUSTRaLIa’S PaYDIRT