Teranga says Massawa project to deliver 40% lift in gold output, $215m in annual cash flow

Massawa gold mine, Senegal

TERANGA Gold said the development of its Massawa-Sabodala project in Senegal would take total company production to more than 500,000 ounces of gold a year and generate average annual net cash flow over the first five years of $215m assuming a gold price of  $1,600/oz – nearly a fifth below the current spot price.

This is one of the outcomes of a pre-feasibility study (PFS) published on Sunday by the Toronto-listed gold producer which announced in December it had bought Massawa from Barrick Gold for $430m in cash and shares.

Teranga’s proposal is to effectively operate Massawa and its flagship mine Sabodala as a single complex extracting synergies between the two nearby properties. Company-wide proven and probable reserves would increase 70% to 6.4 million oz of gold as a result of the development of the complex.

Based on the results of its study today, average production over the first five years from the complex will be 384,000 oz at an all-in sustaining cost of $671 per ounce. The pre-feasibility study said total net cash flow of $1.1bn would be collected assuming $1,600/oz. A definitive feasibility study is expected to be completed in 2021.

“The integration of Sabodala and Massawa is perhaps the best example in mining of the ‘greater than the sum of its parts’ concept,” said Richard Young, president and CEO of Teranga in a statement.

Life of mine capital development costs has been estimated at $409m with the first and second phases estimated to cost $37m and $219m respectively. The balance of the capital is not expected to be deployed until 2027.

Barrick is providing $25m of the $225m syndicated debt financing secured by Teranga in connection with the transaction. Teranga’s debt will increase to more than $400m, but the expectation was that this would be repaid “in a very short time,”, said Young in an interview with Miningmx in December.

Teranga has forecast gold production of between 215,000 and 230,000 oz from Sabodala this financial year. It expects to produce a further 130,000 oz in production this year from its Wahginon mine in Burkina Faso.

“The PFS announced today confirms that the Massawa acquisition is truly transformational for Teranga and repositions the company as a leading mid-tier gold producer with one of the lowest all-in sustaining cost profiles in the industry,” said Young.

Shares in the company closed nearly 4% higher in Toronto on Friday taking the firm’s valuation to a new all-time high of C$2.45bn.

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