Contango acquires quick-to-production project in Mali
Mining News Pro - Contango Holdings has acquired the Garalo project, in Mali, for $1-million.

Contango states that the acquisition speaks to the company’s strategy of acquiring defined assets with near-term production potential and modest capital requirements.

The company also raised £1.8-million to progress the project to first gold production in the second half of 2021.

The £1.8-million capital raise was achieved through an oversubscribed placing of 36-million new ordinary Contango shares at a price of 5p apiece.

The Garalo permit occupies 62.5 km2 in the Sikasso region of southern Mali, 200 km south-east of the capital Bamako and close to the Guinea border.

The permit is surrounded by a number of multimillion-ounce gold deposits and the region is home to some of the world’s biggest gold miners, including AngloGold Ashanti, Iamgold, Barrick Gold, B2 Gold, Endeavour Mining and Hummingbird Resources, which has helped to establish Mali as the third-largest gold producing country in Africa.

Contango has already paid $100 000 of the total purchase consideration to a vendor, who will retain an initial 25% stake in the project.

The vendor’s interest is not free carried and will dilute in the event the vendor does not provide his pro rata contribution to the development of Garalo. The balance of the acquisition cost falls due in February 2021, following conformational exploration work to be undertaken by Contango in the period.

Garalo is an advanced discovery and has an estimated resource of 320 000 oz of gold, grading an average 1.5 g/t gold across three dominant structural trends.

Garalo has been subject to regolith mapping and interpretation, soil geochemistry, airborne magnetic and radiometric surveys and over 900 drill holes, which have returned grades of up to 43 g/t.

To date, the drilling on site focused on the G1A and G3 targets, which cover a relatively small footprint of the licence and remain open along strike, indicating further resource upside.

With the planned exploration work to be undertaken by Contango over the coming months, the company expects to be in a position to reclassify the resource to Joint Ore Reserves Committee-compliant standards in 2021, in conjunction with an anticipated increase in resource ounces.

However, given the attractiveness and robust nature of the economics and drilling undertaken to date, the company intends to trigger construction ahead of this to enable first production during the second half of next year, for a capital cost of a relatively low $1.2-million – thanks to infrastructure in the vicinity, historical exploration and the deposit’s surface location.

Contango says the project will be able to initially produce 10 000 oz/y of gold through an oxide plant, with further capital required for subsequent production from the sulphides.

The company is also considering sourcing a further $4-million through non-equity capital providers, which will enable the company to increase production to 30 000 oz/y.

At current gold prices of about $1 900/oz, the company’s mine planning and block modelling studies suggest that margins on production would exceed $1 000/oz – at the initial yearly production level.

Contango believes this will result in a potential earnings before interest and taxes figure of about $1-million a month from the Garalo project.

Contango executive director Carl Esprey says that, once Garalo is in production, there should be a significant opportunity to acquire similar projects nearby, which have typically been overlooked by the larger operating companies in the region that are developing multimillion-ounce deposits.

“This, coupled with the prospectivity that remains unexplored at Garalo, should in due course ensure a significant boost to reserves and mine life, which already stands at over ten years.

“In Zimbabwe, we recently reported two letters of intent for a combined 32 000 t a month from our Lubu coking coal project. As previously stated, we expect to move these to formal offtakes over the coming months, thereby enabling construction ahead of first production also in the second half of next year,” he explains.

Share the news

In Picture