KOBADA, words to be clarified In a video published on June 24, 2021 on Youtube, the president of African Gold Group, Mr. Danny Callow, gave us a status report on their Kobada license. Work has been carried out on this permit for several years and more recently the team is actively seeking the necessary financing to build a plant and exploit its gold resources.
In the 16th minute of this video, Mr Callow made 2 references including one direct to Robex in an attempt to demonstrate the financial potential of the Kobada permit. This reference is understandable because the Nampala (RBX) and Kobada (AGG) permits have similar geology, comparable gold grades and are located on the same geological deformation as well as in the same jurisdiction. I emphasize that Robex is the only operating company in Mali that has been mentioned in this context.
The second mention concerns the Orezone company. It has obtained financing for its Bombore permit located in Burkina Faso and expects to reach the production stage at the end of 2022. Its mineral reserves are slightly above 1 million ounces of the measured and probable category, in an oxide (56%) and sulphide (44%) type ore. The average gold grade is 0.81 grams / tonne. Beyond the low gold grade, the Bombore permit has very little in common with the Kobada permit. Ultimately, Orezone never operated a factory and has no source of income.
Mr Callow also mentioned that Australian companies have shown interest in AGG. He spoke about it vaguely and for good reason. The current political situation and security issues mean that only companies that are already well established in Mali will find the courage to invest money there. This context makes it more complicated for companies that have not already established quality contacts with local suppliers and the Malian administration.
Finally, the explanations provided to describe what is happening in Mali are demagogic. We know that operating a mine in Mali involves risks and that these risks are positively offset by several positive factors. However, Mali is not for all that a sun destination because these risks are always present and they should not be minimized.
In a second video presented on October 8, 2021, Mr Callow mentions several companies without specific mention for Robex. This time, the aim was to name other deposits in operation in order to demonstrate the feasibility of the Kobada project. These companies are Hummingbird Resources, B2gold, Cora Gold, Barrick Gold and AngloGold. They are bound by the fact that they are established in Mali. There is nothing further to support the idea that Kobada is a low financial risk project or that these companies could be potential buyers.
Hummingbird Resources operates the Yanfolila project in Mali, which has an average gold grade of 2.55 grams / tonne. The annual production target for the Yanfolila Project is 100,000-110,000 ounces of gold. Considering Yanfolila's gold grade and its all-inclusive production costs of $ 1,400 per ounce, I believe that Hummingbird Resources must surely judge the Kobada project to be based on improbable economics and far too risky for them. Therefore, the Kobada permit is certainly of no interest to Hummingbird Resources.
Regarding B2gold, they operate the Fekola project in Mali, whose average gold grade is close to 2 grams / tonne. The annual production target for this permit is 530,000-560,000 ounces of gold. Considering Fekola's gold grade and its production costs per ounce sold of $ 661, I believe B2gold must also consider the Kobada project to be based on unlikely economics. As the gold grade on the Kobada permit is 40% lower, it can be anticipated that the Kobada acquisition could deteriorate B2gold's financial ratios. In addition, the Kobada project is not large enough to participate significantly in the growth of B2gold, which produces more than 1 million ounces of gold annually.
For Cora Gold, there is still a lot of exploration work to be done on its permits in Mali. Eventually, the Sanankoro permit could perhaps become an opportunity for Robex.
Regarding Barrick and AngloGold, they are mega gold producers who have no interest in permits like Kobada.
About Robex, they are currently operating the Nampala permit which has a gold grade of less than 1 gram / tonne. The annual production target is 51,000 ounces of gold or more. Despite the low gold grade, the cost of production per ounce sold is $ 813 and will decline to around $ 700 when the mining plan is better defined and adhered to. Considering these measures of financial returns, it is relevant to believe that Robex could consider reproducing its know-how and obtaining a financial return comparable with the Kobada permit. We can also consider that Robex could improve overall its economic ratios. Definitely, Robex is the company in the best position to become a quality purchaser or financial partner because it is the only one able to appreciate the Kobada permit at its fair value. Therefore, I reiterate that it would be a perfect marriage.
Other important facts, Mr Callow fails to mention many factors when he uses Robex to convince us of the quality of his project. When looking closely at the financial results of other gold companies, it quickly becomes clear that favorable geology is not the only factor explaining the tremendous economic results achieved by Robex. I believe that Robex has been able to integrate information technology better than anyone else in the various layers of operations, the integrated management of maintenance plans for the critical components of the plant, the planning and management of its shutdowns factories, the management of its human resources and all of its contractual agreements, the management of its inventory and its supplies, the management of its debt, the selectivity of minerals carried out upstream, the establishment of its private analysis laboratory, the configuration of its real estate assets on the site, its corporate structure and the management of its taxation, ... Because the exceptional financial results of Robex are the consequence of a set of factors, Mr. Callow cannot claim that African Gold Group could achieve similar results.
I find that Mr Callow lacks rigor in his way of providing information and we understand that he is now very concerned about the stock price. If AGG is not able to strike a deal within the next few weeks, regardless of the partner, it will have to ensure its survival through additional funding and with the usual consequences. Currently, this is the scenario that is anticipated by the market because it is what has always happened in the past.
I have always said that Mr. Callow was a very dedicated manager for the cause of AGG, just as I have always recognized the quality of the profiles on the board of directors. But here, I consider that the team is wasting precious time and that waiting more could shatter the dream of all AGG shareholders.