TORONTO (miningweekly.com) – Trading of the TSX-V-listed stock of Burkina Faso-focused project developer True Gold on Tuesday started on a high note, after the company late on Monday announced that precious metals streaming firms Sandstorm Gold and Franco-Nevada joined forces to provide it with $120-million in finance to build its foundational Karma gold mine.

The gold stream was being syndicated between Franco-Nevada and Sandstorm, with Franco-Nevada providing 75% of the funding and Sandstorm providing the remaining 25%. This was the first syndicated gold stream between two royalty and streaming companies.

Under the agreement, in exchange for $100-million in funding, True Gold would be required to deliver at least 20 000 oz/y of gold, for a total of 100 000 oz of gold, starting on March 31, 2016. Sandstorm's 25% syndicate position would result in True Gold delivering 5 000 oz of gold to Sandstorm each year during the delivery period for a total of 25 000 oz of gold.

During the delivery period, the syndicate would pay True Gold 20% of the spot price of gold for each ounce delivered. Following the delivery period, True Gold would be required to deliver 6.5% of the equivalent refined gold output from Karma for the life of the mine (Sandstorm's share would be 1.625% of the gold produced) in exchange for 20% of the spot price.

“This deal stood head and shoulders above any other financing options we considered. The agreement has a total cost of capital of 3%, which we regard as exceptional value for our shareholders,” True Gold VP for business development Alex Holmes said during an analyst conference call.

Further, Sandstorm and Franco-Nevada had provided True Gold with an 18-month option to increase funding by up to $20-million in exchange for eight quarterly deliveries of up to 30 000 oz of yellow metal based on the pro rata portion of the amount drawn thereunder, starting 18 months from when the first tranche under the increased option was drawn down.

True Gold already had the required mining permits in hand to start construction of the $131.5-million project, guided by the current feasibility plan. The board had also made a positive construction decision. Building the major mining infrastructure was expected to start next month with the first gold pour expected by the end of next year.

"The Franco-Nevada/Sandstorm funding package demonstrated the strongest solution in terms of cost of capital, operational flexibility, alignment of business interests and long-term partnership benefits, which we believe will provide maximum benefits to our shareholders," True Gold executive chairperson Mark O'Dea said.

The financing agreement covered all of the concessions within the 856 km² Karma project and also included a defined area of interest of 5 km surrounding the borders of the Karma project.

"As the first syndicated gold stream, this transaction is a milestone event for the streaming and royalty sector. Streaming finance has become a mainstream source of funding in the mining industry and I expect we will see more syndicated transactions in the future,” Sandstorm senior executive VP and cofounder David Awram commented.

GOLDEN DESTINY

True Gold broke first ground at its Karma project on May 26, marking the start of construction of the gold mine, slated to pour its first yellow metal late next year.

Since the beginning of the year, True Gold had completed the construction of the barrage, ordered the mining fleet, nearly completed detailed engineering work and started with early construction activities, including site access road upgrades and plant site earthworks.

The feasibility study completed on the Karma project supports a heap leach mine scenario from currently defined openpit deposits containing 949 000 oz of probable mineral reserves.

The heap leach pad is designed to process oxide and transition ore from the five shallow pits, with a small amount of leachable sulphide ore extracted from two pits.

The two pits with the highest-grade mineral reserves will be mined first, allowing rapid payback and strong cash flow from the outset of commercial production.

About 113.8-million tonnes of material will be mined from the five openpits over the course of the estimated project life. This will deliver an estimated 33.2-million tonnes of ore to the process facility and 80.6-million tonnes of waste to storage facilities located near each pit. The overall strip ratio for the project is 2.43:1, with mining being conducted 350 days a year by an owner-operated fleet at total material movement rates from 35 000 t/d to 45 000 t/d.

Conventional truck and shovel methods are likely to be used. Two 200 t hydraulic excavators configured in backhoe mode will load a fleet of ten 90 t trucks for the transport of ore and waste to the primary crusher and respective near-pit waste dumps.

Four additional 90 t trucks will deliver ore directly from the pits to the process facilities without the need for ore rehandling.

The soft nature of the openpit ore and waste material will allow for free-digging (excavated without blasting) of the bulk of the material.

Twenty-five per cent of the transition ore and all the sulphide ore material will be drilled and blasted at low powder factors. This comprises only about 10% of the total material to be excavated over the mine life.

The Karma project’s process design is based on the use of conventional heap leach technology, with a production capacity of four-million tonnes a year. Mined ore will be crushed, agglomerated and conveyed to the leach pad, where it will be stacked in two 10 m lifts and irrigated with a dilute cyanide solution. Gold dissolved by the cyanide will then be adsorbed onto activated carbon in a carbon-in-column circuit. The loaded carbon is then stripped of the gold using Zadra-type elution and the resulting product will be subjected to electrowinning and smelting to produce doré on site.

The mine will produce an average of 97 000 oz/y of gold over a mine life of 8.5 years.

True Gold’s TSX-V-listed stock traded up 12.5% in early deals at C$0.45 apiece.