Declan Franzmann, President and CEO, African Gold Group Inc.

Mali is the third largest gold producer in Africa.

Can you please provide some background information into African Gold Group?

Declan Franzmann (DF)African Gold Group, Inc. (AGG) was incorporated in Ontario in 2002, and is involved in the exploration and development of gold projects in West Africa. In 2005 AGG acquired several exploration concessions from Compagnie Minière d’Or SA of France. These properties were subsequently consolidated and now comprise the Kobada Gold project, located in southern Mali.

Kobada covers an area of 215 km2, and presently contains a measured and indicated mineral resource of 1.2 million ounces (oz) of gold, with a further inferred mineral resource of 1.2 million oz.

In July 2015 AGG received the mining license for Kobada, and the company also has all the necessary environmental permits in place. The project is production-ready and the company is poised to become the next gold producer in Mali, joining other successful Malian gold producers such as IAMGOLD/AngloGold Ashanti (Sadiola mine), Randgold Resources (Loulo mine and Morila mine) and Resolute Mining (Syama mine).

How does the grade found at Kobada compare to neighboring mines?

DF: The Kobada gold deposit has an average resource grade of 1.05 gram per metric ton (g/mt) Au. Whilst this may be considered low grade, there are important aspects to the mineralization that enhance its economic potential. Firstly the geology of the deposit comprises a very deep weathering profile, with the base of oxidation measured at depths of more than 100 meters below surface. Secondly, the ore types are hosted in a very fine-grained saprolite rock, and much of this material is finer than 100 micron (0.1 mm). Conversely, most of the gold is much coarser that 100 micron. These two factors make the concentration of gold utilizing techniques that take advantage of contrasting size and density of material very effective, allowing the processing of ore at similar cost per mt treated to that of a heap leach operation, but with significantly faster and higher recovery.

This also has significant benefits on the pre-production capital costs of the project.

What company milestones have been achieved at Kobada over the last year?

DF: During the past 12 months, AGG has carried out extensive work at Kobada. The company has produced a preliminary economic assessment, carried out baseline environmental work, as well as submitting the environmental impact statement assessment to the government, which has been accepted, and the environmental permit granted. The company worked through the Malian government’s requirements to justify the award of the mining license, which was granted in July 2015. This included extensive community liaison and the finalization of the community development plan.

The company is finalizing the Kobada Feasibility Study to support project finance.

What strategy does AGG have in place to advance its flagship property, Kobada?

DF: AGG’s strategy is to develop Kobada in two phases. The first phase will target +25,000 oz per year (oz/y) with a smaller footprint plant aimed at optimizing the pre-production capital expenditure required. The Company estimates that this can be achieved for approximately $15 million.

The phased approach to the development of the project is recognition of the difficult market, and the Company is looking at a variety of financing solutions. Once the project financing is secured, AGG anticipates that first gold production can be achieved in around nine months.

The second phase of AGG’s development plan is to expand plant throughput and increase plant recovery to achieve gold production greater than 60,000 oz/y. One reason for embarking on the phased approach is that AGG believes that the shallow oxide resource base will expand with further drilling, and ultimately the resource may justify the construction of a larger plant than presently contemplated. The phased approach may prove to be accretive to the project’s value.

What kind of reaction do investors have towards Mali and AGG?

DF: Mali is misunderstood by investors due to alarming media reports of unrest in the northern parts of the country. What investors fail to realize, however, is that the country is peaceful in the southern parts of Mali, where the mining sector thrives. In fact, Mali is steeped in mining history, representing the third largest gold producer in Africa. Based on experience, AGG perceive Mali as a desirable mining destination, with a supportive fiscal regime and government.

Like many other junior mining companies, in recent times AGG has fallen under the radar, as the market is currently not interested in funding exploration. AGG is different, however, as Kobada to a near-term production story with significant potential to increase mineral resources funded from an operating cash flow. The project’s attraction is its simple mining and metallurgical characteristic, resulting in low operating costs and capital expenditure.

Do you have a final message for the readers of MACIG 2016?

DF: Today, given a conservative and cautious investor and mining community, the key is to the development of mining projects is scalability. The ability to commence a project at a relatively small scale with growth funded partially from cash flow not only mitigates risk but may enhance the project’s overall return to shareholders through lower reliance on equity, debt and royalty financing. The challenge for the industry and investors will be to determine which projects merit development during a period of difficult funding, but provides the development timeline to take opportunity of anticipated strengthening metal prices in 2016 and 2017. AGG’s Kobada project will do just that.

This interview was part of research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. A pre-release report on the Central African Copperbelt was released in October 2015 and can be accessed here. To participate in this report, please contact Katie Bromley at kbromley@gbreports.com

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