Teranga CEO Richard Young said the new mine in Burkina Faso was on track to contribute 30,000-40,000oz this year, adding to 215,000-230,000oz at AISC of US$1,085/oz from Sabodala in Senegal. While Sabodala's output was down 9% for the third quarter, year-on-year, stronger gold prices continue to lift its net cash flow contribution, which was up 252% yoy for the quarter at US$18.7 million and 136% higher over the year to date at $68.6 million.
Elevated Sabodala cash generation has helped Teranga offset some of the costs associated with Wahgnion's development, which nevertheless caused the company to post a net loss of $9.7 million for the September quarter. "An increase in gross profit was more than offset by mainly non-cash costs related to financing of the Wahgnion gold mine, including movements on gold sales derivative instruments and changes in fair values of the gold offtake payment liability and warrant liabilities," Teranga said. "In addition, higher share-based compensation expense and income tax expense also contributed to the loss for the quarter."
Teranga expects to declare commercial production at the US$240 million Wahgnion operation in the current quarter.
The company is projecting annual output of 130,000oz from the 2.5 million tonnes per annum CIL plant and series of openpits at Wahgnion, about 510km south-west of Burkina capital, Ouagadougou. It produced 10,620oz in the September quarter after pouring first gold in August.
Wahgnion joins the recent string of new gold mines in West Africa that have been started on or ahead of schedule, and on or below the budgeted cost.
"With the successful commissioning of our Wahgnion gold mine, ahead of schedule and under budget … we have two operating mines and an advanced-stage exploration project, moving us significantly closer to achieving our vision of becoming a mid-tier West African gold producer," Young said.
Teranga kicked off a 27,000m drilling program at Golden Hill in Burkina Faso as planned in the September quarter, using US$2.5 million of funding from its Taurus Funds Management facility. It also initiated environmental and social studies, and engineering work, to support an application for a mine licence in 2020.
Young said at the recent Beaver Creek Precious Metals Summit in Colorado, USA, Wahgnion and Sabodala gave Teranga a platform to produce 300,000-350,000ozpa in 2020 and generate more than $100 million of free cash flow at a US$1,250/oz gold price.
The company has a current goal of being a 500,000oz-a-year producer in West Africa.
Teranga (TSX: TGZ) shares are up more than 87% since May at Friday's C$5.62 close, taking its market value above C$600 million. The shares were at C$6.85 back in September 2016.
