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Oklo Resources Ltd: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Oklo Resources stepping up a gear in 2018 as it sets its sights on defining gold resource

Dandoko is in the Kenieba inlier where more than 50-million ounces of gold have been discovered.
Picture of gold bar
INVESTMENT OVERVIEW: OKU The Big Picture
Oklo's management team boasts more than 40 million ounces of gold discoveries in West Africa

Oklo Resources Ltd (ASX:OKU) is a right place, right time gold story.

While ‘right place’, AKA 'nearology', is a well-worn and often loosely used cliche in the mining industry, in the case of Oklo there is no doubting its relevance.

The company’s landholding in Mali, West Africa, covers more than 1300 square kilometres with its flagship gold projects including Dandoko and Moussala.

Not only will you find a map clearly illustrates the close proximity to multi-million-ounce projects, but even the style and grades of mineralisation are consistent with nearby world-class deposits.

Managing director Simon Taylor said: “Oklo’s prime strategy is to discover and develop the next multi-million-ounce gold deposit within the company’s highly prospective and relatively underexplored project portfolio in Mali.”

30 kilometres from 5.1 million ounce Fekola mine

Dandoko is within the highly endowed Kenieba inlier where more than 50 million ounces of gold have been discovered.

This is along the southern extents of the Senegalo-Malian Shear Zone, a 60-kilometre long, structural corridor that is host to numerous, large gold deposits.

Oklo's projects are in western Mali, near the Senegal border.

These include Randgold Resources Limited’s (LON:RRS) 17 million-ounce Loulo/Gounkoto deposits and IAMGOLD Corp’s (NYSE:IAG) Sadiola and Tabakoto deposits totalling 18 million ounces.

The closest is B2Gold Corp’s (TSE:BTO) 5.1 million-ounce Fekola project which lies a mere 30 kilometres to the west.

Comparisons being drawn with Fekola

Oklo’s Dandoko project has a 12-kilometre long gold trend which includes the Seko discovery.

Taylor said: “All of the projects are in proximity to operating mines with the company’s exploration results to date indicating a comparable geological setting.

“Seko is an exciting new discovery within the Dandoko project, yielding highly positive drill results in a short time frame.”

Limited early-stage drilling has intersected broad high-grade mineralisation such as 79 metres at 2.17 g/t gold and 42 metres at 6.14 g/t.

Upcoming catalysts

While this has provided share price momentum there are plenty of catalysts on the horizon in 2018 as the company receives final assays from phase I drilling and embarks on phase II drilling.

Success with this drilling could result in an earlier than expected resource definition.

Chairman Michael Fotios said, “We have clear objectives set for the 2017-18 field season, including outlining a maiden resource at our Dandoko project, particularly at Seko.”

Of course, corporate interests could be a catalyst and this needs to be taken into account particularly given cashed up global gold producers have operations in close proximity.

Will Oklo follow a similar trajectory to Papillon

The Fekola parallel needs to be examined given comparisons have been made with the project over the last 12 months.

In May, Canaccord analyst Reg Spencer said: “Papillon’s (previously ASX-listed owner of Fekola prior to the takeover by B2Gold) discovery at Fekola was preceded by an initial focus on a smaller deposit.

Exploration of limited soil anomalies then gave way to a larger 1-kilometre long mineralised trend, now host to a deposit of more than 5 million ounces.”

Consequently, not only are the projects geographically close, they also host similar style mineralisation and it would be fair to say that Oklo is now at a similar stage to when Papillon’s shares started to take off.

Oklo spoilt for choice

it is important to remember that even outside Seko, Oklo has numerous options.

Plenty of companies would rightly get excited about discovering gold at 50 g/t from 76 metres.

Targets within the Dandoko and Moussala projects.

When Oklo threw the net a little wider at its Diabarou prospect this was one of the impressive results it came up with.

While these results are important, helping the company gain investor support, Taylor and the team have their sights firmly fixed on identifying a deeper plunging ore body - another Fekola.

With high-grade vein mineralisation, Diabarou would be ideally suited to providing extra feed for a larger project, and Taylor said the company would definitely be returning to the site.

The more I practice the luckier I get

So is Oklo one of those stocks that is a 10-bagger in the making?

It is too early to say, but what is worth considering is the fact that the company has notched up all of the right milestones plus some over the last 12 months.

This appears to be more than just coincidental given the experienced management team that has shaped the exploration program.

Together, they boast more than 40 million ounces of gold discoveries in West Africa.

Taylor said: “Oklo’s in-country management team has a proven track record of large discoveries in West Africa and are ably supported by its corporate team in Australia.

“It is worth noting that director Madani Diallo acquired Dandoko before the Fekola project even got off the ground.

“General manager, exploration, Andrew Boyd was general manager, geoscience for Papillon Resources, and he has 20 years of exploration and mining experience as a geophysicist.”

High profile tight share register

There is no doubting the fact that Oklo remains a news-driven story and analysts tend to believe ongoing exploration success will result in a re-rating.

Capital raisings undertaken by the company to date have been extremely well supported, and the company now boasts a tightly held register featuring big names.

These include BlackRock, Inc. (NYSE:BLK) with 15.2% and ASX-listed African producer Resolute Gold (ASX:RSG) with 5.4%.

While raisings have been completed at 7.5 cents, 12 cents and 24 cents there hasn’t been evidence of investors taking stag profits - they tend to be there for the long haul.

So what is Oklo worth

The company’s shares have roughly doubled in the last six months, hitting a high of 50 cents on January 8, 2017.

While they are not trading too far shy of that mark now, Canaccord’s Spencer is bullish on the stock.

As recently as last week he said: “Oklo remains well-funded with cash of $9 million to continue exploration programs, with ongoing newsflow from drilling to provide potential share price catalysts.

“In our view, the deeper drilling results from SK2 at Seko could represent a southerly plunging continuation of high-grade mineralisation encountered 80 metres to the north.

READ: Oklo Resources drill results confirm gold extends deeper at Seko discovery, shares rise

“While further drilling is required to confirm continuity and test strike extents, the high grades and widths encountered to date lead us to speculate that SK2 could host a significant primary gold deposit.”

Ryan Armstrong, research analyst at Taylor Collison, is bullish on the stock, as his ‘speculative buy’ recommendation suggests.

Armstrong said: “The geological settings are favourable and OKU will re-rate accordingly with further drilling success at the Dandoko Gold Project.”

Resolute Gold has the cash, the know-how and possibly the intent

As mentioned, Oklo has a strong share register, but one of the more interesting shareholders is Resolute Gold (ASX:RSG) with a holding of 5.4%.

Resolute is a large gold producer with its Syama Gold Project in Mali delivering 100,000 ounces in the six months to December 31, 2017.

The company is highly active in Western Africa with its Bibiani gold mine in Ghana having a resource of 2.5 million ounces.

Bibiani alone is expected to be producing more than 100,000 ounces of gold per annum for at least 10 years from the date it comes into production.

Neither Resolute nor John Welborn, the group’s managing director, have a habit of taking minority stakes in projects.

As at December 2018, the company had cash, bullion and listed investments of about $200 million.

Wellborn has extensive experience in Africa and notably was instrumental in the early stage identification of the prospect which went on to be developed as the Fekola project.

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