Tietto Minerals Ltd (ASX:TIE) has secured a Speculative Buy rating and a price target of A$0.75 per share from Canaccord Genuity Ltd off the back of its recently published pre-feasibility study for the Abujar Gold Project in Côte d’Ivoire.
The study considers an open pit mining scenario solely based around the large Abujar Gludehi (AG) deposit but also presents an expanded scenario to scoping study level of detail, which includes Abujar Pischon Golikro (APG) satellite pits and an underground resource at AG tacked on the end of the PFS LOM.
Notably, the PFS is underpinned by a maiden reserve of 860,000 ounces at 1.7 g/t gold and an AG mine inventory of 1.12 million ounces at 1.5 g/t gold (PFS) and/or 1.5 million ounces at 1.4 g/t gold (expanded case), compared to previous CGe of 1.5 million ounces at 1.2 g/t.
“PFS meets expectations”
Canaccord analysts Paul Howard and Reg Spencer said the PFS met their expectations for a low cost base case with 200,000 ounces in Year 1 and averaging 182,000 ounces per annum in Years 1-3.
“PFS costs are lower than we expected owing to higher LOM grades and lower unit costs.
“We believe the first six years present a compelling open pit opportunity that will be augmented over time through drilling to deliver a long mine life operation.
“We find it very pleasing to see a 1.7 g/t gold reserve grade owing to infill around higher grade zones.”
Base case and expanded case
Highlights from the PFS include Year 0 pre-stripping, stockpiling and 48,000 ounces gold production, with production averaging 164,000 ounces per annum over the 6.5-year LOM in the PFS and 153,000 ounces per annum over the 9.4-year expanded case.
CGe was 156,000 ounces per annum over a 9-year LOM (182,000 ounces per annum in the corresponding years 1-6).
The analysts said: “AISC is expected to be a lowly US$839/ounce over the 6.5-year PFS case and US$903/ounce over the 9.4-year expanded case, comparing favourably to CGe of around US$1,000/ounce.
“Capital costs (including US$35 million contingency) to build the proposed 3.5 million tonnes per annum plant come in at US$230 million, in line with CGe, also US$230 million.”
LOM production and cost profile; focus areas for DFS.
Areas to deliver upside
Howard and Spencer said that, aside from increased mine life/production profile through discovery, they see a number of areas that can deliver upside.
“TIE has stated that it is confident the DFS can demonstrate a requirement for less capital contingency compared to the US$35 million seen in the PFS.
“We see the 1.7 g/t reserve grade for AG (compared to the 1.5 g/t resource grade) as a promising sign that as the satellite deposits of APG and SG are drilled out, we could see a lift in global grade, above the 1.3 g/t gold that we currently model in our development scenario.
“We continue to model a 94% recovery, despite TIE's class-leading 96% assumption in the PFS.
“We believe further upside remains if TIE can achieve such high recoveries when in production.”
Model first gold in mid-2023
The analysts said: “We have updated our model as guided by the PFS, but with added conservatism, and include the satellite pit scenario as per the expansion case.
“We have not yet modelled the underground beneath AG as we believe further drilling is required to better understand the requirements for selective mining in this underground.
“TIE has an aggressive target to commence construction mobilisation before the end of 2021 and first gold in late 2022.
“We model first gold in mid-2023.”
Valuation and recommendation
The analysts said the company expected to deliver an updated resource next month which they assume will include more material in indicated to bolster higher conversion to reserves in a DFS in the September quarter.
“We maintain our SPECULATIVE BUY recommendation and have revised our price target to A$0.75/share (from A$0.80).
“Our valuation at spot is A$0.52/share.
“Our NPV12 valuation is on a fully diluted basis, now with no additional risking given the PFS adds more certainty to our assumptions.
“With an EV of A$100 million and a future funding requirement of ~A$270 million, TIE trades at an EV/CF of 1.7x on Year 1 production.”
Tietto shares have today traded up to A$0.32 while the company's market capitalisation is approximately A$141.1 million.