Consolidating the Most Prospective Gold Belt in Burkina Faso
Globe 24-7’s James Sawyer meets with Andrew Dinning – Executive Chairman and a founder of Sarama Resources Ltd. (TSXV: SWA) – to gain an insight on Sarama Resources and Mr. Dinning’s perspective of the HR space in mining.
Since 2010, Sarama Resources has made positive contributions to the economies of Burkina Faso, Liberia, and Mali. Sarama’s investment in community projects is founded on the principle that initiatives must be sustainable and build capacity beyond the lifespan of their activities in a region. Photo courtesy of Sarama Resources.
Sarama Resources is a West African gold explorer and developer focused on establishing a new mining district in southwest Burkina Faso. Sarama’s flagship project, South Houndé, boasts an inferred 2.1M ounces of gold while their adjoining ThreeBee Projects hosts an additional 0.43M ounces of gold and recent discoveries indicate this number is likely to increase. Sarama is looking to bring both these projects to account in a belt that already hosts world-class gold mines belonging to mining peers Semafo, Roxgold, and Endeavour and where significant new discoveries continue to be made.
Globe 24-7 is a Human Resources Consulting firm that specialises in talent acquisition and human resources solutions for the global mining industry. Globe has been in operation for fifteen years and has staff in 15 countries servicing small, mid-tier and large-scale mining companies through its project recruitment, search, HR consulting and HR Systems divisions.
Andrew, you have a successful discovery record in Burkina Faso and a reputation for advancing mining companies; right now, your team has a pipeline of projects from early stage to scoping in Burkina Faso, you also have a new gold discovery adjacent to the Bondi deposit – a lot of exciting things are happening – what is your vision for Sarama Resources?
We have been in Burkina Faso a number of years now; the area we are in is attractive geologically and there are a number of players. Our focus has been to reduce the number of players and consolidate so that we can move projects forward. We have had reasonable success on this front with the acquisition of the Bondi Deposit from Orezone and it also looks like Acacia will need to make some long-term decisions given their challenges in East Africa and inability to meet contractual obligations under their earn-in agreement on Sarama’s South Houndé Project.
"We have been in Burkina Faso a number of years now; the area we are in is attractive geologically and there are a number of players. Our focus has been to reduce the number of players and consolidate so that we can move projects forward."
We have been doing our own exploration in addition to the work being undertaken by our JV partners. As mentioned, Acacia Mining has an earn-in agreement on our South Houndé Project and they have spent in excess of $12M to date bringing total project exploration expenditure to almost $30M. We are currently in discussions with Acacia on the best way to take this project forward and it is highly unlikely they will be continuing their ongoing involvement.
Once we have resolution with Acacia, we can start framing up the what the mining opportunity looks like when we combine resources from the ThreeBee and Houndé Projects. Current thinking is a heap leach operation drawing feed from our regional properties and our internal work indicates that we can probably construct a low capex mine that provides a rapid payback and a very high IRR at a $1,200 gold price.
A worker logs core samples as Sarama Resources advances exploration activity in West Africa. Photo courtesy of Sarama Resources.
The South Houndé Project has about 2.1M ounces indicated; 0.6M ounces are oxide that can go to heap leach – what are your plans for the sulphides?
Whether the sulphides get mined or not is really gold-price driven. There are various development options available but unless we are in a higher gold price environment, the low capex option always wins in the scenario modelling. Material additions to the resource base that reduce the capital intensity per ounce may change the development scenario, but we are focused on getting something into production that is inherently financeable in the current gold price environment; a project that has rapid payback and low capex will definitely help.
“Whether the sulphides get mined or not is really gold-price drive"
In addition to Sarama’s existing projects, there are some other projects in the catchment area and if we could secure them then that might flip the way we develop this; but we cant bank on them so we intend to move forward and leave them as an opportunity should the regional dynamic change. But having said all of that, the best economics at the current gold price, no matter how we cut it, is always with a heap leach because the capital is so much lower than building a mill/CIL.
What are your short-term plans at Sarama?
Once we have a resolution with Acacia on our South Houndé Project, we can sweep through all of the exploration data and results and identify areas where we can add additional oxide resources fairly quickly; we have already identified several areas. We can then spend the upcoming season drilling these areas to grow and upgrade the existing oxide resource base. In parallel to this we will do further metallurgical work and look to optimise the flow sheet for treating oxide and transition material. Previously our focus was on fresh material so there is plenty of scope to refine our thinking on how best to maximise returns on this material. Once this work is done we can then look at how best to frame up this opportunity and head into project scoping work and a PEA.
At the adjoining ThreeBee Project, where there is a historical resource of 0.43Moz at the Bondi Deposit. We will continue exploration work to follow-up on the extensions we have made to the southern part of the deposit and also to the new discovery located 4km to the northeast. We expect to put the whole Bondi deposit and any other resource additions from that locale onto the leach pad. However, if we get some good exploration success we might look at configuring a different plant. With approximately a ~$100M capex differential between the heap leach option and the mill/CIL option, the additional ounces will need to provide a compelling reason to shift from the initial thinking; particularly given the availability and cost of capital. Having said that, we are optimistic on the likelihood of exploration success and also on the chances of being able to configure a larger, longer life operation. None of the work we plan to do will preclude us from shifting tack should the opportunity present itself.
Andrew Dinning shares his love for sports as his team at Sarama engages with local communities in West Africa. Photo courtesy of Sarama Resources.
What does it seem that investors are looking for today?
A few things. A miner who is run by miners and not promoters and a miner who will do what they say they will do. Investors want to see a miner run the company like a business – this was not always done in the past and a lot of value has been destroyed. Capital needs to be applied properly, prudently; investors today don’t need a random walkabout and the guys that BS hurt the industry.
People invest in us because we have a great track record, know our business, are seasoned industry professionals and are straight up, so what you see is what you get. When shareholders want to know how things are going – they are informed in a transparent, unfiltered manner. They are given our views based on the best information we have at the time. As a result, we have long-term shareholders that have supported us through the highs and lows of the mining cycle.
“…we have long-term shareholders…”
When I ran the Moto Gold Project in the Congo, it was a wild ride from many different perspectives. However, I always told people exactly how things were going; sometimes they didn’t like hearing what I had to say. This approach is not always easy and if you take a shallow view of the world, not always in short-term interest of the company, but when I go to meet an investor, they know they are going to get the information straight, to the best of my knowledge and they can decide whether they want to come along for the ride or exit, but at least they can make an informed decision. At some point, you have to pay the piper and if we say we are going to do something, we do it.
“…if we say we are going to do something, we do it.”
What do you think are the greatest challenges we face in the mining industry?
Geopolitically, governments are constantly trying to extract more out of the industry whether it is directly through changing royalty and fiscal regimes or via indirect means, be it through changing expectations or regulation.
Third party interference from people who are not stakeholders in the industry or host nations that have a single-minded agenda of frustrating and/or stopping mining distorts public perceptions and delays companies and countries from pursuing sustainable industry. This is unhelpful and undermines all the good work being done by the industry; this includes all the constructive organisations that are looking for ways to deliver sustainable outcomes that meet the requirements of all stakeholders.
Social expectations and accountability of mining companies is set higher and higher all the time. This is not a bad thing. However, these expectations are not applied equally across the industry. Expectations on western mining companies is significantly higher than those from the east and this leads to an uneven playing field and ultimately loss of competitiveness.
“We have so many challenges in mining…but I think one of the biggest issues is attracting talent to the industry…”
We have so many challenges in mining and the industry being the way it is, manages these and gets on with it; but I think one of the biggest issues is attracting talent to the industry, to start with; especially as the pool of experienced and well trained people is getting spread thin. In Australia for example, the intake of mining engineering students across the country is 10% of what is was ten years ago and if this trend is not reversed, it will have serious implications for the future.
On that note, the baby boomers are retiring and behind them is a generational gap in our mining workforce – are you feeling any effects of this changing demographic in industry?
I see it. We don’t seem to have the quality coming through like we used to. We also don’t have people with a tolerance for where we need them to go. When I started in mining – you would go live out in the bush; more recently we have had a lot of fly-in/out; but now it seems that people don’t even want to do that.
Looking at the intake of mining engineers in schools, Australia is by far the best in the world; those guys are guaranteed jobs – high paying jobs – when they are done school. So I guess the industry has to come to grips with changing seeds and expectations of young people heading into tertiary education to keep itself relevant.
Positive exploration results boost confidence for Sarama investors as sampling work continues in West Africa.
Arguably, the mining industry is in a position to be disrupted. There is discussion related to collaborative R&D or asset sharing between companies, but what about workflows in the HR space? Every miner pays massive amounts to manage the same type of work, what if the HR function were a shared professional service among several companies? Also, HR often functions as a gatekeeper – sometimes making it a challenge to acquire strong talent. HR is a sensitive function for companies to share but if it is done right – it could be an opportunity to reduce cost in a volatile marketplace. What are your thoughts on outsourcing the HR function?
Outsourcing elements of the HR function allows you a bit more discretion on the skill set of the people you employ in HR roles within your organisation. Outsourcing core elements of the HR function facilitates installation of the requisite structures and processes required to support and properly manage the business. Establishing and setting in train good HR management processes in conjunction with quality people reduces risk and provides for a greater opportunity of success.
“…good HR management processes in conjunction with quality people reduces risk and provides for a greater opportunity of succes..."
When we have had the requirement to go down the recruitment route, we have typically done it ourselves and used HR people that we know in the industry to facilitate and support the process. The role of HR is to support Management; to make sure that the right processes/policy are in place and to ensure that due process is followed; if not properly managed, this is an area that can get out of hand in many ways. If you are outsourcing the HR function, it is less about economics and more about the quality of service that you are going to get as this is an area that needs to be done right.
At the end of the day, HR is a line management function; the trouble is, a lot of line management do not do it very well. They may not have the right supporting processes or training or just not the right personality. It is line management that has to live with who they employ, manage, and develop. If discipline or guidance is required, this cannot be undertaken by a third or unrelated party. The afore-mentioned is people management. However, a big part of HR is risk management and the decision for me to outsource happens if I can’t get the right people or the right skills into the business to establish the requisite processes and disciplines to execute this area well. There are a few people that do HR well, but there are also a lot that devalue the role that the whole HR function plays. HR is easy to screw up if you don’t have the right processes or people in place. It is not hard to find yourself in a bit of a mess and a bad HR person is one of the worst things that you can have in your organisation.
“It is not hard to find yourself in a bit of a mess and a bad HR person is one of the worst things that you can have in your organisation.”
Finally, gold price – what is your prediction?
[laughs] I don’t know. It is hard to build a mine much below $1,300/ounce and it is pretty tough to fund mine development or exploration if you are a single asset company in a $1,200/ounce gold price environment so if the current gold price pervades, then existing levels of mine output are unsustainable. Likewise, if you subscribe to efficient market theory, that ultimately the market gets it right, that short-term manipulation will run out of legs; if you also consider what the US dollar might do – then overall you would say that in the medium term, gold price has the potential to increase. I am not a $2,000/ounce gold bull but I do think sustainable levels should be around the $1,350 – $1,400/ounce mark. It seems that people are reluctant to touch gold because they have been burnt many times, but we will see what happens.
Sarama Resources sharing the opportunity for education in West Africa. Sarama invested significant time and resources in developing and executing a distribution strategy for educational materials along side consultation partners that would eventually reach 26 schools and 3,147 primary students, 1,914 senior students, and more than 100 senior students studying outside of Norkama Village in West Africa. Photo courtesy of Sarama Resources.
See more news from Sarama Resources on their website at: http://www.saramaresources.com
See Globe 24-7's experience in West Africa: https://globe24-7.com/case-study/detail/1
James Sawyer – Business Development Executive