Mali: African Gold explores debt finance, corporate action options for Kobada

By David Whitehouse
Posted on Wednesday, 10 November 2021 15:38

Gold nuggets are displayed at the PDAC annual conference in Toronto
Gold nuggets on display at the Prospectors and Developers Association of Canada (PDAC) annual conference in Toronto, Ontario, Canada March 1, 2020. REUTERS/Chris Helgren

Canadian junior miner African Gold is exploring debt finance and corporate action options to fund its planned Kobada gold mine in southern Mali, CEO Danny Callow tells The Africa Report.

The company needs $165m to produce the first gold from the mine, Callow says. He aims to raise about $110m in debt and the rest in equity, and is in discussions with banks as well as mezzanine-debt providers.

Another possible avenue is investment from a gold producer looking for ready-to-build projects, Callow says. According to him, “corporate discussions are happening” with producers who could add the project to their portfolio or take an equity stake. A corporate transaction would take away the need for fundraising, he says.

African Gold is currently debt-free and has not promised any future royalties, Callow says. Its Kobada project is fully permitted. “A corporate transaction would be straightforward and simple.”

The company has so far drilled along a strike length of 4km, out of an available total of 55 km. “We always think that we start in the best spot, but often we don’t,” says Callow, a former CEO of Katanga Mining and Mopani Copper Mines. Chances are that “we’ve only scratched the surface.”

  • In September, African Gold published an updated feasibility study, which Callow says shows substantially more resources than originally thought.
  • The company forecasts average annual gold production of 100,000 ounces over the first 10 years and $733m in pre-tax cash flow over the mine’s life.
  • Further exploration locations have been identified in Kobada and Farada, meaning potential for an increase in resources.

Hybrid power

Major shareholders in African Gold include Ixios Asset Management, the Nero Resource Fund, L1 Capital and Pala Investments. The company owns 90% of the Kobada project, with the government of Mali holding 10%. The project, Callow says, is in a safe and secure location, about 126 km south-west of Bamako. Miners such as Barrick also operate in southern Mali, he says.

The company says poor electrical infrastructure in the region means that tying into the national grid is not a feasible solution. African Gold will use a hybrid thermal and solar photovoltaic power plant with battery energy storage, to be funded by an independent power producer. It calculates a 43% reduction in fuel requirement versus conventional thermal power plants, and 39% less carbon dioxide emissions.

Callow has found it straightforward to deal with Mali’s government.

  • “The government is on the ball and very responsive,” he says. “If you want to meet them, you can. A lot of African countries have forgotten that. Mali has been a breath of fresh air.”
  • The country’s new 2020 mining code includes slightly higher taxes and shorter licenses, Callow says. The company secured its permit in 2015 and the new code is not retroactive, he says. “It’s a very fair code.”
  • The company, which trades on Canada’s TSX Venture Exchange, raised C$5.1m ($4.1m) this week, in an oversubscribed private placement to help fund the Kobada project. The company hasn’t yet decided how to use the money.
  • “We could put the drills back in the ground,” Callow says. “We have a lot of optionality.”

Bottom line

African Gold is confident it has enough proven and potential resources in Mali to attract financial or industry investment.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options