PERTH (miningweekly.com) – TSX-listed Semafo has called into question takeover target Orbis Gold’s ability to develop its Natougou project, in Burkina Faso, saying the junior lacked experience in developing and building operating gold mines in West Africa.
Semafo, which was offering Orbis shareholders 65c a share in cash for their shareholding in the company, said that the transition from explorer to producer for a standalone company in West Africa has repeatedly proven to be challenging, especially for shareholders.
In addition to the capital markets’ lack of interest in the 18- to 24-month period, the track record and history of developers without existing production in West Africa did not favour Orbis shareholders, Semafo said.
“Recent West African construction financings have demonstrated that traditional equity and straightforward project debt are not readily available. Whether or not Orbis will be able to obtain construction financing and if so, the associated dilution and overall cost to shareholders, remains uncertain and represents a significant risk.”
A recent scoping study by Orbis revealed that the Natougou project could deliver revenues of some $1.9-billion and a net present value of $533-million. The project was expected to deliver total gold sales of some 1.5-million ounces, based on a two-million-tonne-a-year operation, and would have a mine life of 6.7 years.
Semafo told Orbis shareholders that if its takeover play for Orbis was successful, the company would pursue a different development plan for Natougou.
“A developer, builder, owner miner and operator for more than a decade in various jurisdictions in West Africa, Semafo has the skills required in-house to evaluate and advance the project,” the company said.
The Canadian company said that Orbis’ scoping study was preliminary and insufficient to provide assurance of economic development, adding that it allowed for the inclusion of inferred resources into the mine plan, whereas prefeasibility and definitive feasibility studies did not. Furthermore, Orbis had not provided an ore reserve for the Natougou project.
Semafo also pointed out that the scoping study did not take into account the Burkina Faso government’s 10% free-carried stake in the gold project, or a 6.25% dividend withholding tax.
Orbis has maintained that shareholders take no action on the Semafo offer, instead the company was continuing to advance discussions with third parties for a possible superior alternative to the Semafo offer.