Osino Resources (TSXV:OSI – OTC:OSIIF – FSE:R2R1) is now pursuing another game-changing gold discovery says CEO Heye Daun: “We identified a very large sort of 50-100 kilometer trend that we control. We’ve got a 15 kilometer gold system on it, of which about a third has been tested so far–that currently contains about two million ounces. And we’ve got a number of rigs and 10,000-20,000 meters of drilling to test along strike–along that trend. So, very legitimate potential to add further satellite discoveries and add another game-changing sort of satellite discovery to what we already have”…“ we’ve done a lot of that exploration drilling in Brownfields, which is designed to add another game-changing discovery. And in fact, we already have some quite intense smoke. We haven’t put this out yet, but we’ve got some quite intense smoke, which we’ll be following up with two or three rigs, which is only about five kilometers to the east of where we currently are. So there’s lots going on.”
Osino recently issued a maiden PEA on its flagship Twin Hills Gold project in Namibia. The project has a Net Present Value (“NPV”) of US$579 million (pre-tax) and US$377 million (after-tax) at a 5% discount rate with a respective after-tax payback period of 2.3 years and internal rate of return (“IRR”) of 38%, using a base gold price of US$1,700/oz. Also, since the PEA was published Osino has released more infill and expansion drill results which demonstrate the deposit is expanding and possibly looking even more economic than the numbers set forth in the PEA. See the press release links below for more information.
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0:00 Introduction
1:05 PEA thumbnail overview
3:24 Simple, low-risk development project
5:25 Very legitimate potential to add further satellite discoveries
6:40 “These things tend to grow with time” (10 drill rigs turning)
8:04 “We already have some quite intense smoke”
9:02 “PEA has certainly attracted attention from corporates”
9:50 PEA directly to FS?
11:14 Permitting
12:06 Timeline to production
13:24 Treasury and burn rate
TRANSCRIPT:
Bill: Thank you for tuning into Mining Stock Education. I’m your host, Bill Powers. And in today’s show, we’re going to be getting an update from the founder, president, and CEO of Osino Resources, Heye Daun. We’ve been featuring Osino for about two years–ever since just before their discovery hole. And in the last two years, Osino has truly been a prime example of what it means to lay out potential milestones, hit those milestones, and actually exceed those milestones. So this has become kind of a poster child of virgin discovery progressing into a development company. So Heye, welcome back onto the program. Since we last spoke, you’ve put out a PEA and then passed the PEA. You’ve put out some excellent drill results and you have many drill rigs turning. So there’s a lot going on operationally. Congratulations on this advancement. And perhaps since we didn’t go over the PEA, could you give us a thumbnail overview of the preliminary economic assessment to start with?
Heye: Yeah, thanks Bill. It’s great to be back. I appreciate the opportunity. So yes, the last two years was really about drilling, drilling, drilling–turning that discovery from a discovery into a resource. So that resource, just under two million ounces, came out in March and we followed it up very quickly with a PEA. The PEA was arguably premature because the project is actually still growing as we speak. We’ve got 10 rigs turning and we’re adding ounces every day, but we put the PEA out because we wanted the market to understand that we’re not an exploration company anymore. We’re now a development company. We’ve got a real project, which is going to turn into a gold mine–and soon. So we focus heavily on just getting those…those balls into the ground.
So we drilled…we’ve drilled about 80,000 meters this year. We drilled 60,000 meters last year; 80,000 meters this year. So far, we’re going to end the year with probably 100,000-120,000 meters drilled. So very, very active, and that will make that PEA substantially better. So, to answer your question on what it is right now, it’s about just under 400 million US dollar NPV based on 1700 gold and reasonable assumptions. It was done by a specialist Australian mine builder, the best of the best, really like a podium. So all their assumptions are…have been stress tested, benchmarked, et cetera–very defendable. And the returns are excellent, like 30-40% are ours; quick payback around two years. So, a very credible project and especially also a very doable project because the capital costs are low. I think that really sets us apart like sub $200 million–one of the lowest sort of intensity… Capital intensity projects out there. So this project is very doable in terms of scale–in terms of technical metallurgy, geology, et cetera. And we’re very focused on not just delivering the project, but to make it substantially better. But maybe I should pause there.
Bill: So we should point out for new listeners that aren’t familiar with the story: this is actually a simple project in terms of its metallurgy, geology, terrain…isn’t it? It’s an open pit, simple project compared to what else is developed in the mining space.
Heye: Yeah. Yes, absolutely. You said it. It’s a vanilla project. It’s got very consistent well-understood geology. I mean the…what you’re still calling a discovery already has 120,000 meters into it. So, it’s well understood geologically. We’ve done all the metallurgical tests; we’ve done four phases of _____ test work; already feasibility level test work. We haven’t put out a feasibility level or a feasibility study, but the work has been done into great amount of detail–which has proven that it’s straightforward off-the-shelf processing technology, open-pit mining…And also to remind your listeners, I’m a Namibian citizen. I was born in this country. I’ve developed a project there before, which I ended up selling to B2 golds and they built a very successful gold mine. And what we’re doing now is just a carbon copy of what we did then–we’re just doing it one more time. That project, to remind your listeners, is the Otjikoto gold project–which B2 gold has–which is doing 200,000 ounces of production per year.
It’s a really high quality, very low cost, highly profitable $100-$150 million free cash flow of mine. But yeah, it’s a dripping roast; it’s a billion dollar company. And what Osino has is actually very similar. We’re not quite there yet in terms of scale, but we got to get there very, very quickly. I think in sort of six to nine months’ time, when we put out our next advanced study, we will prove that, and our market cap at the moment is a $100 million. So it’s… there’s huge upside: protect the downside, low valuation, money is in the bank…we know what we’re doing. So we’re just going through the motion, ticking the boxes, and focusing on delivering. That’s what we do best.
Bill: And that goldmine is called Otjikoto. So when you sold that to B2 gold, I believe that they came up with some good results after they bought it from you. But you just came up with some good results here at your deposit, Twin Hills. Talk us through these good results on the other side of your PEA and how many meters aren’t included in the PEA that you’ve now given to the market.
Heye: I’ll try and keep it brief. But we’ve got a large gold system, surface system. It’s an orogenic system. So it’s actually similar to the Carlin in Nevada geologically speaking. So it’s sedimentary hosted; structurally controlled. We identified a very large sort of 50-100 kilometer trend that we control. We’ve got a 15 kilometer gold system on it, of which about a third has been tested so far–that currently contains about two million ounces. And we’ve got a number of rigs and 10,000-20,000 meters of drilling to test along strike–along that trend. So, very legitimate potential to add further satellite discoveries and add another game-changing sort of satellite discovery to what we already have.
Bill: What I was getting at is…Otjikoto, the full potential of that mine when you saw it–you didn’t realize it–but it seems that you’re realizing more of it with your Twin Hills discovery quicker before…if you sell it or if you build it, the value’s going up quickly here.
Heye: Yeah, for sure. The one thing is … What you caught is a great example. These things tend to grow with time. I mean, the other mine that’s like Otjikoto–that’s 20 kilometers away from us–It’s an X Anglo operation; was built on a million ounces. 30 years later, they’ve produced two and they still have more than five million ounces in the ground. This is in the nature of these type of gold belts. Now, that obviously doesn’t happen overnight. But the way to get there is to just drill holes. You’ve just got to drill holes. That’s what we’re doing–10 drill rigs. You asked me about the meters. So the PEA had 70,000 meters, which comprise the PEA. We have since done another 80,000 meters of which 20 is exploration and about 60 is resource. So basically we’ve doubled the drilling on the PEA.
A lot of that is infill drilling, which is a bit of a dirty word to some because they think infill drilling is kind of… doesn’t add to the picture, but that’s actually wrong because infill drilling improves definition. It’s a good thing. So we’ve done lots and lots of that to make the project better, but it will also make the project bigger. That’s just the sort of organic incremental growth, but we’ve done a lot of that exploration drilling in Brownfields, which is designed to add another game-changing discovery. And in fact, we already have some quite intense smoke. We haven’t put this out yet, but we’ve got some quite intense smoke, which we’ll be following up with two or three rigs, which is only about five kilometers to the east of where we currently are. So there’s lots going on, and…and a really fantastic opportunity to…to turn this into another project–very similar to Otjikoto–which is what…what B2 gold has.
Bill: So you called yourself a development company–but you’re also still an exploration company, then, with what you just described, right?
Heye: Yeah, no, we are. I mean, I haven’t even spoken about the sort of regional exploration–the optionality of our [inaudible 00:08:26] position where we’re also active. We’ve already made a number of surface discoveries, in inverted commas, because obviously the word discovery gets abused. But we’ve got lots of upsides on the rest of the ground and that’s actually not in the valuation at all.
So I mean, the one thing I could tell you without sort of giving it away–obviously I’m in a public forum here–but the PEA has not created a lot of traction or has gotten…hasn’t gotten that much attention in the equity markets because we all know what the state of the gold equity markets is at the moment. But it’s certainly attracting attention from corporates. People out there: specialists, operators, gold miners…they know what this is and what this is turning into. And there’s a rapid realization from an increasing number of entities that are interested to speak to us. So, that’s why I’m relaxed. Our share price is low. We just need to do what we’re doing and keep on delivering–make the project bigger and better. And then, the right price will be paid.
Bill: And then can you go from a PEA directly to the feasibility? Or are you going to do the Pre-FS in between?
Heye: Yeah. Great question. We’re not going to do a Pre-FS in between. I mean that…we are, in effect, doing the Pre-FS internally right now. But in terms of the PEA…is the next study going to be a PEA or Pre-FS or FS? Probably both. And there are technical reasons for it because in a FS you’re not allowed to use inferred resources. But as you can imagine with the new discovery, initially, it’s inferred resources.
So generally speaking FS tends to be smaller than PEAs, but I think it’s important for us to set the benchmark with the next study. So my feeling is it’s going to be another PEA followed up very quickly with the FS. And in fact, it’s the first time I’m saying it publicly over here on your show, because otherwise…publicly, I’ve always said that the next one will be a FS. It will be a FS yes, but there’ll be a PEA as well, I think. We’re figuring that out. It depends on what we can find. Obviously, there’s so much going on exploration-wise at the moment. And if we make another discovery–which I hope we can announce in the next few weeks or months–then definitely it should be a PEA, but followed up with the FS because for us to continue to be a credible developer, we need to fast track along that true development path, not promotion, the true development path, which will require a FS near terms. So we’re quite focused on that.
Bill: And you’re already working on your permitting with the Namibian government?
Heye: We’re very close to that. We…in fact, there are going to be announcements soon. We…don’t want to say too much. But yes; lots of that in the background, surface rights…lots has happened. We’re literally 95% there–that’s another key de-risking event. We’ve got a large hydrological drilling program. Namibia is a dry country. So there’s so much going on in the background, which will…which is designed to de-risk the project and deliver it to a shovel ready stage. And I think we’ll be there in about a year’s time. So, just with that, I expect a substantial rewrite of our writing and share price. And then of course there’s the very, very real possibility of additional game-changing discoveries.
Bill: And then in terms of actually building the mine, is it about a 12 month process–do you estimate at this point–to what it would take to build a mine?
Heye: I think it’s a bit more–so like a podium who have mine builders…they think it’s about 15…probably about 15 months. So the steps would be PEA; FS in the first half of next year. A PEA probably earlier; FS probably in the sort of Q2 next year. Hopefully by mid year, we should have the permitting in place and then it’s FEED, they call it front end engineering and design, which is basically turning a feasibility study into actual drawings and designs. Of course, debt financing would have to be raised also in the first half of next year–which we’re already engaging with banks as we speak. And then sort of late next year, you could expect early works potentially. Of course, then, the question is: are we going to do it on our own? Will we do it with partners? Will we do it … Will a partner do it on our behalf? Who knows? That’s all in the stars. I’d be certainly developing a project on the basis that we will develop it or co-develop it.
Bill: So production 2024, if everything goes as planned–would that be an estimated timeline?
Heye: Well, I think that should be it. I think if we don’t achieve that, it would be a disappointment.
Bill: Okay. And Heye your treasury and burn rate–I know I sent you a check for my 55 cent warrants from a financing two years ago. How much more money did you receive? What’s the treasury like?
Heye: Yeah, we got quite a bit. It was … Yeah, thanks for the check. We got it. We’ve got about $12-$11 million in the bank right now. We will probably spend five, six, or so before the end of the year. We still have some additional warrants which are in the money, which are there, which will come in the next couple of months. So, we’re still good. Well into next year, of course, we’re not going to go to the wall. So at the right time–maybe late this year; early next year; there might be another financing. But there are a lot of discussions going on in the background. There are many alternative ways of financing that we’re looking at, at the moment. I’m not suggesting that we will sell a stream or anything like that. Certainly not the idea. But right now we’re well-funded, we’re very, very active and not financing anytime soon. But at some stage we’ll have to do another one.