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Wednesday, June 22, 2016 Derek Macpherson

Algold’s Maiden Resource at Tijirit is only the Beginning


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Algold Resources Ltd (TSXV:ALG) released the maiden resource of 270,490 oz Au (M&I+I) from its Tijirit Property in Mauritania. While the resource is on the smaller side, it features decent grade for a near-surface deposit and is only based on historic work. In our view, the market may have overreacted to the news (stock down 9.2%) as the deposits have room to grow, potentially providing an attractive entry point ahead of drill results from the 10,000m program planned for 2016.

 

Maiden resource from Tijirit is small but features good grade. The maiden resource from Tijirit is 270,490 oz Au at an overall grade of 1.71 g/t (Figure 1). While small, this is an early stage resource and based on only on the historic work of previous operators. At its current size, this resource is not economic, but the grades provide a strong base on which to build. It is worth noting that the M&I+I (Measured and Indicated plus Inferred) grade of Kinross Gold’s (TSX:K, NSE:KGC) +11 million ounce Tasiast mine is 1.75 g/t, albeit using a lower cut-off grade.

 

 

Recent surface work and an active drill program suggest resources are likely to grow. The company already has an active surface exploration program which extended the potential strike of the Eleonore to 3km. While, one of the highest potential targets, Eleonore was one of the smaller deposits defined in this resource; however, the resource model does not take into consideration the high-grade gold bearing quartz vein target at Eleonore suggesting significant upside remains. As well, the gold-in-soil anomalies at Tijirit, particularly Eleonore, are much larger than the current resource footprint (Figure 2). Algold plans to drill 10,000m this year, with a focus on Eleonore and plans to release an updated resource towards the end of 2016.

 

Tijirit Resource and Soil Anomaly Outlines

 

Despite the pullback, valuation reflects modest exploration success. Based on this maiden resource, Algold still trades at a premium to peers at C$69/oz versus other West African peers at C$20/oz. This essentially implies the market is expecting the resource to grow by ~3.5 times from the recent update (~947k ounces), which may be conservative, based on the size and quality of the targets being explored by Algold. We note that it remains early days but exploration success from the ongoing program should see this implied growth multiple increase.

 
Mauritanian government interaction with Kinross increases risk profile but issues historically are resolved. On June 20th, Kinross announced it was suspending operations at Tasiast because of work permit issues for expatriate employees. This is not the first time that Kinross has experience bureaucratic or labour issues in Mauritania and should history repeat itself, we would expect it to be resolved, suggesting the government remains supportive of continued foreign investment.

 

Company Description: Algold Resources Inc (TSXV:ALG) is an early stage West African gold exploration company that controls meaningful land packages to the North and South of Kinross Gold’s (TSX:K, NYSE:KGC) Tasiast mine in Mauritania. The team includes Benoit La Salle (Chairman) a founder and former CEO of SEMAFO and Francois Auclair (President and CEO), who was the General Manager of Tasiast during its early stages of development.
 
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