Casimir Capital on Wednesday initiated coverage on Orezone Gold Corp. (TSE:ORE) – which is focused on gold projects in Burkina Faso and uranium projects in Niger - with a “speculative buy” recommendation and target price of C$3.00 per share.
Canada-based Orezone is a junior exploration and development company that was spun out of Orezone Resources in early 2009, under a plan of arrangement with Iamgold Corp. (TSE:IMG).
The company’s primary asset is the Bomboré gold project, the second-largest undeveloped gold deposit in West Africa, where a feasibility study is advancing toward completion in the second half of this year.
Orezone’s 90-per-cent-owned and less advanced Bondi gold project, also in Burkina Faso, remains a second priority and is estimated to host total resources of 6.68 million tonnes averaging 2.01 grams per tonne (g/t) gold, for 431,700 ounces of contained gold.
The company also has two uranium permits in Niger which are in the early stages of exploration.
Casimir analyst Stuart McDougall said his target is “almost entirely” based on the Bomboré project, where a 2011 preliminary economic assessment outlined enough oxide resource to allow a staged approach to development, whereby the less expensive material would be mined for up to 10 years to provide internal cash flow toward the development of the underlying sulphides.
“A feasibility study is currently assessing the economic viability of such an approach,” noted McDougall in a research note.
“Assuming a positive outcome, permitting and project financing is expected to be wrapped up by year-end, followed by construction start-up in 2014, and production in late 2015.”
Last August, Orezone Gold announced a 49-per-cent increase in resources at Bomboré, with measured and indicated resources of 125.0 million tonnes grading 1.03 grams per tonne (g/t) gold, for 4.13 million ounces of contained gold.
Bomboré also has inferred resources of 32.13 million tonnes, averaging 1.00 g/t, for an additional 1.03 million ounces of contained gold.
Since then, Casimir said another 85,000 metres have been drilled, with a focus on infilling inferred material and extending known mineralization.
“On that basis, we think top-spot could be around the corner, when the next resource update is completed later in the first quarter of 2013,” said McDougall.
He adds that ongoing drilling at Bomboré continues to produce “positive results” in both oxides and underlying sulphides, as well as in satellite prospects, such as P17N – where the latest drill results returned 15 metres grading 2.22 g/t gold starting at 14 metres down-hole.
“Furthermore, most of the resource extends to just 120 metres below surface, which marks the depth for 95 per cent of the drilling done to date, implying excellent potential to further expand the sulphide resource and extend the project’s overall life."
McDougall also said he attaches a “small value” to Bondi, given its potential attraction as a start-up play for another junior, or as a secondary project for a more advanced producer.
“At this point, we apply no value to the uranium projects, but note the potential for longer-term upside, via a joint venture or sale process.”
Shares of Orezone are lower today, down 3.28 per cent as at about 11 a.m. EDT, trading at $1.18.