Orbis Gold Limited (OBS) Research Report 20141017



Orbis Gold Limited (OBS) is an emerging gold producer, planning to develop its Natougou deposit, a low cost, low strip ratio, open cut mine in Burkina Faso. A Scoping Study indicated mining at a rate of 2.0 Mtpa to produce 213,000 Oz p.a. Au would have cash operating costs of about USD 538/Oz and USD 634/Oz in all-in-sustaining costs, after capital of USD 233m. A Definitive Feasibility Study is in progress, to be completed mid-2015. Natougou and other OBS prospects have significant potential to add to existing Resources with further exploration. Our unrisked DCF valuation is AUD 0.75/share, with a risked and discounted 12 mo fwd Price Target of AUD 0.40/share. We believe further progressive project de-risking and a high potential for discovery of new Resources warrants recommendation of Speculative BUY.


Investment Thesis

  •  Orbis Gold Limited (OBS) has exploration and evaluation projects in Burkina Faso (Au), Cote d’Ivoire (Au) and Queensland (IOCG). The most advanced are Natougou, Nabanga and Bantou, in addition to several other prospects in Burkina Faso, and Korhogo in Cote d’Ivoire and Boomara in Qld.
  •  At Natougou OBS has outlined 18 Mt of 3.4 g/t Au, which initial evaluation indicates mining at 2 Mtpa can produce 213,000 Ozs p.a. at USD 538/Oz cash operating costs after development capital of USD 223m. The deposit is open in several directions. Recent drilling of shallow mineralisation has scope to markedly reduce the initially estimated waste-pre-strip requirement.
  •  Mineralisation at Nabanga is steeply dipping and high-grade, hosted in porphyry and sediments, and likely amenable to underground mining methods.The Scoping Study completion is anticipated for December.
  •  At Bantou three prospects have been identified with strong Au-soil anomalies from two of which, drill testing has returned attractive gold intercepts to date.
  • Burkina Faso is a landlocked west African nation with a reputation for high levels of integrity, and covering an extension of a major mineralised greenstone belt containing major gold deposits.
  • Based on our assumptions of debt funding capacity and the forecast capital requirements for development of Natougou we modelled OBS to need to raise about AUD 115m of equity in the June 2015 HY. This requirement can of course be reduced by other funding methods including potential for, sell-down of an interest in the project, commodity loans, royalty finance or ECA finance.
  •  Our discounted target price($0.40) is near the current share price. We consider that further de-risking by progress of Natougou alone through the Feasibility studies, coupled with a high potential for discovery of additional resources at Natougou and at other of OBS’ prospects, should lead to an upgrade in valuation and a re-rating of the company. Our Target Price would ultimately move toward our un-risked value when the key project Natougou comes into production.


  • Favourable update to Scoping Study (October) and Definitive Feasibility study (mid-2015) outcomes and recommendations for Natougou.
  • Discovery of additional and or new mineralisation including upgrades to Resource statements at or near Natougou, that may be developed and treated through the facility.
  • Discovery of additional or new Resources at Nabanga, Bantou or other of OBS’exploration projects in Burkina Faso, Cote d’Ivoire or Queensland.



  • OBS needs to raise capital for Natougou and to continue exploration on its other projects, by June 2015.
  •  Natougou has yet to pass through the detailed scrutiny of a Feasibility Study. However we believe that the initial parameters of the Scoping Study are encouraging.
  •  We consider the risk of current Ebola virus outbreaks in coastal West African Nations is likely to remain relatively contained to current areas, as have previous outbreaks since the first in 1976, although the current outbreak is much larger, being in large populated centres with poor administration. The key factor in avoiding disease transmission is to avoid contact with secretions from infected patients. (See Matau Advisory’s separate note “Ebola – a summary”


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