Oklo Resources (OKU:ASX)

Transcription

1 A research initiative by Canaccord Genuity Oklo Resources (OKU:ASX) Following in the footsteps of Fekola - Dandoko showing early promise Key Facts Company Code OKU.ASX Closing Price (17/5/17) 0.24 Date of Report 18/5/17 Company Website Analyst Reg Spencer Company Statistics 12 Month High Month Low 0.09 Market Cap (A$m) 65 Issued Shares Issued Options 46.6 Cash (A$Mil) A$14m Major Shareholders % Blackrock 14.9% 1832 Asset Management 8.1% Management 5.9% Resolute Mining 5.6% Share Price Performance May 16 Aug 16 Nov 16 Feb 17 Canaccord Genuity (Australia) Limited has received a fee as the Lead Manager to the Oklo Resources Ltd capital raising announced April Canaccord Colts provide research coverage on a select group of early-stage ASX-listed microcap companies that our institutional research team believes have strong development trajectories. If you have received this indirectly, please click here to receive future research on OKU and other Colt companies. Investment Highlights OKU s Dandoko gold project shows early promise for a new gold discovery, in a region well known for 5-10 Moz ore bodies. The Company s systematic approach to exploration at its Dandoko project has led to the identification of the exciting Seko prospect. Based on the results to date and potential scale, the project is already attracting corporate interest, and its on this basis we see striking similarities with Papillon Resources Fekola discovery and eventual acquisition for A$650m - even at this early stage. A recent capital raising now assures more than sufficient funding to accelerate exploration programs, while ongoing drilling should provide good newsflow over the coming months. Should further exploration prove fruitful, there is clear potential for OKU to follow in Papillon s very succesful footsteps. Exploring in a high quality address OKU s gold exploration licences in SW Mali cover a total of ~1,400km², with priority targets located at Seko, Diabarou and Disse within the 134km² Dandoko project. Dandoko is situated within the highly endowed Kenieba inlier (+50Moz discovered to date), and is located along the southern extents of the Senegalo-Malian Shear Zone ( SMSZ ), a +60km long, structural corridor that is host to numerous, large gold deposits including Loulo/Gounkoto (17Moz), Sadiola (13Moz), Tabakoto (4 Moz) and B2 Gold s 5Moz Fekola development. Dandoko sits on a NE splay off the main SMSZ, a structural setting similar to many other major gold deposits in the region. Early taste of success at Diabarou but a bigger prize could await at Seko The company s initial focus was the Diabarou prospect, where initial drilling identified high grade quartz veins. The prospect has potential to host a modest, high grade resource, but a shift in focus mid-late 2016 to more effectively assess the wider project area led to the identification of the exciting Seko target. OKU has since completed +60,000m of auger/ aircore drilling, identifying a 12km long trend of geochem anomalies. Follow up aircore drilling of several ~2km long auger anomalies at Seko have identified multiple, broad zones of bedrock gold mineralisation, with drilling results including ore grade intersections (1-2 g/t Au) over widths of up to 50m (<120m below surface). Infill aircore drilling is now underway, ahead of a more targeted RC/Diamond drilling program in Q4 17/Q1 18. It is early days at Seko, but results to date suggest the potential for a sizeable gold discovery, based on the scale of anomalism, and favourable regional setting which is known to host numerous +5 Moz gold deposits. Exploration pathway shows similarities to other regional discoveries The best evidence of the possible scale of Seko is through a comparison with early stage exploration at the nearby, 5Moz Fekola deposit, currently being developed as a US$395m, ~350ozpa project. The discovery pathway for Fekola looks, at this stage, strikingly similar to OKU and Seko. Papillon s discovery at Fekola was preceded by an initial focus on a smaller deposit, before exploration on limited soil anomalies gave way to a larger 1km long mineralised trend - which now plays host to +5Moz. Other possible targets at Seko include large, saprolite hosted gold deposits, similar to B2 Gold s new discovery at Anaconda-Adder. Catalysts Infill drilling results at Seko Q2/Q3 17 Auger results from Moussala Q2/Q3 17 RC/diamond drilling at Seko Q4 17/Q1 18 Colts May

2 Company Overview Oklo Resources (OKU:ASX) is an Australian gold exploration company, whose focus is a suite of gold exploration properties located in south-western Mali. The 100% interest in the projects were acquired in late 2013 from Compass Gold Corp in a scrip based transaction with a total value of A$4m. The licences cover a combined area of ~1,400 km², with priority targets are located at Dandoko, with secondary prospects located at Moussala, Socaf and Yanfolila. Throughtout 2015/6 OKU completed initial drilling at the Diabarou (high grade quartz vein hosted gold) prospect at Dandoko, but in late 2016, refocussed attention on indentifying larger-scale resource targets through a widespread soil augur geochemistry program. Through this work, the large-scale, highly prospective Seko target was indentified. The company s in-country exploration efforts are led by Dr. Madani Diallo, (a +30 year veteran in West African gold who was involved in number of large scale discoveries throughout the region including Sadiloa [13 Moz], Morila, [8.5Moz], and Syama [8Moz]) and Andrew Boyd, who was a key member of the team which proved up the now +5 Moz Fekola deposit with Papillon Resources (acquired by B2 Gold in a ~A$650m transaction in 2014). Figure 1: Project location map Colts May

3 Dandoko Gold Project (OKU 100%) Location The Dandoko Gold project is located in SW Mali, approximately 160km east of the Capital Bamako, and 35km West of the Faleme River and the Malian-Senegalese border. The project area covers a total 134km², and is accessible by road from Bamako, and the regional centre of Kenieba (20km to the WNW), which is also serviced by an airstrip. Geology The Dandoko project lies within the highly endowed Kenieba Inlier, a major Proterozoic- Birimian inlier located along the north-eastern margin of the Man Shield, part of the major West African craton. To date, +50Moz has been discovered with the Inlier. The region is host to numerous large gold deposits...including Loulo, Gounkoto, Sadiola and Fekola. Dandoko is located along the southern extents of the Senegalo-Malian Shear Zone ( SMSZ ), a +60km long, north-south trending structural corridor. The region is host to numerous, large gold deposits and gold mining operations, which tend to be associated with splays or cross cutting faults which typically run NE from the SMSZ. These include: Randgold s Loulo (12.5Moz) and Gounkoto (+5Moz) operations AngloGold s Sadiola (13Moz) and Yatela (4.5Moz) mines Endeavour Mining s Segala/Tabakoto (3.8Moz) operation, and B2 Gold s +5Moz Fekola development, and their recent Anaconda-Adder saprolite hosted discovery to the north of Fekola Figure 2: Project location map for Dandoko and Moussala relative to structural trends and other notable deposits Colts May

4 The Dandoko project features multiple targets, all featuring extensive gold in soil anomalies and artisanal workings, adjacent to NNE trending structural trends (similar setting to Tabakoto and Gounkoto) which remain poorly explored. Key prospects/targets at Dandoko include Diabarou, Seko, and Disse. Diabarou initial discovery with high grade resource potential The Diabarou prospect is located in the east of the Dandoko project area, and features significant artisanal gold workings over a 1.0 x 1.2 km area. The workings revealed the presence of gold bearing quartz veins up to 3m wide over an initial 600m strike. Initial drilling beneath the workings in 2015 intersected high grades up to 10 g/t Au, with follow up drilling in 2016 returning results such as 6m at 54 g/t from 36m, 28m at 3.9 g/t from 88m and 21m at 2 g/t from 45m. Figure 3: Diabarou prospect; plan view showing drill collar location and selected assays OKU completed limited follow-up diamond drilling in Jun 16 to assess structural settings and alteration characteristics. Assays from this drilling included continued high grades, with results including 8m at 12 g/t from 130m (inc. 4m at 22 g/t from 134m), and 19m at 3.2 g/t from 89m (inc. 3m at 11.4 g/t from 91m). It was noted that deeper drilling encountered alteration characteristics similar to those seen at other major regional gold deposits. Colts May

5 Limited RC drilling was also completed to the east and to the west test for immediate strike extensions to high grade structures. Results from this drilling included narrow zones of high grade gold mineralisation with highlights including 7m at 19.4 g/t from 43m (inc. 3m at 38 g/t from 43m) and 4m at 21 g/t from 117m (inc 1m at 81 g/t from 119m). Despite the apparent success of initial efforts at Dandoko (ie. potential for modest but high grade resource), OKU subsequently shifted focus in late 2016 to more adequately assess the wider project area before committing significant additional capital to Dandoko. This shift in focus included undertaking a total +60,000m augur and aircore drilling program over the wider Dandoko (and Moussala) tenement areas, and a more targeted 7,000m program at Diabarou and Disse. Seko showing the early signs of a possible large scale discovery The Seko prospect is located approximately 3.0 km west of Diabarou and 1.6km NE of the Disse prospect (see below). The prospect was originally identified by limited soil sampling and artisanal workings, with widespread auger drilling over much of the Dandoko project area during late 2016/early 2017 identifying a series of large, north-south striking auger anomalies up to 4km long, as part of a more extensive belt of gold anomalism extending over a total distance of +12km....extensive belt of gold anomalism over a total distance of +12km Figure 4: Dandoko project auger anomaly showing Seko trend Colts May

6 The auger drilling, designed to efficiently test for gold anomalism underneath shallow cover over wide areas, encountered peak grades of up to ~3 g/t in the top of fresh rock, with subsequent infilling demonstrating widespread anomalism and some continuity. A follow up program consisting of +5,000m of deeper aircore drilling over 5 of the main anomalies on the Seko trend was completed in Apr 17, with the aim of testing the anomalies at depth (to ~100m below surface) and along strike to confirm orientation of the mineralisation. Figure 5: Auger drill hole location plan showing aircore drilling results at Seko Results from the aircore drilling were very successful. OKU reported significant ore grade intersections in numerous holes (Figure 5), confirming the presence of near surface, primary gold mineralisation in multiple areas. Highlights from this drilling include: 13m at 2.27 g/t from 23m (Anomaly 1) 18m at 2 g/t from 51m (Anomaly 1) 14m at 1.96 g/t from 8m (Anomaly 1) 54m at 1.37 g/t from surface, including 8m at 2.82 g/t from 25m (Anomaly 2) 35m at 1.86 g/t from 55m including 15m at 3.02 g/t from 64m (Anomaly 3) Colts May

7 Figure 6: Seko Anomaly 1 Aircore cross section OKU has recently commenced a 10,000m follow up drilling campaign at Seko, consisting of aircore (infill line spacing and to test for strike extents to bedrock anomalism Figure 7), RC drilling (to further evaluate mineralisation in fresh rock), and a small amount of diamond drilling for stratigraphic and structural information ahead of a planned deeper RC program. Results from the ongoing Induced Polarisation (IP) geophysical survey are anticipated to help improve lithological and structural understanding with a view to firming up subsequent drilling targets. Figure 7: Seko Aircore drill traverses and planned traverses Colts May

8 While it is only early days at Seko, results to date suggest the potential for a meaningful, greenfield gold discovery based on the scale of anomalism, and favourable regional setting which is known to host numerous +5 Moz gold deposits. Nearby deposits present as possible analogies for Seko The best evidence of the possible scale and potential endowment (subject to further drilling success and resource estimation) of the Seko discovery can be shown through a comparison with early stage exploration results at the nearby, 5Moz Fekola deposit, currently being developed by B2 Gold as a US$395m, ~350ozpa project. Figure 8 below shows the initial, limited soil geochemical signature of Fekola, due primarily to the presence of transported alluvium masking gold anomalism. Also shown is a plan of subsequent auger/aircore drilling at Fekola which revealed widespread bedrock gold mineralisation, with the anomaly extending for a length of +1km (now host to total resources of ~5Moz at +2.0 g/t)....suggest the potential for a meaningful, greenfield gold discovery The discovery pathway for Fekola looks, at this stage, strikingly similar to OKU and Seko. Papillon Resources discovery at Fekola was preceded by an initial focus on the Fadougou deposit which hosted a modest resource of 300koz at 2.0 g/t - versus OKU s initial drilling at Diabarou and encouraging early stage results from Seko. The similarities also extend to the initial exploration carried out at Fekola, where limited gold in soil anomalies have given way to a mineralised (gold in bedrock) trend up to 2km in length. Figure 8: Auger drill hole location plan showing aircore drilling results at Seko Based on the early stage of exploration and results to date, OKU has suggested two initial targets at Seko. These include: 1) Large scale ( Moz?) primary gold deposit (a la Fekola style shear hosted, Birimian-style mesothermal gold deposit) 2) Large scale saprolite hosted gold deposit, similar to B2 Gold s Anaconda-Adder discovery (located north of Fekola, and planned to play host to a potential standalone gold development). In addition to a possible discovery at Seko, any resource positions outlined at either Diabarou or Disse could act as potential high-grade satellite ore sources for any future mining development, given their proximity to Seko. Disse Located 6km SW of Diabarou. Disse features artisanal workings over an 880m strike with coincident gold in soil anomalies. Initial drilling in 2013 returned significant intersections (inc. 16m at 2.3 g/t from 158m), with follow up aircore in 2015 confirming extensions to known mineralisation, with results including 21m at 5.67 g/t from 33m (inc 3m at 21 g.t from 51m) and 3m at 12.8 g/t from 39m. Colts May

9 Mineralogy at Disse suggests similar characteristics to other large deposits in the Kenieba inlier, with gold mineralisation hosted in silicified quartz tourmaline sandstones. Two structures have been defined for follow up RC drilling. A follow up program of AC drilling successfully tested along strike extensions to the gold mineralisation identified in earlier programs. Following the success of shallow drilling, Disse was tested with a single Diamond hole to a depth of 200m with the most notable intersection a 3m interval grading 11.4g/t (from 163m) within a wider 13m running 4.69 g/t. Moussala (OKU 100%) The Moussala permit is strategically located approximately 15km to the west of the Dandoko Project, and 15km east of Fekola (See Figure 2). The project area covers 66km2, with its prospectivity based on its location on a NNE trending splay fault off the main SMSZ, which has been interpreted from regional aeromagnetic data. This setting is similar to other large gold deposits in the region including Sadiola and Loulo. There has been limited modern day exploration completed within the project and no drilling. Results from two programs of soil sampling previously completed in 1997 and 2011 delineated a number of gold-in-soil anomalies with a peak value of 542ppb gold (equivalent to 0.542g/t gold). OKU has completed a comprehensive auger drilling program at Moussala, with infill drilling on anomalies as they are identified. Interpretation of data collected from geophysical surveys (airborne magnetics and Induced Polarisation) will be completed to provide an improved geological framework within which to interpret auger drilling results and the next phase of follow up work. Yanfolila Gold Project (OKU 100%) The Yanfolila project is located in another well-endowed region of South Mali, 45km north of Avnel s 2.1 Moz Kalana deposit, 35km east of Hummingbird s 1.8Moz Komana project, and within 150km of Resolute Mining s 8.5Moz Syama operation. First-pass RC drilling in 2012 at the Solona Main prospect returned broad zones of ore grade mineralisation with results including 26.5m at 3.59 g/t, 26m at 7.17 g/t and 10.1m at 3.79 g/t supporting the prospects potential. Only 700m of potential 2.5km strike has been drill tested. Figure 9: Yanfolila project map Colts May

10 Corporate & Finance Balance sheet OKU reported a cash balance at the end of the MarQ 17 of A$6.1m. In April 2017, the company completed an A$8.7m placement through the issue of 36.2m shares at a price of A$0.24/share. Prior to this, the company s last capital raising was the placement of 80m shares at A$0.125/share to raise A$10m, completed in May There are a 23.3m options exercisable at an average price of $0.127 expiring between 30/6/2017 and Dec 17, which could provide a further A$3.2m on exercise. Total options on issue are 46.6m at an average exercise price of A$0.17 between Jun 17 and Jun 20.Including the potential cash from option exercises, OKU will have up to A$17m in cash reserves to continue aggressive exploration at the Dandoko project. Major Shareholders Substantial shareholders include: Blackrock 14.9% 1832 Asset Management 8.1% Directors & Management 5.9% Resolute Mining 5.6% Ack Pty Ltd 5.4% Board & Management Michael Fotios Non-Exec Chairman Mr Fotios is a geologist, specialising in economic geology with extensive experience in exploration throughout Australia. Mr Fotios has previously held positions with Homestake Australia and Sons of Gwalia, and was formerly Managing Director of Tantalum Australia NL (now ABM Resources Limited) and Galaxy Resources Limited. More recently, he served as Non-Executive Director of Northern Star Resources Limited and Stirling Resources, and is currently on the Board of Eastern Goldfields Limited (Executive Chairman), Horseshoe Metals Limited (Non-Executive Chairman), Pegasus Metals Limited (Non-Executive Director) and Redbank Copper Limited (Executive-Chairman). He is also founder and Executive Chairman of unlisted investment company, Investmet Limited. Simon Taylor Chief Executive Officer Mr Taylor is a geologist with over 25 years experience in exploration, project assessment and development in the resources sector. He has had a diversified career as a resources professional providing services to resource companies and financial corporations. His experience spans a range of commodities including gold, fertilisers (phosphate and potash), base metals, nickel, uranium, coal and coal seam methane. Whilst his experience includes Australia a majority of his projects have been in countries including Brazil, Turkey, Uganda, Tanzania, Mali, China, UK and North America. Dr Madani Diallo Non-executive Director & Country and Exploration Manager Dr Diallo has an outstanding track record for over 30 years of successful exploration in Africa. During his lengthy career, Dr Diallo on several occasions has directly lead the teams that discovered several large gold deposits including the multi million ounce deposits of Syama, Morila, Sadiola and Essakane. Dr Diallo is a director of several companies focused on precious and industrial minerals in the region. He also advises private and government agencies involved with the financing of resource related projects. Dr Diallo is a Director of the Sadiola Gold Mine (IAMGold/AngloGold Ashanti JV). Dr Diallo holds the position of Vice-President of the Mali Chamber of Mines, President of the Association of Geoscientists in Mali and Director of UBA bank in Burkina Faso. He has also been honoured with the second highest distinction in Mali, Knight of National Order for his contribution to the development of the Mali mining industry. Lara Iacusso Chief Financial Officer Ms Iacusso has over 25 years experience in providing financial advisory services in Australia and overseas across a wide range of industries including natural resources. She specialises in providing advice to emerging companies relating to corporate transactions and strategies, including due diligence, financial structuring, feasibility studies, capital raisings, financial governance and commercial matters. She is an experienced board member, chief financial officer and corporate adviser. Andrew Boyd Technical Consultant Mr Boyd is a geophysicist with over 20 years exploration and mining experience. More recently Mr Boyd was General Manager - Geoscience for ASX listed Papillion Resources before its merger with TSX listed B2 Gold, valuing Papillion Resources at around A$600m. Prior to working with Papillion Resources, Mr Boyd was General Manager - Geoscience with Mantra Resources before its takeover by ARMZ/Uranium One for +A$1.0 billion. Colts May

11 Appendix: Investment Risks & Important Disclosures Key investments risks for OKU include (but are not limited to) the following: Exploration risks Exploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated with exploration techniques and lack of accuracy in the interpretation of geochemical, geophysical, drilling and other data. No assurance can be given that exploration will delineate Resources or mineable Reserves. Commodity price and currency fluctuation The company as a gold explorer is exposed to commodity price and currency fluctuations, often driven by macro-economic forces including inflationary pressure, interest rates and supply and demand of commodities. These factors are external and could reduce the profitability, costing, prospective outlook for the business, and/or the ability to raise further capital to fund ongoing exploration activities. Financial risks As a pre-production exploration company with no material income, OKU is reliant on equity and/ or debt markets to fund on-going exploration development of its assets and progressing exploration activities. Further we can make no assurances that accessing equity/debt markets can be done without further dilution to shareholders. 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Sydney Level 26, 9 Castlereagh Street, Sydney, 2000 Ph: Melbourne Level 4, 60 Collins Street, Melbourne, 3000 Ph: Colts May