Mali Lithium (ASX: MLL) has jumped into gold producer ranks after agreeing to acquire 80% of the Morila mine in Mali from majors Barrick Gold Corporation and AngloGold Ashanti.
The purchase price for the asset is estimated to range between US$22-$27 million.
According to Mali Lithium, Morila is a “world class asset” that has produced more than 7.4 million ounces of gold over 20 years.
Mali Lithium expects the acquisition will position it as a cash generating gold producer. The company anticipates Morila will generate 26,350oz gold and bring in about U$17 million in cash flow between the acquisition date and May 2021.
This assumption is based on an average gold price of US$1,850/oz.
Gold production is arising from tailings with around 5.5Mtpa currently being processed.
Mali Lithium said it will use the cash flow to fund drilling, updating resources and exploration, plus ramping up production.
The acquisition remains subject to securing all requisite approvals and finance.
Mali Lithium chairman Dr Alistair Cowden described the acquisition of Morila as “transformational” for the company.
Morila gold mine strategy
Morila was a foundation asset of the former mine Randgold, which has now merged with Barrick.
Barrick is the operator of the mine and owns 40%, with AngloGold holding 40% and the Mali Government retaining the remaining 20%.
As a non-material asset to the vendors, the mine was due to close in mid-2021. The last major resource estimate was carried out in 2008 when gold was attracting US$700/oz.
Of the remaining inventory at the mine, Mali Lithium estimates an inferred mineral resource of 32Mt at 1.26g/t gold for 1.3Moz.
The company noted this resource was beneath and around the main pit and was constrained by a US$1,250/oz pit optimisation. Additionally, no major drilling investment has been made in the project in more than a decade.
Mali Lithium claims the project has potential to grow resources and it will initial target production from the Morila and satellite pits.
All-up, the project has a 8.7Moz gold endowment (production plus resources).
Mature gold producing region
As part of the rationale for the acquisition, Mali Lithium noted that Morila was within a world class gold belt.
The project comes with requisite infrastructure and government support.
Infrastructure includes the plant, staff village and water storage, a 14MW diesel power station
Mali Lithium said because the region housed a mature gold industry, the area had many skilled locals.
“We have a unique advantage as the newest gold producer on the ASX as Morila has all the infrastructure required of an operating remote gold mine as well as the expertise of the operating team,” Dr Cowden said.
“We will benefit from the substantial sunk capital invested by the previous owners over the last 10 years,” he added.