West Africa-focused Avesoro Resources (TSX, LON: ASO) continues to transition from mining operator to contractor after concluding an agreement for Youga open pit gold mine in Burkina Faso, which could ease project funding pressure on the company.
Under the deal with Orkun Group Sarl, secured by Avesoro’s subsidaries, Burkina Mining Company and Netiana Mining Company, the mine is expected to deliver increased production at reduced costs in the second half of the year.
The announcement comes at a time of higher gold prices, which are forecast to stay strong throughout early 2020.
The Canadian junior recently had to cut annual output guidance for both the Youga and New Liberty mines by 30,000 ounces because of operational challenges experienced earlier in the year.
Orkun is expected to move 800,000-900,000 bank cubic metres of material per month at $3.75-4.26/bcm to deliver at least 120,000 tonnes of ore a month to the Youga ROM pad.
The service provider will progressively buy Avesoro’s mining fleet, and invest in expansion (this year) to improve production rates. It is also taking over fleet maintenance straight away.
“This contract will enable Avesoro to significantly reduce its future mining costs at Youga,” Avesoro chief executive officer, Serhan Umurhan, said in the statement.
“Outsourcing the mining activity will also enable us to reduce our direct employee headcount and overall business complexity thereby reducing general and administrative costs.”
Avesoro intends to apply the same model at its New Liberty mine, in Liberia.
The company acquired Youga, about 180 km southeast of the capital Ouagadougou, adjacent to Burkina Faso’s border with Ghana, in 2016. The licence contains seven open-pit deposits and a 1.1 million tonne per year carbon-in-leach processing facility.