Toubani Resources Limited (TRE) Earnings Call Transcript & Summary

Good morning, and thank you for joining us today for the Toubani Resources Investor Webinar. Today, we're joined by Toubani CEO and Managing Director, Phil Russo, who will provide an update on the Kobada gold project located in West Africa and present to the recently launched investor presentation. With that said, Phil, I'll hand over to you.

Thanks, Jane, and thanks, everyone for joining us. I know it's a busy morning out there, and we won't take up too much of your time. I wanted to have this webinar for 3 reasons this morning. One, to update the market on what we've been working on since I joined the company 5 or 6 weeks ago, briefly go through our investor deck to existing, new and potential investors on the call. And thirdly, just to let the market to status of our drilling campaign where we're expecting results to start to flow through in a couple of weeks and the drill program completed within essentially 2 months. So there's some rapid news flow ahead. So for those 3 reasons, I felt it was time we had to give a short update on where Toubani is at this morning. So again, thanks for joining us. Before we get into the investor deck, since joining the company like I said 5 or 6 weeks ago, we've been very active. Within a few days of joining, we bolstered our technical team with some strong geological appointments [indiscernible] and I'll talk a bit more about that in a minute. Immediately, once we joined the company, we put our fingerprints on our exploration program. And again, I'll talk about that strategy in the coming slides. I also visited the site, and again, I'll talk about my takeaways from that. But in short, I was pleasantly surprised at the potential of the Kobada project. And it really is -- project is flying under the radar for reasons we will -- hard to say and we'll get into. And so that strategy is here today. We call it grow, optimize, develop. I want to focus on grow today. This is the strategy essentially in the near term, and we'll get right into it. So why Toubani? Just as a refresher for people on the call, it is a strategic asset. This isn't an orphaned gold project. It is a project of size of 3.1 million ounces, it is in one big 4.5-kilometer long pit. And again, as we'll talk about momentarily, it has the potential to get significantly bigger oxides -- oxide resource growth. We're going to talk about that a lot today. It is the strategy of the company to delineate more oxide resources across our land package. And again, I'll show you how we're going to try and do that, but there's 2 ways to win on that oxide. We have 700,000 ounces of oxide not in reserve that we're focused on, but in the near term, we're immediately focused on delineating new oxide resources. And we're doing all that to improve the base case DFS that was put out a year ago. So we have 100,000 ounce a year project. But I think -- and again, we will all step through this. We think there is something bigger on offer here for our shareholders. We think we can push something closer to 150,000 ounces a year of an oxide project. And again, the oxides will be the flavor of the day, but there's a reason for that, and that is because it's cheap mining, it's cheap processing, it's lower capital and it reduces your technical risk and so that's bang-on strategy for us. Corporate activity here in the last 2 years in West Africa, there has been a heightened level of activity in terms of corporate acquisitions, but also in projects being built. So we're really happy with where we're located. It's the right spot. It's a hot spot for activity. So we're ideally placed there. Like I mentioned in the onset, technical team has been strengthened at Toubani and with our Board and the management team, we are really the right team to advance this asset. So the right people and the right assets are very important for -- to execute an outcome here. And lastly, and I know you'll hear this from many resource companies, our valuation is compelling, though one might argue that we may be the most mispriced resource name out there. Again, after hearing the potential of the asset and our exploration, actually you agree, but that's the job of the management team and board right now to get that valuation up. Just quickly on our structure since the ASX listing, we are 100 million shares out, 20 or 30 million options and warrants, oil price significantly higher today. I do want to highlight that for a company of our size, we have a large institutional relationship to which to build on, and those institutions see the strategic potential of this Kobada asset and so we thank them for their support. But clearly, it's a vote of confidence in the project. Like I mentioned, the team, this is [indiscernible] I can introduce them to our shareholders and potential shareholders, a very strong 20-, 25-year experience in West Africa. They know this type of geology. They know resource development and they know how to unlock dormant exploration potential. So we're very fortunate to have been part of our team. And with Board it is a very accomplished, well-rounded team to bring this asset forward. So I'm excited about the group we've got together here. So our strategy, we call it grow, optimize and develop. We will focus on grow. And again, it's about the exploration of areas that we don't have resources, [indiscernible] through that, $5 an ounces is where we trade today, our peers are at $30 an ounce. And again, I'll talk about that, we're going to try to bridge that gap in the coming months. Just quickly on where we are in the right place in Mali, about 2 hours' drive from Bamako, sealed road essentially the whole way. It was a very smooth trip in terms of getting from Bamako and to the site. And then immediately around us, we have 5 villages, all very supportive of the project, all would like to see it build. So locally, we have enjoyed strong support. Regionally, we're in the right part of the country. And so we are very happy about that. We don't have any expats on site because we have a strong Malian team, who've been here for some time. Their infrastructure is very, very good, all part of being able to advance this project for. And so we are excited about that. Just on this slide, there's a few boxes here. But the message I'm trying to convey here is there's not many assets out there in the market that can tick as many boxes in terms of scale. And I'm talking 3.1 million ounces, 1.2 million ounces of reserves, 75% of them in oxides. That's -- again, these are things that are hard to find in the gold space. But I do want to focus in on grade and oxides. And this is all about creating, bolstering this project to become even more simpler, but also rising to the top versus other projects that we're competing with. And with that, I'll get straight into it. So the main deposit is Kobada, it's 4.5 kilometers long. The scale is kind of breathtaking -- the artisanal workings across this whole deposit are extensive, that's in the past, they're no longer there, but it does show you that with 150,000 meters of drilling below this pit that there is a lot of gold here. We do [indiscernible] at the moment at 0.35 cutoff. And you see there 3.1 million ounces [indiscernible] . What's important to highlight here is as shown there in the red is that a 1 gram cut-off, the [indiscernible] and grade in this deposit are significantly well -- the grade is significantly improved. It's almost double the grade for 2/3 ounces at a 1-gram cutoff. And I think that is really misunderstood in the market in terms of the optionality that [indiscernible] project has. The average depth of this deposit is 110 meters. And so it's all open when we start to hit the fresh around 150-ish meters or 100 meters to 150 meters where we typically start to see the fresh material, but what's unique about Kobada is our average oxide depth is nearly 70 meters. Orezone, for instance, our peer doing well in Burkina Faso, their average oxide depth is 35 meters. So you head to Kobada and the weathering profile does extend quite deep. And that is all favorable in terms of delineating a project here with strong economics. And that is why we're focused on the oxides is it in terms of how deep is weathering profile does extend across this land package, and it's something we're really excited about and going to start. But again, I think these are the things that are misunderstood in the market in that there is a high-grade component through Kobada that we're going to be doing more work on in terms of presenting that in the market, but also the oxides and the depth of the weathering profile. And that means shallower pits and lower stripping profiles. Straight into the exploration. So like I mentioned, from the onset, we had a [indiscernible] program underway from the listing. We are doing that. In the coming weeks, we'll start to see the first results come out from Kobada. We're really focused on number 3 and 4 in that image on the right-hand side, that's Kobada North. We'll talk about that. But there's a couple of [indiscernible] and strike we're trying to extend from the main pit. We do have some early drilling in #6 there that will also be due out in the next few weeks. But like I said, we're going to complete this program really rapidly from here over the next sort of 6, 7 weeks and [indiscernible] should all be in essentially within 2 or so months. So we're going to see regular drilling use from this point. And I just wanted to highlight where these drill holes are going to be coming from and what they're going to mean when you do see them come out. So this is Gosso, which is 6 kilometers from the main Kobada Shear where all historical drilling essentially has taken place. On Gosso here, you see this gray outline, they are the artisanal workings. What I learned from the site is it is that these artisanals sometime over the last few years, they weren't there in a large way when I was working there. They are starting to join those pits out together. We're not starting from scratch here. There's already 36 layers at 1.6 here, but no resource on here, like I said, but our program will be moving here in the coming weeks. We will be running the drill rigs across these artisanal workings which at Kobada are a really good indicator of where there's a potential for mineralization at depth. So we're really encouraged to see what was happening here, it was lying dormant for the last few years, but these guys have now started to join these pits together, but again largely untested for some time. So, there is another 2.5 kilometers of strike here on offer if we can have some success with the drill bit. [indiscernible] from the main pit is Kobada Est, laid last year. Again, this is underappreciated by the market, 21 grams per tonne over 8 meters [indiscernible] . We are -- again, the rig after going to Gosso will go here. And it is -- we've got a few holes planned here to see if we can see what's happening at depth. But again, we've got zero RSV holes here, it's all the auger holes and this is coming up over the coming weeks as well. This would be a new frontier for mineralization at Kobada. Artisanals are also active on this package, both on the structure and off the structure, which, again, is something that was somewhat of a surprise to us following the site visit. And then the last set of targets in this round of drilling is Kobada North and Kobada West. The rig is at Kobada North as we speak, you can see there, it's 2.5 -- 2.3 kilometers of strike we're aiming for here. And these holes are [indiscernible] are testing it, [indiscernible] number 2 is depicted on that image. Again, we've got no testing -- the blue dots there the extended of the drilling that forms within the Kobada main pit, but we are going to see what is happening there. And again, artisanal workings -- and then one just to the western to it we call it Kobada West, 1.3 kilometers of artisanal workings going on, but no filling at all. And these are some of the I guess modest tweaks to the program that we made with the new technical team coming on. We shallowed the drilling, if you want to call it that, and spaced it out, we're not looking for resource definition from the onset. We want to snag new areas of mineralization to show the market that this land package is actually very prospective and untapped. And so these are coming over the coming weeks, and it should be regular use on this front for the next couple of months. I should highlight that this is not just an isolated land package that has some exploration activity, this is a hot spot. We have activity at either side of us with two other companies. It's clearly a prospective area -- they've all got projects that are advancing with the drill bit and with studies. And so clearly, we hold the largest land package in this build, we control most of the structures. We've got the biggest resource. So we're well placed in this region. But it isn't just an isolated land package. It is a bigger play here that is highly prospective, and it is important to highlight that we are part of a much larger system. Why are we doing all this oxide drilling, if you want to -- if I can call it that, is to improve the base case DFS. So we have a strong 8 years of oxide production, 100,000 ounces a year for 7 or 8 years. We want to go for something closer to 150,000 ounces a year. And like I alluded to at the beginning, when we talked about the high-grade component of Kobada pit, we've got more resources, you can grade stream this to improve the economics markedly. We can make it shallower pit, lower that strip profile. So costs will improve, CapEx will improve, a host of wins by focusing on a predominantly oxide project for a strong 10 years at closer to 150,000 ounces a year. That's the goal, and we're going to see what the drill bit delivers. But this is a part of our near-term plan, but just to give you context of why we're focusing on what we're focusing on. Oxide mining again, there's a track record. This is improved, tried and tested strategy in West Africa. There are several big mines that began in the oxide projects and then they move on to sulfide projects. We do have a large sulfide component, 1.5 million ounces is there. But for our market cap and our budget and for our strategy to win for us, the low-hanging fruit is on the oxide strategy. It's new service. It's shallow, it's cheaper to drill. But we have the same rocks [indiscernible] . So in terms of the potential here, we just need to keep the rigs sturdy, and I think we will yield results. But starting off as an oxide project and transitioning into sulfide is a tried and tested way to produce gold in West Africa. Just the last couple of slides here, so just this sort of speaks obviously. Here, there's a lot of disconnect in the market in terms of where Toubani trades versus our peers. There is no technical reason for that. There's no fundamental reason for that. And as we grow the profile here and have some results on the drilling front, that capital will bridge. Certainly, there is no -- certainly my takeaway from the site visit [indiscernible] before joining, there's no reason for it to be where it is. And I think as we highlight the strategic nature of this asset, it's stand-alone potential to be something bigger than 3.1 million ounces, that gap is going to close. And I'll just conclude last slide here before handing it back to Jane, our investment case is to grow, optimize, develop. We are focused on the growth part here. And like I said at the beginning, new oxides as well as converting that 700,000 ounces of oxides that we currently have, 900,000 ounces of oxide today, we're looking to try and essentially double that sort of level over the -- not just this drilling campaign, but over the next 12 to 24 months. And with that, we're going to have improved project, that sort of rises to the top versus peer projects out there, and then we'll see where it goes in terms of development. But the value proposition is really, really clear. I think that's not lost on anyone today, but there's a lot of upside from this point, it is kind of hard to really see the downside. And with that, Jane, I'll hand it back to you.

Thanks for that, Phil. We've had a couple of questions come through. And I know you've covered them, but I'll jump into them anyway. And shareholders if you have any further questions, please use the Q&A function at the bottom of your screen. What has been the delay with the results from the drilling? And when can shareholders expect results to be coming through?

Yes, from joining, I was always been earmarking towards the end of February for results. So we should be more or less around there early March now. The drilling started at the southern end where the artisanal workings are -- there are some cavities and brand issues we had to manage through. [indiscernible] in Mali is very busy. And so that's why I've been able to come on board online today to articulate that we're in a position now where the rig will deliver regular results for day and night shift. And we've got an arrangement with the SGS [indiscernible] we're going to see finally turnover of those results. So thanks for your patience, but it is coming now, and you'll see it regularly for a few months.

So just on strategic interest. So how do you manage strategic interests when the market cap is sort of where it is at the moment?