Theta Gold Mines (ASX:TGM, OTCQB:TGMGF) Presentation, FNN Online Investor Event, April 2021

Company Presentations

Theta Gold Mines Limited (ASX:TGM, OTCQB:TGMGF) CEO Mitford Mundell presents on the company's gold resource in South Africa's golden triangle, discussing mining methods, production units, metallurgy and timeline.

Thank you, Clive, and good afternoon, everyone. And thank you to Finance News Network for this opportunity to present Theta Gold's development strategy. It really is a story that started 150 years ago. The assets under Theta's management today were the source of South Africa's very first gold rush. So, it certainly is a privilege to be part of this continuous story as we plan to re-establish multiple mines from a more than six million ounce resource.

Please just note the disclaimer. This presentation will be available also on the Theta website.

Just giving you a brief corporate overview. Theta Gold Mines is an ASX-listed company with a secondary listing on the US-based OTC markets. Theta's assets includes more than 62,000 hectares of gold mining rights in South Africa, over 6 million ounces of a combination of open-cut and shallow underground resources, and the CIL plant and tailings storage facility ready to be recommissioned and expanded for production. Just highlighting there, as well, the current market cap is about AU$130 million.

So why is this an attractive investment opportunity? We have a significant resource size of six million ounces to start with. There is enormous potential for low-cost expansion. The company is significantly undervalued compared to similar-size peers, which is really a factor of the early development lifecycle that we're in. The assets are inherently low cost by nature, as we develop these largely predeveloped shallow mines. The team is highly experienced, consisting of people with solid track records, especially in business development and asset optimisation. And finally, the multiple points of entry to these mines provide flexibility to build the production profile from underground and open-cut operations.

Really just you can read further about the team on the website and on the presentation afterwards. But the team consists of people with diverse and very relevant experience, especially in building and optimising mining companies and projects in southern Africa and other developing countries.

So, South Africa hosts the third-largest gold reserves in the world. And Theta controls, basically, a significant corner of South Africa's so-called golden triangle. And it is appropriate just to look at and take note of our peers' production profiles and market caps, which will give a glimpse of Theta's potential going forward.

I'm not going to talk through it all, but ESG is really integral to our development strategy. We will absolutely leave everything we touch in a much better shape than when we found it. And those communities and that area of Mpumulanga are really looking forward for us to start these mines.

So this is just an orientation of the first six underground mines targeted for development, starting with Beta, Frankfort and CDM Mines. Those mines, together with the first phase open-cast, were also part of the first phase prefeasibility study. And that will be followed by Rietfontein, Vaalhoek and Glynn’s Lydenburg. The picture on the right just gives an idea of the spread of the various other more than 40 mines, which are not yet reflected in the resource, but which will be systematically investigated over the next few years. And various open-cast opportunities also exist.

The growth potential is therefore based on developing multiple mines within five years. The first three mine operations, central plant and tailings facility will produce more than 60,000 ounces per annum. The expansion to 160,000 ounces per annum is based on adding three more mines. And various further expansion opportunities exist with a potential mine life of more than three decades. Modern mining and treatment methodologies enable low-cost operations and reserve expansion. And Theta will also have a significant positive socio-economic impact on the communities and region where we operate.

A bit about South Africa. It is a country that has significant advantages compared to many other jurisdictions. And the current government, under President Cyril Ramaphosa, has taken very positive steps to increase prospecting and miner investor friendliness. And you could look at the quote there. It's part of the South African recovery plan, especially after COVID. And mining plays a very significant role in that. And also, government, the Department of Mineral Resources and Energy, is working very closely now with the Minerals Council of South Africa to improve some of those things, like permitting, etc.

Just a brief project overview, looking at the prefeasibility and reserve declaration that we announced over the last few weeks.

High costs and low gold prices in the past drove cut-off grades up. Many people ask, "Why did these mines stand for so long?" Well, give you an example. The Beta Mine's pay limit was 18.7 grams per ton just before it closed. Now, today, it is just over a gram a ton. It's a huge difference. And this is made possible by the pre-development, the technology and the logistics at our disposal today.

So, the mining methods, it's a proven, long hole stoping method. It's very suitable to these ore bodies. The significant safety and production advantages that it comes with was a big deciding factor. It also allows for minimum mining dilution. It has proven stoping width of under 50cm. And our planning is conservatively based on 60cm.

So, the production units. The mining method entails the utilisation of a defined mining fleet and ancillary equipment, where one production unit will produce 20 to 30,000 ounces per annum, employing about 45 direct production personnel. And the strategy is based on employing seven such production units to reach the 160,000 ounces per annum.

On the metallurgical side, the plant designs are based on results from metallurgical test work. And current indications are 84 per cent recovery for the first three mines. Our philosophy of upgrading the run of mine products through DMS and XLT technology means that the mill feed rate will be increased by up to 40 per cent. So, to feed the mills with 80,000 tons, we will mine in the region of 130,000 tons. So, it's much bigger than what the actual plant shows, because that's not the run of mine. The plant designs are based on modular expansion, and differentiated process streams can be accommodated in a variety of ore sources, while sharing front and back end infrastructure.

So, Beta Mine is the first and the biggest of the three mines that form part of the initial prefeasibility study. Almost 350,000 ounces have been included in the mine design, shown here on the left. While the picture on the right shows more than 580,000 ounces of inferred resource that will be continuously explored with underground development and infill drilling, really as a continuous part of the mining process.

Frankfort is a second mine, and the same applies here, with only a small portion of the resource currently in the mine plan. And the third mine, CDM, shows the same potential. We therefore know that we've really only touched the tip of the iceberg. Very little included in the plan so far that we released in the last few weeks.

Really, the initial underground prefeasibility study incorporates only 16 per cent of the underground mineral resource. There is a payback period from first gold of 13 months, and 22 months from start of mining. In year three, almost 70,000 ounces will be produced from three production units. Remember, we're working towards seven. The life of almost eight years excludes then any inferred resources and delivers $241 million EBITDA. That's an IRR of 82 per cent and an NPV of $91.2 million. And this is US dollars. The all-in sustaining cost is $905 per ounce over the life of this mine, over the almost eight-year period. The total capex is $79 million, with peak capex $36 million. And it also includes almost $11 million in contingency. The picture here on the right shows the Beta Mine and surface infrastructure, including plant and tailings facility. And, as can be seen, it leaves a very small environmental footprint.

This protocol shows the option of expanding throughput from open-pit operations, and it formed part of the prefeasibility study. And if implemented with the initial three underground mines, it will deliver up to 120,000 ounces per annum. So it remains an option to do this, but the intention at this stage, moving into the detailed planning, is to first expand throughput from the higher grade underground sources. And the combined reserve declared from underground and open-pit is 850,000 ounces.

So, just a further look at the financial projections. The average, all-in sustaining costs of around $900 per ounce over the life of the project is in the bottom quartile of South African gold mines. And, at full capacity, actually the cost comes down to around $800. So, we will certainly be established as a very low-cost producer.

Now, some of the low-cost drivers that. You know, why can we operate so cheaply? Well, firstly, it's shallow gold reefs, largely predeveloped with multiple entry points and therefore also flexibility. We walk into these mines, very good ground conditions, even though many of them stand many, many years. So, the opening up and entry is very easy. The modern mining methods are also a cost driver which are safe and productive. Great engineering, which really results in minimum dilution and maximum recovery. I mentioned the effect that it will have on throughput. The economies of scale and synergies that come from these different mines, central treatment facilities. And a business approach to mining really, to me, that's actually key. And when we talk about that, that's really based on the management team's experience in optimising marginal assets. Now, when you apply that thinking to quality assets like these, you can actually create some magic.

So, this slide shows that the current plan does not show the full scope of capacity, as it's not including the later years. It's because we only included the reserve that was declared now, which excludes a lot of the rest of the resource. So, in practice, it will not be the case, as more resources will be converted to reserves and added to the plan. And so, it also then shows the $800 per ounce cost at the full capacity. And it highlights there the $1,700 per ounce, which is lower than the current gold price. But those are numbers that one can look at. The prefeasibility study results are based on a gold price of only $1,570 per ounce.

So, looking at further production growth beyond the three mines and the open-cast that was the basis of the first prefeasibility study. So, Rietfontein. The pipeline of the projects will be developed systematically. Rietfontein Mine is the next phase prefeasibility study, with almost 800,000 ounces in resource. And, historically, this mine, they've taken out about 270,000 tons at eight grams per ton. That's a very good grade. And again, you can walk into this mine, many entry points, fairly easy to re-establish.

So these two mines, Vaalhoek and Glynn’s Lydenburg, will be the next phase after Rietfontein. And there's about 2 million ounces in resource combined between these two mines. And all these mines also have lots of other expansion potential other than what's in the resource. So, these mines that I've taken you through now, these six mines, will be the basis of the five-year ramp-up as the planning currently stands.

Various exploration opportunities also exist, including exploring within these starter mines with resource extensions, as well as many new targets. The more than 40 mines that already exist and for which no resources have been declared yet will provide the easiest and most significant resource extensions, based on drilling into the vast historical documentation, really, rather than actual drilling.

Our high-level outlook to get to 160,000 ounces per annum is based on a conservative grade approach, discounting the resource grades by 20 per cent, really. There will be flexibility to establish more production units when the first six mines have been commissioned. And we estimate it will be able to accommodate at least 10 production units on those three mines. Various surface sources and underground gold-bearing residues are also available to be used as fillers during commissioning and build-up phases. And we therefore believe that our strategic outlook is conservative with significant upside potential.

So, why invest in Theta? Well, we have a very low discovery cost. We are on the verge of transitioning to producer status. Our operating costs will be half the current gold price. And we have a multimillion ounce and expanding goldfield. You can expect various news flows over the next period. We'll be talking about increases in the mining resource and reserve, plant design and metallurgical updates as well as development and exploration updates. So, please feel free to contact us. Thank you very much. Thanks, Clive. Back to you.


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