The 2023 biggest surprise sale was Dundee Critical Metals’ buy-off of Osino Resources’ flagship Twin Hills Gold Project in Erongo.
Osino Resources sold off the project for more than N$3,9b.
Although this appeared to be a regular deal, Osino Resources could not advance the project because of massive losses.
Twin Hills is a multi-million-ounce gold project with 2.15 million ounces of proven and probable reserves, discovered by Osino in 2019 and fast-tracked to the pre-construction stage within four years.
The estimated gold production is 175,000 ounces per year over the first five years and 162,000 ounces per year over the 13-year mine life, as outlined in the Twin Hills Feasibility Study.
The project is substantially permitted, with a 20-year mining licence already granted, subject to certain conditions, with only site-level permits still outstanding.
Osino Resources co-founders are Heye Daun and Alan Friedman, who were also part of the Auryx team but sold off their shares in Otjikoto Gold Mine to form the new company.
The Twin Hills project’s targeted production is in 2026.
A HISTORY OF LOSSES
In a March 2022 report titled Unaudited Interim Condensed Consolidated Financial Statements for the three months ended on 31 March 2022, Osino admitted to operating at a loss.
The report said the company had a history of losses with no operating revenue and an accumulated deficit of US$64,5m as of 31 March 2022, up from US$58,397,856 on 31 December 2021.
According to the report, Osino’s working capital on 31 March 2022, was US$11,1m, up from US$9,6m as of 31 December 2021.
“The company will continue to require additional sources of financing to fund ongoing operating costs and the exploration and development of its mineral properties,” the report said.
The report said although Osino raised gross proceeds of US$10,5m from non-brokered private placements during 2021 and US$7,5m from the exercise of share purchase warrants with an expiry date of 31 January 2022, it needed additional funds during 2022 to fund its ongoing operations.
“There can be no assurance that the company can obtain additional financing. If the company cannot get adequate additional financing, it may need to curtail its activities further until additional funds can be raised.
“It is reasonably possible that certain events could adversely affect management’s estimates of recoverable amounts and require an impairment provision to the carrying value of exploration properties and related assets,” the report further said.
It added that due to operating losses, the company’s continuance as a going concern is dependent upon its ability to obtain adequate financing to fund ongoing planned operating costs and planned activities at its Twin Hills Gold Project.
“These material uncertainties may doubt the company’s ability to continue as a going concern. Management believes that the company will be able to continue as a going concern for the foreseeable future, realize its assets, and discharge its liabilities and commitments in the ordinary course of business,” the report said.
COVID-19 PARTLY TO BLAME
Osino said during the first quarter of 2020, there was a global COVID-19 outbreak, which significantly impacted businesses through the restrictions put in place by the Canadian and Namibian governments regarding travel, business operations, and isolation/quarantine orders.
At this time, the company further said that the extent of the impact the COVID-19 outbreak may have had on the company was unknown, as this depended on future highly uncertain developments that could not be predicted with confidence.
“While the extent of the impact is unknown, we anticipate this outbreak may cause reduced customer demand, supply chain disruptions, and staff shortages, all of which may negatively impact the company’s business and financial condition,” Osino said.
RICH DUNDEE
Dundee has a solid financial position, including a cash balance of approximately US$563m, an undrawn US$150m revolving credit facility, and no debt.
The company also has robust cash from operating activities and free cash flow generation of US$247m and US$213m over the last twelve months.
The acquisition strengthens Dundee’s mineral reserve and resource base, increasing proven and probable reserves by 43% to approximately 7.2 million gold ounces and adding 2.9 million ounces of measured and indicated resources and 0.25 Moz of gold in inferred resources.
Dundee’s enhanced asset portfolio now includes its high-margin production profile of 258,000 ounces of gold annually from the Chelopech and Ada Tepe mines in Bulgaria.
*The full report here OSI-Financial-Statements-1Q2022
