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While no one was looking, a miner pulled off a major gold find

In Namibia – with Namibian and South African managers, Australian technology and Canadian money.
Osino’s open-minded approach has yielded fruit where large mining houses previously working this area were oblivious to the riches beneath their feet. Image: Baz Ratner, Reuters

One has to ask: where have the South African mining investors gone?

Right under our noses, Osino Resources – managed primarily out of South Africa and listed in Canada – has pulled off a potentially stunning gold find in Namibia.

Osino raised $15 million (R276 million) from Canadian investors in January, sufficient to complete its exploration programme within the next 18 months. The exploration company is targeting an initial resource of 1-2 million ounces with potential upside for much more, and indications so far are that this is now within reach.

Gold mines of this size are few and far between, which has thrust Osino onto the radars of North American mining investors – but none from SA.

The gold majors have had a spectacular run over the last two years, with companies like AngloGold Ashanti quadrupling in price. Now the attention is shifting to junior companies with quality assets.

Osino is a junior mining company founded by CEO Heye Daun, a South African resident who grew up in Namibia and served time at AngloGold Ashanti, Rio Tinto and Gold Fields, before striking off on his own (interestingly, he is also the nephew of Steinhoff founder Claas Daun).

’10 times’ potential

With gold prices nudging towards $1 800 per ounce, and the Bank of America forecasting a price of $3 000/oz within 18 months, Osino is being touted by some analysts as a potential 10-bagger (stocks that appreciate ten times their initial purchase price). The share currently trades at 86c, having shot up fourfold over the last 15 months.

The reason for the excitement: the exploration results coming out of the group at its Twin Hills area in Namibia, about 25km from the producing Navachab Gold Mine sold by AngloGold Ashanti in 2014 to QKR. Osino has exclusive rights over an area of nearly 7 000 square kilometres on the Karibib Fault Line, about 200km north-west of Windhoek.

Five of the seven holes drilled at Twin Hills have yielded promising mineralisations, indicating a strike length of 11km. This will likely expand as exploration continues.

A unique aspect of the exploration is that drilling is being carried out through the hard calcrete cover which is common in this part of Namibia.

The samples are sent to Australia for assaying, where a relatively new ultra-low grade detection technology has illuminated what appears to be one of the biggest gold discoveries on the sub-continent in a decade.

The grades so far vary between 0.65 grams a ton (g/t) to 2.2g/t, but have been found to occur over a massive area.

This is a shallow deposit, allowing for low-cost open pit mining, and hopefully a relatively inexpensive gravity separation processing method.

Read: World’s deepest gold mines on a ‘cliff’ as virus curbs output

This is Daun’s second foray into Namibian gold exploration, the first being the advancement and definition of the Otjikoto resource which was sold in 2011 to another Canadian mining group, B2Gold, for nearly $200 million (R3.6 billion). B2Gold invested nearly $300 million (R5.5 billion) to develop the mine, which last year produced 178 000 ounces, roughly 20% of the group’s total gold haul for 2019.

Sweet spot

The sweet spot for any new gold mine is a resource of at least one million ounces. With gold prices now on the rise, investors are scrambling for good assets. This puts Osino in the pound seats. There are hundreds of junior mining companies, many of them operating out of Canada, but it is also a field strewn with dodgy characters. As Mark Twain remarked: “A gold mine is a hole in the ground with a liar standing on the top of it.”

“The only way to survive as a junior mining company is build a solid track record and we have that,” says Daun. “Our investors are highly respected and our geological team, led by Jon Andrew and Dave Underwood, is among the best in the business. This explains why we have managed to close four separate rounds of funding, the latest being $15 million, which we secured in January.”

Osino was the first to explicitly apply the so-called orogenic approach to gold exploration in Namibia. This implies a geological approach based largely on structural geology and a new understanding of how fault lines occur and how this can point to the location of mineral deposits. Historical gold exploration in Namibia tended to be model-driven and somewhat dogmatic and Osino’s open-minded, first-principles based exploration approach has now yielded fruit where large mining houses previously working this area were oblivious to the riches beneath their feet.

The Damara sedimentary belt on which Twin Hills is located is part of the Pan-African belt which extends through East Africa to Sudan and Egypt, and has been known for more than 100 years as a heavily mineralised belt containing copper, uranium, gold and other minerals.

It wasn’t exactly a hunch (or near-ology, as it is often referred to in the industry) that got Daun and his team to start looking in the area – but almost.

The fact that Twin Hills is located about 25km from the functioning Navachab mine meant it was a reasonable bet that gold was likely much more widespread. Taking into account that orogenic gold systems usually occur in clusters and not just in isolation, Underwood, Osino’s head of exploration, directed the company to start looking along the large, regional structural trends connecting Otjikoto and Navachab, which bookend Osino’s licence holding. He assumed that gold could also occur in sequences that had previously been overlooked and Osino thus started a large regional soil and calcrete sampling programme.

In these desert conditions, millions of years of surface evaporation of ground water pulls tiny particles of gold to the surface, giving an indication of what’s lying beneath – which is exactly what was found.

Unlike the thin hard rock veins found in the Free State and Witwatersrand, the gold in Twin Hills is disseminated in tiny fragments over a very large area.

In 2018, Osino’s soil sampling indicated that it had hit the motherlode and Daun went to Canada in search of funding to allow for the start of a drilling programme. “We got the funding we needed and then started drilling holes every 25 metres, going down to depths of five to 20 metres,” says Daun. “It was at this point we realised the extent of the mineralisation.”

Indicators

Although no formal resource modelling has been done yet, the footprint and grades of the discovery so far indicate the potential for a 1-2 million ounce deposit with significant further upside. Daun is confident further exploration will see this increase. Osino plans to rapidly advance the project to feasibility stage and then to seek an operating partner or even on-sell to a mining major, as Osino’s founders did previously.

Based on a rule of thumb calculation of $100 million for one million ounces, the deposit could fetch $200 million to $300 million (up to around R5.5 billion).

As was the case with the other two Namibian gold projects, further exploration and infill drilling should also lead to an increase in grades by discovering further high grade zones and extending the ones already identified.

Namibian upside

Operating in Namibia has two major benefits: it is cheap to mine due to likely easy metallurgy and the weak exchange rate allows for cheap operating costs.

US dollars go a lot further in Namibia when converted to local currency than they would in most other countries.

Osino trades on the Canadian Stock Exchange at 87c a share. It is difficult to value junior mining companies with no cash flow, so a useful rule of thumb is to assess what other investors are paying. The initial investors bought their shares at 20c in 2016, followed by another round at 38c in 2017. The latest round in January 2020 for $15 million was concluded at 78c a share, only slightly better than the current share price of 85c.

Read: Inflow into gold ETFs accelerates

To access the shares you would have to open an account with a local broker that gives you access to the Canadian stock market.

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It’s sad that South African technology was once the best globally but now the South African experts grow the Australian and Canadian economies. All kudos to messrs. Daun & Co and brickbats to the ANC.

Using calcrete as a medium for exploration was perfected in Australia which has plenty of this. The gold in the calcrete is normally remobilised from the underlying bedrock and exists in a chemical not particulate form. Many other orogenic belts have major gold deposits. That aside, this discovery was long overdue IMHO. The fluids that formed the Navachab skarn are widespread in the high temperature/ high pressure part of the Damara orogen. Even the leucogranite uranium deposits have been altered by fluids with a markedly similar chemical signature. This may be a remobilisation of an non miscible sulphide phase formed by by partial melting.

BTW the gold deposits of the Freestate and the Wits Basin (of which the Freestate is a part thereof) are not veins but quartz pebble conglomerate tabular ore bodies colloquially called “reefs” of disputed origin.

Richard, thank you for the interesting info. Could the Wits Basin gold deposits and the Bushveld Igneous Complex platinum deposits have originated from the Vredefort meteor impact 2 billion years ago?

The Mining Charter removed South Africa’s mineral wealth from the surface of the earth and hid it in a safe in Luthuli House where Gwede Mantashe, Ace Magashule, Jessie Duarte and old Mrs Zuma guard the keys. They slowly release mineral rights to those investors who are willing to fund the ANC and to line the pockets of these unscrupulous individuals who guard the keys to the safe. Nobody who worked for his money is willing to enter that ambush, so the minerals stay in the safe and the people go hungry in the country with the most abundant mineral wealth on earth.

Luthuli House is a hoarder of mineral wealth, a price-gouger, that exploits the economic ignorance of the voting population by promising them “local beneficiation”, redress and participation on the one hand, and then delivering poverty and decay on the other hand.

Sensei, the age of the Bushveld Complex with the platinum deposits is about 2055Ma which predates the Vredefort event which has been dated at 2023Ma. The Wits basin is about 2900 to 2700Ma which also predates the Vredefort impactor which hit the centre of the basin. One should remember there were about 10km thickness of Transvaal sediments above the Wits basin when the bolide ~20km diameter hit. If the Wits is a paleoplacer and the gold allogenic in origin i.e. particulate and derived from outside the basin, then the Vredefort event did not create the gold deposits. However, the Wits gold is in fracture systems which are associated with shock metamorphic features. The placerists will argue that it has been remobilised a few mm. The hydrothermalists will argue that the gold was precipitated from fluids mobilised from the event. I lean towards the latter theory.

Wonderful! I appreciate your opinion and your answer. As I read both your posts it feels as if I am looking at a masterpiece, a work of art.

Sounds like one of those pump and dump penny stocks scams. Not interested

Lovely story in these dismal times. Great job creator…..It might be fun to have a not-too-expensive punt on this ….even if it’s just for the ride either way! Pity access to this share is not easier.

Well said Mac and great to see you are looking at the positives. You can make money even in times of crisis! We just need to believe in ourselves. South Africans are brilliant. We may not have the best leadership. But we are brilliant! That is the word.

I agree with you on that point.

Locals are forced to be innovative and entrepreneurial, and if they are appropriately incentivised, they are hard workers. You have identified the real problem. The political system does not incentivise people to work, the system incentivises people to steal and to wait for handouts. Any nation on earth will react in the same way under a similar system. This country has huge potential, but that potential is hidden under an old dilapidated couch in Luthuli House, where Gwede Mantashe and Jesse Duarte are sitting on it.

Indeed south Africans are. Elon Musk is a south African as are a number of silicon valley CEO’s. Sir Mick Davis is also a south African, as is Lord Peter Hain. So is Mark Shuttleworth.

Roger Federer is part South African. And the South African in this article is working in Namibia for Canadians.

What do they all have in common? They’re not in South Africa anymore.

40 years ago, Anglo American (world no 3) and BHP Billiton (world no 1) were headquartered 500m apart in downtown Johannesburg. Now they’re offshore.

They’ve all gone to countries where they are appreciated and where their talents are allowed to shine.

It’s amazing that the Rupert’s are still here. I would not be surprised if they decided to join the exodus soon.

Sounds good.the biggest problem is always the permits.

Why do you always need to mention the problem?! Why not just talk about the solution and mention the positives. This is brilliant in all senses. And we must be grateful! More jobs. Lots more cash. More taxable income. ITS GREAT! THERE IS NO PROBLEM.

No, there is a huge problem. On this one, you are way off.

People will die because of this. This is the most serious event in the history of the country, after the Xhosa cattle killings in 1956 where 80% of the Xhosa population died of starvation. Apartheid was nothing compared to this one. You have got no idea what catastrophe is waiting for you. Read “When Money Destroyed Nations” by Russel Lamberti and Philip Haslam if you want a glimpse of what is heading your way.

Whenever there’s a geological discovery of significant value in an African country, there tends to be a waiting line of government officials holding things up, until they get their palms crossed with silver from the discoverers. The issuing of permits is one of these holdups.

Sounds like an advertorial.

” Where have all the South African Mining Invedtors Gone?”

You are kidding right ?

In 1980 there were probably 1 million employed by Chamber of Mines affiliated mines. These men earned a living, raised a family, paid taxes as did their Employers. Mining towns such as Stilfontein, Orkney , Welkom, etc thrived. Today that number is around 150 000, and those hamlets are ghost towns.

There are more zama zama’s than ” legal miners” today.

So who has benefitted from their demise ? That question has been answered by other correspondents on this page – the greedy ANC.

Dubai imports tonnes of gold each year. How much of it from S A operations, probably a fair bit.

This is fantastic! It shows you the might and the innovation of South Africa and South Africans. And it is a find which will help our already growing trade surplus and make South Africans wealthy! May we get stronger and wealthier. South Africans are Brilliant! We are Dynamic!

May God bless us all.

Namibia is not part of South Africa. Namibia is a sovereign country. Maybe you’re still thinking in terms of apartheid times.

Mr Dadape, you have perhaps not noticed that this venture is taking place not in SA, but in Namibia t and not under draconian SA rules.

I took a small gamble on this punt on the day the article was posted and have almost doubled my money – let’s see what happens over the longer term, both in this company and to the gold price. So far so good.

End of comments.

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