Theta Gold to complete DFS on TGME underground project in second quarter

Following on from an update on progress at the company’s Transvaal gold mining estates in South Africa on Monday, Theta Gold Mines (ASX:TGM) this morning updated on progress made for the Definitive Feasibility Study (DFS) being undertaken at the Company's TGME Underground (UG) project comprising the Beta, Frankfort, CDM, and Rietfontein mines.

The DFS is now 85% finalised and is expected to be completed during second quarter 2022, which will aid the progression towards mine build and project development financing.

Post DFS – which incorporates four mines and a shared metallurgical facility - the company will advance discussions with several parties in relation to the larger develop CAPEX funding options.

Metallurgical test completed for Rietfontein Mine

Metallurgical test work undertaken at the Rietfontein Mine has achieved 89.5% gold recovery from simple leach testing (Free Milling Ore). 1.5-ton representative ore samples were taken at various points along the 3.2km orebody strike length, with five approximately equal samples collected by channel sampling across the gold reef system. Samples were collected from both high and low-grade gold areas in the mine to get a representative sample.

The bulk sample was dispatched to "Ready Lead Assay Laboratory" for Bottle Roll Leach Test.

Testing confirming a free-milling ore with a head grade of 4.41g/t and an overall ore recovery factor of 89.5%.

Rock engineering modelling

Rock engineering modelling, now completed on the vertical gold reef system at Rietfontein was undertaken to assess the optimum rock support system, indicating the size of the rib, crown, and sill pillars.

Results from Rock Mechanics Laboratory revealed that a 2.5m rib pillar, 5.0m crown, and sill pillar will be stable and the conditions acceptable for shrinkage mining at Rietfontein. In addition, the uniaxial, tensile, and compressive strength and deformation modulus of the reef and surrounding rock was tested.

Results suggest the reef can be blasted out without causing excessive damage to the hanging wall and footwall. It also implies that the correct sized pillars will intentionally crush without damaging the host rock.

Mine life

With Rietfontein now included in the TGME Underground project DFS alongside the Beta, CDM and Frankfurt mines, chairman Bill Guy hopes the Life of Mine can be extended to approximately 10 years.

"With the feasibility now moving to into its final stages we will continue to ramp up initiatives in order remain on track for completion in Q2. I look forward to updating shareholders as initiatives are completed and milestones hit."

Debt overhang

Theta Gold’s share price was down -12% two hours out from the close.

What could be creating an overhang on otherwise good news being issued by Theta are concerns over project development financing given company’s current debt level.

Earnings will clearly impact how the balance sheet stacks up into the future. Given that Theta currently has no significant operating revenue, shareholders will want to see clearer evidence that a valuable new mine can be developed in the not-too-distant future.

Over the last twelve months, Theta lost US$3.6m at the earnings (EBIT) level.

While Theta had US$11.8m of debt, an increase on US$7.35m over one year, it also had US$1.98m in cash, hence net debt is US$9.84m.

Theta Gold Mines share price has progressively lost ground over the last six months.