Exploration business Oriole Resource rose to 0.37p on Wednesday after updating investors on its strategic repositioning, exploration progress in Cameroon and Senegal, and strong financial position. Here, chief executive Tim Livesey and chief financial officer Bob Smeeton talk us through the significance of the figures and why they believe Oriole remains highly undervalued in the retail market.

Financial discipline

The headline figure from the results was an operating loss of £2.55m for the year to 31 December 2018, a significant improvement on the loss of £7.5m in the prior year, where the higher operating costs were due mainly to the attempted acquisition of Australian listed Crusader Resources.

Chief financial officer Bob Smeeton tells us this drop in operating costs has arisen from the business’s strategic repositioning over the year as well as an increased cost discipline over the period, which resulted in an impressive 26pc reduction in administration costs.

This saw Oriole introduce a renewed strategic focus on high-impact, early-stage exploration assets. Principally, it shifted its focus onto its existing exploration project in Senegal and a new project in Cameroon while continuing its efforts to monetise its legacy and royalty assets in Turkey.

Elsewhere, the firm introduced a new management team headed up by chief executive Tim Livesey, who joined in March last year to replace Bob Foster, who had been in an interim role. Finally, to reflect its repositioning, the outfit changed its name to Oriole Resources from Stratex International in September.

We basically did all of the administrative changes that we could do without having to close down and re-open the firm,’ Smeeton tells us. ‘We have refreshed the company entirely. We are on a much more even keel now, following a difficult 2017. The reduction in administrative costs reflects the agreed revised compensation positions of the new management team and Board, additional fiscal discipline around advisers and other corporate running costs, and this will continue.’

Expanding on this final point, Smeeton said the successful resolution of a long-running VAT dispute with HMRC in February 2019 is likely to cut administration costs further this year. Indeed, the organisation incurred £170,000 worth of adviser fees in relation to the dispute last year, which will now fall away.

He adds that the resolution will also boost Oriole’s cash balance, as it expects to receive a £500k rebate from the UK tax office in Q2 2019. The organisation’s cash, which sat at £1.29m at the end of 2018, will also be boosted by a recent $500k success fee from its Turkish partners on the Karaağaç gold project and a £40k R&D credit noted last month, from activities in the 2016 tax year.  Further R&D rebates are expected for 2017 & 2018. Smeeton says this should cover the cost of its planned work activities and administration for the remainder of the year.

‘Obviously, as a junior explorer the more work we do, the more money we will spend,’ he added. ‘However, we are in a fairly comfortable position at the moment.’

New assets

Wednesday’s results also saw Oriole update investors on its 85pc-owned Dalafin project in Senegal. In March last year, the business announced that it had struck an agreement with IAMGOLD that would allow the mining major to earn a 70pc interest in the licence over six years by spending $8m. Work has commenced, with IAMGOLD meeting and exceeding its first year spending commitment.

The firm has confirmed mineralisation within multiple zones at the Madina Bafe target in the south of the licence area. This is a priority for the business as it falls within 10km of its 2.59Moz Boto gold project, where it has applied for a mining licence.

Last month, IAMGOLD outlined a $1m year two work programme for the asset that will see it carry out another c.13,000m of AC and RC drilling. This will include work at the Saroudia prospect, which Livesey tells us is also just a stone’s throw away from Boto.

A diagram showing the location of Dalafin and its prospects

Elsewhere, Oriole provided an update on its new Bibemi and Wapouzé ventures in Cameroon. Last year, the firm signed an agreement to earn-in up to a 90pc stake in the sites by spending $3.12m over four years. It has already completed a rock-chip sampling programme at Bibemi that demonstrated ‘bonanza’ grades, with multiple assays returning in excess of 100g/t.

Meanwhile, it started a phase one trenching programme on the licence late last year, with initial results this month confirming multiple zones of orogenic-style gold mineralisation. This includes 6m at 3.02g/t with individual veins returning up to 13.6g/t gold. The organisation is currently waiting for its remaining trenching results but has already commenced Phase 2 trenching across key results to date At the earlier-stage Wapouzé asset the firm has started a systematic soil sampling programme, with results expected soon.

With Cameroon’s wet season now approaching, Livesey told us that Oriole will spend some time analysing its geological results at both sites to date with a view to progressing them later this year:

‘We are interrogating the geological and sampling data that we have received and are still receiving. We will then try to understand the controls on the mineralisation at Bibemi and then apply that knowledge to the next phase of exploration. We will also look at whether the findings also apply at Wapouzé or if it is a completely different system. Ultimately, the goal is to get to the point where we can maximise our chances of success with some targeted drilling.

A diagram showing the location of Oriole's assets in Cameroon

Moving forward

Finally, in its outlook for 2019, Oriole said there is a ‘great opportunity’ for Oriole to establish itself as a high-quality exploration player after building foundations throughout last year. Despite the progress made by Oriole since its restructuring, the company’s shares have struggled to progress and currently sit at 0.38p. This gives the business a market cap of £2.63, little over its current cash balance.

The recent resource bear market has provided little support here, and Livesey told us he believes that Oriole is currently highly under-valued. However, he remains hopeful moving forward:

We consider Oriole to be massively undervalued with its current market cap close to cash in bank,’ he said. ‘We should be trading significantly higher than where we are today when one considers the money we have got in the bank, the fact we have IAMGOLD as a partner, the value being realised in our legacy assets, and the progress we are making as first movers in a new gold district in Cameroon. It just doesn’t make sense at all. Moving forward, we will continue to progress our efficient and cost-effective exploration programmes, and we are sure the market will eventually catch on. We have a free carry in Senegal, cash in the bank and a team delivering on exploration in Cameroon.  It is a very exciting time for us and we look forward to updating investors over the coming months.’

Author: Daniel Flynn

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