Orezone Gold: A High-Conviction Growth Story in a Rising Gold Cycle

The gold sector is entering a structural bull market, driven by inflationary pressures, central bank demand, and a global shift toward tangible assets. Amid this backdrop, Orezone Gold Corporation (ASX: ORE) stands out as a compelling long-term investment thesis. The company's strategic capital allocation, disciplined operational execution, and scalable production growth in a low-cost African gold asset position it to capitalize on the rising gold cycle. With a robust liquidity position, a dual-stage expansion plan, and strong margin visibility, Orezone is poised to deliver outsized returns for shareholders.

Strategic Capital Allocation: Fueling Growth with Discipline

Orezone's recent $75 million ASX initial public offering (IPO) underscores its ability to secure capital at favorable terms, accelerating its hard rock expansion roadmap. The proceeds will directly fund Stage 2 of its 5.5 Mtpa expansion, which is projected to cost $90–95 million. This disciplined use of capital reflects management's focus on balancing growth with financial prudence.

The company's liquidity of $103.9 million (as of June 30, 2025) provides a strong runway to execute its 2025–2026 expansion plans without diluting shareholders. Notably, Orezone has maintained a conservative debt structure, with $31.3 million in undrawn senior debt acting as a buffer for unexpected costs. This flexibility is critical in a sector where capital-intensive projects often face delays or inflationary headwinds.

Operational Execution: Scaling Production While Managing Costs

Orezone's Q2 2025 results highlight its operational resilience. Gold production rose 8% year-over-year to 27,548 ounces, driven by a 10% increase in plant throughput and improved recovery rates. Despite a 3% decline in head grades, the company offset this with higher throughput, demonstrating its ability to adapt to geological challenges.

However, all-in sustaining costs (AISC) increased by 13% to $1,830 per ounce, primarily due to higher royalty costs, diesel dependency, and currency fluctuations. While these factors are largely external, management has taken proactive steps to mitigate them. For instance, grid power utilization improved to 50% in Q2 2025 (up from 34% in 2024), reducing reliance on costly diesel generators. This trend is expected to continue, with grid utilization exceeding 90% in Q3 2025, directly lowering AISC.

Scalable Production Growth: A Dual-Stage Expansion Catalyst

The cornerstone of Orezone's growth strategy is its two-phase hard rock expansion at the Bomboré mine.

• Stage 1 (2.5 Mtpa): At 63% completion, this phase is on track for first gold in Q4 2025. Once operational, it will boost annual production to 170,000–185,000 ounces by 2026.
• Stage 2 (5.5 Mtpa): Approved in 2025, this phase will further expand capacity, targeting 220,000–250,000 ounces annually by 2027. With a 16-month construction timeline and a $90–95 million price tag, Stage 2 is a high-impact lever for long-term growth.

These expansions are not just about scale—they are about sustainable margin expansion. By increasing throughput and leveraging economies of scale, Orezone can reduce per-ounce costs while capturing higher gold prices. The company's exploration success, which has extended mineralization by 200–300 meters in key zones, further de-risks the long-term resource base, ensuring production growth is backed by a robust asset.

Margin Visibility in a Rising Gold Cycle

Gold prices have surged to record highs in 2025, with Orezone's average realized price jumping 43% to $3,338 per ounce in Q2. This tailwind, combined with the company's low-cost African model, creates a powerful margin lever.

Despite rising AISC, Orezone's adjusted EBITDA more than doubled to $45.5 million in Q2 2025, reflecting the inelasticity of gold demand and the company's ability to pass through higher prices. With gold trading near $3,400 per ounce and central banks continuing to accumulate reserves, the margin upside is substantial.

Investment Thesis: A Long-Term Play with Clear Catalysts

Orezone's combination of strategic capital allocation, operational execution, and scalable growth makes it a rare high-conviction opportunity in the gold sector. Key catalysts include:
1. Stage 1 and 2 expansions coming online in 2025–2026, driving production and margin growth.
2. Exploration success expanding the resource base to 7–10 million ounces, supporting multi-year production.
3. Gold price momentum and sustained industry demand, particularly from central banks and ETFs.

While the company's free cash flow remains negative due to capex, its liquidity position and conservative debt structure provide ample runway. For investors seeking exposure to a low-cost, high-growth African gold producer, Orezone offers a compelling risk-reward profile.

Final Take

In a rising gold cycle, Orezone Gold is uniquely positioned to outperform. Its disciplined capital allocation, operational agility, and scalable expansion roadmap align with the structural drivers of the sector. With a clear line of sight to production growth, margin expansion, and resource base expansion, the company is a must-watch for long-term investors.

Investment Recommendation: Buy and hold for the next 12–24 months, with a focus on execution of the Stage 1 and 2 expansions and continued gold price strength.