Guyana, a Caribbean country on the South American coast, is a hidden gem of the minerals industry – underexplored by large mining companies but voraciously mined for decades by small-scale artisanal miners. Canadian company Guyana Goldfields (TSX: GUY) is one of the few international companies to be in on the secret. It arrived in the country in 1996 and went on to develop a high-grade, open-pit gold mining project with excellent recoverability and economics. Twenty years later, the company is finally closing in on its first gold pour.
Scott Caldwell has been part of Guyana Goldfields for around three and a half years, spending the first half of that time on the Board of Directors and the second half as President and CEO. He describes how the Aurora Gold Project is the result of many years’ hard work and perseverance.
“Guyana Goldfields had been in the country for eight years, undertaking exploration and CSR activities, before it made its big discovery at Rory’s Knoll,” says Scott. “That discovery was the catalyst for everything else.”
He explains that the Rory’s Knoll area had been mined long before Guyana Goldfields came across it – as far back as the mid-1900s, when high-grade underground mining began and gave way to decades of small-scale artisanal mining. When Guyana Goldfields made its own discovery there it immediately optioned the property off and proceeded to investigate further.
“The company spent a lot of money on more than 300 kilometres of exploration drilling within the Aurora property package,” says Scott. “The first feasibility study was completed in January 2012 and a second feasibility study in January 2013, which we used to finance the project through equity and debt.”
The Aurora Gold Project is now fully financed – in fact, the initial capital is overfunded by an estimated $58 million – and about 80% built. First gold production is expected mid-year, followed by complete mechanical completion of the processing facilities and commercial gold production late in the third quarter. “It’s been a long journey,” Scott remarks, “but we’re almost there.”
With full-blown construction now underway, the project site is a hive of activity. Guyana Goldfields is pleased to be building the project with the help of numerous Guyanese companies, including Barama Company Limited, Trail Boss Trucking Services and Caterpillar supplier Macorp. “Trail Boss has done a great job transporting our equipment up to site from Buckhall Port, and Macorp has been very supportive in providing equipment and services for the construction,” Scott remarks. The largest contractor on-site is GSJV: a joint venture between Australia’s Sedgman Limited and Peru’s Graña y Montero (GyM). Both companies provided highly skilled labour, with Sedgman managing the procurement and design work and GyM handling the construction work.
The Aurora Project
The Aurora Gold Project is projected to produce 3.29 million ounces of gold over an initial 17-year mine life. It is expected to produce 30-50,000 ounces of gold in 2015 and 120-140,000 ounces of gold in 2016, which will rise over the life of the mine to an average annual rate of 194,000 ounces per year. The project has an average grade of 2.74 grams of gold per tonne and a strip ratio of 4.7:1, allowing for comparatively low-cost recovery of 97% saprolite and 94.4% fresh rock.
Scott and his team are confident that these figures will give Guyana Goldfields an advantage in the highly competitive gold market. “We’re blessed with a very high grade for an open pit and excellent metallurgy,” he remarks. “The deposit is all free-milling gold with very low sulphide content, so it recovers very well. That equates to low costs and high profitability. We’ll be producing gold at an all-in cost of $800 per ounce, so at today’s metal price that gives us a $400 margin and the ability to generate quite a bit of cash, despite the mine having a relatively small mill throughput of around 5,000 tonnes per day.”
However, there is scope for the operation to grow bigger. The Aurora Gold Project has a total gold resource of 6.54 million ounces in the Measured and Indicated categories, as well as 1.82 million ounces in the Inferred category. These ounces are located below the 970m depth of the planned underground pit at Rory’s Knoll and below the satellite pits of the Aleck Hill, Mad Kiss and Walcott Hill targets.
“We believe there is scope to expand the mine and double the size of the processing plant after several years,” Scott remarks. “At the planned throughput rate of 5,000 tonnes per day, the full Aurora Project potentially has a mine life exceeding 30 years – which is a really long time – so we’d like to condense that and generate more ounces over a shorter period if possible. But before we make that decision we want to run the plant, see how it performs, see how the deposit performs and then evaluate whether it makes sense to expand it.”
The Marupa and Iroma prospects immediately north of the Aurora project have potential to provide supplemental feed for the Aurora mill, expanding the operation further. Guyana Goldfields is undertaking exploration here.
A foundation for success
Guyana Goldfields has invested heavily in developing government and community relations and this should ensure that the course of the mine runs smoothly. “Our CSR [Corporate Social Responsibility] effort has been led by our Guyanese Country Manager, Violet Smith, who has done an amazing job of developing our relationships with the government, the regulatory authorities and the local people,” Scott explains. “We’ve ran some really effective social programmes thus far.”
Guyana Goldfields’ CSR activities have helped built trust between the company and the Guyanese government, which Scott says is very supportive toward miners and well regulated in regard to mineral claims, licensing and environmental and safety standards. “The government’s support and stability, together with Guyana having a well-educated workforce and English as its official language, have made the country a very good place to work,” says Scott. He adds that the company also has a good relationship with the artisanal miners operating nearby.
These factors lay a solid foundation on which to develop its first mine, as well as others in the future. Guyana Goldfields already holds the vast Aranka property located 19 miles northeast of Aurora Base Camp, comprising 19 contiguous prospecting licences covering more than 307,589 acres. Further exploration work here could lead to discoveries enabling further open-pit mines. Scott says he is keen for Guyana Goldfields to branch out into different assets.
“We believe any mining company should have more than one asset in order to lower its risk,” he explains. “In the longer term we’ll look at gaining further assets through M&A, but we’re not active on that front yet.”
In the shorter term, the focus lies entirely on getting the Aurora Project up and running. “We have a lot of work to do over the next six months, where we’ll hopefully be generating a lot of cash,” says Scott. “We’re focused on the near term because we believe that if we execute our milestones – get this project up and running on time and on budget – then hopefully our share price will respond favourably and we’ll get a re-rate bump. Once that’s happened, we’ll figure out what’s next.”