New zone shows promise for Greystar as Angostura feasibility progresses

Vancouver – Regional exploration efforts are paying off for Greystar Resources (GSL-T) as drills return oxide gold-silver intercepts from a new zone just 3 km from the company’s flagship Angostura deposit in northeast Colombia.

The new area, dubbed Mongora, appears similar to the upper oxide layer at Angostura, returning short, high-grade gold intercepts within broader mineralized envelopes. Greystar vice-president Frederick Felder says the findings are exciting because the new zone could enhance the economics at Angostura, where a recent prefeasibility study proposed mining and processing oxides only for the first two years of operation.

For that reason the drill program at Mongora is focused on delineating oxides, using 50-metre drill hole spacing and 50-degree drill angles. The first set of results included several promising intercepts.

The best result came from hole AN08-09, which returned four mineralized intercepts: 36.7 metres grading 1.11 grams gold per tonne and 3.5 grams silver per tonne from 26 metres depth, 10.6 metres averaging 3.77 grams gold and 3.5 grams silver from 70 metres downhole, 14 metres of 0.77 gram gold and 3.3 grams silver form 217 metres below surface, and 20 metres of 0.9 gram gold and 1.1 grams silver from 240 metres.

Collared 220 metres to the north, hole MO09-09 also hit four mineralized zones: a 17.4-metre intercept averaging 2.67 grams gold and 4.2 grams silver from 99 metres depth was followed closely by 9.4 metres grading 1.01 grams gold and 3.3 grams silver. Some 70 metres later the drill hit 19 metres carrying 0.87 gram gold and 1.9 grams silver, followed directly by 1.9 metres of 8.53 grams gold and 1.7 grams silver.

Moving in the opposite direction, hole MO09-01 was collared 230 metres south of hole AN08-09. It first hit 26.8 metres grading 0.55 gram gold and 2.1 grams silver and then, 33 metres later, cut 14.2 metres averaging 0.86 gram gold and 1.6 grams silver. Then at 165 metres depth the drill hit 5.1 metres of 2.67 grams gold and 2.3 grams silver, at 205 metres downhole cit cut 3 metres of 1.31 grams gold and 2.8 grams silver, and at 265 metres below surface it drilled 5.5 metres of 1.44 grams gold and 0.9 gram silver.

Greystar plans to complete 10,000 metres of drilling in 2009 testing satellite targets; roughly half of the program is already complete and has focused exclusively on the Mongora zone.

Most of the company’s attention is focused 3 km to the north, on the Angostura deposit. In December Greystar updated the project’s resource estimate; in March a pre-feasibility study based on the new resource numbers came out. Encouraged by the strong pre-feasibility numbers, Greystar immediately commissioned a feasibility study, which is due out by the end of the year. The company also expects to submit its environmental and social impact studies to the Colombian government before year-end.

The pre-feasibility study proposed an operation processing both oxide and sulphide mineralization in separate avenues. Oxide mineralization would be treated in a 70,000-tonne-per-day heap leach operation; after the first two years of operation the mine would also start up a 5,200-tonne-per-day milling and flotation circuit for sulphide ore.

Current reserves support a mine producing 511,000 oz. gold and 2.3 million oz. silver annually for 15 years. Using a gold price of US$700 per oz. for the first three years and US$650 per oz. thereafter, the project carries a net present value (NPV) of US$558 million, using a 6% discount rate, and generates a 19% internal rate of return (IRR). If the price of gold averages US$750 per oz., the NPV rises to US$942 million and the IRR climbs to 24.9%.

A mine at Angostura should be able to produce an ounce of gold for US$391, excluding by-product credits. The stripping ratio is expected to be 2.25 to 1.

So the economic numbers for Angostura are all big, including the estimated capital cost. To develop the mine is expected to cost US$638 million; to sustain the operation over its 15-year mine life will cost US$307 million.

The feasibility study will look to improve the economics from the pre-feasibility study in five specific ways. The study will investigate using a fixed primary crusher instead of a semi-mobile unit, recirculating and concentrating the pregnant leach solution, and adding a heap bio-oxidation pretreatment phase to the heap leach process. The study will also incorporate data from run-of-mine heap leach test, currently underway, to finalize crush sizes and will decide between three possible processes streams to recover gold and silver from the flotation concentrate (on-site roasting, bio-oxidizing the concentrate, or super-fine grinding and tank leaching).

So far Greystar’s environmental and social work has not identified any impediments to mine development. The area is an historical mining district, which has helped position community support behind the project.

The project’s overall resources sit at 331 million measured and indicated tonnes grading 1.1 grams gold and 6 grams silver. Inferred resources add 91 million tonnes averaging 1.2 grams gold and 6 grams silver. Mineral reserves total 312 million proven and probable tonnes grading 0.9 gram gold and 5 grams silver. The majority of the tonnage – 293 million tonnes grading 0.6 gram gold and 4 grams silver – are oxide. The sulphide component – 19 million tonnes grading 5.1 grams gold and 21 grams silver – is smaller but carries a better grade

As of the end of March Greystar had $34.4 million available as working capital. The company’s coffers enjoyed a $12-million top-up in the first quarter, as Greystar sold 6.6 million units at $1.83 a piece in a private placement. Each unit comprised a share and three-quarters of a warrant. The buyer was the International Finance Corporation (IFC), which is a member of the World Bank Group focused on private sector investments in developing countries.

Greystar’s management says the company has sufficient cash on hand to fund this year’s operations. The company plans to spend $13.5 million on exploration and feasibility-related costs, $4.2 million on early construction activities, $2.3 million on various capital asset and equipment acquisitions, and $5.4 million on administration.

On news of the Mongora drill results Greystar’s share price gained 5¢ to close at $3.70. The company has a 52-week trading range of 55¢ to $5 and has 53 million shares outstanding.