Guyana Goldfields Rises On Study

VANCOUVER — A mine at the Aurora gold project in north-central Guyana could produce 4 million oz. gold over a 16-year mine life for Guyana Goldfields (GUY-T, GUYFF-O), according to a new scoping study.

The preliminary study investigated the economics of developing a mine at Aurora that would start as an open-pit operation and, after several years, would add an underground component. For the mine’s first nine years it would churn through 8,000 tonnes of ore per day, to produce an average of 250,000 oz. gold each year over its 16-year mine life.

The study predicted total capital costs to build, sustain and reclaim the mine at US$520 million. Of that amount, development to begin open-pit operations accounts for US$26 million, surface equipment takes US$21 million, underground development and equipment add US$157 million, and sustaining and closure costs chip in the remaining US$80 million.

For that investment, Guyana Goldfields should be able to produce an ounce of gold for US$364. And using a base-case gold price of US$750 per oz., the project carries a net present value (NPV) of US$236 million, using an 8% discount, and generates a 16.3% internal rate of return (IRR). Capital cost payback could be achieved in six years.

Using a gold price of US$950 per oz., the NPV climbs to US$678 million and the IRR reaches 27%, reducing the payback to just under four years.

An updated estimate pegs Aurora’s indicated resources at 24.1 million tonnes grading 4.1 grams gold per tonne. Inferred resources add 12.9 million tonnes averaging 3.3 grams gold. Combined, the resources contain 4.6 million oz. gold.

Most of those resources fall within the conceptual pits and underground mine plan, which means minable tonnage is not dramatically less than total resources. The conceptual open pit hosts 17.9 million tonnes grading 2.8 grams gold, while the underground operation would tap into 18.1 million tonnes averaging 4.5 grams gold.

The mineralized rock at Aurora is primarily sulphide, with a thin layer of oxide at surface. Ore would be fed through a semi-autogenous grinding mill and ball mill combination; gold would be recovered from the milled ore via gravity and carbon-in-leach circuits.

Guyana Goldfields envisages construction beginning at Aurora in 2010 and taking two years. On that schedule, the open pit would be mined from 2012 to 2020; underground operations would begin in 2015 and last until 2028.

The company is designing an embankment, or river dyke, to protect an area at the northern end of the site from potential flooding during exceptional events. In addition, a surface water management system for drainage is being designed to manage surface water in the high-rainfall environment.

The scoping study outlines a development plan that includes a small port facility and an access road extension, though work is still needed before those projects are finalized. And the company is conducting a topographical survey to identify potential sites for a hydropower dam.

Over the next six months, Guyana Goldfields will continue its extensive drill campaign, which is a combination of infill and stepout drilling. The company wants to complete the Aurora environmental and social impact assessment before the end of the year, complete the hydropower feasibility study in early 2010, and complete a feasibility study before the middle of next year.

To help fund those activities, the company closed a non-brokered private placement, selling 6.2 million units at $2.75 apiece to raise just over $17 million. Each unit comprised a share and half a warrant, with each warrant exercisable at $4 for three years. On news of the scoping study, Guyana Goldfields’ share price gained 31¢ to close at $4.54, a new 52-week high. The company has a 52-week low of 61¢ and 65 million shares outstanding.