Auryx Gold says Namibia has been overlooked

Sometimes it pays off going to mining conferences.

In 2006 Tim Searcy, founder of Luna Gold (LGC-V) and its 1-million- ounce Aurizona gold deposit in northeastern Brazil, attended the Society of Economic Geologists’ conference in Keystone, Colo., where he met an exploration geologist working in Namibia.

The Namibia-based geologist happened to have discovered a gold deposit called Otjikoto that was similar in size to Luna Gold’s orogenic Aurizona deposit and the two geologists started chatting about the similarities of the two projects.

It was a conversation that would see Searcy ultimately shifting gears from South America to Africa. Now president of Auryx Gold (AYX-T), Searcy purchased Otjikoto from Teal Exploration and Mining for US$28 million earlier this year — a good deal considering Teal had spent about US$20 million over 10 years on exploration and development.

“I had my eye on the project for a long time,” Searcy says of the deposit, 300 km north of Windhoek. “Our purchase price was a 40% premium to their total cost over ten years. When you look at the time value of money it was probably very close to break-even for them.”

Searcy is excited about the late Proterozoic to early Paleozoic Otjikoto deposit because it is “similar in age and tectonic environment” to AngloGold Ashanti’s (AU-N, ANG-J) Navachab deposit, a multi-million-oz. deposit, 250 km to the southwest and Namibia’s only producing gold mine.

Otjikoto also shares some similar traits with Romarco Minerals’ (R-V) Haile gold deposit in South Carolina and Centamin Egypt’s (CEE-T, CEY-L) Sukari gold deposit, Searcy maintains, all of which have more than a million ounces of gold in the ground.

“The similarities with Navachab and ours are remarkable,” he says. “They have a parallel fracture system, they were formed at the same time, and they are located in the same stratigraphic host rock.”

Searcy also points out that when AngloGold put Navachab into production 20 years ago, it had a resource of 800,000 oz. gold. Today its current resource — after producing a total of 1 million oz. gold (50,000 oz. per year) — stands at more than 4 million oz. gold.

“Navachab has grown dramatically and we want to use that as a template for exploring, growing, and ultimately developing Otjikoto,” he explains.

Currently, Otjikoto has an indicated resource of 28.4 million tonnes grading 1.34 grams gold per tonne for contained gold of 1.22 million oz. and an additional inferred resource of 17.2 million tonnes of 1.28 grams gold for 708,000 oz. gold. The resource was calculated using a 0.4 gram gold cutoff and samples were capped at 15 grams gold.

Auryx started drilling the deposit on July 7 — the first exploration program on the property since 2008 — and the first drill results are expected in mid-September.

Searcy argues that Namibia — even after Navachab was discovered — has been overlooked and “doesn’t register on the screens of a lot of companies as being a major gold district.”

Navachab and Otjikoto are located within the Damara belt, which as it snakes its way into the rest of Africa is called the Pan- African belt.

In Namibia, the closure of a rift created large deposits including some uranium deposits which are of the exact same age as Navachab and Otjikoto, Searcy explains. The same belt hosts some copper deposits in Zambia, which are of a similar age to the gold and uranium deposits in Namibia.

“It was a massive continental-scale process that has formed all of these deposits,” he says. “And it’s not well-documented in the industry.”

Namibia, which gained independence in 1990, has many other attributes that make it a great place for a mining company, says Searcy. It regularly ranks as one of the top investment jurisdictions in Africa and with a population of 2 million people, conflicts over land are unlikely to emerge, which makes it easier to get approvals.

It’s also an inexpensive place to do business. Holding costs for Auryx’s 3,500 sq. km are extremely low at just US$5,000 per year, as are the costs of buying data from the government. The Namibian government has flown an airborne geophysical survey over the entire country at 200 metres spacing and companies can buy data for about US15¢ per line kilometre.

“The geography reminds me of northern Ontario,” Searcy adds, “with small towns separated by long distances connected with two-lane paved highways.”

The junior listed on the Toronto Stock Exchange on July 9 and is currently trading at about 60¢ per share.