Buddy Doyle leads Amarillo Gold

Seven years in the malaria-infested rainforests of Papua New Guinea and six years in Canada’s Arctic led Buddy Doyle and his exploration teams at Rio Tinto (RIO-N, RIO-L) to the two biggest discoveries of his career: the 30-million-oz. Minifie gold deposits at Lihir and the Diavik diamond mine in the Northwest Territories.

But after two decades at a major the geologist from Brisbane, Australia, decided it was time to strike out on his own. He made the jump into the juniors in 2004 and today heads  Amarillo Gold (AGC-V), a company with ground in Brazil.

“It was a good 23 years and I must admit leaving it was one of the scariest decisions I have ever made,” Doyle reflects in an interview. 

“It was great having a big company with support and infrastructure, but with that comes a lot of red tape. So, I thought I would jump out the next time there was a boom, and 2004 was a good time to jump out and that’s what I did.”

His leap of faith resulted in the start up of Amarillo Gold, a company in which he and co-founder and fellow Australian geologist Rick Brown invested their combined life savings of US$450,000, and took public in 2005.

The junior’s flagship project is Mara Rosa, a formerly producing open-pit mine in central Brazil’s Goias state, about 36 km to the northeast of Yamana Gold‘s (YRI-T, AUY-N, YAU-L) Chapada open-pit copper-gold mine, and 100 km from Kinross Gold‘s (K-T, KGC-N) Crixas underground mine.

Mara Rosa is also about 105 km northeast of Kinross’s and AngloGold Ashanti‘s (AU-N) Serra Grande underground gold mine, 105 km northwest of Anglo American‘s (AAUK-Q, AAL-L) nickel laterite project (under construction), 95 km northwest of Votorantim’s Niquelandia nickel laterite mine, and about 60 km northeast of Yamana’s Pilar gold project, which is in the feasibility stage.

Amarillo is advancing Mara Rosa through a prefeasibility study and Doyle says the company expects to make a production decision in early 2012. Conceivably the project could be in production as early as 2014. Kinross holds a 5% stake in the junior.

“We are about de-risking Mara Rosa and moving on to feasibility. We should have the decision to mine early next year and, about
18 months after that, we can be mining,” he says. “Judging by all the mining around us, getting
environmental permits is doable and we don’t see any roadblocks there.”

Grid-power to the site was established during the previous open-pit mining operation, there
is a paved highway to site, and
35 km to the east is the Serra da Mesa 450-megawatt hydroelectric dam. 

“You drive to your drill rig, your cellphone works, and there’s great geology – to me, it’s paradise,” says Doyle, whose memories of foot rot and malarial fevers in the jungles of Papua New Guinea and bone-chilling temperatures of the Arctic are still vivid.

Mara Rosa’s Posse deposit has a National Instrument 43-101 indicated resource of 11.9 million tonnes grading 1.62 grams gold per tonne for 623,000 oz. of contained gold. Inferred resources add 10.1 million tonnes of 1.38 grams gold for 451,000 oz. gold, at a 0.5 gram gold cutoff grade.

“We all thought this would be a good project to buzz US$600 per oz. gold and we thought US$600 would come some day,” Doyle recalls. “So now at these gold prices it’s a great little project. It’s basically 900,000 oz. accessible to an open pit.

“We’ve done forward modeling to about US$1,200 per oz. gold,” Doyle continues. “A US$1,200-per-oz. gold pit goes down about 300 metres and has a 5.4-to-1
strip ratio.”

Results from recent resource definition drilling at Mara Rosa included intercepts such as 26.3 metres of 1.08 grams gold, 25.4 metres of 1.47 grams gold, and 16.4 metres of 3.17 grams gold.

Doyle says the company’s strategy is to push ahead with building a mine at Mara Rosa, but adds that the company fully intends further exploration around the site. 

“We think there’s blue sky around Mara Rosa, but we have the bird in hand and with the gold price, the thing has nice economics so we’re moving ahead with what we’ve got. But after we’ve been doing the drilling that’s almost completed now, we do intend to go exploring.” 

In southern Brazil, Amarillo Gold has an advanced-exploration stage gold project called Lavras do Sul in Rio Grande do Sul state. The company says its 12-km by 7-km project is the largest land package put together in the 300-year mining history of
the Lavras Intrusion, which cont-ains many old gold workings.

So far, Amarillo has tested five of the 19 known prospects at Lavras do Sul and four have returned significant gold values. Each of the areas is far enough away from each other to operate as separate open pits but with one common processing plant, Doyle envisions.

“Our strategy is to map the old areas of diggings and put about 10 holes into each one and if any of them come back we’ll spread it out,” he explains. “So far it’s working four times out of five and we’ve got 14 areas to go. There’s gold in 80% of the holes, so there is a resource there.”

One of the prospects at Lavras do Sul, called Butia, already has an initial resource estimate of
6.4 million tonnes at an average grade of 1.05 grams gold for 215,000 oz. gold in the indicated category and 12.9 million tonnes of 0.74 gram gold for 308,000 oz. in the inferred, at a cutoff grade of 0.3 gram gold.

Doyle has a knack for finding deposits. “You get to know what nature delivers,” says Doyle, who in 2007 received the Hugo Dummett Award for excellence in diamond exploration. “Big systems deliver big orebodies and you get to know or have a feel for that… you do get a nose for what nature works. And then it’s down to building the right team and the right people to make it work.”

Mackie Research analyst Dale Mah has a buy on Amarillo Gold’s stock with a 12-month target price of $2.40 per share. 

Amarillo is currently trading at about $1.50 per share, within a 52-week range of 50¢ (April 8, 2010) and $1.90 per share (Dec. 24, 2010). It has 56.2 million shares issued, and no warrants.  

Doyle argues the company is undervalued, partly because as president and chief executive he hasn’t spent enough time on marketing. “Whenever we do try to get our story out and go on a roadshow our share price always goes up but we can’t do everything,” he says. “I’m more effective doing what I do; I’m not built to promote on the street.”