Guyana Goldfields outlines 22-year operation at Aurora

Guyana Goldfields’ (GUY-T) Aurora project, in Guyana, could produce nearly 200,000 oz. gold per year over 22 years for a total of 4.4 million oz., according to a new feasibility study.

At US$1,300 per oz. gold, US$100 per barrel of oil and a 5% discount rate, the project has a net present value (NPV) of US$432 million and a 12.7% internal rate of return after taxes. Payback is expected in seven years.

Operating cash costs are estimated at US$522 per oz. — or an 8% production royalty that declines to 5% if gold dips under US$1,000 per oz. — and US$626 over the life-of-mine.

Initial capital costs at the combined open-pit and underground operation come to US$525 million. This amount could get the six planned open pits going, with US$465 million in anticipated initial costs for the underground ramp and shaft operation to be funded through cash flow.

The feasibility study outlines an 8,000-tonne-per-day operation, with throughput declining to 4,500 tonnes per day after underground mining replaces open-pit production in 2024.

The fully permitted Aurora project is located 170 km west of Georgetown on the Guiana Shield’s Cuyuni greenstone belt.

Slated to begin commercial production in late 2014, the project would be the first large-scale gold mine in Guyana since Cambior Resources’ and Golden Star Resources’ Omai mine shut down in 2005. In a recent presentation, Guyana Goldfield’s president and CEO Claude Lemasson noted that the project would increase Guyana’s gross domestic product by 25%.

Lemasson believes the study represents the high side of the project’s ultimate cost and expressed confidence that the project won’t see the same cost overruns others have seen in recent years.

“As everybody knows, there’s been some serious issues with capital costs in the industry in general,” Lemasson said in a conference call. “We believe that it was very important for us at this time in the industry to really revisit and triple revisit our costs in detail, and at the same time build conservatism into some of the numbers to ensure that . . . the costs would hold under scrutiny, and are also executable in the field.”

The company presented other scenarios in the feasibility that put gold and oil prices at a ratio of 16 to 1, which Lemasson believes is more realistic than using the three-year, US$1,300-per-oz. trailing average price for gold and US$100 oil. One scenario for US$1,775 per oz. gold and US$110.94 oil put Aurora’s after-tax NPV at $1.2 billion, its IRR at 23.6% and the payback period at 4.3 years.

The study is not the final word on the project. Over the next few months, Guyana Goldfields will be working on an optimization study that should improve the economics. It has also commissioned an independent review of the feasibility study.

The company is also examining the possibility of using hydro and biomass power at Aurora to reduce fuel and power generation costs. However, that initiative would require separate permitting. The company will be studying its options over the next eight months.

Another opportunity for upside at Aurora comes from ongoing drilling at the site. A resource update is expected in the second half of the year.

Aurora holds proven and probable reserves of 45.22 million tonnes grading 3.17 grams gold per tonne for 4.6 million oz., at US$1,200 per oz. gold. Total gold production is pegged at 4.4 million oz., with gold recoveries at a conventional carbon-in-leach plant are forecast at 94.8%.

Guyana Goldfields also has the large Aranka project 30 km northeast of Aurora, where the Sulphur Rose deposit hosts an indicated resource of 8.3 million tonnes grading 1.04 grams gold for 277,580 oz., plus 6.3 million inferred tonnes at 1.42 grams gold for 289,250 oz. The company recently announced the N1 prospect at Aranka, which is a 400-by-300-metre soil anomaly where drilling has returned 29 metres of 1.03 grams gold from 36 metres depth, and 20 metres of 4.35 grams gold. With a top cut of 25 grams gold, the grades decline to 0.77 gram gold and 2.62 grams gold, respectively.

At presstime, Guyana Goldfields shares traded at $5.60. The company has a 52-week trading range of $5.37–$10.58, and 83.9 million shares outstanding. The company is looking to raise funds for Aurora in the third quarter.