Guyana has issued its first large-scale mining licence in the gold sector since 1991–giving Guyana Goldfields (GUY-T) the permission it needs to build and operate its Aurora project.
Terms of the licence include a mining royalty of 5% on gold sales at a gold price of US$1,000 per oz or less, and a mining royalty of 8% on gold sales at a gold price over US$1,000 per oz. The corporate income tax rate has been set at 30%. The agreement also outlined duty and value-added tax exemptions on all imports of equipment and materials required for continuing operations at the project, including the panned port facility, road and power improvements, and the construction and operation of the mine. The licence is valid for an initial 20-year term with provisions for extension.
Adam Graf of Dahlman Rose & Company said in a note that the licence “sets the stage for other future large scale mining operations in Guyana” and has a buy on Guyana Goldfields with a target price on the stock of $17.68 per share–an expected return of 119.1%.
At presstime the company was trading at $8.40 per share within a 52-week range of $6.82-$10.95. Guyana Goldfields has about 83.71 million shares outstanding.
The Aurora project currently has measured and indicated resources of 47.04 million tonnes grading 3.83 grams gold per tonne for contained gold of 5.71 million ounces of gold and the company expects to file a revised resource estimate in mid-December followed by a completed feasibility study in mid-January 2012.
Guyana Goldfields says construction on the mine site facilities and the mill will begin in the first quarter of next year and will be completed over 24 months. The mine and mill are expected to be fully operational in the first quarter of 2014.
The Aurora property consists of a number of gold deposits on the eastern side of the Aurora zoned instrusion in the Cuyuni greenstone belt of the Guiana Shield in the Amazon Craton.
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