Guyana’s challenges may hold rewards for gold explorers

VANCOUVER — When it comes to unearthing gold in a youthful mining jurisdiction like the South American nation of Guyana, explorers are often faced with infrastructure-based speed bumps on the road to establishing an economic deposit. Both Toronto-based Guyana Goldfields (GUY-T) and Australian newcomer Azimuth Resources (AZH-T, AZH-A) have unveiled multi-million ounce gold resources, and are aiming at becoming players in Guyana’s untapped commercial gold mining industry.

Guyana Goldfields is at a more advanced stage, having received its large-scale commercial mining license in November before filing an inaugural feasibility study in mid-April. The company has faced its share of adversity over the past five months, as questions surround the economic viability of its Aurora gold deposit 170-km west of Georgetown.

Trouble started in mid-February when a feasibility study was released carrying a hefty US$626 million capital expenditure and a relatively low 12.6% after-tax internal rate of return at a US$1,300-per-oz. gold price. Due to the fact Aurora is isolated from potential power supplies or shipping avenues, Guyana Goldfields was forced to contemplate heavy fuel costs and infrastructure spending that dampened the project’s profitability.

The company saw share prices plummet 67% or $5.34 following the release of Aurora’s initial feasibility study on February 12, though a recent resource update and news of a re-optimized economic strategy have driven share increases over the past four weeks.

Market sentiment started to shift in late May, and benefited from added momentum when Guyana Goldfields announced a change in Aurora’s development strategy on June 13. According to reports, a bankable feasibility update scheduled for year end will focus more on Aurora’s surface mining potential — whereas the previous study had leaned on an underground component — as the company intends to drop a proposed vertical shaft operation in favor of a ramp decline that would hit 750 metre vertical depths. Oxidized ore would be mined and processed over an initial two-year period followed by hard-rock open-pit and underground mining operation.  

An additional update portended an improvement in economics when Guyana Goldfields increased Aurora’s measured and indicated open-pit resources by 27% on June 25. The company boosted its open-pit measured and indicated resources by 580,000 oz. of gold — to a total of 33 million tonnes grading 2.62 grams gold per tonne for 2.8 million contained oz. Higher-grade underground indicated resources were also on the rise, now totalling 27 million oz. grading 3.9 grams gold for 3.8 million contained oz.

Guyana Goldfields has leapt 47% or 83¢ over the past five weeks en route to a $2.60 presstime close. The company completed a US$30 million non-brokered private placement in late April through the issuance of 10.9 million shares at $2.91 per share, and now has 84 million shares outstanding with a $219 million market capitalization.

Bank of Montreal (BMO) Capital Markets analyst Andrew Kaip maintains a $5 price target on the stock with a “market perform” rating. Kaip notes that the expanded resource came with a 27% drop in open-pit grade — decreasing from 3.34 grams gold to 2.62 grams gold. According to preliminary estimates, BMO Research now models a US$525-million mine development at Aurora that includes an 8,000-tonnes-per-day open-pit operation followed by a US$270-million underground expansion in 2017.

Meanwhile in Guyana’s historic Omai gold district to the south, Azimuth is busy defining another large-scale gold resource at its West Omai project 60-km west of the old Omai gold mine. Though Azimuth only joined the Toronto Stock Exchange in early May, the company has already established what it describes as a “shallow, non-refractory inferred resource” at West Omai, totalling 12.4 million tonnes grading 3.1 grams gold for 1.22 million contained oz. Included in Azimuth’s total is a higher-grade resource at its Smarts deposit that carries an intriguing 5 million tonnes at 4.6 grams gold for 750,000 oz.

According to the company the deposits extend to a maximum depth of roughly 200 metres, with 80% of the total ounces within 140 metres of surface. Azimuth has also completed preliminary test work that demonstrates 93% oxide and primary mineralization recoveries via cyanide leaching and gravity processes.

Azimuth benefits from two infrastructure advantages that could make project feasibility a less daunting task. Firstly, the Guyanese government is planning to construct a 165-megawatt hydroelectric plant nearby that could provide West Omai with a much more affordable power supply. Secondly, Guyana’s only major roadway — which runs from Georgetown to the Brazilian border — passes relatively close to Azimuth’s potential open-pit mine. An access road is under construction, making transportation less of a cost burden on potential economics.

Though Azimuth owns a massive 8,000-sq.km land position in the Omai gold district, upstart Vancouver-based explorer Tajiri Resources (TAJ-V) holds a majority interest in a potentially strategic piece of the puzzle in the centre of the Australian explorer’s inferred resources. Brand new to the Guyanese gold space, Tajiri recently filed its inaugural technical report on its Kaburi PL property, which occupies 26 sq.km on the Guiana Shield Greenstone belt. Kaburi PL also houses a number of artisanal gold pits — the Omai district is a favourite of local miners — and Tajiri intends on undertaking a scout drilling program over the next few months.

Another early-exploration player in southern part of the country is Guyana Frontier Mining (GYG-V), which released results from a 2012 exploration program at its Marudi Mountain project on June 22. Though the explorer failed to hit similar grades to the Guyana Goldfields and Azimuth deposits, Guyana Frontier did intersect 3.4 grams gold over 4 metres and 1.9 grams gold over 8 metres in hole 12-140.

Both Tajiri and Guyana Frontier have bounced around in the 5¢ range over the past four weeks, with Tajiri holding a $1.2 million market capitalization at presstime with 24 million shares outstanding, and Guyana Frontier maintaining a $5.2 million market capitalization with 94 million shares issued.