A July 24th decision by
The 72-sq.-km Ntotoroso project area covers 13 km of strike length along the middle of the belt, which is in the Brong Ahafo region of west-central Ghana.
Newmont acquired its half-stake in Ntotoroso in February, through the takeover of Australia’s
Since then, the major has been busy reviewing a feasibility study of Ntotoroso, completed last year by Aussie consulting firm Lycopodium, as well as a larger feasibility study of the surrounding, much-larger Sefwi project, which encompasses the rest of the 75-km-long belt.
The Sefwi project is effectively 90%-owned by Newmont since, if it reaches the production stage, the Ghanaian government would assume a 10% carried interest entitling it to 10% of any dividends paid from corporate surplus cash flow. At Ntotoroso, the government would similarly assume a 10% carried interest in the project as it moves into production.
At June 30, 2001, reserves at Sefwi (not including Ntotoroso) totalled 33.3 million tonnes grading 2.6 grams gold per tonne (containing 2.8 million oz.). The global resource was 76 million tonnes grading 2.2 grams gold.
Reserves at Ntotoroso stood at 14.8 million tonnes grading 2.4 grams gold, and global resources amounted to about 29.5 million tonnes at 2 grams gold.
Normandy calculated the reserves at Sefwi using a US$300-per-oz. gold price, and Moydow used a US$275-per-oz. price at Ntotoroso. However, with the recent rise in gold prices, Moydow is now recalculating the figure at a higher gold price, which the company says should add several hundred thousand ounces of reserves.
Most gold deposits in the Sefwi belt occur within a northeast-trending, gold-bearing shear structure that serves as a contact between footwall metasediments to the north and hangingwall granites to the south.
The richest deposit on the belt, Ntotoroso’s Zone E, is a bit of an oddball in that it is hosted largely by diorites and is 1.5 km off the main shear structure. Moydow’s discovery of Zone E just a few years ago gives rise to hopes that more gold-rich zones can be found away from the main shear.
Most of the gold in the belt is fine-to-very-fine grained and occurs as inclusions in, or marginal to, goethite in the oxide zone, and in association with pyrite and/or carbonate in the primary zone. Pyrite content is low (under 3%), and no arsenopyrite is present.
Any treatment plant would be designed to process a 30% oxide/70% primary ore feed, which approximates the life-of-mine feed. Recovery rates are in the low 90% range.
The key question for both companies is whether the Sefwi and Ntotoroso projects will be developed in concert, with a single mill and processing plant in the middle of the belt, and with ore trucked from a string of 18 or more open pits, including at least three on the Ntotoroso property, named Zones E, A and C.
Normandy’s feasibility study, revised in July 2001, envisaged extensive open-pit mining on the belt, with ore sourced from both the Sefwi and Ntotoroso properties and sent to a conventional, 5-million-tonne-per-year, carbon-in-pulp treatment plant built on Normandy-owned ground, right next door to Ntotoroso.
Annual gold production under this plan would average 340,000 oz. over a 10-year mine life, with cash operating costs ringing in at US$193 per oz. and total costs at US$243 per oz.
The cost of developing Sefwi and Ntotoroso together is estimated at US$112 million.
Looking at Ntotoroso on its own within Normandy’s plan, and on the basis of mining 1.5 million tonnes of ore per year, annual production from Zones E and A in the first five years would likely average 120,000 oz. gold at a cash cost of US$184 per oz. Mining at Ntotoroso would last for at least eight years.
Moydow’s current deal with Newmont effectively allows the junior to participate in a greatly enlarged mill with all the associated advantages of a larger-scale operation. Furthermore, Moydow can elect to contribute its share (about US$16 million) of the capital costs of the mill, or else opt for a toll-milling arrangement.
Guarantees
Either way, Moydow would have certain guarantees: production would begin at Ntotoroso within three months of the startup of the mill, and a minimum of 1 million tonnes of Ntotoroso ore per annum would be milled, effectively translating into a minimum of at least 100,000 oz. per year to the joint-venture account.
Development activity in the belt has understandably slowed as a result of the drawn-out takeover of Normandy and the long review process by Newmont of its new Normandy and Franco-Nevada Mining assets.
Still, there has been some progress: in the past year, the Ghanaian government granted a 30-year mining lease to the Ntotoroso project and, following public hearings, the Ghanaian Environmental Protection Agency granted approval for the development of a mine at Sefwi/Ntotoroso.
Under the Ntotoroso joint-venture agreement, now that Newmont/Normandy has earned its half-stake by spending US$6.5 million on exploration. Additional exploration expenditures of up to US$8 million may be incurred before 2004, of which Moydow is obligated to fund its half-share in order to avoid dilution.
In the shorter term, the partners will be preparing a supplemental study of the viability of mining Ntotoroso’s Zone C and any other zone on the property.
Two of the deeper holes drilled at Ntotoroso, collared about 200 metres apart in 2000, have intersected mineralization 200 metres below the currently outlined pit limits and represent downdip extensions of the high-grade Zone E.
These holes returned, respectively, 9.7 grams gold over a true width of 13 metres and 7.7 grams gold over a true width of 6 metres.
Under the joint-venture agreement, Moydow remains the operator of any exploration efforts at Ntotoroso, though the operator does not have a casting vote on any decisions, which must be mutually agreed upon by the two partners.
At Moydow’s recent annual meeting in Toronto, President Brian Kiernan said “it’s our opinion that the best place to add ounces on the whole of the Sefwi belt is deep on Zone E. If we extrapolate, we believe we can at least double, and possibly treble, the resource ounces on Zone E by drilling out the depth potential — and that’s only to depths of around 700-800 metres.
“It’s a shame the project has taken longer than we expected, but I also think Newmont’s ideas will be different than Normandy’s on how to mine this, and on what the most-viable and most-economic way of going forward will be.”
Kiernan added that on July 24, the current production and development agreement Moydow signed with Normandy (and now Newmont) will expire — though the two will remain 50-50 joint-venture partners.
“If Newmont makes a production decision on this ground before the 24th of July, then Ntotoroso will be mined and milled with the rest of Sefwi, and all the rest of the benefits that accrue to Moydow and the joint venture will take [effect]. However, if they don’t make the decision, Ntotoroso will be developed as a stand-alone project.”
He said Newmont is “obliged to develop a stand-alone project independent of any of the other stuff around them, on reasonable commercial terms. That basically means that if you have a feasibility study that says this makes a dollar, they are obliged — and I don’t use that word lightly — obliged to develop it.”
He added that he doesn’t “know Newmont’s mind,” but that he “expects they would prefer it to be part of the large development — chiefly because it would be cheaper for everybody — than to be forced into developing a smaller project, particularly when they have so many ounces next door.
“We’ll see what happens, but there is no doubt this project will be developed, and it will be developed in the short term however it is done. Moydow is positioned very well to take advantage of this ne
w run in the gold market. By this time next year, we will be a totally different company in many ways.”
Reached by phone in Denver, Newmont spokesman Douglas Hock said his company is “continuing to do some pretty intense drilling this year [at Sefwi] to try to increase resources and reserves. No long-term decision on the projects has been made or is anticipated this year. We want to continue to do the drilling work this year and improve our model and see if there are any extensions to the orebody.”
Hock was not familiar with the Ntotoroso project, but he did emphasize that Newmont would “not be making any decision on the overall project this year. . . . Our intention is to prove up reserves and see if that potential is there. It’s a fairly grassroots project at this point, and we have other projects in Indonesia — I would put it at that level.”
As Moydow continues to wait on Newmont, management is being tight-fisted with the treasury. At the end of the first quarter, Moydow held cash and equivalents of US$1.7 million and total liabilities of just US$274,300. Last year, the company lost US$570,000 (2 per share) on no revenue, compared with a loss of US$1.2 million (4) on revenues of US$200,000 in 2000.
Moydow has put behind it its experience with the failed Wassa open-pit mine in south-central Ghana. Moydow’s 1999 results made provisions for a US$4.1-million writedown to nil on its 34% equity interest in mine operator Wassa Holdings, most of which is owned by Irish-listed Glencar Mining.
Today, the company has no liabilities related to the project, which was sold by receivers to
The mine began producing gold in January 1999, but excessive mining dilution and poor gold recovery rates quickly put the project in technical default on US$40 million in borrowings from Standard Bank of London and the U.K.’s Commonwealth Development Corp.
The leach system was designed by Kappes Cassiday.
Moydow ended 2001 with about 27 million shares outstanding, or 33 million fully diluted. The chief shareholder in Moydow is Chairman Noel Kiernan, who at last report owned 9.9 million shares. His son, Brian, is the next-largest insider shareholder, with 135,000 shares.
Of note, Noel was managing director in charge of bringing the Tererebie gold project in Ghana through feasibility and into production in the early 1990s. The mine is now owned and operated by Ashanti Goldfields.
Meanwhile, in western Newfoundland, Moydow has staked 570 contiguous claims covering more than 140 sq. km. along the entire western edge of the Botwood pluton. Moydow’s ground is about 10 km west of the Mustang Trend property, which is held by Altius Minerals and subject to an earn-in agreement with Barrick Gold.
At Botwood, Moydow is looking for a Carlin-style gold deposit, with mineralization associated with antimony, arsenic and barite. The company is developing targets to be drilled before the end of this season.
In late June, Haywood Securities agreed to broker a private placement of 625,000 flow-through Moydow shares priced at 80 each, a number that can be boosted by 125,000 shares at Haywood’s option. Funds will be used to explore Botwood Basin.
In Nevada’s Elko Cty., Moydow has optioned three claims groups in the Wells region, coincident with a strong geochemical anomaly.
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