Guyana Goldfields, Inc.

The golden square mile As the name implies, Guyana Goldfields is developing a property in the South American country of Guyana for a combined pit mine and underground mine that will be the largest gold operation in the country, Gary Toushek learns.  Toronto-based Guyana Goldfields, Inc. was a junior exploration company when Claude Lemasson joined as president and COO in early 2009. After drilling for the previous four years, it had a large discovery in Guyana on its hands called the Aurora Project, and within a property covering 110,000 acres. It had grown into a significant resource, ÔÇ£but without a firm plan for taking the project forward through pre-development, development or eventual production,ÔÇØ Lemasson says. Early in 2009 the companyÔÇÖs board of directors had decided that they wanted to strategically take the project to the next level and in March brought in Lemasson to lead the way. The pre-development phase was initiated, and the first phase of the feasibility study, including the 43-101 resource estimate, was awarded to AMEC Consultants, Inc. of Oakville, Ontario, to update the studies done in the past; it was completed in August. Next came infill drilling and exploratory drilling, followed by database modeling and resource estimation, begun in September, with a definitive feasibility study to be completed in 12 months, at which point a decision will be made on development. In conjunction with the studies, an environmental and social impact assessment was performed by Environmental Resources Management of Washington, DC; it will be submitted to the Guyanese government by the end of the first quarter. As well, permitting applications for building and operating the mine have been filed with the government, to be completed shortly. Part of the permitting is a mineral agreement, which is the financial aspect of the permitting process, and itÔÇÖs a matter of coming to an agreement with the government on the various payments to be made. A royalty, which is in the countryÔÇÖs mining act, is set at 5 percent; the remaining payments are negotiable. Financing is an important aspect of the project. ÔÇ£Since IÔÇÖve come on board,ÔÇØ ┬áLemasson says, ÔÇ£weÔÇÖve done two funding stages: $17 million as a private placement last year to have cash flow to move forward, and a larger placement recently, a marketed deal, mainly Canada/US, which brought in another $72 million. That gives us enough funding to complete all our pre-development activities, as well as the first portion of the project itself, which will take us into early 2011. We still need to raise about $250 million, and weÔÇÖll look at our options on that later this year.ÔÇØ Guyana is located in the northeast corner of South America, between Venezuela and Brazil, and is within the Guiana Shield, a pre-Cambrian geological formation similar in geology to West Africa, as well as having established greenstone belts known for gold production. ÔÇ£ThereÔÇÖs lots of gold in the ground, but the key is identifying the sources,ÔÇØ Lemasson explains. ÔÇ£Typically thereÔÇÖs a top layer of saprolite oxide material that contains some gold, then below that are sulphidesÔÇöhard rockÔÇöand thatÔÇÖs where the real gold usually is.ÔÇØ He notes that Guyana is the only English-speaking country on the continent, since itÔÇÖs a former British colony that became an independent country in 1965. It operates under British common law, with secure tenure, and is part of the Commonwealth. It has a democratically elected government with a two-party system. ÔÇ£The gross domestic product is just over US$1 billion, and the impact of the Aurora mine will add another $250 million,ÔÇØ says Lemasson. ÔÇ£We are currently considered the number one project in the country. We are supported by government officials, from the president and prime minister down, including ministers and key officials, which means an excellent relationship. Since 1996 Guyana Goldfields has been a going concern, with a Canadian-educated, Guyanese-national country manager who is very well connected into all facets of society there. So we have a reputation as a good company to do business with. And as keen as we are in moving this project forward, the government there is just as keen to see us become successful and help put Guyana back on the map.ÔÇØ Aurora is in a tropical rainforest environment with consistent rainfall, so the design and build of the mine will be appropriate for those conditions. ItÔÇÖs in a fairly isolated part of the country, with nothing but jungle within more than 100 kilometers. The only other activities in the area are selective logging and small-scale artisanal gold mining. Infrastructure so far is a road that ends 40 kilometers from the mine site, and when itÔÇÖs built to the site, it will provide access to a port area at the Essequibo River, where a small port facility will be constructed to receive mid-size ocean-going vessels with equipment and material that can then be loaded onto trucks. Mine personnel will mostly be flown in to an on-site landing strip. Hydroelectric power may be available nearby and is being looked at as an alternative to heavy fuel oil power generation. The operation will be a combined pit mine and underground mine; the process is conventional gold milling. TheyÔÇÖll start with the open pit, expected to run for about nine years; after the third year, the underground will be developed enough to come online to operate for about 13 years. So the combination should mean at least 17 years of mining, including ramp-up and ramp-down. Production should average 250,000 ounces per year, for a total of more than 4 million ounces. The split in tonnage between pit and underground is about 50/50, about 18 million metric tons (tonnes) of ore from each. The pit contains high-grade ore at about 2.8 grams per tonne, for a total of nearly 1.5 million ounces, and the underground grade is about 4.5 grams per tonne, which results in about 2.5 million ounces over the life of the mine. Lemasson says, ÔÇ£The mineralization is actually only a single square mile within the entire Aurora land package of 110,000 acres. We call it the golden square mile. And the footprint of the mine will be a maximum of 10 square miles. We have another property about 75 kilometers to the northeast, called Aranka, that is very prospective ground where weÔÇÖre actively doing exploration on two specific claim packages that we have. So weÔÇÖre also pursuing other targets within the region. But Aurora will be the largest gold operation in the country starting in late 2012.ÔÇØ