Guyana Goldfields nears first production at Aurora

Jul 24, 2015 News

Construction workers at Guyana Goldfields’ Aurora gold project.

(northernminer.com) Guyana Goldfields is gearing up to start production at its Aurora gold project in Guyana in the coming weeks, which will make it the country’s newest gold producer in the South American nation.
The upcoming Aurora mine sits in the forested region of Guyana, 170 km west of the capital Georgetown. It should produce a total of 3.29 million oz. gold, averaging 194,000 oz. per year, over an initial 17-year mine life. Estimated operating cash costs are US$527 per oz., with all-in sustaining costs of US$698 per oz. (Both amounts include royalties.)
In a July presentation, the company, led by CEO Scott Caldwell, notes construction at the fully funded and permitted project is about 95% complete. The Semi-Autogenous Grinding (SAG) mill started up in the second quarter, with the gravity and saprolite circuits set for commissioning shortly.
First gold production should kick off early this quarter. Also during the three months ended September, the junior intends to achieve mechanical completion of the 5,000-tonne per day processing plant and begin commercial production.
The junior estimates delivering 30,000 to 50,000 gold oz. this year, followed by 120,000 to 140,000 oz. in 2016, the first full-year of production. The ounces will come from the open pit, until underground mining starts in 2018.
The Aurora project gained momentum in 2013. In January that year, the junior published a positive updated feasibility study, showing a combined open pit and underground mine with start-up costs of US$205 million and healthy returns.
In the subsequent two months, Guyana Goldfields closed two equity raises priced at $3.40 a share, including a $100 million bought deal and a separate $5.6-million private placement with the International Finance Corp. (IFC).
Later that year, it signed a mandate letter with the IFC to arrange a senior debt facility, selected an engineering, procurement and construction (EPC) contractor, and updated the feasibility study’s initial costs to US$249 million in December. The US$44-million hike resulted from further detailed engineering and the company’s decision to use an EPC contractor to build Aurora’s processing plant and diesel power plant.
Despite the higher costs, the project’s economics remain robust. Based on a US$1,300 per oz. gold price and a 5% discount rate, Aurora has an after-tax net present value (NPV) of US$735 million and an internal rate of return (IRR) of 31%. Payback should occur within 4.4 years. If gold drops to US$1,000 per oz., the after-tax NPV and IRR are a promising US$374 million and 20%, respectively.
In 2014 the firm formalized an EPC contract with Sedgman Ltd. and Grana y Montero for US$137 million. In June that year, it secured a US$185 million project loan with a syndicate of senior lenders, including IFC, Export Development Canada, ING Capital LLC, Caterpillar Financial Services Corp. and the Bank of Nova Scotia.
The loan consists of two tranches, including a tranche 1 US$160 million facility and a tranche 2 US$25 million cost overrun facility.
As a requirement for that loan, Guyana Goldfields had to raise US$33 million in equity. It, however, ended up closing a US$44.4 million non-brokered private placement of 24 million shares at $1.85 apiece last June.
In October, the junior made its first drawdown from that loan and reported that construction at Aurora was 40% complete.
The project’s total cost is US$277 million, consisting of US$249 million in pre-production capital, and US$28 million in financing costs, pre-operating costs and working capital. The junior will finance that through US$117 million in equity contributions and the US$160 million tranche 1 facility.
At the end of March, it had US$44 million left to spend of the US$249 million start-up capital, and currently has access to US$52 million in an overrun facility.
However, the firm reiterated in its latest presentation that it would deliver the Aurora mine on time and budget.
Guyana Goldfields closed July 22 at $3.61 per share, with a $545 million market capitalization.
“The company’s shares remain poised for a positive re-rate through commissioning and upon delivering first production,” notes BMO analyst Andrew Kaip. He has $4.50 target and a “speculative-outperform” rating on the stock.

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