Power struggle at Guyana Goldfields…Executives say all is well; shareholders say figures bogus

Mar 28, 2019 News

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With a special shareholders meeting weeks away, the internal struggle at the country’s largest gold mining operations is intensifying.

Hours after a statement by Guyana Goldfields Inc. about future plans and projected production, a number of shareholders reminded that they have hired an independent, international consulting practice specializing in the resource sector to provide a third-party review and analysis of the resource model at the Aurora mine.
For several months now, former founder, Patrick Sheridan, and a number of shareholders, has been fighting the current Board of Directors over what they say is poor management and questions over the figures as announced.
In addition, the shareholders were concerned over what it says was a sharp drop in the value of their investments- the drop is in the vicinity of hundreds of millions of dollars.
The Aurora mine was commissioned in early 2016 becoming the biggest single gold producer.
It is in the process of entering underground mining shortly, the first in Guyana.
The company has been handed millions of dollars in tax concessions and has in excess of 500 employees at the mine site on the Cuyuni River, Region Seven.

Ahead of the special shareholders’ meeting, the company has hired former US ambassador to Guyana, Perry Holloway to help over aspects of its operations.
According to a statement yesterday, the Canadian-based Guyana Goldfield said it has an updated Mineral Resource and Mineral Reserve estimates, and life of mine plan (LOM) completed by Roscoe Postle Associates Inc.
The company is upping its annual estimated average recovered gold production to 218,000 ounces over the next five years at average operation cash costs of US$753/oz, including royalties to the Government of Guyana.
It has total capital of US$124M to develop the underground mine and US$256M in sustaining capital.
500,000 ounces
“Aurora has produced more than 500,000 ounces of gold in just over three years of commercial production and, despite some tough challenges, we remain confident in our future success,” said Scott Caldwell, President and CEO.
“We have identified and initiated a number of cost savings programs that will lead to improved operational efficiency. We have strengthened our leadership team, streamlined our organizational structure, initiated partnership arrangements with key contractors and suppliers and, in addition, implemented improved operating procedures and optimized our capital spending.”
The company said it engaged a consultant to review the Mineral Resource and Mineral Reserve estimates, and overall LOM plan at Aurora last October after it became apparent that gold production during the fourth quarter would fall short of the forecast, which had been based on the original resource model developed in 2012, under prior management.
“The updated Mineral Resource is based on a revised geologic interpretation of the style and structural controls for certain areas of Aurora mineralization resulting from open pit production and geologic mapping, 12,801 metres of new oriented core drilling along with relogging of some 50,000 metres of drill core.”

Guyana Goldfield said its production is expected to peak in 2024 at -251,000 ounces.
Total estimated LOM capital cost, excluding working capital, is expected to be US$381 million including a 10% contingency.
Capital costs include US$124 million in development capital for the underground mine and US$250 million in sustaining capital over the mine life.
The development capital is expected to be split between 2019 and 2020.
Misleading?
Meanwhile, the “concerned shareholders” in a statement, said that given the continuing concerns over the company’s seemingly misleading disclosures and general market skepticism, they want to ensure that an independent review is conducted.
“The Concerned Shareholders believe that their third-party review will serve as a check and balance against the company’s resource model, especially if the company tries to use its resource model to excuse management’s poor performance.”
“We want to ensure that the current Board and management aren’t manipulating data to justify their poor results. Over the past year alone, the Company’s missed production and cost guidance have left shareholders with market losses exceeding $500 million,” said Sheridan, one of the largest shareholders and former Executive Chairman and former director of the company.
“We believe that the root cause of the Company’s problems is poor execution, poor planning, and poor mining practices —not the resource model. It’s important that shareholders, the market, the Government of Guyana, and the public at large have credible and reliable information”.
The shareholders said that last year, the current management of Guyana Goldfields twice lowered production guidance by a cumulative 25% and increased their projections of their all-in-sustaining costs by 20%.
In addition, the shareholders pointed out that a ScotiaBank analyst on a November 13, 2018 tour, made the following comment: “While we wonder if previous operational disappointments may not have had a grade reconciliation component, the company reiterated that poor performance of year-to-date production was due to execution issues, most notably the slow mobilization of the new contractor.”
The shareholders said they believe there are no substantial issues with the resource model at Aurora.
“Instead, they believe the missed guidance and increasing costs plaguing the company are the result of poor management (including the engaging of an unqualified contractor) and lack of oversight by the Board.”
In the coming weeks, the “concerned shareholders” said they will present a new life of mine plan for Aurora that, if executed with the proper oversight, should allow the company to realize the full potential.
“The new LOM Plan will focus on ensuring the long-term viability of the mine and thus ensure the continued support of shareholders, the Guyanese government, and employees of the Company.”

 

 

 

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