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Execution now critical as Goldsource aims to pour gold before year-end

Execution now critical as Goldsource aims to pour gold before year-end

Photo by Goldsource Mines

25th March 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Mine developer Goldsource Mines expects to pour its first gold before the end of the year, which would open the door to organically grow the low-cost operation in politically stable Guyana.

TSX-V-listed Goldsource had started construction of its $5.9-million Eagle Mountain gold project earlier this month and was looking forward to completing construction and producing gold by the fourth quarter.

“It is quite a simple operation and we have derisked it as much as we can. Our permits are done, the political regime is stable and we should be fully financed for the first phase. All that remains is the execution and we have a pretty good record of execution under arduous conditions,” Goldsource CEO and director Scott Drever told Mining Weekly Online in an interview.

The project was one of three gold mines expected to come on stream this year in the South American country. Canadian explorer Guyana Goldfields was focused on developing the 194 000 oz/y Aurora gold project, which was scheduled to achieve its first gold pour by midyear. The company also held the Aranka gold project that was in the prospecting and advanced-exploration stage of development.

Australia-based Troy Resources was also progressing the  development of the 90 000 oz/y Karouni project, which was also expected to start production this year.

PERMITS IN HAND
Goldsource in August reported that the Guyana Geology and Mines Commission had issued a medium-scale mining permit for operations on a 250 ha portion of its Eagle Mountain deposit, located within the 5 050 ha Eagle Mountain prospecting licence.

The permit granted permission to mine gold, diamonds, precious metals and precious minerals within the permit area, located in Potaro Mining District No 2.

The Eagle Mountain prospecting licence was held by Goldsource’s Guyana subsidiary, Stronghold Guyana. However, owing to Guyana’s legal requirements, a medium-scale mining permit was required to be held by a Guyanese national, prompting Stronghold to sign agreements with Kilroy Mining, a private arm's length Guyanese company under which Stronghold and Kilroy would jointly operate the property.

Kilroy, as holder of the permit, had granted Stronghold the exclusive right to conduct mining operations on the property, including any additional areas acquired by Kilroy. Stronghold would fund all expenditures on the property and receive all revenues, subject to applicable government royalties and a 2% net smelter return royalty to Kilroy as compensation for its participation.

PRIORITY PROGRESS
Goldsource’s critical objective for the next nine months was to get into production before year-end, COO Eric Fier told Mining Weekly Online.

The company had earlier this month contracted Guyanese firm MMC to rehabilitate the existing 10 km laterite road between the town of Mahdia and the Eagle Mountain project, which was expected to be complete by May.

He noted that it currently took about six hours and a two-wheel-drive vehicle to navigate the 240 km route between Guyana’s capital of Georgetown and Eagle Mountain on a good day, and about eight hours and a 4X4 on a rainy day.

Goldsource was also currently focused on procuring longer-lead mining equipment, undertaking a preproduction drilling programme for confirmation and condemnation, rehabilitating and upgrading the camp facility and recruiting key operations personnel. Site preparation for the plant and initial mining area was expected to start during the second quarter.

The most significant item on the company’s shopping list was the 100 t/h processing plant, for which Vancouver-based Sepro Minerals had now completed the detailed design and started construction. The plant was scheduled to be complete by the third quarter, after which it would be shipped to Guyana, where it was expected to arrive on site during September, pending a smooth customs clearance process.

The 1 000 t/d first phase of the Eagle Mountain mine would require little investment in other significant equipment, requiring only an excavator, bulldozer and a loader that could be bought locally.

POSITIVE METRICS
Goldsource in September last year filed the positive results of a preliminary economic assessment (PEA) on the Eagle Mountain deposit with Canadian securities regulators, saying it planned to take a four-pronged approach to developing the project over four years.

Phase 1 would target a milling rate of 1 000 t/d, ramping up to 4 000 t/d by its fourth year. The first phase of the openpit mine project entailed building a 1 000 t/d gravity plant, which was expected to deliver gold at a cash operating cost of $480/oz over the eight-year mine life. The all-in sustaining cost was expected to average $620/oz.

The company would use conventional openpit mining and downhill-gravity slurry to transport weathered saprolite ore for processing.

The study expected the strip ratio to be low at 0.9:1, while the operation would not require blasting or surface haulage.

Eagle Mountain’s total capital costs were pegged at $24.2-million, with Phase 1 expected to cost about $5.9-million.

The PEA estimated that the project would process about 7.3-million tonnes of ore at a head grade of 1.2 g/t, producing about 168 700 oz of gold at cash costs of $480/oz over the project’s eight-year mine life.

The conceptual approach entailed the first four years of output being 5 600 oz, 14 400 oz, 21 600 oz and 28 800 oz of gold, respectively.

Eagle Mountain hosted 3.9-million tonnes, grading 1.49 g/t gold for 188 000 oz in the indicated category and 20.6-million tonnes, grading 1.19 g/t gold for 792 000 oz in the inferred category.

About 40% of the project’s overall ounces comprised saprolite, or weathered ore, which could allow Goldsource to fast-track operations through low-cost gravity processing.

Goldsource would have an inventory of about 162 000 oz of gold in its settlement ponds, owing to the gravity processing, that could potentially be milled at a later date.

Also not considered in the PEA were Eagle Mountain’s in-situ ‘fresh-rock’ resources of 2.3-million tonnes, grading 1.52 g/t gold for 114 000 oz,in the indicated category and 13.4-million tonnes, grading 1.13 g/t gold for 486 000 oz in the inferred category. Resource calculations were modelled on a 0.5 g/t gold cutoff grade.

At an assumed gold price of $1 250/oz, Goldsource's PEA placed a 63% after-tax internal rate of return and a $46-million net present value at a 5% discount rate, on the project. Pretax undiscounted operating cash flow before capital expenditures were estimated at $123-million, while the PEA pointed towards a favourable sensitivity analysis for a potential dip in the gold price or recoveries.

OPTIMISATION UPSIDE
Fier said the company was already mulling future improvements to the operation, once the first phase had been proven, which included the introduction of a night shift that could instantly doubleoutput with the appointment of just a few more employees.

“We could easily go to between 1 500 t/d to 1 700 t/d this way, which would mean we can produce a lot more low-cost ounces a lot quicker,” he explained.

Fier also noted that the saprolite resource was open in all lateral directions, which the company would pursue with further exploration once the mine was operational. He noted that while it was an option to transition to the gold-bearing, hard-rock resource below the saprolite ore in the future, the company would prefer to focus on the simpler, near-surface ore during the operation’s first several years.

There was also the potential to add flotation and leaching circuits later on, which would provide increased synergies between the different types of ore.

“The Phase 1 development at Eagle Mountain is fully financed, the mine area is fully permitted for operations and mine site preparation and processing plant construction has begun," Goldsource president and director Ioannis Tsitos advised, adding that with several members of the company’s senior management having been previously involved with the successful execution of projects under onerous circumstances, he had every confidence that Goldsource would complete the project on schedule and within budget.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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