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High-grade Sona Hill a potential game changer for Sandspring’s Toroparu project

1st September 2016

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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VANCOUVER (miningweekly.com) – The discovery of the nearby Sona Hill satellite deposit has blown new life into developer Sandspring Resources’ flagship Toroparu project, in Guyana, providing the prospect of higher grades of gold-only mineralisation – a potential game changer.

DISTRICT DISCOVERY
Initial drilling in 2012 intercepted high-grade mineralisation in both saprolite and bedrock at the satellite deposit called Sona Hill. This provided the company with an opportunity to potentially enhance investor value while Sandspring waited out the unfavourable market.

In the third quarter of 2015, a 3 679 m drilling campaign to an average vertical depth of 100 m confirmed the continuity and grade potential of the Sona Hill mineralisation. Highlights of the drilling to date included 5.9 m grading 23.41 g/t gold; 4 m grading 8.72 g/t gold; 4 m grading 8.45 g/t gold and 10.5 m grading 3.63 g/t gold.

Located about 5 km south-east of the flagship Toroparu deposit, Sona Hill is the eastern-most gold anomaly in a cluster of ten gold features located within a 20 km x 7 km hydrothermal alteration halo around Toroparu.

A third phase of drilling at Sona Hill is currently under way. To further confirm the continuity of mineralisation between existing drill holes, Sandspring has initiated a 5 800 m infill drilling programme in 50 diamond drill holes on 50 m x 50 m spacing. This drill density is designed to allow the company to model and estimate a resource for the Sona Hill anomaly that can be incorporated into the mine plan for the Toroparu project.

The drill programme should be complete in early December, with results available in February 2017, CEO Richard Munson advised Mining Weekly Online in an interview on Wednesday from Guyana.

ADVANCING THE PROJECT
Since closing a novel early deposit gold stream agreement with Silver Wheaton in 2013, Sandspring has been working closely with the precious metals streaming firm to determine the best way forward for the project, especially considering the tumultuous gold prices and exceptionally difficult capital market environment over the last few years.

Under the agreement, Silver Wheaton advanced $13.5-million to Sandspring to enable it to deliver a bankable definitive feasibility study on the Toroparu gold project, located in the Upper Puruni River region of western Guyana, by the end of 2015, after which Silver Wheaton would be able to choose whether to fund an additional $135-million for project construction.

Munson explained that, by December 2014, the company had presented the internal financial model for the Toroparu project to Silver Wheaton, requiring only certain price updates and the formal packaging of the information into a National Instrument 43-101-compliant feasibility study.

However, both companies agreed that the estimated cost of around $500 000 to complete the feasibility study was considered wasteful, given that the capital markets were at the time all but shut to a junior project developer sitting with a four-million-ounce project at a grade of about 1 g/t gold.

By early 2015, with all field and design engineering work required for the feasibility study complete, the company chose, by mutual agreement with Silver Wheaton, to defer the additional expenditures required to complete the final stages of the study, such as value engineering and optimisation studies.

The early deposit streaming agreement was amended in April last year to include a silver stream, under which Silver Wheaton agreed to pay Sandspring incremental upfront cash payments totalling $5-million for 50% of the future payable silver output from the company’s Toroparu project. The amended agreement also extended the deadline by which Sandspring would have to deliver a feasibility study to December 2016.

Now the company is considering a further extension to the feasibility study to assess the results of Sona Hill exploration. Should the company find sufficient high-grade mineralisation to complete an indicated resource for the Sona Hill anomaly, the positive impact on project economics could be substantial.

“If we did not have an exploration target on our property, we would already have moved forward,” Munson, who has been involved with the Toroparu project for 16 years, said. “We need to decide, and agree with Silver Wheaton, if we’re best to complete the feasibility study this year, or wait until we’ve seen the Sona Hill drill results.”

PREFEASIBILITY STUDY
The May 2013 prefeasibility study (PFS) outlined the design of an openpit mine producing more than 200 000 oz/y of gold over an initial 16‐year mine life. The PFS also estimated proven and probable gold reserves for the project based on a 0.3 g/t cutoff grade, $1 400/oz gold and $3.25/lb copper, resulting in 127.1-million tonnes grading 1 g/t gold and 0.11% copper, for contained proven and probable reserves of 4.1-million ounces of gold and 211-million pounds of copper.

These reserves were included in the overall mineral resource estimated at 6.89-million ounces of gold and 444-million pounds of copper contained within 240.2-million tonnes grading 0.89 g/t gold and 0.084% copper in the measured and indicated mineral resource categories. A further 3.09-million ounces of gold and 120-million pounds of copper is contained within 129.5-million tonnes grading 0.74 g/t gold and 0.042% copper in the inferred mineral resource category.

In February last year, Sandspring also declared a silver resource at Toroparu, estimated to contain 240.2-million tonnes grading 0.82 g/t silver for 6.3-million ounces of silver in the measured and indicated category, along with 129.5-million tonnes grading 0.07 g/t silver for 310 000 oz of silver in the inferred category.

“The opportunity to find a joint venture partner is improving with the rising gold price. There are not many multimillion-ounce deposits out there ready to be constructed at grades of 1 g/t to 1.1 g/t. People will start looking at us again as prices stabilise and recover,” Munson stated.

ADDITIONAL EXPLORATION
Concurrent with the drill programme, Sandspring is extending surface exploration west of the Sona Hill anomaly. The programme includes saprolite geochemical as well as geophysical surveys designed to identify gold mineralisation down‐dip and to the west of mineralisation currently delineated at Sona Hill.

The presence of magnetite in the hydrothermal alteration zones that carry gold mineralisation at Sona Hill provide a potential marker for ground magnetics and induced polarisation survey methods to trace the mineralisation and further define the structural setting in the targeted exploration area. The programme includes eight line kilometres of ground geophysics at 100 m and 200 m spacings, additional sampling to tighten the saprolite geochemistry grid to 100 m x 50 m, and a small alluvial sampling programme.

Munson added that the company was also planning exploration in other satellite targets including the Otomung area, where it would undertake a 700-sample infill saprolite geochemical survey in anomalous zones and a 300-sample (36 km2) regional grid extension.

Should weather and its schedule allow, Sandspring will also undertake a 2 500 m Phase 1 exploration drill campaign at the Wynamu-Makapa anomaly.

HYDROPOWER OPPORTUNITY
Munson noted that discussions with the Guyana government were ongoing about the opportunity to improve long-term project power costs through construction of a 25 MW run-of-river hydropower facility in the Kurupung river.

Development of the full potential of the hydroelectric facility to more than 100 MW could provide significant cost benefits for other mining projects in north-western Guyana, and the Guyana power grid, he added.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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