Two major gold mining operations set to boost industry, economy

Two major gold operations are set to come on stream within the next year with combined gold production by Guyana Goldfields Inc and Troy Resources Limited pegged to be about 341,000 ounces per year which would add to the 481,087 ounces declared by small and medium-scale miners last year.

“It is good to know that after Omai, there are other major players coming on board,” Patrick Harding, the President of the Guy-ana Gold and Diamond Miners Association (GGDMA) told Stabroek News. He said that the projects by the Canadian and Australian companies represent direct investments in the economy of Guyana and while others are still prospecting, these firms are moving to the production stage.

“It is good for Guyana,” Harding said, adding that he hopes that the companies overcome obstacles such as a dip in the price of gold and that they are successful.

Guyana Goldfield’s Aurora Gold Project on the Cuyuni River was projected to begin its commercial production phase in mid-2015 though Minister of Finance Dr Ashni Singh, in his Budget 2014 speech last month said that the company is advancing aggressively for a late 2014 start-up which is earlier than originally projected.

The company has completed all relevant documentation and the terms of its Mineral Agreement would see it paying mining royalty of 5% on gold sales at a price of gold of US$1,000/oz or less with an increase in a royalty of 8% on gold sales at a price of gold over US$1,000/oz. The company would also pay corporate income tax at a rate of 30%.

The initial span of the project has been set at 17 years but it could be increased and for this period, according to the company, it expects to pay about US$341 million in royalties, US$509 million in corporation taxes, US$67 million in payroll taxes, and US$43 million worth of excise taxes.

Once completed, the mine is expected to produce 3.3 million ounces of gold over its initial 17-year life-span, and operate at a cash cost of US$527 per ounce.

In December, Guyana Goldfields which is based in Canada, announced that the US$238 million in capital costs needed to take the Aurora project towards the commercial production phase was approved. The overall cost needed to bring the long-awaited large-scale operations to commercial production is US$249 million and up to December, US$11 million of this amount was spent on enabling infrastructural facilities.

The total project cost is estimated at US$300 million, comprising an estimated initial capital expenditure of US$250 million; working capital, operating losses during construction, interest during construction and financing fees of US$30 million; and potential cost overruns of US$20 million.

The private sector arm of the World Bank, the International Finance Corporation (IFC) was expected to vote on February 28, on a US$200 million debt package for the Aurora gold project. In all, the IFC was expected to make available close to US$200 million in loans, while the company itself will put up more than US$100 million. The transaction was expected to be completed during the second quarter of this year.

The project comprises an open pit and underground gold mine, process plant, tailings management area and other associated facilities. The Buckhall port facility will also be upgraded to accommodate ocean-going vessels and will provide facilities for cargo, fuel and personnel handling during project construction and operations.

The mine aims to produce 3.3 million ounces of gold over an initial 17 year mine life with gold production expected to average 194,000 ounces per year over the life of mine, and average 231,000 ounces per year over the first ten years. Mining will be phased with initial open pit mining commencing in 2015 (continuing through 2023) with underground mining commencing in 2018 (continuing through 2031).

The IFC has said that the expected development impact from this project will include employment creation of about 700 to 900 jobs; fiscal payments in the form of royalties and taxes paid to government estimated at US$850 million over the 17 year mine life or US$50 million per year on average (based on US$1,300 per ounce gold); and setting good benchmarks in environmental and social sustainability for other potential projects in the region.

Meantime, Troy Resources Guyana Limited has proposed a medium-scale gold mine designed to produce up to 110,000 ounces of gold per annum based on an average overall recovery of 92% at the Black Water Creek, Kaburi Area, in Region Seven. The Environmental and Social Impact Assessment (ESIA) for environmental authorization of the Karouni project is currently being done.

Troy Resources requires a new mining licence for the operation and one of the mandatory requirements is the conduct and submission of a feasibility study which must include an ESIA for approval by the Guyana Geology and Mines Commission (GGMC).

The mine will be focused on the recovery of ore for processing from Smarts and Hicks gold deposits. The project components include an open cut mine, processing plant, tailings storage facility, mine site accommodation and additional infrastructure required to recover and to process ore for the recovery of gold. Develop-ment and operation of the mine site will involve several distinct phases including the relocation and resettlement of the community at 14 Mile Issano, construction of mine site infrastructure and upgrading of the mine site access road, construction of a process plant and the staged construction of a tailings storage facility.

The company has said that 500 persons are likely to be employed during construction and over US$15 million has already been directly committed for the building of the mine. The total construction budget is approximately US$87 million and the construction phase is likely to see about 500 people on site reducing to a permanent work force of 250-300, it had said. The expected impact on the Guyana economy is large in terms of direct taxes, royalties and knock-on effects from local purchases of goods and services both by the company and the employees, the company said.

The Finance Minister told the National Assembly during his 2014 budget presentation last month that Troy Resources is on stream for a late 2014 start up if not earlier.

Last week, the Aus-tralian mining company said it had refinanced its debt through a new A$100 million (US$92 million) facility with Investec Bank that will allow it to bring its Karouni gold project in Guyana into production. The company said that it has signed a Mandate Letter and Term Sheet with Investec Bank for the provision of a Revolving Corporate Facility of up to US$92 million to progress the development of the Karouni project in Guyana, refinance existing facilities and provide working capital.

“Of the A$100 million, A$70 million has been credit approved subject to finalisation of documentation. The remaining A$30 million will become available to the company with satisfactory progress with development of the Karouni project and Investec Credit approval. The available Facility will refinance the existing A$40 million borrowings of the company,” Troy Resources said in a statement.

The company said it believed the A$30 million the new facility offered in new immediate debt capacity, along with existing cash reserves of A$54.1 million and operating cashflow would be sufficient to bring its Karouni mine into production. Troy managing director Paul Benson said the new facility would also give the company the flexibility to consider other opportunities.

“Equally importantly from my perspective, the facility also enables us to utilise operating cashflows to recommence brownfields exploration at both Karouni and Casposo where we believe we have excellent potential to add to the resource inventory,” he said.

The funding agreement comes with hedging obligations. Troy will also be obliged to grant 3.3 million, three-year call options over its ordinary shares to Investec to the value of A$5 million with an exercise price of A$1.50.

Troy said the facility would have a three-year term with semi-annual repayments beginning in June next year. The Karouni project in Guyana hosts a known resource of 16.7 million tonnes at 3.1 grams per tonne gold for 1.65 million ounces, the company said.

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