Gold production in the second quarter for the Guyana Goldfields Inc (GGI) operations at Aurora, Region Seven was less than the first quarter of the year and there has been a significant change at the top with its Executive Chairman Patrick Sheridan replaced.
On July 30, the board of directors of GGI announced the appointment of independent director, René Marion, as the non-executive Chairman of the Board. “Patrick Sheridan Jr. has been terminated by the Board in his capacity as Executive Chairman, effective immediately. Mr. Sheridan will continue to be a member of the Board”, the company said. Sheridan was the founder of the company and had been its key figure going all the way back to 1996.
“The Company has substantially evolved since its founding into a sophisticated mid-tier producer that requires an effective management structure. The Company intends to realign its dual reporting structure and streamline communication with a single reporting structure to CEO, Scott A. Caldwell. The Company also intends to prioritize its effort to maximize production from the Aurora Gold Mine, focus on near mine exploration opportunities until mining operations are optimized,” Marion stated in the July 30 release.
The release said that Marion has over 30 years of diversified management and senior technical experience with resource industry expertise in operations, mineral exploration, and mine development, along with a successful history of corporate development. He currently serves on the board of Superior Gold Inc. and was most recently Director and Chairman of Richmont Mines Inc. Marion has been a director of GGI since 2013.
In a second quarter earnings conference call with bankers on July 31st, Caldwell said that the company sold about 31,700 ounces of gold in the second quarter compared to about 37,000 ounces tin the first quarter.
“Recovery is going up. Grade is improving. So I think we are back on track. We’re going to have a very strong third quarter and an even stronger fourth quarter,” he said.
Meanwhile, the company has revised its 2018 production target to about 175,000 to 185,000 ounces of gold down from 200,000, he said. Its production for 2017 was 117,002 ounces.
On gold production being below target in the second quarter, Caldwell said in the conference call from his Thomas Street office, “it was an isolated one-time event primarily due to issues in the mining operation.”
He added “Delays in mobilisation and upping our stripping efforts and then also not delivering some high-grade material from the Mad Kiss satellite deposit and a little bit from Aleck Hill. We just had mining issues and that’s really what hit our grade”.
Having produced 14,000 ounces in July which “is a little bit ahead of our plan,” Caldwell said, puts the revised target achievable.
“Head grade was about 2.45 gram of recovery which continues to trend upwards,” he said.
He continued, “The mill had some issues.” A scheduled 48-hour downtime was taken for a liner change followed by required maintenance on the primary crusher. “So we have a little bit of loose throughput.”
These days, he said, the mill was “running like a champ” and recovery has “started to move in the right direction.”
Milling is just over 7,000 tons a day, and recovery is over 91 per cent. It was close to 93 per cent in June, he said. The grade also increased from the second quarter up to 2.45 grams in July.
Meanwhile, the mining contractor, STRACON has mobilised and the mining rates are slowing, hitting planned levels of 30,000 tons a day. STRACON, a Peruvian company, has an open pit contract mining agreement in order to meet higher waste stripping requirements through to the end of 2021.
Caldwell said, there was a peak mining rate of about 63,000 tons a day during the second quarter. The target is 70,000.
“If we can do more than 70,000 tons a day ore and waste we will.”
Expressing confidence in the experienced team at STRACON, which has worked in Panama and Peru, he said, they are used to heavy rainfall. Guyana Goldfields, he said, is excited about seeing how they perform alongside them. The contractor is in the process of training local equipment operators in order to add a third crew to give 24-hour coverage. The operators hired are experienced, he said, “but they want to make sure that they do it in a safe and efficient manner.”
The second phase of the expansion of the mine, he said, is progressing and it is scheduled to be commissioned during the fourth quarter. The mill should be fully operational in the first quarter of 2019.
In terms of underground mining, Caldwell said that Guyana Goldfields has requested proposals from several international contracting groups.
“We will get those proposals back in the middle of August. The idea is to have that group mobilised and begin working on our underground development with a single heading drive out of the Mad Kiss portal area targeting to get below Rory’s Knoll over the next couple of years.”
More mining equipment has been ordered. Initial mining equipment was bought a year ago. “It’s been shipped. It should arrive shortly. So basically the contractor mobilisation will be people. We have all of the gear LHDs (load, haul and dump) jumbos et cetera to begin that work. We will use all our equipment to get started and then mobilise some more equipment.”
When the company talks about mobilisation, it might be mobilising about 20 to 30 people, he said. “Unfortunately there are no experienced underground mining people in Guyana, and so we will start with expatriate labour and slowly transform to Guyanese operations as times goes by,” he said.
Paul Murphy, Chief Financial Officer and Executive Vice President, Finance noted that in the second quarter, production was 10,000 to 12,000 ounces short because of the grade that was milled. The installation is capable of generating about US$20 million a quarter in free cash flow. However, he said, due to the missing ounces they “only generated about US$3 million in cash flow in the quarter.”