Greystar gets underground study on Angostura

Greystar Resources (GSL-T) has released an underground-only scoping study of its beleaguered Angostura gold-silver project in northeastern Colombia.

The company was forced to look at a pure underground option after it became clear that the Colombian government would not alter existing rules protecting the high-elevation paramo ecosystem to allow an open-pit mine at Angostura. With the restrictions in mind, the mine layout was designed to avoid surface accesses, portals and roads higher than 3,000 metres above sea level.

The study establishes that a 4,000-tonne-per-day underground mine could be viable, with the potential to produce 1.9 million oz. gold, 7.7 million oz. silver and roughly 228,000 lbs. copper over a 14-year mine life.

Greystar looked at roasting, bio-oxidation and pressure oxidation for processing, with roasting coming in with the strongest economics.

Initial capital costs are estimated at US$301.6 million, while average total cash costs are expected to be US$455 per oz., net of silver and copper credits.

The pretax internal rate of return came in at 21.4%, and the pretax net present value, using a 5% discount, at US$400.2 million. The numbers were based on US$1,015 per oz. gold and US$15.85 per oz. silver, factoring in somewhat higher prices for the first two years.

Those numbers contrast with a 2009 open-pit, heap-leach study, which found that using US$650 per oz. gold, the company could produce 4.2 million oz. gold though heap leaching and 3.5 million oz. through conventional processing, plus 34.5 million oz. silver over a 15-year mine life.

The 2009 study established a net present value, with a 6% discount, of US$942 million with an internal rate of return of 24.9%. Capital costs were pegged US$638 million.

The new study excluded resources outside the stopes that make up additional indicated resources of 1.44 million indicated oz. gold and 1 million inferred oz. gold, both with a 3-grams-gold cutoff. The company also sees room for improved metrics by optimizing the cutoff grade and by expanding the resource that remains open at depth.

The company recently changed its management team in light of the failure to permit the Angostura project. New York hedge fund Amber Capital LP, which controls roughly 18% of Greystar’s shares, appointed Juan Orduz and Rafael Nieto Loaiza as directors, and will replace the rest of the board at the company’s annual general meeting on May 18.

Greystar’s shares dropped 2¢ to $3.44 on the day the new study was released. The company has a 52-week trading range between $2.26 and $5.80, with 84.2 million shares outstanding.