Azimuth aims to join TSX from down under with serious upside

VANCOUVER — Australian gold outfit Azimuth Resources (AZH-A) is looking to bring its advanced-stage Guyanese project portfolio to Toronto in the coming weeks.

The company is so bullish on its upcoming TSX market listing that it is relocating its corporate headquarters to North America to be closer to its projects in Guyana, and improve its access to Canadian financing pools. Azimuth is also looking to recruit a local CEO to oversee operations in Canada and the U.S. 

Much of the Canadian market coverage on Guyanese gold projects has followed the late-stage development of Guyana Goldfields’ (GUY-T) Aurora gold project and Sandspring Resources’ (SSP-V) Toroparu gold-copper property, but Azimuth has the land portfolio and drill results to rival both endeavours.

“We’ve been very lucky, or very fortunate, or very skillful,” managing director Dominic O’Sullivan said during a Feb. 2 presentation at the Sydney Mining Club. “But if you look at the numbers, I’m sure you can agree that they are some of the best that are coming back in the industry and business today.”

The company has built the largest land position in Guyana over the past five years, with the majority of its greater than 8,000-sq.-km exploration package under full ownership.

According to company directors Azimuth anticipates a re-rating of company shares following the Toronto Stock Exchange listing, based on its exploration success and the valuation of peer-gold exploration companies listed on the exchange that also operate in the region.

Azimuth’s projects are located in an area of Guyana that produces 300,000 oz. gold annually from a series of alluvial-artisanal operations, as well as the historic Omai gold mine, which produced 3.7 million oz. gold prior to its closure in mid-2008.

The advanced-stage West Omai land package totals 1,000 sq. km and is accessible by road 150 km southwest of Georgetown.

Azimuth’s exploration at West Omai has focused on a 15-by-3-km corridor and includes the Smarts, Hicks and Kaburi targets. The company has identified mineralization 30 km along strike, and drill programs have demonstrated a 12-km-long, mineralized-shear zone across the three targets.

The Smarts zone was discovered during a drill program targeting a small-artisanal pit and other auger anomalies, and has returned Azimuth’s strongest gold grades. The company has completed 40,000 metres of reverse-circulation drilling at Smarts, and the mineralization is open at depth with intersections as deep as 140 metres vertical. Azimuth expects a maiden resource estimate on the deposit in the next few weeks as final results roll in from the resource drill program.

The Smarts program encountered high grades within 50 metres of surface, and at depths up to 160 metres. Assay highlights include: 15 metres grading 34.5 grams gold starting from 45 metres depth, 7 metres of 19.9 grams gold from 49 metres, 29 metres of 14.3 grams gold from 15 metres, 2 metres of 168 grams gold from 150 metres and 38 metres carrying 6.2 grams gold from 25 metres.

Metallurgical testing at Smarts has identified an average head grade of 4.6 grams gold, and cyanide-leach recovery estimates of 93%.

The Hicks prospect has mineralization over a 2-km, continous shear zone averaging between 10 metres and 15 metres in width, and open along strike and at depth. Azimuth recently completed an 8,000-metre resource drill program on the target and an updated resource estimate is expected in the next four weeks. Hicks has a non-compliant gold resource, based on 17,000 metres of historic drilling, totalling 4 million tonnes grading 2.2 grams per tonne gold for 290,000 contained oz. gold.

The Hicks drill program identified solid gold grades within 60 metres of surface, including: 30 metres grading 7.68 grams gold starting from 54 metres downdip, 5 metres carrying 7.92 grams gold from 58 metres, 17 metres of 5.4 grams gold from 14 metres and 87 metres of 1.77 grams gold from 34 metres.

 Azimuth’s metallurgical testing at Hicks demonstrates a 1.77-gram-gold-average head grade under cyanide-gravity testing, with a 93% gold recovery in cyanide-leach models.

The Kaburi target is located on the largest artisanal bedrock pit in Guyana. Azimuth estimates that 20,000 oz. saprolite and alluvial gold have been produced from the pit at a 20% recovery rate. The company has completed 14 drill holes on the property totalling 2,500 metres, and found mineralization in quartz veins grading to a high of 56 grams gold over 1 metre.

Kaburi was unexplored using modern methods outside of basic stream-and-sediment sampling by the Guyana Geology and Mines Commission until Azimuth released results from its maiden drill program on March 13.

Initial assays returned gold mineralization at depths of up to 140 metres, including: 9 metres grading 9.2 grams gold, 1 metre carrying 55.9 grams gold and 135 metres of 0.32 gram gold. Azimuth continues scout drilling at the target, with up to 5,000 metres planned over the next three months to test a granitoid intrusion’s margins to the southeast.

The East Omai project is 210 km east of West Omai towards Guyana’s coast. The property is part of a 110-km greenstone belt that includes Iamgold‘s (IMG-T, IAG-N) Rosebel gold mine in Suriname, which produced 385,000 oz. gold in 2011.

Azimuth has identified numerous gold occurrences at East Omai through stream-and-surface sampling, and plans to start air-core drilling in the next two months.

Infrastructure and gold grades tend to be the two main concerns in Guyana.

As part of its commitment to renewable energy, the Guyanese government has pledged to build a 150-megawatt (MW) hydroelectric power plant at Amaila Falls, on the Kuribrong River in the Pakaraima Mountains. According to plans the power line is projected to pass directly through Azimuth’s West Omai project. The company is also in the process of building an access road which will pass within 5 km of the Hicks zone.

“The deal is once the road is completed financing of the dam will be arranged,” O’Sullivan comments. “It is already 30% debt financed. You might think that the size of the dam is quite small, but the total power draw for Guyana as it stands is only 100 MW, so that gives you a gauge of the size and intensity of development in the country.”

Azimuth has been a big riser on the Australian Exchange so far this year, with its shares jumping 42%, or 21¢ since Jan. 3, to a first-quarter high of 97¢ in early March. The company has 392 million shares outstanding, and a US$277-million presstime market capitalization.

Azimuth raised US$20 million in late October through an institutional private placement which totalled 42 million shares at 46¢. The offering attracted a “number of significant Canadian institutions.” The company is 32% institutionally owned with shareholders including Macquaire Group (MQG-A) and Vale (VALE-N).

Total exploration expenditures were projected at US$10.5 million through the first quarter in a cash-flow update filed at the end of January, including US$2 million worth of capital expenditures. Azimuth reported US$16 million in its treasury to end February.

Australian-based Blackswan Equities wrote in a note to clients on March 13 saying that “due to West Omai’s high-gold grades and simple metallurgy, it will have very low capital intensity and an attractive operating cost.” 

Blackswan analysts project a capital expenditure of US$200 million and forecast average cash costs at US$433 per oz. gold. Blackswan maintains a “buy” recommendation on the stock, and has Azimuth’s price target at $1.10.