Edgewater outlines Ghana resource as it focuses on Spain

VANCOUVER — Edgewater Exploration (EDW-V) has released a maiden resource on its Enchi gold project in Ghana as it continues to push forward with its flagship Corcoesto gold project in Spain.

The company is advancing Enchi with 49% joint venture partner Kinross Gold (K-T, KGC-N), while the Government of Ghana holds a 10% carried interest. The initial resource has outlined 20.6 million inferred tonnes grading 1.13 grams gold per tonne spread over three zones for 749,000 contained oz. gold.

The resource is based on a cut-off of 0.7 grams gold, while a drop to a 0.5-gram-gold cut-off brings the total contained ounces to a little over a million at a grade of 0.89 grams gold. Edgewater noted that the resource, hosted mainly in oxidized saprolitic rock, sits at or near surface and generally extends to about 75 metres depth.

The resource is just an anchor for the Enchi project though, with numerous other targets identified and lots of exploration potential. The Enchi property, which Edgewater secured from Red Back Mining before its takeover by Kinross, spans 568 sq. km in southwest Ghana and covers 50 km of the Bibiani Shear Zone. Kinross’s Chirano mine, sitting some 60 km north, also straddles the Bibiani shear, and like Enchi is spread over several pods of mineralization separated by dead zones.

Edgewater had a VTEM survey flown over the property last year that identified 10 new targets on top of the many targets Red Back had already discovered. The company is now conducting 10,000 metres of drilling with one rig plus survey and sample work to follow up on the targets.

But with capital markets tight, the company is dedicating most of its $4-million in cash to advance its more advanced Corcoesto project. By the end of the year Edgewater is looking to have completed an updated resource, a feasibility study, exploitation and environmental permitting, plus have a good grasp on project financing.

The Corcoesto project sits in the autonomous region of Galicia in the northwest corner of Spain, which means all permitting happens at the local and state level with no approvals needed from Madrid. Edgewater reports it has overwhelming support from the local community and all levels of government in the region, with the mine not presenting relocation or significant environmental issues.

Edgewater put out a preliminary economic assessment on the project last November that outlined a 6,000-tonne-per-day open-pit mine producing 102,000 oz. gold per year for 10 years. Based on US$1,300 per oz. gold, the financials worked out to a pre-tax net present value of US$206 million using a 5% discount rate, an internal rate of return of 24%, and a 3.4-year payback.

The mine plan calls for milling about 2.1 million tonnes a year at a 1.7-grams-gold feed grade and achieving an 89.1% recovery. The strip ratio is fairly high at 8 to 1, with the company mining three separate pits, but it still expects to produce at a cash cost of US$713 per oz gold.

The PEA was based on a resource 5.8 million measured and indicated tonnes grading 1.74 grams gold plus 20.3 million inferred tonnes grading 1.76 grams gold. The company launched a 20,000-metre drill program soon after the study came out to upgrade a good part of the inferred resource so it can be included in the feasibility study. The resource update, expected around August, however isn’t expected to add much in the way of total ounces. The deposits are all open at depth, but the company is holding off on any deep drilling for the time being.

The next big step in advancing the project is for Edgewater to secure financing. Initial capital costs run at a fairly reasonable US$135 million, with another $25 million in contingency. To help secure financing the company last year brought on AJ Ali as project finance advisor, who has advised on over a billion in financing including Avanti Mining‘s (AVT-V) recent $640-million financing and Platinum Group Metals‘ (PTM-T) US$260-million financing last August.

Joining Ali in the search for capital is Edgewater president and CEO George Salamis, who was most recently president of Rusoro Mining (RML-V), CEO of Caledon Resources before that, and served as a senior geologist at Cameco (CCO-T) and Placer Dome in the 1990s. Edgewater management also includes Greg Smith, as VP exploration, who holds the same role at Calibre Mining (CXB-V); Edward Farrauto, as CFO, who holds the role of president and CEO at Calibre; Doug Forster, director, who is also president and CEO of Featherstone Capital; and the company appointed John Thomas as COO earlier this year to lead construction at Corcoesto.

Edgewater’s share price climbed 5¢ to 35¢ on news of the latest resource estimate. The company has 67 million shares outstanding, of which Kinross holds 5%, insiders hold 19%, and institutional shareholders have 38%. Edgewater also has about 15.5 million warrants at between $1.10 and $1.40, all expiring by the end of next year, and 7 million options.