Golden Star, Placer, Giant. probing for gold in Guyana

The Amerindians who arrived in this country centuries ago called it Guyana — “Land of Many Waters.” Guyana has also been known as El Dorado, the site of the mythical City Of Gold. In recent years there seems to be a struggle to revive the mythical past. Private sources indicate an annual gold production in excess of 100,000 oz, mostly by small river dredges and gold panners. To avoid taxes, most of this output remains anonymous.

Golden Star Resources takes a lot of credit for its perseverance and foresight. In April, 1984, Golden Star acquired four exploration properties from the government of Guyana and in June, 1985, they acquired exclusive rights to explore and develop the Omai property. The history

The Omai region, some 175 km south-southwest of the capital Georgetown, was a very active placer gold mining area between 1889 and 1911. A German consortium produced a lot of the gold around the turn of the century and records indicate to some 128,000 oz in total. In 1937, bedrock deposits were discovered and Anaconda acquired the property in 1947. In the period to 1950, Anaconda spent about $3 million(US) for geological evaluation, which included an extensive 39,800 ft of diamond drilling and also bulk sampling from a 385-ft shaft and approximately 3,000 ft of crosscuts. The fixed gold prices of the day of $35(US) an oz and inferior bulk mining technology deterred Anaconda’s ambitions. When Golden Star acquired the property, Anaconda sold all documentation and cores to the new group. Recent events

Golden Star commissioned SNC Inc. of Montreal for an evaluation of Anacoda’s records. The report of early 1986 outlined a weathered zone with inferred reserves of 13 million tons grading 0.042 oz per ton and a primary zone of indicated and inferred ore of 29.77 million tons averaging 0.043 oz. The report also outlined the potential of a large-scale open pit operation capable of supporting five million tons of ore, yielding 200,000 oz annually. However, another feasibility study for the weathered zone indicated higher grade alluvial reserves to three metres of 1.65 million tons grading 0.093 oz and saprolite material of 11 million tons (from three to 17 m from the surface) grading 0.042 oz. The study suggested, under the constraints of capital requirements, a 485,000-ton-per-year plant at a capital cost of $11 million to yield 40,000 oz annually at an operating cost of about $135 per oz. Placer in picture

Placer Development expressed interest in the property in late 1986, signed an agreement in December, 1986, and the parties completed negotiations with the Guyana government on March 21, 1987 to the satisfaction of everyone. Placer has been on site since April and according to the agreement, within six months it will reach a decision as to whether the property might be developed in one of the two scenarios.

A phase-2 program that would involve the construction of a one- million-ton-per-year plant giving parties equal working interest or a single phase program involving a plant capable of producing more than one million tons (possibly five million tons per year). In the 2-phase program each party will have 47.5% interest and the government a 5% interest. In the case of the larger plant, Placer will have a 71.25% interest, Golden Star 23.75% and the government will carry its 5%. Placer’s program consists mainly of confirmatory in-fill drilling and further exploration in the weathered zone. Th e other properties

Apart from Omai, Golden Star identified three other properties in Guyana — Baramita, Arakaka and Million Mount — or a total of eight more anomalies of comparable size to Omai. The Baramita property is 260 km west-northwest of Georgetown and is itself another old mining camp. Historical production records indicate some 12,000 oz of grades of about one ounce per ton. The geological setting is stockwork-intrusive contact.

Arakaka is 220 km west-northwest of Georgetown and is also of Precambrian age with a stockwork of metavolcanics. Six small mines in the area produced some 22,000 oz over many years.

The Million Mount Exclusive Permission is located in the central part of northern Guyana, 145 km southwest of Georgetown. The property lies near the old Peters mine which produced 40,000 ozs around the turn of the century. It is in an intrusive geologic setting with mineralization occurring in felsic to andesitic metavolcanics, metapyroclastics and metasedimentary rocks.

All properties are accessible by big choppers which makes life easier in the dense tropical forests. Arrival of Australians

To the credit of Golden Star and Guyana, another international mining company, Giant Resources of Australia, recently became involved in the three properties. To earn an equal interest with Golden Star, Giant will spend up to $5 million per property “on further exploration and related feasibility studies. It will also arrange the required financing for the development of any of the properties should a production decision be made.” Most of the management at Giant Resources had significant open pit experience with Placer Pacific and their expertise will enhance the rate of development of these properties. Mineral policy of Guyana

Acknowledging the effect of country risk on capital intensive projects such as mining, the government has adopted a very accommodative framework of policies to dissipate the concerns of the international mining community. A sign of confidence is that Placer, with the experiences of Mexico and Papua New Guinea, was satisfied with the negotiations with the government. To enhance the confidence of the mining industry, Dr G. Walrond, the Canadian-educated leader of the Guyana Geology and Mines Commission, will, report directly to the chief executive of the country.

In the case of Golden Star, which is typical of a “Mineral Agreement:”

* mining concessions of 20 years are granted with 7-year extensions as required;

* the government has the right for an undilutable 5% interest and can purchase up to 44% of the equity at market value and in convertible currency on or after April 27, 1994;

* a gross royalty of 5% which is deductible;

* no customs duties on most essential goods;

* sufficient gold must be sold to the Guyana Gold Board to meet local expenses. The remainder of the gold can be sold abroad and the funds held overseas. In addition, sales of gold to the Gold Board can command a 40% premium above the official Guyanese dollar vs U.S. dollar exchange rate;

* the income tax rate of 45% is after all legitimate costs, including royalties, depreciation and amortized exploration expenses;

* Guyana does not insist on the Calvo clause which is common in South America. The Calvo clause, in essence, specifies local jurisdiction in the case of legal disputes and furthermore allows expropriation in case of the party resorting to home country legal protection. Guyana is a signatory to the International Centre For the Settlement of Investment Disputes. Mr Ortslan is a mining analyst at Deacon Morgan McEwen Easson Ltd. in Montreal and has recently visited Guyana with a mining mission.