A bankable feasibility study of a proposed expansion at
The study is centred on an updated reserve of 40.5 million tonnes grading 1.7 grams gold per tonne, equivalent to 2.2 million oz. gold. The new estimate is based on drilling to the end of 2004 and on a conservative gold price of US$400 per oz.
The latest round of reverse-circulation drilling targeted the area around the Lero Karta and Fayalala pits. Results from the Lero South area were especially encouraging, and include the following:
– Hole 454 — 26 metres of core length (beginning 41 metres below surface) grading 13.75 grams gold per tonne, and 5 metres (from 100 metres) grading 13.75 grams gold;
– Hole 521 — 7 metres (from 12 metres) of 11.7 grams gold, and 26 metres (from 70 metres) of 13.2 grams gold;
– Hole 531 — 7 metres (from 102 metres) of 8.75 grams, and 6 metres (from 33 metres) of 21.5 grams;
– Hole 574 — 10 metres (from 49 metres) of 9.2 grams gold, and 27 metres (from 111 metres) of 15.3 grams.
Lero South contains at least 750,000 tonnes of inferred material grading 4.2 grams gold — significantly higher than the overall reserve grade.
The best interval from the Camp De Base area, near the Lero Karta pit, occurred in hole 512: 6.6 grams over 7 metres, beginning at a depth of 10 metres. At Bofeko, near the Fayalala pit, results are highlighted by hole 121, which yielded 10 metres (from 50 metres) grading 10.6 grams gold.
Overall resources at Dinguiraye stand at 68.1 million tonnes averaging 1.6 grams gold, or nearly 3.5 million contained ounces.
“Drill results from the end of last year are encouraging,” says Guinor CEO Trevor Schultz. “They point to an economic boost in the first two years of operation, especially the second. The third year is a bit skinny [forecast production of 292,288 oz. at US$284 per oz.], but we’ve got US$5 million worth of exploration planned for 2005. Our goal is to find more of the good stuff we found in 2004.”
Plans call for an expansion of the ongoing open-pit operations to a processing rate of 6 million tonnes per year. At full steam, 900,000 tonnes of laterite and clayey saprolite material would be stacked on the heap, with up to 200,000 tonnes of clean laterite material placed on dump-leach pads. The annual gold production rate is pegged at 70,000 oz.
The new plan envisages the blending of oxide ore from near the surface with deeper, primary ore. The life-of-mine stripping ratio for the owner-run operation is estimated to be 3.9-to-1 (including existing stockpiles).
Primary gold mineralization at Dinguiraye occurs in structurally controlled, quartz-poor lode and quartz-vein deposits in the Birimian sedimentary units. The deposits lie within the 10-by-12-km Lero-Fayalala Corridor, which runs east-west in the northeastern portion of the concession.
The corridor consists chiefly of arkosic silts with a few horizons of arkose. Gold is associated with stockwork and sheeted quartz-carbonate-sulphide veining plus stockworks of albite-carbonate-sulphide veinlets. Pyrite is the dominant sulphide.
Guinor plans to send the blended ore through the Kelian carbon-in-leach plant, currently in Kalimantan, Indonesia. In November 2004, the company inked a deal to acquire the mill and associated diesel power station from
Schultz says that while he expects the government to allow the sale to go through, no guarantees can be made. The government is required decide within 30 days of signing of the deal.
Initial production of around 361,102 oz. from the expanded operation is expected by the end of 2006; cash costs (excluding royalties, which run 5.4% of revenue) during the first year are pegged at US$184 per oz. In all, average life-of-mine production is projected at 320,000 oz. per year at US$231 per oz. for seven years. The average head grade is forecast at 1.75 grams gold per tonne, with the average recovery rate figured at 91.7%.
Based on a gold price of US$400 per oz. (and US$35 per barrel of crude oil), the operation is expected to generate an internal rate of return of 22.3%, with the net present value, at 8% discount, ringing in at US$58.3 million. At a gold price of US$375 per oz., the IRR slips to 16.3% and the NPV, to US$34.5 million. At US$450 per oz. gold, the IRR hits 34.3%, and the NPV reaches US$112.4 million.
The expansion scheme carries a price tag of US$144 million; Schultz figures that number would have been US$50 million higher without the pre-owned mill and power plant. The capital cost includes a mining fleet worth around US$40 million.
The Guinean government retains a 15% free carried interest at Dinguiraye.
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