Juniors taking hard look at Guyanese scene

A decision by the Guyanese government to sell nationalized industries back to the private sector in a bid to stimulate economic growth appears to have renewed the interest of Canadian juniors in that South American country.

Golden Star Resources (TSE) and South American Goldfields (TSE), who have been actively exploring for both diamonds and gold in Guyana, are planning to expand their activities there by amalgamating.

Golden Star owns 35% of the developing Omai gold project. The Alberta-based junior and majority project owner Cambior (TSE) are preparing to bring Omai into production at a rate of 225,000 oz. annually by the beginning of 1993. Goldfields is a joint venture partner with Golden Star in the Mazaruni diamond project and owns 2.5 million shares (or 16%) of the Edmonton-based company. Controlled by Vancouver promoter Robert Friedland, Goldfields can also double its stake in the Aurora gold project, a former gold producer, to 80% and reduce partner Denison Mines (TSE) interest to 20% by spending $5 million during a 5-year period.

Other mining representatives who are expressing interest in Guyana include Toronto promoter Patrick Sheridan, who recently visited the South American country to take a look at what is going on.

Goldfields has been impressed by initial results at the huge Mazaruni River concession. It says 25 million cubic metres of diamond-bearing gravel with associated gold credits have been outlined. With values estimated at US$100-120 per raw carat, the joint venture conducted a bulk-sampling program after installing a 1.5 cubic-metre-per-hour plant capable of recovering 96% of diamond tracers.

The return of Reynolds International, a unit of Reynolds Metals (NYSE), in 1986, after a 10-year absence, has likely helped in attracting foreign interest in Guyana.

Reynolds and Alcan Aluminum pulled out of Guyana in the mid-1970s when the government decided to nationalize the countrys key bauxite, sugar and forest products interests. But after that decision brought the economy to the brink of collapse, the government has had to rethink its policies. In January, Reynolds celebrated the opening of the 1.5 million tonne-per-year Auroaima bauxite mine. A joint venture with the Guyanese government, the mine is located about 112 km southwest of Georgetown.

Reynolds spent US$65 million on the project last year and is scheduled to spend another US$10 million in 1992, said Larry Hawkins, general manager, aluminum, bauxite and chemicals.

As in most developing countries, technical skills are lacking and wages can be as low as US 50 per day. But Hawkins says the literacy levels are high because children are schooled under the British system and there is a tremendous desire among the population of about 800,000 to learn. Guyana has several large bauxite deposits with tremendous numbers in the ground, he said.

To protect itself from political uncertainty, Cambior took out political risk insurance before committing to spend US$160 million on the Omai gold project. Similar steps were also taken by Reynolds before it agreed to contribute its $60 million share of capital costs to develop the Auroaima mine under a 50/50 joint venture with the Guyanese government.

We operate the facility and profits are split down the middle, said Hawkins. On the gold exploration front, Sutton Resources is currently calculating a preliminary reserve figure at its Marudi Mountain property after obtaining wide intersections, including 105 metres grading 2.16 grams per tonne. Having negotiated a $1-million line of credit, the company is also testing three prime targets away from the Mazra Hill zone.