Guinor digs deeper at Dinguiraye

A bankable feasibility study of a planned expansion at Guinor Gold‘s (GNR-T) 85%-owned Dinguiraye gold project in northeastern Guinea indicates a respectable 22.3% internal rate of return.

The study is centred on an updated reserve totalling 40.5 million tonnes grading 1.7 grams gold per tonne, for around 2.2 million contained ounces of gold. The new estimate is based on drilling up to the end of 2004, and a conservative gold price of US$400 per oz.

The latest round of reverse-circulation drilling was focussed around the Lero Karta and Fayalala pits, with the Lero South area returning some of the best-ever results from the property.

Selected results at Lero South include:

• Hole 454 – 26 metres of core length (beginning 41 metres below surface) grading 13.75 grams gold per tonne, and 5 metres (from 100 m) grading 13.75 grams;
• Hole 521 – 7 metres (from 12 m) of 11.7 grams gold, and 26 metres (from 70 m) of 13.2 grams;
• Hole 531 – 7 metres (from 102 m) of 8.75 grams, and 6 metres (from 33 m) of 21.5 grams; and
• Hole 574 – 10 metres (from 49 m) of 9.2 grams gold, and 27 m (from 111 m) of 15.3 grams.

So far, Lero South has been estimated to contain 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, runs 6.6 grams over 7 metres, beginning at a depth of 10 metres in hole 512. At Bofeko, near the Fayalala pit, results are highlighted by hole 121, which yielded 10 metres (from 50 m) running 10.6 grams gold.

Overall resources at Dinguiraye stand at 68.1 million tonnes averaging 1.6 grams gold, for nearly 3.5 million contained ounces.

“The last round of drilling we did towards the end of last year really gave us some very interesting and encouraging results,” says Schultz. “It gave us an economic boost in the first two years of operation, especially in the second year.

“The third year is a bit skinny (forecast production of 292,288 oz. at US$284 apiece), but we’ve got US$5 million worth of exploration planned for this year with the goal of finding some more of the good stuff we found last year,” he adds.

Plans at Dinguiraye call for an expansion of the ongoing open-pit operations to a processing rate of 6 million tonnes per year. At full steam, the current heap- and dump-leach operations sees about 900,000 tonnes of laterite and clayey saprolite material stacked on the heap, with up to 200,000 tonnes of clean laterite material placed on dump-leach pads to produce at an annual rate of around 70,000 oz. ounces of gold.

The pits currently target near-surface oxide ore only; the new plan envisages the blending of those oxides with deeper primary ore. The life-of-mine stripping ratio for the owner-run operation is pegged at 3.9-to-1 (including existing stockpiles).

Primary gold mineralization at Dinguiraye occurs in structurally controlled, quartz-poor lode and quartz-vein deposits within the Birimian sedimentary units. The deposits lie within the 10-km-by-12-km Lero-Fayalala Corridor, which runs east-west in the northeast portion of the concession.

The corridor is predominantly comprised of arkosic silts with a few horizons of arkose. Gold is associated with stockwork and sheeted quartz-carbonate-sulphide veining, and stockworks of albite-carbonate-sulphide veinlets, with pyrite ranking as the dominant sulphide.

Guinor plans to send the blended ore through the Kelian carbon-in-leach plant currently in Kalimantan, Indonesia. In November, the company inked a deal to acquire the mill and associated diesel power station from Rio Tinto (RTP-N) for US$15 million. The price includes shipping from Indonesia. The sale is subject to the Indonesian government not exercising its right to purchase the plant.

Guinor CEO Trevor 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 the deal’s signing.

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 7 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 generates an internal rate of return (IRR) of 22.3%, with the net present value (NPV), 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’ve been around US$50 million higher if not for the use of the pre-owned mill and power plant. The capital cost includes the cost of a mining fleet worth around US$40 million. Originally, the plan was to use contract mining; the new plan lowers operating costs.

The Guinean government retains a 15% free carried interest at Dinguiraye.