Intrigued by the stock price success of its neighbour Guyana Goldfields (TSX: T.GUY, Stock Forum), Stockhouse last week joined a group of geologists, analysts, and mining financiers, for a tour of Sandspring Resources’ (TSX: V.SSP, Stock Forum) Toroparu gold-copper deposit in the Republic of Guyana in South America.
(More than a pot of gold at the end of
this Guyana rainbow)
Toroparu is a 102,900 hectare land package about 40 kilometres southwest of Guyana Goldfields’ Aurora Gold Project and approximately 200 kilometres of thick jungle west of Georgetown, Guyana’s capital. The property is a 45 minute bush plane flight from Georgetown and while it does have road access (hard-packed clay), it would be an eight hour drive from the capital during the dry season.
Sandspring’s tour was conducted by Lead Director John Adams of Colorado, a friendly fellow yet one that could likely hold his own in a western saloon. Adams, who boasts once owning 40% of the National Football League’s Denver Broncos franchise (an interest that would be worth US$432 million today according to Forbes.com), is hoping for another ‘touchdown’ at Toroparu.
While surely regretting selling his Broncos stake too soon, Adams seems determined not to make the same mistake with Sandspring, a company in which he claims to have put US$15 million of his own money. Despite his wealth, Adams is not afraid to get his hands dirty on this project, along with his son Wes who also handles Investor Relations. John Adams brings more 30 years experience in the mining business to Toroparu, including managing his family-owned company Energy Fuels Corp, which developed and owned the largest coal mine in Colorado (four million tons per year), as well as serving as Chief Executive Officer of Energy Fuels Nuclear Inc., the largest producer of uranium in the U.S. (five million pounds per year) during the 1980's and early 1990's.
Adding further credibility to this project is the recent addition of Cameco CEO Gerald Grandey to Sandspring’s Board of Directors. Mr. Grandey recently purchased 304,866 shares of Sandspring at a price of $1.28 a share.
Toroparu’s current gold-copper mineral resource as disclosed June 3, 2010, and independently modeled by P&E Mining Consultants Inc., is a potentially open-pittable bulk tonnage deposit with an NI 43-101 compliant Indicated mineral resource of 3.69 million ounces gold-equivalent (2.89 million ounces gold and 288 million pounds copper) and an additional Inferred mineral resource of 1.08 million ounces gold-equivalent (895,000 ounces gold and 66 million pounds copper).
(Sandspring’s Toroparu operation)
In comparison, Guyana Goldfields’ Aurora Gold Project has an NI 43-101 compliant Indicated mineral resource of 3.2 million ounces gold and an Inferred mineral resource of 1.4 million ounces gold. While the numbers are similar to those of Sandspring, Guyana Goldfields’ market cap is nearly $800 million (fully diluted) as opposed to about $140 million for Sandspring.
“They (Guyana Goldfields) have a good resource, a 4.5 million ounce gold resource and a scoping study with a positive economic projection. They’ve been public in Guyana for seven or eight years. We’ve been public in Guyana for less than a year,” said Sandspring President Abraham Drost, who also assisted in the Toroparu tour. “I think the Sandspring story is out there and growing, both in terms of the resource and in terms of the investor awareness … it takes time to appreciate value. From our perspective it’s continuing to deliver on the organic growth in terms of the exploration side and the resource side.”
(One of the drill holes at Toroparu)
One of the biggest challenges faced by Sandspring, as well as other miners in the area, is its energy costs. Currently, Toroparu is powered by four large diesel generators. The company is presently in discussion with government officials regarding alternative sources of power. Options on the table include hydro electric or run of river power. A coal fire plant would be a long shot given that Guyana’s President, Bharrat Jagdeo, was one of the six recipients of the United Nations Environmental Program 2010 Champions of the Earth award. Regardless, a cheaper energy source would significantly change the economics of this project, one that Drost presently estimates would have a cash cost “in the high US$400’s (per ounce of gold extracted).”
“Hydro electric is about two and a half times less expensive than diesel on a per kilowatt hour basis,” Drost added, figuring that Sandspring is burning about 10,000 litres of diesel fuel a month in the exploration phase. “That’s about $30,000 to $40,000 a month in diesel costs.”
Budgeted exploration costs of Toroparu account for about $9 million in 2010, while the budgeted corporate activities are estimated to be about $2 million. The company’s working capital was $12,119,802 as at March 31, 2010, which would mean Sandspring will need to raise more money in about a year’s time.
Another potential obstacle involves the possible raising of Guyana’s mining tax. Currently, all minerals produced from Guyana mineral claims are subject to royalties of 5% payable in cash or kind to the Government of Guyana. Other nations, such as Australia, have also been mulling over the idea of increasing taxes for those extracting minerals as a way to replenish dwindling government coffers.
To this end, John Adams and Sandspring seem to have the ears of top government officials, including Transport Minister Robeson Benn and even Prime Minister Samuel Hinds. Benn, a trained geologist, has been mentioned as a possible successor to the soon to be retiring Prime Minister Hinds, this according to Adams. Were this to happen, it would be considered a positive development for miners and exploration companies working in Guyana.
(Sandspring President Abraham Drost (left)
discusses the possibility of developing an
alternative energy source for Toroparu with
Guyana’s Prime Minister Samuel Hinds)
Wes Adams told the tour group he thinks Sandspring stock should be trading in the $3-a-share range, which is consistent with analyst target prices that vary from $2.75 to $3.30 a share. To get there, the company will need to keep drilling and raise more money to expand its resource and eventually convert those ounces into proven and probable gold reserves. One geologist on the tour estimates Sandspring will need to spend about $400 million on its Toroparu project.
In meantime, investors can expect new drill results coming out soon. On July 6, 2010, Sandspring released results that included 1.07 grams per tonne gold and .04% copper over 151 metres. In the release Drost stated: "The latest batch of assays are anchored by Hole 76 on the western edge of the current 800 metres long Toroparu gold-copper resource envelope. Assay results from stepout Holes 75, 77 and especially Hole 80 collared 400 metres northwest along strike suggest the discovery of a new gold-mineralized shoot and potential for resource expansion. The Toroparu deposit horizon remains open at depth and along strike at this time.”
“The latest step-out drill results validate a shear-hosted gold-copper deposit model highlighted by the gradient array IP geophysical dataset produced on site by Insight Geophysics Inc. With the IP data, not only can we "see" the Toroparu bedrock deposit horizon under saprolite cover, we can now follow it out with confidence along strike.”
“Drill testing of the Toroparu deposit horizon has been remarkably successful thus far with an Indicated resource discovery rate of approximately 100 ounces gold-equivalent per metre drilled to date. Previous technical reports on the property note similarities between the Toroparu deposit in Guyana and that of the Las Brisas deposit, part of the Kilometer 88 gold district in Venezuela. In terms of upside size potential and low discovery cost, the latest assay results point to the potential to develop a new gold district at Toroparu."
Thom Calandra and Ticker Trax reviewed the site in 2009: Please see articles
