VANCOUVER — It has been nearly a decade since president and CEO Gregory Sparks put together a large property package in Guyana with the hope of discovering a world-class gold deposit that might make an attractive acquisition target for a major gold miner.
Fast forward to 2013 and Sparks' Sacre-Coeur Minerals (SCM-V) has positioned itself as one of the few juniors in the region with a strong working capital base, and though focus has shifted toward near-term production at the company's Million Mountain project, Sparks still believes that big discovery is out there waiting in the Guyanese jungle.
“It became apparent to us that, though we had enjoyed some successes with exploration and resource development, the deposit we were working with probably was not marketable to a major,” Sparks explains during a phone interview. “So we began experimenting with various means of production that would see us cost effectively extract gravity-recoverable gold. We struggled a little bit to figure out the recovery methods for the in-situ gold in a heavy clay environment, but settled on a bit of an updated version of what the local artisanal miners use.”
Sparks is referring to Guyana’s rich history of alluvial and elluvial gold mining. Sacre Coeur began inventorying its alluvial gold deposits in a bid to generate sustainable cash flow that could cover the company's corporate and holding costs, as well as provide sufficient working capital to pursue exploration on an wholly-owned, 860-sq.km land package in some of Guyana's most prospective areas.
And that strategy is starting to pay off, with Sacre Coeur producing roughly 600 oz. of gold during the third quarter of 2012 and generating US$990,000 in gross sales receipts. The company continues to improve operations and production rose to around 70 oz. per week in September at cash costs of US$357 per oz. The result was a cash margin of US$1,1012 per oz. and net cash flows for the third quarter clocking in at US$604,000.
As a result Sacre Coeur is in the midst of a C$435,000 expansion at its operation that should more than double production to between 1,450 oz. and 1,800 oz. of gold per quarter. Sparks says the upgrade is on schedule for production in April, and should result in reduced cash costs.
But the big windfall for Sacre Coeur has been access to debt markets only available to producers, which has given the company the ability to finance without further equity dilution in a tough market.
In early February Sacre Coeur closed a gold-participating bond offering and raised US$6.48 million. The company's bonds mature in December 2016 with 10% annual interest on a declining balance payable in cash each quarter.
The bonds will be redeemed in sixteen equal quarterly installments, delivered via gold exchange-traded fund (ETF) units on the SIX Swiss Exchange. Sparks explains that the agreement should account for roughly 15% of Sacre Coeur's production per quarter, and meets a number of criteria the company was looking for in a financing.
“We set out and were determined we were not going to be one of those companies that has trouble surviving in a market like we are dealing with these days,” Sparks says. “We chose this level of financing for a couple of reasons. Obviously we needed enough working capital to complete what we wanted to complete, doubling our alluvial capacity, and completing our feasibility study. The other criteria we used in determining the size of the issuance was that we wanted no less than a five-to-one coverage ratio on production.”
With surface mining operations humming along Sacre Coeur can turns its time and money to the next stage of its strategy, which involves a hard-rock resource at its Million Mountain property. The resource is contained in the Zone 1 deposit, which totals 12 million measured tonnes grading 1 gram gold per tonne and 2.2 million indicated tonnes grading 0.9 gram gold for a global in-situ resource of 451,000 oz.
Sparks points out that Sacre Coeur has completed around 40 holes since its last resource update, and speculates that the company could be sitting on over 500,000 oz. of gold once it has a chance to recalculate with new drilling data. The company also expects to drop its resource cut-off grade from 0.5 gram per tonne to 0.3 gram per tonne.
“Our current business model, and one we'll be pursuing for the foreseeable future, contemplates not necessarily counting on ever making a huge or world-class discovery here,” Sparks says. “We'll focus on the smaller, satellite deposits that are in saprolite and have simple metallurgy and are easy to mine. We're looking at low-entry costs and affordability here. So if we can get a number of these going at one time we could generate a lot of ounces at very reasonable costs.”
And due to promising internal studies on Million Mountain, Sacre Coeur has opted to move directly to the feasibility stage with the project. The company has internally modelled a 100,000 tonnes per month mine, including a portable modular process plant with gravity front-end and cyanide back-end to optimize recovery of fine gold. The operation could produce roughly 40,000 oz. of gold annually over a seven year life and carry a price tag of around US$30 million.
Sparks is quick to point out that through geophysical and geochemical work Sacre Coeur has outlined nine similar anomalies to Zone 1 across its Million Mountain property, which holds 20-km of east-west striking megalineament.
The company plans to drill around 10,000 metres this year, with a focus on upgrading Zone 1’s resource, as well as outlining a maiden resource at its Zone 9 prospect. During scout drilling at Zone 9 Sacre Coeure cut 14 metres grading 4 grams gold, including 0.55 metres of 84.26 grams gold, in discovery hole KM0209.
“We consider each of these nine targets prospective for deposits of varying size,” Sparks says, pointing out that Sacre Coeur owns three core drills and enjoys very competitive exploration costs. “I've worked in Guyana for 17 years so we sort of know how to do business in the deep bush, and that gives us a great advantage. You have to be pretty much self-sufficient when you're scoping a project in this sort of working environment.”
And Sacre Coeur will continue to pursue target generation on its greater land packages. The company holds 356-sq.km in its Lower Puruni regional block, which houses Million Mountain and sits near the historic Omai gold mine. A second 450-sq.km tract sits in the historic Arakaka district in northwestern Guyana. Arakaka has recorded gold production since the late 1900s — generally associated with high-grade quartz veining — and continues to be targeted by artisanal mining operations.
Sacre Coeur has 59.3 million shares outstanding and has traded within a 52-week range of 8¢ and 26¢. The company has had a strong start to 2013, jumping nearly 40% in the past six weeks en route to a 20¢ per share close at the time of writing for a $12 million press-time market capitalization.
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