As industrial metal prices continue to rise from their 2008 lows, Vancouver-based Reunion Gold (RGD-V) has refocused its exploration efforts away from precious metals and on to past-producing manganese mines in Guyana.
Six months after acquiring four Guyanese prospecting licenses, the company has released trenching results from the historical Matthews Ridge mine, on which Reunion has found “thick, high-grade manganese mineralization” over a strike length of at least 2.5 km. The trenching results, which included 64 metres grading 20.5% manganese, helped push the stock up 99% to $1.65 from 83¢ in early March.
Manganese is the fourth-most consumed metal in the world, behind iron, aluminum and copper, and currently trades for around US$3,700 a tonne (99.7% FOB Chinese), according to Platts. It is mostly used as a component in steel production, though some lithium battery makers are using the metal as a substitute for cobalt, creating a high-energy battery with a longer shelf life at a lower cost.
Reunion’s properties briefly saw production from 1962 to 1968. Like many historical mines subject to renewed interest as metals prices have increased, production at Matthews Ridge shut down following a downturn in the price of manganese, and Reunion believes a considerable amount of ore was left in the ground.
In an unusual twist, the North Korean government had a brief look at the properties in the mid-1980s, but apparently did not find enough manganese to justify development, abandoning the prospects after drilling around five holes.
A non-National Instrument 43-101 compliant survey completed in 1985 by the Guyana Geology and Mines Commission and the North Korean government estimated the remaining resource at Matthews Ridge to be 3.6 million tonnes of recoverable manganese concentrate (33.4% manganese).
Reunion now plans a 24,000-metre, 220-hole drill program at Matthews Ridge to define a NI 43-101-compliant resource estimate by the end of 2011. If all goes well, the company then hopes to explore another past-producing manganese mine, Pipiani, 40 km away.
Last year, with Reunion’s stock struggling to break past 10¢, director David Fennell decided to take a more managerial role in the company and became executive chairman. According to Reunion’s president, James Crombie, Fennell played a “critical role [in the acquisition of the manganese properties] because of his history and contacts in Guyana.” The company paid nothing for its four licenses except for the cost of the filings, though it did have to provide a work program.
Fennell’s experience in Guyana dates back at least to the 1980s, when he was exploring for gold there as president of Golden Star Resources (GSC-T, GSS-X). Golden Star would become a huge market success after it and joint-venture partner Cambior put the promising Omai gold deposit into production in 1993, creating the largest gold mine in South America at the time.
In 1995, however, production briefly shut down after a toxic wastewater dam at the mine broke, sending millions of litres of cyanide waste into a nearby river. The JV partners decommissioned Omai in 2005 due to the depletion of reserves. Fennell was also instrumental in helping the two companies advance their large Rosebel gold project in neighbouring Suriname until 2001, when Cambior bought out Golden Star’s 50% interest. Iamgold (IMG-T, IAG-N) took over Cambior in 2006, and now produces roughly 400,000 oz. gold a year from the deposit.
As for Reunion, this is not the first time Fennell has played a key role in the company’s property acquisitions. In 2006, his private company, Laurentian Mountain Investment Ltd., sold Reunion the Antino 1 gold project in neighbouring Suriname for US$50,000 and 1.6 million shares. Speculation surrounding drilling at the property pushed Reunion’s stock as high as $2.25 that year, though shareholders were less excited about the resulting assays. The company abandoned the project in 2010, writing down $10.8 million in deferred exploration costs.
In 2007, another private company controlled by Fennell sold Reunion the Lely Mountain gold project, also in Suriname, for $100,000 and two million shares. Reunion got as far as mapping, sampling and building an ATV access track before running into difficulties at the hilly property. Too much rain and delays in receiving survey data stalled exploration and the company ran out of money before completing more substantial work, such as drilling. By October 2008, the company had to suspend exploration and place Lely Mountain on care and maintenance, where it remains today.
Nevertheless, chairman Fennell, a lawyer, and president Crombie, an engineer, are well-known market players who have fine track records and useful connections. Crombie was the president of Palmarejo Silver and Gold Corp. when it merged with Coeur D’Alene Mines (CDM-T, CDE-N) in late 2007, and Fennel was also Miramar Mining’s vice-chairman when it was taken over by Newmont Mining (nem-n) in 2008. The pair also seems to have the backing of Ned Goodman’s Dundee Group, which owns 19.25 million Reunion shares and equivalent number of 10¢ warrants. This past summer a Dundee subsidiary sold a Serbian gold project to their new company, Avala Resources (AVZ-V), and helped it arrange a $22-million private placement to finance the deal. Fennell and Crombie are also directors or officers at Odyssey Resources (ODX-V), Queensland Minerals (QML-V) and Sutter Gold Mining (SGM-V).