It has been a rough year for junior explorer Sandspring Resources (SSP-V), with its share price plummeting 67%, or $1.60, to lows of 57¢ in May.
The company has suffered from questions concerning the economics of its low-grade, high-tonnage Toroparu gold property 220 km west of Georgetown, Guyana, but it has been moving forward in the face of market adversity since acquiring its environmental permits in early June.
Measured and indicated resources at Toroparu stand at 240.9 million tonnes grading 0.78 gram gold per tonne and 0.079% copper for a contained 6 million oz. gold and 420 million lb. copper. Another 179.2 million tonnes at slightly lower grades lie in the inferred category.
Toroparu’s conceptual mine plan at the preliminary economic assessment (PEA) level envisages an open pit operation producing an average of 197,250 oz. gold per year over a 22-year mine life. The mine would be processing 28,030 tonnes per day at US$14 per tonne or cash costs at US$643 per oz. gold
The project would have a US$446-million capital expenditure (capex) with expansion costs totalling US$225 million — aimed at bumping throughput to 33,000 tonnes per day by its fourth year of operation. According to the PEA, the project carries an after-tax net present value of US$540 million at a 5% discount rate, and a 17.9% internal rate of return.
A major hurdle would of course be operating a bulk-tonnage mine in a challenging jurisdiction such as Guyana. The country is not overly developed, with most infrastructure limited in scale. Cost uncertainties swirl around fuel consumption, transportation and labour, having already haunted rmore advanced projects such as Guyana Goldfields’ (GUY-T) Aurora gold property.
By comparison, though, Toroparu would benefit from being an open-pit-only operation — Aurora is proposed to include an underground element.
Sandspring aims to deal with infrastructure concerns by working with the Guyanese government to secure adequate transportation and power sources to pave the way for mine production in 2015.
The company has built its own power plant, installed a 762-metre runway and formed a large, mobile construction team complete with a heavy-equipment maintenance centre.
Sandspring also enjoys road access to a tidewater port via the Essequibo River, and its 120-person camp includes an on-site preparation laboratory and an in-house construction team.
Sandspring received its environmental permit from the Guyanese government on June 8, which approves a 3.5- to 20-million-tonne-per-year mine. Under a mineral agreement signed in late 2011, the environmental permitting is the first step towards receiving a full-scale mining licence. The second qualification is the company’s feasibility study, which is at least six months away.
“All environmental aspects of the permit application were developed in accordance with international environmental standards, and took into account the ecological effects of the biodiversity that are unique to Guyana and the Toroparu area,” director and CEO Rich Munson comments. “This milestone is another significant step in de-risking the project and is clear evidence of the government of Guyana’s continuing support of responsible mineral development.”
In addition to permitting progress, Sandspring has discovered a satellite gold deposit 1.2 km southeast of its Toroparu resource. The company completed a 20-hole drill program on its newly minted SE zone along 50-metre spacing to vertical depths of 300 metres. Intercepts in the core holes have initial widths between 25 and 100 metres, showing good distribution of disseminated medium-grade mixed with higher-grade zones.
The initial hole at the SE zone — 313 — was reported in late February and intersected 1.09 grams gold over 80 metres. Highlights from the subsequent program include 1.45 grams gold over 66 metres in hole 378, 1.74 grams gold over 54 metres in hole 390 and 1.23 grams gold over 53 metres in hole 366.
The company is spending US$5 million on exploration drilling in 2012, with high-priority targets established at the SE zone, where a resource drill program is underway, as well as a northwestern extension of the Toroparu mineralization. The company has two additional regional targets in its Ameeba Hill and Red Dragon North anomalies.
Sandspring has enjoyed a bit of a bounce back over the past four weeks, with share prices jumping 33%, or 20¢, to an 80¢ presstime close. The SE zone gold discovery and environmental permitting appear to have apparently buoyed the company’s share price.
The company is cashed up for the year thanks to a US$25-million bought-deal financing at the end of March consisting of 23.2 million shares sold at $1.08.
Following the financing, Sandspring had 132 million shares outstanding, with a presstime market capitalization of $106 million.
The company remains 21% held by insiders, with institutional shareholders Sentry Investments holding 4.55% and RBC Global Asset Management with a 3.9% stake.