VANCOUVER — It has been a rough year for junior explorer Sandspring Resources (SSP-V) as its share prices have plummeted 67% or $1.60 over the past 52-weeks to a low of 57¢ in early May.
The company has suffered from questions surrounding potential economics at its low-grade, high-tonnage Toroparu gold property 220-km-west of Georgetown, Guyana. Sandspring continues to de-risk the project and move forward in the face of market adversity with the successful acquisition of its environmental permits in early June.
Toroparu’s conceptual mine plan involves an open-pit operation with a 22-year mine life slated to mill 28,000 tonnes per day at $14 per tonne. Sandspring’s model includes average cash costs at US$643 per oz. gold at a grade of 0.65 gram gold per tonne. The company is planning on producing 255,400 oz. of gold per year.
The project will reportedly carry a US$446-million capital expenditure (capex) with additional expansion costs totalling US$225 million — aimed at bumping throughput to 33,000 tonnes per day by its fourth year of operation. According to current economics the project carries an after-tax net present value totalling US$540 million with a 17.9% internal rate of return at a 5% discount rate.
Sandspring’s major issue revolves around operating a bulk-tonnage mine in a challenging jurisdiction. Guyana is not overly developed, with a majority of the infrastructure in early stages or build-out periods. Inflationary elements involving fuel consumption, transportation, and labor consistency have haunted regional projects like Guyana Goldfields (GUY-T) Aurora gold property.
Sandspring benefits from a solely open-pit operation —Guyana Goldfields’ Aurora proposal includes an underground element — as well as a shallow measured and indicated resource totalling 241 million tonnes grading 0.78 gram gold for 6 million contained oz. The company is aiming at dealing with infrastructure concerns by working with the Guyanese government, developing adequate transportation and power sources to handle potential mine production slated for 2015.
The company has built-out its own 300-kilovolt-amperes power plant, installed a 2,500 foot-long runway, and boasts 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 prep lab and in-house construction team.
Sandspring received its environmental permit from the Guyanese government on June 8, which approves a 3.5 million to 20-million-tonnes-per-year mine. Under a mineral agreement signed in late 2011, the environmental permitting is the first step towards receiving a full-scale mining license. The second qualification is the company’s feasibility study, which is probably 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,” commented director and CEO Rich Munson. “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 announced the discovery of a satellite gold deposit located 1.2-km-southeast of its Toroparu resource to end May. The company completed a 20-hole 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 of between 25 and 100 metres, showing solid distribution of disseminated medium-grade mixed in with higher-grade zones.
The initial hole at the SE Zone, TPB-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 TPB-378, 1.74 grams gold over 54 metres in hole TPB-390, and 1.23 grams gold over 53 metres in hole TPB-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. News of the SE Zone gold discovery, as well as environmental permitting has undoubtedly buoyed the company, as has a firming up of the gold price.
The company recently cashed-up, having completed a competitive US$25 million bought-deal financing at the end of March with 23.2 million shares being sold at a price of $1.08. Following the financing, Sandspring has 132 million shares outstanding with a presstime market capitalization totalling $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.