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Batero Gold Makes $9M offer for CB Gold $3.99 • AUGUST 3-9, 2015 • VOL. 101, NO. 25 • SINCE 1915
Gold price fall may trigger another round of writedowns “If prices fall that low, Data recently published a lot producers will have by Wood Mackenzie ilto redo their pricing aslustrates that at US$1,100 sessments for their reper oz. gold, about 10% of serves,” he says, which current gold mine proresulted in multi-billion duction is uneconomic dollar writedowns on a total cash cost plus just two years ago. sustaining capex basis. Gold miners have their If the gold price slips to US$1,000 per oz. that BY TRISH SAYWELL reserves set at between US$1,100 and US$1,300 percentage climbs to 18%, and at US$900 per oz. it rises per oz., he explains, so if the gold to 31%, Ryan Cochrane, a senior price falls below US$1,000 per oz., research analyst at the metals and these companies will have to remining consultancy with a PhD in move marginal ore from their geology, says in an interview mines and raise the cut-off grade, with The Northern Miner from his essentially cherry-picking the best parts of their deposits that office in London. Cochrane also notes that at cur- will generate the highest return. “The next couple of years are rent gold prices, 40% of project production capability is uneco- going to be difficult for gold minnomic, and that percentage in- ers, and at some point you’d need creases to between 45% and 50% at a higher gold price to justify new US$1,000 per oz. gold, and to growth of supply,” Cochrane says, nearly 60% at US$900 per oz. gold. adding that a lot of gold majors are “If prices get to the US$900 per struggling to replace reserves and oz. level, there is going to be a keep the business sustainable. bloodbath,” the analyst says, not- “The free cash flow is not quite ing that even if gold falls to there to develop new greenfield US$1,000 per oz., it will likely trig- projects or expand existing projger another round of impairments ects, and return cash per share to — a repeat of what happened shareholders,” he says. across the gold industry in 2013. See WOOD MACKENZIE, Page 3
Guyana Goldfields nears production at Aurora BY SALMA TARIKH
Guyana Goldfields (TSX: GUY) is gearing up for production at its Aurora gold mine in Guyana this August, which will make it the newest gold producer in the South American nation. Aurora sits in a forested region, 170 km west of the capital Georgetown. It should produce a total of 3.29 million oz. gold — averaging 194,000 oz. per year — over an initial 17-year mine life. Estimated operating cash costs are US$527 per oz., with all-in sustaining costs of US$698 per oz. (Both amounts include royalties.) “We are actually commissioning the mill right now,” Scott Caldwell, the company’s CEO, said in a July 24 interview. “We’re on track to hit our completion milestones. By the end of the month, the entire plant — except for the primary crusher — will be in the commissioning phase or operation-ready.” The junior is running the saprolite circuit, which has a gravity circuit and carbon-in-leach (CIL)
TNM August 03 2015 Issue.indd 1
tanks. The initial ore doesn’t require crushing and goes directly to the semi-autogenous grinding (SAG) mill, Caldwell explains. The junior expects to find hard rock in November, coinciding with when it will turn on the primary crusher. “We will hit commercial production of 5,000 tonnes per day some time in September,” Caldwell reckons. Once the mill reaches design capacity, it should produce 10,000 oz. gold a month. Guyana Goldfields estimates delivering 30,000 to 50,000 gold oz. this year, followed by 120,000 to 140,000 oz. in 2016, the first fullyear of production. The Aurora project picked up momentum in 2013, Caldwell notes. After a “false start” with a modest feasibility study in 2012, the company published a revised feasibility study in January 2013, showing a combined open-pit and underground mine with start-up costs of US$205 million and healthy returns. See GUYANA, Page 11
Calibre Mining 3
Keeps drill results coming from Nicaragua
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First Majestic Silver Bids $154M for SilverCrest
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‘Smart money’ still in gold, Red Eagle CEO says
Geologist Tim Neall (front right) leads a tour of Red Eagle Mining’s Santa Rosa gold project in Colombia. BY MATTHEW KEEVIL
VANCOUVER — Red Eagle Mining (TSXV: RD; US-OTC: RDEMF) looks poised to pour its first gold in 2016 following a $19-million private placement that CEO Ian Slater calls one of the “toughest” he’s ever done. The company is breaking ground on an underground mine at its San Ramon deposit, 70 km
north of Medellin, Colombia. Red Eagle is a pioneer of sorts, since it’s one of the only North American companies to advance an asset to development after Colombian President Juan Manuel Santos triggered a flurry of foreign investment in 2011 by declaring mining one of his “four locomotives” for economic growth. The company received its mine
Teck chugs along, amid plunging coal prices BY SALMA TARIKH
Teck Resources (TSX: TCK.B and NYSE: TCK) has posted decent second quarter results. But analysts remain cautious about the diversified miner’s path forward, amid weakening coal markets. The senior producer of metallurgical coal, copper and zinc reported a $63-million profit on revenue of $2 billion. While revenue was flat year-over-year, earnings dropped 21%. However, adjusted earnings were $79 million, or 14¢ per share, up from last year’s $72 million, or 13¢ per share. Analysts on averaged had expected adjusted earnings of 11¢ per share. The beat came on the back of higher production and declining costs, mainly in its coal and copper divisions, coupled with lower energy prices and a weaker Canadian dollar. “Production was up for all of our major products,” Teck CEO Donald Lindsay said on a conference call. “We also reduced unit
cost in both copper and coal by 9% and 10%.” Quarterly coal production was 6.6 million tonnes, rising 3% from a year ago, while sales dipped nearly 5% to 6.5 million tonnes. Unit costs were $83 per tonne, down from $92 per tonne. This helped offset the 5% drop in the average realized price of $116 per tonne. (In U.S. dollars, the realized coal price fell 14% to US$95 per tonne.) The company’s total gross profit, before depreciation and amortization, was $676 million, climbing 6% from the second quarter last year. The coal division delivered $215 million in gross profit, while copper and zinc added $317 million and $143 million. While applauding the decent quarterly results, Raymond James’ analyst Alex Terentiew notes that “commodity headwinds, the lack of company-specific catalysts and growing questions over potential future impairments have taken
RED EAGLE MINING
permits for San Ramon in March 2015, but the financial overhang remained an issue, since Red Eagle needed US$15 million to unlock a US$60-million secured credit facility under an agreement with private-equity outfit Orion Mine Finance. “The conditions are pretty terrible. I mean, the day we closed our financing the TSX Venture hit a low we haven’t seen in something like twenty years. It was the toughest financing we’ve ever done, and some of the bankers in town said they hadn’t seen a company with our level or market capitalization raise this kind of See RED EAGLE, Page 2 PM40069240 – PAP Registration #09263
See TECK, Page 14
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