By: Dylan Sikes - AllPennyStocks.com News

Friday, December 12, 2014

Gold was everyone’s darling for a decade from the start of 2001 when the precious yellow metal could be bought from just over $250 per ounce. Spot gold rose to as high as $1,923 an ounce in September 2011, but has been on the slide since, including losing 28 percent in 2013. In 2014, gold is basically flat thanks to a December that is proving to be fruitful so far with gains just over 5 percent taking spot gold back to $1,227 through Thursday. Still, the precipitous $700 per ounce drop in gold has put pressure on many producing miners, stressing balance sheets and forcing cuts in expenses and production targets for some. Guyana Goldfields Inc. (TSX:GUY) isn’t producing yet, but it is getting close and at a production cash cost of $423 per ounce (excluding royalty to Guyana government), the company can still make good money at current – or even lower – gold prices. The Toronto-based company is fully financed for its flagship Aurora Gold Project in Guyana, South America, in October taking its first drawdown of $42.6 million from a $185 million project finance facility for development and construction on the project. Commercial production is expected to commence in mid-2015. More than 700 people are working on site to keep the project on schedule, with plans to ramp the number of workers up to more than 900 in the next couple weeks.

The measured and indicated gold resources for the project total 6.54 million ounces (62.83 million tonnes at 3.24 g/t). Another 1.82 million ounces of gold (16.93 million tonnes at 3.34 g/t) are in the inferred category, according to the latest NI 43-101 technical report. Guyana Goldfields expects an average life of mine gold grade of 2.74 grams per tonne of ore milled and produce 3.29 million ounces of gold over a 17-year mine life. In order to achieve commercial production, initial capital is estimated at $249 million. The latest feasibility study should see an internal rate of return (IRR) of 31% on an after-tax basis with a payback of approximately 4.4 years, based on $1,300 gold. That will shift a little with gold cheaper, but it’s still an attractive IRR.

On Friday, the company took another step towards production at its Aurora project with the arrival of the semi-autogenous grind (SAG) mill shells. The nearly 200,000-pound shells were made by CITIC Heavy Industries and have an installed power of 5.5 megawatts designed to process an initial throughput of 5,000 tonnes of ore each day.

"We are pleased that the arrival of this critical plant completes yet another key milestone towards the development of Aurora and achieving first production in mid-2015,” said Guyana Goldfield’s president and CEO Scott Caldwell in a statement today. “The arrival of the SAG mill shells was the heaviest component to be transported to site which clearly demonstrates that our logistics chain is fully operational."

With gold eking a little lower in early Friday trading and the main Toronto index testing its lowest level in about two months, investors are mostly ignoring the arrival of the shells on site for Guyana Goldfields. The stock is off by about 4 percent at $2.69 per share.

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