Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Though it has long been a source of wealth for the country, gold exploration in Guyana has been on a tear over the last four years. While sociopolitical disruptions seem to be popping up in other nations within South America, Guyana is moving forward, and catching up on learning more about its mining districts to the benefit of the investment world abroad.
There have been a number of successful gold stories coming out of Guyana already. From Guyana Goldfields [GUY:CA] and its Aurora Gold and Aranka Projects, to Sandspring Resources [SSP:CA] and its multi-million ounce Toroparu Gold-Copper Deposit, there have been enough success stories to get excited about.
The latest pair of companies that have been aiding in the act of putting Guyana onto the world’s golden map are Azimuth Resources[AZH:ASX] and its next door neighbour Tajiri Resources [TAJ:CA].
Earlier this summer Azimuth turned heads by achieving a drill density high enough to push its West Omai property (15km and 60km to the west and northwest of Iamgold’s Omai Gold mine), into 43-101 compliance. With the announcement came the very promising realization that West Omai was containing close to 12.5 million tonnes for over 1.2 million ounces of inferred gold resources at an average grade of 3.1 g/t Au.
Situated right beside and within the same corridor as Azimuth, is Tajiri’s Kaburi property, which occupies 2,598 hectares (6,421 acres) of the Guiana Shield Greenstone Belt. With drilling set for Q4 of this year, Tajiri is looking to capitalize on the successes witnessed by their neighbours, Azimuth.
Not wanting to be late to the party, Tajiri has boots on the ground, having already built a camp and begun soil sampling. Should the company receive the results it is looking for, their confidence in their ability to define their drill targets in time will increase. Looking forward, Tajiri’s Kaburi project is next in line to deliver important news.
KABURI GOLD PROJECT, GUYANA
The Tajiri team has already established a 20 man camp on its 100% optioned Kaburi Gold Project, in preparation for a planned Phase 1 auger soil geochemical sampling program. The plan is to survey and cut a grid of 200 meter spaced lines over the interpreted “Kaburi Gold Mineralization Trend,” with the grid covering approximately 5km of strike length, and will be used to target areas of anomalous gold geochemistry for future drilling targets.
Based on the success of Azimuth’s West Omai Project to the southwest, which includes the Hicks and Smarts zones, it’s been established over the last three years that Tajiri’s Kaburi Gold Project is contiguous to Azimuth’s prospects. Wisely, Tajiri plans to emulate Azimuth’s systematic gold exploration model to define and test areas of anomalous gold mineralization within the Kaburi.
Though underexplored by today’s standards, there are historic remnants worth pursuing within the Kaburi, namely with the extensive artisanal operations that have been established from the past. When combined with Azimuth’s exploration findings on the Aurora-Gem Creek Corridor (which Azimuth kindly interpreted as striking through the Kaburi property), Tajiri has a solid base to work with when identifying its targets.
It is important to note that Azimuth has recently announced that they are successfully conducting drilling on their Goldstar Prospect, which lies less than a kilometer away from Kaburi’s northern boundary. Results from this drilling have returned chip samples as high as 5 g/t Au. It is in the northern area of the Kaburi that Tajiri have indicated to be the prime focus of the company’s upcoming 2012 exploration efforts.
GUYANA AS A BUSINESS DISTRICT
For its size, Guyana has been blessed with a large helping of gold and other important metals. That said, the entire mining potential of the country has flown under the radar for many decades, leaving the wealth to be accrued through mineral means quite underdeveloped.
A sea change at the political level within the last five years has opened up the opportunity to the world that had previously held back on entering the country. Backed by the British system of law, Guyana has proven itself to be safer than previously thought, and is shedding any doubt that outsiders historically had.
With companies of all sizes making large strides in proving up the enormous mining potential of the country, it appears that we are getting much closer to identifying Guyana as a serious player in terms of gold production. But thanks to the previous standoffishness outsiders had, smaller companies such as Tajiri and others have been able to secure large tracts of prospecting ground with huge potential.
Strangely enough, one can actually look at the production being seen in West Africa as an indicator for Guyana’s potential. Prior to continental divides, Guyana was actually situated right next to its West African sister states in prehistoric Pangean times, and its Guiana Shield Greenstone Belt shares many properties with prolific greenstone belts found all over the world.
Historically speaking, we’ve known for nearly 500 years now that Guyana had gold potential. Over the span since, thousands of small artisanal operations have sprung up, delivering hundreds of thousands of ounces of gold per year. The process was simple in its execution, as old timey would-be miners simply processed surface gravels for profit. It’s through the multitude of surface showings of gold occurrences that prospectors have exclaimed the massive potential of gold under ground, if only they could get down to depth.
That time is arriving now, as we’re definitely seeing more numbers rolling out of Guyana, proving the existence of what others always knew was there. For the companies that secured their land positions prior to the governmental changes in their favour, it’s only a matter of time before the market respects their foreknowledge.
THE BOTTOM LINE
While other South American nations are drawing negative headlines such as the rebellious protests in Peru, or the threat of nationalization in Argentina, Guyana has quietly moved into being one of the more welcoming nations for international miners. The current Prime Minister of Guyana has emphasized repeatedly the importance mining holds for the development of his country. His background is in mining, thus he clearly understands how economically important appearances are, when it comes to the international investment community, and he’s poised to win them over.
Due to the delayed reaction to this change of power, the benefit lies with the smaller companies that got in before the international community noticed Guyana’s friendlier environment. Companies such as Azimuth and Tajiri are both at different stages, but were able to secure highly valuable lands before the onslaught of future activity truly ramps up. While Azimuth continues to work to prove up its other properties in its Guyana portfolio, Tajiri is on a relatively clean slate with upside to go.
What’s important here is that there is a major market cap disconnect between Azimuth and Tajiri. Azimuth is currently around the $180 million market (with Cormark Securities targeting them to hit $500 million), whereas Tajiri is at a meager $1.1 million, making it an attractive undervalued opportunity among today’s other market offerings.
By gearing up for its work ahead before the end of calendar 2012, it’s safe to say that there is still a lot of potential for short term gain in Tajiri’s share price, and the longer term specter of being possibly bought out by their much larger neighbour. Azimuth has continuously stated that their intention is to develop a mine at West Omai, and that they are wanting to grow their 1.22 million ounce resource over the next 6 months by capitalizing on “targets in the immediate area” of which, Tajiri is a very likely candidate.
With two major projects up its sleeve, one in Guyana, the other offering bluesky in British Columbia, Tajiri will interject with findings of its own later this year. A drilling program slated to start in Q4 2012 gives followers of Tajiri much to look forward to, in terms of seeing whether the potential seen in the surrounding lands indeed continues strongly into the Kaburi.
G. Joel Chury
for the Bottom Line Report
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