Energy & Gold had the opportunity to connect with Sandspring Resources (TSX-V: SSP) CEO Rich Munson to get an update on Sandspring’s latest drill program and the company’s plans for 2017.
Sandspring is an exciting gold exploration story in the British Commonwealth country of Guyana in South America. Its Toroparu Project boasts a projected 16+ year mine life producing more than 225,000 ounces of gold annually in an excellent mining jurisdiction with British Commonwealth law. Moreover, Sandspring has strong financial backing in the form of its largest shareholder billionaire mining entrepreneur Frank Giustra and the Fiore Group as well as a gold & silver purchase agreement with Silver Wheaton (NYSE:SLW) which will reduce project capex by ~30%.
In order to include the complete results from the 2016 drill program at Sona Hill, Sandspring and Silver Wheaton agreed to extend the due date for the final feasibility study to December 31st, 2017. In a press release dated December 15th Rich Munson, CEO, stated:
“We began discussions with Silver Wheaton regarding an extension of the due date for the final feasibility study in light of the drill results received to date at Sona Hill (see the Press Releases dated February 13, 2016 and November 3, 2016). The drill results indicate the potential that higher grade, shallow gold-only mineralization from Sona Hill could alter the mine plan that formed the basis of our work on the final feasibility study in 2014. The extension allows Sandspring to complete the 2016 drill program at Sona Hill, analyze the data and, based on those results, decide whether to revise the mine and processing plan for the Toroparu Project.”
Toroparu is an extremely attractive gold project in a strong, rising gold price environment due its size, longevity, and excellent jurisdiction. However, project economics become challenging below US$1200/oz Au due to mine construction capex and the fact that Sandspring will need to generate its own power (Kurupung Hydro Project) for the mine. I feel confident in saying that Toroparu will produce millions of ounces of gold, the only question is when.
Munson offered insights into Sandspring’s ambitions for its Sona Hill prospect (5km to the south of the main pit at Toroparu) as well as a target to the northwest of the Toroparu main pit called Wynamu. Munson expects to have assay results from its late-2016 drill program within 7-10 days.
CEO Technician: Thank you for taking the time to answer a few questions. How does the recent gold price correction affect Sandspring and how does the company plan to navigate the first half of 2017?
Rich Munson: As the gold price began to retrench we’ve always said it would be a big challenge for us sitting in Guyana with the need to produce our own power and being slightly better than a 1g/t Au property. At US$1172 gold if all we have is the main pit at Toroparu it would be a big stretch to build this mine.
Our focus since Mr. Giustra and Fiore Capital got involved in 2015 was to increase the mine grade and find a high grade starter pit with a gold concentrate that we could refine on site as opposed to sending a gold/copper concentrate to a smelter.
The area we decided to target for a potential starter pit is called Sona Hill, which is 5km from the main pit at Toroparu. So it’s within an operating area that can easily be handled by a main facility at Toroparu. The reason we chose Sona Hill is that we had done some work there in 2012 and found some interesting grades but just as exciting to me is that we didn’t find any copper. The 2015 drill program was positive and so far the first 20 holes in 2016 are promising and offer a good possibility that “something” is there (an economic gold resource). Sona Hill is quite different geologically than what we see at Toroparu; Toroparu is a classic disseminated gold deposit, one of the geologists who wrote an initial 43-101 on Toroparu used the word “ubiquitous” to describe the gold mineralization. Meanwhile, at Sona Hill the gold mineralization is more spotty with veins. It’s a bit more challenging to come up with a resource calculation. We split the Sona Hill exploration program up into two parts totalling more than 10,000 meters and we have now completed the second part.
CEO Technician: Tell us about your 2016 drill program.
Rich Munson: We extended our latest drill program a bit based upon what the geologists were seeing. We expect to receive assay results back from the lab within two weeks (from January 9th). We will then have our consulting geologists put them together and send what they come up with to SRK to see if they can come up with a resource estimate.
A portion of our 2016 drill program was infill drilling and a portion was a “step out” program to determine the level of continuity between the main pit at Toroparu and Sona Hill. We will have a chance over the first quarter of 2017 to go over not only the results at Sona Hill but also a target we drilled to the northwest called Wynamu.
We will have a chance to determine if these other targets merit exploration. In addition, if we like what we see at Sona Hill in terms of size and grade I will be recommending to the board that we move back towards final feasibility.
CEO Technican: I know you have an “energy challenge” at Toroparu in terms of generating your own power to the mine. Tell us about the Kurupung River Hydro Project.
Rich Munson: In 2017 I hope to be advancing work on the Kurupung River Hydro Project. We had halted work on this project in 2014/2015, but we are now in a position in which we can expend some money on moving this project forward. Kurupung is of great significance to us long term and I think it would show major companies that by producing our own power at .08 or .09 per kilowatt hour internally as opposed to spending .30+ per kilowatt hour it changes the economics at Toroparu substantially.
CEO Technician: Why are the Sona Hill results so important for Sandspring?
Rich Munson: The value of Sona Hill is not to make our resource go from say 10 million ounces Au to 11 or 12 million. The value of Sona Hill for us is if it is gold only (which allows Sandspring to process the ore on site as opposed to sending a concentrate to a smelter), 1.5 or 2.0 grams/tonne Au, and that it is shallow in depth. We are sitting on a hill after all. We could be starting with a smaller mining fleet because we wouldn’t have to move near as much material with a much simpler process sheet. Sona Hill could offer us that smaller starter pit that everyone has been looking for since 2013, which would allow us to start at a smaller scale but with higher grades.
The Sandspring chart looks quite constructive after potentially putting in place an important bottom during tax loss selling season last December:
SSP.V (Daily – 1 Year)
The C$.31-C$.33 ‘double-bottom’ support now becomes a crucial downside reference area, whereas, resistance between C$.55 and C$.60 will be the next test for SSP’s rebound. Money Flow (MFI-14) and Relative Strength (RSI-14) are both in bullish areas from which price often reaches higher levels before consolidating.
Sandspring is likely to be one of the premier “go to” gold exploration plays as the long term secular gold bull market continues its resumption which began last January. We would like to thank Sandspring CEO Rich Munson for taking the time to update our readers and we look forward to the Sona Hill assay results and watching Sandspring make some big steps forward in advancing the Toroparu Project in 2017!
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