GGI produced 28,500 ounces in 2nd quarter

-says there may be no further gold production this year at Aurora

Canadian-owned Guyana Goldfields Inc (GGI) posted second quarter revenue for 2020 of US$53.7 million while producing 28,500 ounces of gold and it signalled that there may be no further gold production this year at its Aurora site as it transitions to underground operations.

According to the figures released on Tuesday in Toronto, Canada, GGI produced 28,500 ounces of gold in the second quarter of 2020, totaling 57,500 ounces for the first half of the year, exceeding the guidance of 45,000 to 50,000 ounces for the first half of 2020. This brought the company revenues of US$53.7 million in the second quarter of 2020 and US$92.3 million for the six months ended June 30.

The output for the first half was below last year’s figures. Last year’s second quarter output was 37,300 ounces and the figure for the second half was 74,000 ounces.

Operational update

The company had announced on May 7, 2020 that the next phase of mine development, including both the open pit and underground, would not proceed as set out in its Technical Report dated March 31. Instead it was to be a period of care and maintenance upon completion of Rory’s Knoll Phase 4, mining of select satellite pits and depletion of low-grade stockpiles. The company disclosed on Tuesday that it has subsequently processed the last batch of ore from stockpile on July 8 and continued to recover residual gold from in-circuit inventory. The mine site in Region Seven, it states, is now in full care and maintenance.

In the second quarter, GGI wound down its mining activities and began a phased approach of demobilizing employees. It states that it has spent US$2 million in employee termination benefits which is lower than the previously disclosed estimate of US$3.2 million. Ongoing costs for care and maintenance of the site are estimated to be approximately US$1 million per month, including all costs at site and associated general and administrative costs to keep the property in good standing, as required by the company’s Mineral Agreement and Mining License, each with the government of Guyana. In addition, during the period of care and maintenance, it estimates corporate and administrative costs of US$0.5 million to US$0.8 million per month for overheads for its corporate office.

GGI assures that during the period of care and maintenance, the site “is to be maintained and environmental risks are to be managed to ensure safety and security of the mine site until operations can be resumed.” Infrastructure such as the camp, water supply, power supply and other systems will remain operational at a reduced level and as it had previously disclosed, a period of care and maintenance of more than a quarter may result in no further gold production in 2020. Any additional gold production in 2020, it says, would be dependent on the timing of the closing of its transaction with its new owners Zijin Mining Group, the length of the period of care and maintenance, and the rampup period to restart of operations.

On June 12, 2020, Zijin Mining Group Co Ltd and Guyana Goldfields Inc had announced that they had entered into a binding arrangement agreement pursuant to which Zijin will acquire all of the outstanding common shares of Guyana Goldfields for cash consideration of CAD$1.85 for each Guyana Common Share, valuing Guyana Goldfields at approximately CAD$323 million.

Prior to entering into the Zijin agreement, Guyana Goldfields terminated its arrangement agreement with Canadian miner, Silvercorp Metals Inc dated April 26, 2020, as amended on May 16, 2020, a release from the two companies had said.

As noted in its press release on June 3, 2020, Guyana Goldfields

stated that it had received a binding proposal from Zijin to purchase all of the issued and outstanding Guyana Common Shares and notified Silvercorp that this offer constituted a “Superior Proposal” in accordance with the terms of the Silvercorp agreement. Silvercorp elected not to exercise its right to match and, as a result, Guyana Goldfields ended the Silvercorp agreement in accordance with its terms and entered into the Zijin Arrangement Agreement.

The release said that based on the closing price of the Silvercorp common shares on the Toronto Stock Exchange as of June 3, 2020, the Zijin Arrangement represents a premium of approximately 35% to the implied value of the consideration offered pursuant to the Silvercorp agreement.

According to Tuesday’s release, GGI made a payment of CAD$9 million to Silvercorp Metals as a contract termination fee.