Shares of Sacre-Coeur Minerals (CVE:SCM) (OTC:SCRMF) have begun to gain traction in the last month as investors are beginning to realize the potential of the company’s strong foothold in Guyana, which spans 860 square kilometres of both producing and development-stage properties.
Unlike most Canadian juniors that are scrambling for cash, the company also has ample cash under its belt, having recently completed a $6.15 million financing through the issuance of gold-denominated bonds.
According to president and CEO Gregory Sparks, Sacre-Coeur’s strategic plan is to build out its cash position over the next year on net cash flow from its operations. It no longer expects to issue any more equity as a means to secure financing.
The Canadian company has been invited to participate at the PDAC Guyana Day forum, where Sparks has been asked to speak to attendees about the company’s projects and its experiences operating in Guyana.
“Guyana is a traditionally mining-friendly venue that has been undergoing transition with the recent creation of the new Cabinet post of Minister of Natural Resources and Environment. While it’s taken a little time for the ministry to get its feet on the ground, the direction things are headed is quite encouraging,” he says, giving Proactive Investors a sneak peek of his talk at the PDAC event, which will take place on Monday March 4 at 2:30pm ET at the Westin Harbour Castle in Toronto.
“Mining in general provides a significant level of employment for Guyanese, and gold exports constitute a substantial portion of the GDP. I have yet to meet a Guyanese that is not supportive of the mining industry.”
Sacre-Coeur has a half million ounce surface mineable gold resource at its Million Mountain Zone 1 property, with another eight targets situated along the 20 kilometre structural trend.
The Zone 1 property hosts an NI 43-101 compliant hard-rock resource of 12.1 million tonnes grading 1.0 g/t gold measured, and 2.18 million tonnes grading 0.9 g/t gold indicated for a total 451,000 troy gold ounces combined. Since completion of the NI 43-101 resource estimate, an additional 40 holes have been drilled into the body, which are expected to add to the total.
The company has already completed scout drilling into some of the eight additional targets along the 20km structural trend on its Million Mountain block of properties.
Scout drilling at Million Mountain Zone 9 has returned 13 metres of 4 grams per tonne (g/t) gold and several one metre high grade vein intercepts of up to 85 g/t. “We have a real shot at development of several near-surface modest size resource bodies, as well as targets for potential major discoveries along the Million Mountain trend,” asserts Sparks, adding that Sandspring’s Toroparu 5 million ounce gold-copper deposit is its next door neighbour, and Guyana Goldfields is just up-trend.
“We’re well situated for a major discovery, as well as numerous smaller deposit opportunities.”
Because the results from its internal evaluation of the development of Million Mountain Zone 1 were “very favourable”, Sparks explains that the company skipped a formal third party preliminary economic assessment and jumped straight into commissioning a bankable feasibility study – which it hopes to have finished by mid to late summer this year.
“We expect the results of the study to be very robust based on our internal analysis, and if the results are as we anticipate, we would move immediately to construct the hard rock mine,” the CEO says.
Aside from advancing Million Mountain to a production decision, Sacre-Coeur is looking to more than double its gold output at its nearby alluvial/elluvial operations in Guyana, targeted at 6,000 ounces per year by adding another production unit and making process improvements.
The cash raised from the recent gold bonds offering will go toward boosting production, funding the bankable feasibility study at Million Mountain and other current supporting studies, as well as giving Sacre-Coeur “a comfortable working capital cushion”.
The bonds issued under the financing, which was closed earlier this month, will be redeemed over the course of 16 straight quarters by delivery of a total of 4,240 ZKB Gold ETF units - the value of which is backed by physical gold.
The company says it is anticipated that the amount of gold committed over the term of the bonds will represent less than 20 per cent of its forecast gold production for the amortization period. The bonds mature on December 31, 2016.
“We are one of the better financed junior gold companies, with the money in the bank to achieve our development program objectives, and with comfortable levels of working capital reserves.
"In addition, net cash flow from operations covers all sustaining costs of the company, and net of gold bond amortization, is expected to add approximately $3 million per year to working capital.”
Sparks says mining and process requirements for both the company’s alluvial and hard-rock operation are “relatively simple”. The alluvial deposits occur under generally less than one metre of overburden, and he says alluvial gold responds well to simple gravity recovery techniques.
Meanwhile, the Million Mountain Zone 1 hard-rock mine will initially be producing from the tropically weathered horizon (saprolite) for 5 to 7 years. The heavily weathered rock will not require drilling and blasting, and will need only nominal crushing or grinding for processing, the CEO explains. Also, as mineralization extends from surface, the stripping ratio for the initial open pit mine is expected to be less than 0.1 waste per tonne of ore.
“Our projected capital and operating costs are expected to be very low because of these naturally existing factors,” Sparks emphasizes. “Based on our internal analysis, which was done at $1,500 per troy ounce gold, we expect healthy cash margins from our planned operation.”
The CEO says that while it is disappointing to see the gold price retract, it does not “materially affect” the viability of its operations and he remains bullish long-term on precious metals.
While decidedly bearish, however, on prospects for Canadian junior explorers due to a lack of access to capital through traditional equity markets, Sparks is confident that Sacre-Coeur will stand out from the rest with its business model.
“We have achieved critical mass with positive cash flow from operations and do not anticipate having to go back to equity markets for working capital.”
By the end of the year, Sacre-Coeur hopes to be in construction at the Million Mountain hard rock mine, and to have more than doubled its alluvial output.
“Potential joint venture deals could also provide a robust growth picture for the company, and starting next year, we are aiming to generate shareholder value by issuing dividends through our cash flow from operations,” concludes Sparks, who has more than 40 years in the minerals industry with both surface and underground projects.
Investors are indeed tuning into the stock, as the company continues with its plan to generate working capital organically from production, and to avoid equity issues.