(Kitco News) – Junior miners need to get more creative if they are going to attract the attention of a major producer to move a project along, according to one mining executive.
Richard Munson, chief executive officer of Sandspring Resources, said major mining companies -- just recovering from the multi-year bear market -- are gun shy when it comes to taking on new projects. He spoke with Kitco News following a corporate presentation in Montreal.
In the current market environment of limited upfront capital, Munson said that it is important that junior mining companies find ways to make their projects more attractive and cost effective, something that Sandspring is trying to do as it advances its Toroparu deposit.
While some junior miners have seen an advantage of organic growth, starting out small and building out the mine as cash becomes available, Munson said that his company is taking a different approach.
“We are not so much looking at organic growth but looking to develop a project within a project,” he said. “We are looking at different options to lower the capital expenditures.”
While the Toroparu project, located in Guyana, South America, is one of the world’s largest undeveloped gold resources, the upfront cost of $500 million to build the mine is a major impediment, explained Munson.
He added that with Sandspring’s current market capitalization, it is essential to partner with a major producer with deep pockets if Toroparu is going to be an active mine.
Munson said that the strategy Sandspring has developed is to build out its resource of saprolite gold, which surrounds Toroparu. He noted that in initial exploration, the company has 50,200 ounces of total indicated resources and 70,400 ounces of inferred resources within the brittle, weather rock. He added that through further exploration, the company is hoping to boost that resource by another 200,000 ounces.
“If we could get close to 500,000 ounces in the saprolite, that would be a game changer and would make Toroparu a much more interesting and viable project,” he said.
Munson explained that the advantage of the saprolite deposits is that the gold can be produced relatively cheaply and quickly as there is no need for a major mill.
“We see this saprolite as an opportunity to improve the upfront capex costs of developing the mine,” he said.
He added that once gold production from the saprolite begins, within two years the company could have enough cash on hand to start development of Toroparu, which has reserves of 10 million ounces and a projected mine life of 16 years.
“We aren’t interested in running a saprolite mine but it does provide us with some options,” he said.