Omai Gold Mines Looking To Revive Large LatAm Gold Mine


The Essential Investor appears to be like into Omai Gold Mines, which is proving up as many left behind ounces of gold as they’ll on the historic Omai Gold Mine in Guyana.

  1. Introduction

Lately I used the proverb “with a view to discover a new mine, look within the shadow of the headframe of an outdated or present mine”. Nonetheless, there may be not even the necessity to even discover a new mine within the case of Omai Gold Mines (TSXV:OMG), as they’re engaged on revitalizing the prevailing Omai gold mine in Guyana, which closed in 2005 attributable to low gold costs.

The present gold worth is buying and selling in any respect time highs, and though prices have elevated through the years, the scenario is way more worthwhile in the intervening time. Because the mine closed with a number of gold remaining, Omai Gold Mines already has delineated one deposit with a 2022 NI43-101 useful resource estimate outlining 1.6Moz Au, and one other mineralized envelope has a historic useful resource estimate of 1.4Moz Au.

Administration believes there may be way more gold to be confirmed up and located close to floor and at depth.

  1. Firm

Omai Gold Mines Corp. (TSXV:OMG) is a gold centered exploration and improvement firm with property in Guyana, a South American jurisdiction that has seen noticeable M&A exercise not too long ago (Guyana Goldfields-Zijin $323M in 2020, GoldX-Gran Colombia $252M in 2021). The corporate’s main mission is the Omai gold mission, situated within the Guiana Defend, a prolific Greenstone Belt. This absolutely owned mission contains the previous producing Omai gold mine. This was as soon as the most important main producing gold mine in South America, producing over 3.7Moz Au between 1993 and 2005 from two massive open pits, with a report annual gold manufacturing of 356,000oz Au in 2002.

Because of the low gold worth on the time (lower than US$400/oz Au), the operator (Cambior Inc, acquired in 2006 by IAMGOLD> IAG.NYSE, IMG.TO) determined to not make investments additional in useful resource enlargement or exploration at Omai, and relocated key tools to a different, a lot bigger mine (Rosebel Mine in Suriname). The closure left quite a lot of gold sources within the floor, with a number of identified targets to discover and the potential to make use of extra fashionable exploration methods to additional broaden sources. That is precisely why administration believes it may well show up important sources and construct a mid-tier to Tier one asset.

The Omai administration crew consists of a really skilled group of executives and geologists, with essentially the most notable names being Chairman Renaud Adams and President and CEO Elaine Ellingham. Renaud Adams can also be the President and CEO of New Gold (NGD.TO). Each Elaine (as interim President and CEO) and Renaud (President and CEO) made an affect at Richmont Mines as each had been instrumental in increasing the Island Gold Mine and the last word sale of Richmont Mines to Alamos Gold in 2017 for US$770M. Most curiously, he additionally was the final supervisor of the at present producing 250koz Au every year Rosebel gold mine in close by Suriname for IAMGOLD from 2007 to 2011 (when Adams managed it the annual manufacturing was nonetheless over 400koz Au pa), so he is aware of a factor or two about working gold mines within the area. Elaine and Renaud had been additionally each senior executives at IAMGold throughout this era.

President and CEO Elaine Ellingham is a really skilled geologist with an MBA, having labored in varied positions at junior and main mining corporations, but additionally with the TSX in company finance. She is a director of Alamos Gold, Almaden Minerals and the PDAC. As interim President and CEO of Richmont Mines she led a profitable exploration program on the Island Gold Mine in Ontario that delineated a brand new useful resource at depth, and consequently modified the main focus of the corporate, which in flip led to Renaud Adams coming in to handle the next enlargement of the mine. Ellingham has been working as a guide since 2005, with purchasers starting from mining corporations to non-public fairness teams. Apart from Ellingham and Adams, someone very aware of the Omai mission is exploration guide Dr. Linda Heesterman PhD, who was the regional exploration supervisor at Omai from 2005 to 2010. Omai Gold Mines additionally has a number of skilled Latin American geologists working of their geological crew, realizing every little thing about native conditions, which is at all times a superb factor to have.

Because the firm appears to have a powerful administration crew and many gold in a jurisdiction that has seen latest, substantial M&A exercise and many mining previously, one may suppose this could, mixed with the catalyst of an all-time excessive gold worth (US$2078/oz Au), result in comparatively excessive share costs. One have a look at the chart signifies this isn’t the case but:

Share worth 1 12 months timeframe (Supply: tmxmoney.com)

It seems that Omai Gold Mines has been flying beneath the radar very successfully for the final 6 months or so. As each drawback has its benefit, I view this as a superb entry level for buyers, as for instance Gold X with 7.4Moz @ 0.91g/t Au M&I and a 2019 PEA offered for A315M final 12 months with gold buying and selling at US$1750/oz Au. Omai is buying and selling at simply 10% of this in the intervening time, whereas administration has set a purpose of discovering and proving up 4 to five Moz Au, which doesn’t appear unrealistic in my opinion, extra on this later.

This report gold worth doesn’t come free of charge: there’s a battle occurring within the Ukraine, initiated by Russia who doesn’t appear to fancy lofty Ukraine ambitions to swiftly be part of the EU and NATO an excessive amount of. Gold as a concern commerce is on once more, because the inventory markets are correcting viciously now the battle seems to be evolving into a reasonably damaging affair, as a substitute of rapidly overthrowing the Ukraine authorities by Russia, with restricted casualties and destruction. The present, extraordinarily excessive inflation atmosphere reinforces the unfavorable actual charges, being the primary (at the least for me) sentiment driver for gold, so it appears to be like like these components may push the gold worth above US$1900/oz for a while to come back, because the in depth Russia sanctions not solely cripple Russia itself, but additionally quite a few provide chains that are effecting the remainder of the world.

Some primary data on share construction: Omai Gold Mines has 271.1M shares excellent, and trades at a median every day quantity of 112k shares. There are 76.6M warrants (36.9M @CA$0.44 expire at July 3, 2022) and 16.4M choices (weighted common worth of CA$0.16 with a median remaining life of three.9 years), which means the absolutely diluted variety of shares stands at 364.5M shares now. The corporate not too long ago adopted a ten% rolling inventory possibility plan on March 8, 2022, and introduced the granting of 5.2M choices @CA$0.11 for five years, with 4.3M of those choices granted to administrators and govt officers.

The share construction isn’t precisely good, however be mindful the corporate is already very superior in its exploration, and doesn’t want a number of dilution to show up multi-million ounce deposits. Administration and BoD maintain 3.1%, Sandstorm holds 7.4%, Silvercorp Metals holds 12.7%, HNW’s a mixed 8.3%, institutionals like Mackenzie personal 13.1%, and retail holds the steadiness of 55.4%.

The money place is estimated at CA$3M, with no debt, and administration is seeking to increase extra relying on drill outcomes. For the final 12 months ended December 31, 2021, G&A was CA$3.3M, which was substantial, however nonetheless acceptable as exploration expenditures for a similar interval got here in at CA$5.2M.

The federal government of Guyana has a coverage for a 5% NSR on producing gold mines, and Sandstorm owns a 1% NSR on the mission.

The present share worth is CA$0.11, leading to a present market cap of CA$29.9M, and that is a part of the explanations I imagine this little junior may turn into a real multi-bagger in a 12 months or two. Let’s take a look at their mission to see why I imagine this type of potential may very well be there.

  1. Omai Gold Mission

The corporate’s main mission is the Omai gold mission, situated in Guyana, within the Guiana Defend, a prolific Greenstone Belt. This Belt was once united with the West African Defend thousands and thousands of years in the past, which can also be well-known for its wealthy gold endowments.

Guyana is ranked 53 out of 77 jurisdictions within the Fraser Institute Survey of Mining Firms which isn’t spectacular, however since there are numerous mining operations and initiatives, the allowing course of doesn’t impede initiatives and the nation has seen latest M&A as talked about, my guess is it’s extra a case of realizing your jurisdiction and native folks. And that is precisely what Omai administration is all about. CEO Ellingham had this so as to add concerning the low rating, and the way they cope with it: “The Guyanese authorities are very educated on mining and intensely dedicated to seeing mine improvement. When the Omai mine was in manufacturing it employed over 1000 folks – very important in a rustic with solely 750,000 folks. They acknowledge the advantages accountable mine improvement brings. Guyana is the previous British Guyana, so they’re english talking with the legacy of British legislation and enterprise practices.”

The absolutely owned Omai gold mission contains the previous producing Omai gold mine. This was as soon as the most important main producing gold mine in South America, producing over 3.7Moz Au between 1993 and 2005 from two massive open pits (Wenot and Fennell), with a report annual gold manufacturing of 356,000oz Au in 2002. Because of the low gold worth on the time (lower than US$400/oz Au), the operator (Cambior Inc, acquired in 2006 by IAMGOLD> IAG.NYSE, IMG.TO) determined to not make investments additional in useful resource enlargement or exploration at Omai, and relocated key tools to a different, bigger mine (the aforementioned 14Moz Au Rosebel Mine in Suriname).

Wenot pit in its ultimate 12 months of operation (2005)

The Omai mission not solely incorporates the previous Omai gold mine, previously producing from the Wenot and Fennell open pit deposits, but additionally the Broccoli Hill and Blueberry Hill targets close by, and a land bundle containing many extra exploration targets. The Wenot deposit hosts a NI43-101 compliant, 1.6Moz Au deposit consisting of a pit constrained 703.3koz @ 1.31g/t Au Indicated and 940koz @ 1.50g/t Au Inferred useful resource estimate, which was introduced not too long ago on January 4, 2022. This useful resource is situated straight beneath the prevailing open pit, and runs about 400m deep:

Though deeper than a traditional open pit (about 200m), the encircling rocks are sufficiently competent in keeping with administration, implying a 200m deeper open pit could be very effectively attainable. For reference, open pits can really get a lot deeper, like for instance Bingham Canyon in Utah, US, being greater than 1.2km deep.The corporate drilled 16 holes to outline this useful resource, however was additionally capable of faucet into the large historic database to combine 21,541m of drilling unfold out over 549 diamond drill holes. However this, the Wenot drilling is much from accomplished, and some deeper holes additionally confirmed that this preliminary useful resource is open alongside strike and at depth, as outcomes like 16m @ 8.9g/t Au and 6m @ 30.4g/t Au near the so-called Wenot contact (contact zone between meta-volcanics and meta-sediments) point out excessive grade potential:

As might be seen, mineralization consists of collection of lenses/vein methods operating east-west, which doubtlessly run very deep nearer to the contact zone. A 3D visualization of the lenses appears to be like like this:

Apparently, the sensitivity to the next cut-off grade exhibits the deposit to be very strong. When the cut-off grade is elevated from the present 0.35g/t Au to 0.75g/t Au, the ounces lower solely 12.5% (going from 1.6Moz Au to 1.4Moz), however the common grade will increase to 1.84g/t Au (from 1.43g/t Au), which might enhance profitability an amazing deal.

Present exploration methods for Wenot give attention to filling in among the gaps within the drilling of the useful resource beneath the prevailing pit (administration anticipates an exploration goal there of 170-290koz Au), and lengthening alongside strike to east and west of the Wenot pit. This West Wenot potential wasn’t drilled and pursued on the time of manufacturing attributable to constraints of mine infrastructure on the time, such because the ramp and haulage street which are actually gone. For the East Wenot goal, historic drilling already delineated near-surface mineralization, as shallow drilling from the previous solely went 50-75m deep. Administration is seeking to confirm this drilling, and lengthening mineralization to 200-300m depth each time attainable, relying on drill outcomes. In response to CEO Ellingham, the present drill program will embrace testing chosen exploration targets in addition to initiating some extra Wenot extension drilling. This program is initially set at 3,000 meters and can probably include 15 to twenty holes  and a funds of CA$800k, and commenced in late February. Trenching of extra exploration targets will proceed concurrently with a view to prioritize among the extra potential.

The Fennell deposit sports activities a non NI 43-101 compliant historic useful resource estimate accomplished on it in 2007, containing about 1.4Moz Au @ 2.5g/t Au, conservatively capped at 15g/t Au to exclude excessive grade intercepts. Apparently, when uncapped, this historic useful resource quantity rises to about 2.5Moz Au @ 3.95g/t Au. Because the outdated Omai mine operation produced way more gold than anticipated (3.7Moz vs 2.7Moz primarily based on the FS on the time), and intercepts got here in as excessive as 1m @ 2458g/t Au (see beneath proper), administration expects to show up a sturdy underground NI43-101 compliant useful resource at Fennell later in 2022, solely needing 4-5 verification holes as the standard of historic drilling and sampling was wonderful.

It was fascinating to see that the deeper mineralization at Fennell was separated from the open pit mineralization by a so-called diabase sill (subvolcanic darkish grey to black intrusive rock, extraordinarily arduous and difficult) of about 180m thickness. Exploration drilling (46 holes totaling 27,000m) in 2006-2007 by IAMGold at depth discovered a continuation of mineralization, and some of the deepest holes led to mineralization.

Opposite to Wenot, the vein methods at Fennell had been horizontally oriented. On prime of this, administration has seen robust indications for the same geologic situation as might be discovered on the Aurora Mine, 200km from the Omai mission, extra particularly the Rory’s Knoll gold deposit, which extends to 2km depth. Each Rory’s Knoll and Fennell, the host rock is a quartz diorite inventory, which is a cylindrical intrusive physique with deep roots. That is the conceptual diagram of Fennell (and Wenot), primarily based on drill gap trajectories, indicating the intrusive physique:

In the meanwhile the corporate geologists are optimizing the 3D mannequin, with a view to finetune targets for verification drilling, with a view to improve the historic useful resource right into a NI43-101 compliant one. The drill program for Fennell is scheduled for Q3/This autumn, 2022, and consists of 4-5 holes and 6,000m in whole.

Wenot and Fennell aren’t the one exploration targets administration is specializing in. Omai simply accomplished a small drill program and trenching on Broccoli Hill, has been busy not too long ago with a trenching program at Blueberry Hill (west of Fennell), with 29 out of 60 samples returned gold values better than 1g/t Au, with trenching at Gilt Creek (all 15 samples returned > 1.5g/t Au), and is at present additionally drilling an preliminary 2-3 holes at Blueberry Hill, with the primary outcomes anticipated to return from the labs earlier than the tip of this month.

Broccoli Hill was the primary exploration goal in addition to Wenot and Fennell, as geophysics indicated an enormous magnetic low goal over there. Trenching was  profitable as they recognized a quartz-rich shear zone with samples assaying 29.3 g/t Au, 7.8 g/t Au, 5.0 g/t Au and a couple of.2 g/t Au alongside a 40-metre strike. The next drill program, consisting of 6 holes totaling 690m, was aimed toward revealing among the bedrock geology as it’s hid by a saprolite cowl. Though the gold values aren’t spectacular, these holes had been supposed extra to check the character of the geology so they really exceeded expectations for a primary cross with with 1.5m @ 1.3g/t Au, 6.8m @ 0.91g/t Au and 1.5m @ 2.4m Au. The corporate is continuous with one other trenching program at Broccoli Hill in the intervening time, as it’s nonetheless early days for this goal, and administration has sufficient causes to imagine that there may very well be financial mineralization at depth.

Additionally fascinating is the truth that an airborne magnetics survey confirmed a considerable amount of magnetic lows and highs shut to one another. As Wenot is a magnetic excessive, and Fennell is a low, each goal may very effectively pan out to be mineralized in some form or kind. In response to CEO Ellingham, the highs are attributable to magnetite seen inside Wenot-style of gold mineralization, and the lows might be the quartz diorite intrusions that host gold, corresponding to at Fennell.

     Fennell Pit

Fennell Pit

One other indication of gold potential are the in depth artisanal workings within the direct neighborhood of the Wenot pit and some different areas on the property as effectively. A number of main gold discoveries had been made on the Guyana Defend when testing areas of artisanal workings previously. Administration is trying rigorously at these workings, and is planning sampling and mapping within the areas, however probably some type of shallow drilling would be the greatest device.

It’ll hopefully be clear by now, that Omai Gold Mines has a number of alternatives to create worth for his or her shareholders, starting from increasing Wenot to rapidly verifying Fennell to exploring over 20 greenfield targets. Wenot and Fennell are firm makers in itself, however discovering a brand new deposit may very well be a gamechanger as a complete gold endowment of over 5Moz Au may turn into a actuality in that case, rising attractiveness for mid tier producers much more.

  1. Conclusion

Not typically do I come throughout a junior that not solely flies fully beneath the radar, but additionally appears to have a comparatively straightforward path to show up 3Moz Au, and may have the ability to broaden this quantity to 4-5Moz Au if all goes as deliberate, and all this for a present market cap of simply CA$29.9M. Omai Gold Mines is placing the items of the Omai exploration puzzle collectively now in an environment friendly and strategic approach, guided by a powerful administration crew, who is aware of easy methods to discover, develop and mine deposits in areas very a lot akin to Guyana, the place expertise is essential. The continued exploration packages may present buyers with a real wild card, and with the present excessive gold costs a close to time period re-rating appears lifelike. 

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All photos are firm materials, except said in any other case.

All currencies are in US {Dollars}, except said in any other case.

Please notice: the views, opinions, estimates, forecasts or predictions concerning Omai Gold Mines’ useful resource potential are these of the creator alone and don’t signify views, opinions, estimates, forecasts or predictions of Omai or Omai’s administration. Omai Gold Mines has not in any approach endorsed the views, opinions, estimates, forecasts or predictions offered by the creator.

The Essential Investor is a publication and complete junior mining platform, offering evaluation, weblog and newsfeed and all types of details about junior mining. The editor is an avid and important junior mining inventory investor from The Netherlands, with an MSc background in building/mission administration. Quantity cruncher at mission economics, in search of high-quality corporations, largely progress/turnaround/catalyst-driven to keep away from an excessive amount of dependence/affect of long-term commodity pricing/market sentiments, and sometimes in search of long-term deep worth. Getting burned previously himself at junior mining investments by following overly constructive sources that as a rule averted to say (hidden) dangers or important flaws, The Essential Investor realized his lesson effectively, and goes a number of steps additional ever since, offering a contemporary, extra in-depth, and important imaginative and prescient on issues, therefore the title.

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The creator is just not a registered funding advisor, and has an extended place on this inventory. Fancamp Exploration is a sponsoring firm. All info are to be checked by the reader. For extra data go to www.fancamp.ca and browse the corporate’s profile and official paperwork on www.sedar.com, additionally for necessary danger disclosures. This text is offered for data functions solely, and isn’t supposed to be funding recommendation of any type, and all readers are inspired to do their very own due diligence, and speak to their very own licensed funding advisors prior to creating any funding selections.

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