Back in January, Guyana Goldstrike (GYA.V) announced it had entered into an agreement with an investor that was willing to invest US$9M in the Marudi gold project in Guyana in return for the delivery of 30,000 ounces of gold.
That’s right. For US$9M, the arms-length investor will receive 30,000 ounces of gold over the life of mine which works out to be just $300/oz. Should the Marudi project effectively produce the desired quantities of gold, the US$9M investment will turn into $45M using today’s gold price. And Guyana Goldstrike also committed to make guaranteed deliveries of 3,000 ounces per year within 3 years after signing the funding agreement or 120 days after declaring commercial production. So even if the Marudi project doesn’t go into production within the next three years, Guyana Goldstrike will still have to deliver gold which makes this deal even worse than a straight Net Smelter Royalty agreement which usually doesn’t contain mandatory deliveries if a project isn’t in production yet. And if Guyana Goldstrike defaults on those deliveries, the investor will retain a 12.5% NSR on the project.
And the US$9M won’t even be used to start building the mine, no. The money will be used to finalize the purchase and for additional exploration programs to expand the current 320,000 ounce gold resource as Guyana Goldstrike hopes to find more gold on the 95% of the land package it hasn’t explored yet.
Disclosure: The author has no position in Guyana Goldstrike.