Back in February this year, we flew to French Guiana to visit Columbus Gold’s Paul Isnard gold project. The company just completed a 15,000 meter drill program to increase and upgrade the current inferred resource base of 1.9M ounces at an average grade of 1.6g/t.

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Columbus Gold Corp. – Paul Isnard Site Visit

Introduction

Back in February this year, we flew to French Guiana to visit Columbus Gold’s Paul Isnard gold project. The company acquired this project in 2010 from Paris-listed AuPlata, and has just completed a 15,000 meter drill program to increase and upgrade the current inferred resource base of 1.9M ounces at an average grade of 1.6g/t.

Political Support

CEO Robert Giustra and the analysts on the trip met with both Denis Labbé, the prefect in French Guiana representing the government of France, and Rodolphe Alexandre, the current president of the region.
They were enthusiastic about the proposed project, particularly the president, Mr. Alexandre, who seemed to be particularly supportive. The mine could potentially create up to 1000 direct and indirect jobs, providing a huge boost for the local French Guianian economy, where the unemployment rate currently approaches 25%. The current $20/oz royalty on gold mining would also be favorable for the government budget.

The recent royalty deal

IAMgold, through EURO Ressources, held a 10% gross royalty on the future production of Paul Isnard. The company was able to re-negotiate this deal, and issued 12.87MColumbus Gold-shares and $4.2M in cash to convert the 10% gross royalty to a new structure. Under the new royalty agreement, IAMgold gets a 1.8% royalty on the first 2Moz, and a 0.9% royalty on the subsequent 3Moz. We consider this to be a good deal, immediately increasing the returns of the project.

The new mining zones

At the beginning of this year, French Guiana issued a new law, creating new mining zones. The Paul Isnard project lies within the zone wherein (open pit) mining is allowed (see image on the right).

The 2012 exploration program

In December 2011 Columbus started a 15,000 meter drill program at Montagne D’Or to both increase and upgrade the resource base. The drill program was completed in July, and will lead to an updated NI43-compliant resource estimate around November.
The company currently has an exploration target of 4Moz for Paul Isnard, so we expect a significant increase from the current resource estimate by year’s end.

Infrastructure

Infrastructure seems to be the Achilles heel of the project. The only way the project connects with the nearest city, Saint-Laurent-du-Maroni¸ is through a 110km gravel road. There is also no power readily available, and Columbus will probably have to use diesel generators to provide electricity for the project.
Should the company go ahead with the planned development of the mine later, the road and power grid definitely will have to be upgraded and installed, which will probably add between $100M and $150M to the capital requirements.
But as French Guiana is a part of France, it is not completely unrealistic to think that Columbus Gold might get a loan or some subsidies from the European Bank for Reconstruction and Development (EBRD) or from the French government to construct this necessary road.

The management team

Robert Giustra – Chairman & CEO

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Mr. Giustra has been actively engaged in the creation, financing, development and management of publicly-traded junior mining companies since 1992. His early experience in public markets includes working as an Investment Advisor with a national securities broker and later as an Investment Banker with an international investment dealer; where he co-founded the institutional equity sales and corporate finance departments, with a specialist focus on the junior mining sector. Since 1998, Mr. Giustra has held senior executive positions with and served on the board of a number of junior mining companies. He is presently also the Chairman of Empire Mining Corporation.
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Andy Wallace – President

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• Principal of Cordex Exploration which has a long and successful history of gold discovery and mine development.
• Credited with the discovery of the Stonehouse/Lone Tree (12M oz.), Marigold (4.6M oz.) and Daisy gold mines in Nevada.

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André Adam – Manager French Guiana

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• Geologist with 20 years’ experience in French Guiana.
• Co-discoverer of 4.1M oz. Camp Caiman gold deposit.

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John Prochnau – Technical Director

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• Former management positions with Selection Trust and Billiton.
• Credited with the discovery of the 4M oz. Esquel gold deposit in Argentina.

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Conclusion

As French Guiana is underexplored in its entirety, the region offers tremendous potential for future discoveries. Even senior producers like Newmont are looking to acquire assets in the country.
After visiting Paul Isnard, we are quite confident Columbus Gold will meet its targets, and will significantly increase the resource estimate over the next few years.

As the company currently has approximately $6M in cash and Columbus Silver (CSC.V) shares, Columbus is fully funded to complete its 2012 exploration program.
Infrastructure problems will be the main hurdle to overcome, but this problem will only have to be solved once the construction decision has been made. As said before, it is very likely Columbus will get subsidies from France and/or the EU for the infrastructure upgrades.

During our site visit, we got the impression that Columbus Gold is looking to acquire more properties in French Guiana, to increase its footprint in the country. AuPlata, for example has two projects of interest: The 1.5Moz Yaou and the 1.6Moz Dorlin, and we wouldn’t be surprised if Columbus decided to team up with them to advance these projects.

Disclosure: We have visited the project in French Guiana, and our costs have been reimbursed by the company. The author owns shares of Columbus Gold Corp. Please see our disclaimer for current positions.