Reports overestimating the amount of gold led to junior miners flying high, but the gold was ‘never there’
Junior gold-mining executive Scott Caldwell was in a jovial mood as he sat down for a national television interview in February, 2016. Even though the price of gold bullion had tumbled by more than a third from its 2011 peak, and many of his competitors were struggling, his company was defying the odds.
Guyana Goldfields Inc. had managed to raise US$700-million from investors and put a high-grade gold mine into production in early 2016.
Mr. Caldwell, an avuncular mining engineer with a soothing tone, was happy to promote the company’s Aurora mine, located in a remote Guyanese rainforest, as a cash machine. Indeed, at the prevailing gold price of US$1,200 an ounce, Guyana looked like a surefire winner.
“A little less than US$800 an ounce [cost], US$400 an ounce margin,” he said during a segment on Business News Network (BNN). “Pretty easy to figure out how we’re going to do.” The company’s share price soared as it ramped up production, and its market capitalization crested above $1.5-billion.
But last October, seemingly out of nowhere, the wheels came off. Guyana shed half its stock-market value in one trading session after the company raised doubts about the geology at Aurora. A technical report, upon which the mine was built, had vastly overestimated the amount and grade of gold at Aurora.
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