A virgin stock, diamonds, smelting in sandals

GEORGETOWN, Guyana – This is Toroparu in the thick brush of Guyana. See it?

It’s hot, it’s friendly and it looks, hey, a lot like West Africa: lots of red clay from saprolite cover. Lots of water from rivers, from Atlantic Ocean-fed inlets and from rain.

Could be Ghana in Africa. Could be Venezuela next-door. Definitely not British Columbia or Quebec.

Alluvial artisans are sifting their drivel across the landscape, thanks to steady-Eddy placer gold dusted across much of the tropical landscape. We can see the dredging, the trenching and the bobbing heads from up here in our rented eight-seater prop-plane. Just this week.

Guyana has fewer than 800,000 people, some of the freshest and frostiest bottled beer (Banks) I have tasted in years … and a tattered capital city about to become the globe’s next gold and copper boom town.

For real? You mean, just as Kilometer 88 in nearby Venezuela promised itself to the world years ago, before lawsuits, rhetoric and government decrees threw Las Cristinas and other hopefuls onto a heap leach of flooded woe?

Just as Ivanhoe Mines’ (TSX: T.IVN, Stock Forum) Oyu Tolgoi cast in copper and gold this decade for Ulan Bator, Mongolia’s capital city hundreds of kilometers from O.T.’s monstrous mine in development across the Gobi steppelands?

Sure. See, out here in the Guyana fields, they fight for their gold dust. After a 50-minute ear-splitting plane ride (smooth landing on a runway that might host some promising mineralization), it sure heck-all looks like prosperity could rain upon this English speaking democracy.

Non-Venezuela bucks for the former Dutch and British-run Guyana could come from the tiny nation’s own offshore oil and gas. Or new wealth could derive square-root style from the gold and copper that Pat Sheridan’s successful Guyana Gold Fields (TSX: T.GUY, Stock Forum) and a suitcase of tiny Canadian companies say is in the ground everywhere here.

It is Sandspring Resources’ Toroparu in my eyes that looks like a high-risk, mega-return winner.

Yeah I know, as Global Resource Investment’s Rick Rule says, “If every mine you see becomes a winner, the gold price will be 2 bucks.”

This Toroparu gold property has as good a shot as any to become a 5 million ounce property, maybe more if the hard rock runs true and log some 100 meters below oxidized surface. The project’s American co-owner, John R. Adams from Colorado, is a certified character … and that be very good for visitors and future shareholders.

The 63-year-old Colorado uranium miner just knew (heck-all) as he managed those excavators and tractors that every few chunks of the 140 miles he and his Guyanese team road-scraped into these tropics the past few years, Mr. Adams just knew the closer his guys would get to test theories about nearby Venezuela’s Kilometer 88.

First, Mr. Adams, a son of his and a cast of 60 must tally and confirm with confidence and excellence what already is a compliant resource of 3.36 million gold-equivalent ounces. Also ahead on that dusty road: stepping out, man. Stepping it out.

“We’d lay in road, and every few miles the shop keepers would come and set up shop, and the artisan miners right behind ‘em. Or in front,” says Adams, a director of the entity that hopes to call itself Sandspring Resources in a week or two or three.

Hot as a sauna

How Mr. Adams is telling us these things is a first in my notebook. The rough looking cowboy from Steamboat Springs built a metals shop at the site. It’s hot as a sauna inside. J.R. Adams, sporting Crocs on his feet and a pair of fatigue shorts, is firing up gold “sponge” – a concentrated hunk of impure gold.

The dude whose family owned and ran Utah’s Energy Fuels Corporation, this feisty dude who owns 54 percent of what will become Sandspring Resources in a brand-new stock, will come back to the roaring furnace in a few hours. He’ll be wearing those same naked-toe sandals. He’ll put some plastic over his face and pour the smelted liquid into a bar template. About 93 percent pure. Maybe $17,000 worth at current gold prices.

Back in town, Georgetown that is, the PM, Prime Minister Samuel Hinds, tells the ETK group, led by Mr. Adams and by Canadian Abraham Drost and by longtime Colorado natural resources lawyer Richard Munson, that there are enough water sources across Guyana, some of them stemming from the Upper Puruni River, to shrink the mining industry’s carbon-deposit footprint to toddler steps.

Abraham Drost and Richard Munson and Charles Gryba, lanky field geo Harvey Klatte and that Mr. indefatigable John R.Adams in the shed or scraping away at a trench or driving a tractor – they already have the specs for more hydro-power than a 500,000-ounce-a-year gold mine needs. So they tell Mr. PM in formal exchanges.

These Toroparu gonzo guys -- Americans and Canadians and their 55 or so Guyanese workers at camp 300 kilometers from town -- are itching to publish new data about their trenches, about their 27 existing holes (average 161 meters of 0.9-gram-per-metric-ton gold in each hole). About their IP geophysics. Their airborne magnetics.

But first? “We hope to close the Sandspring (SSP capital pool corporation) transaction in the next two weeks or so, and then we can proceed as Sandspring,” says Mr. Munson, an attorney who bears a striking resemblance to actor Gary Cooper. “But for now of course we are still ETK with a contract to acquire control of Sandspring.”

My take: Never in my a mine visit have I encountered a crew quite like this, or a property that could ignite a tiny company’s yet-to-be-traded and cash-enriched (SSP.P) ticker in Toronto early next month. Virgin territory? Or the usual 140-mile bull-e-vard of busted dreams.

There is Guyana precedent for a manic rush into this region of the country: Golden Star (AMEX: GSS, Stock Forum) shares, for one, when the junior company was riding the promise of the Omai Mine. Guyana’s flagship 20th century gold producer rocked South America with its gold potential before a cyanide spill in 1995 brought mature Cambior into the picture. Omai eventually was mined out.

“There was a lot of frustration about our excellent Omai,” beverage czar/Banks DIH Ltd. Chairman and Managing Director Clifford B. Reis tells me inside his air-cooled Thirst Park Office. Mr. Reis sat on the Omai board back then, in the 1990s. He saw a lot.

“The worst thing I tell you is to spend your time in court, 10 years, more. One day the price of gold is $900, then $1,100, then what? $400? Or $1,400? Omai for us was much different back then, tough times, gold at $275, $295,” Mr. Reis says. “And then, all that bad PR; every one on the planet knew two words about Guyana: cyanide and Omai.”

Banks Ltd. runs rum, vodka and the rest of the beverages business for most of the country – all from that Thirst Park complex in Georgetown. The public company is thriving – total profits running 16 percent higher this year on 6 percent greater revenue.

Mr. Reis says he learned a lot being on the Omai board in those days. “That made us proud, that as a nation, we handled this PR disaster as professionals.”
Back at Toroparu, we trek out to yet another drill hole and yet another perfectly sculpted trench.

That John Adams, son of the late Hall of Fame uranium miner Bob Adams from Utah, is not the only local color on this 240,000-acre property, 200 kilometers west of Georgetown in the Republic of Guyana.

There’s Charles Gryba, a 59-year-old mining engineer who never stops talking numbers. Mr. Gryba is buzzing 18 hours a day. On planes. In ditches. At tailings ponds. (Someone please help us.) His Canada pedigree includes technical stints at Thunder Bay, Hudson Bay, Noranda, many more – building mines, mapping inter-magnetic polarities, testing theory and drilling.

“If we continue to hit 100,000 ounces of gold equivalent each hole, and the IP supports it, we’ll have 5 million ounces in six months,” he says. “Hey,” Charles Gryba shouts to the back of this small plane, “that’s OK to say that, right?”
Well heck, don’t ask John Adams. He’s just looking forward to his smelter thing at the camp. (Please see photos – taken by investor and finance consultant Bruce Reid.)

Don’t shoot him (please)

“My son , Wes, he came in one dirt load with a bunch of these,” Mr. Adams says and shows us a dozen or two sweet looking stones in a bowl. Diamonds?

“Shoot me,” says one boggled viewer among this group of knackered writers, bankers and miners on the Toroparu tour (this week), “that’s more stones than all of the junior diamond directors on the TSX have found in the past 5 years.”

John Adams is convinced, after spending $10 million (or more) of his family money and obtaining property rights from Guyana’s longtime native property staker, Alfro Alphonso, that this so-called capital pool corporation named Sandspring Resources and the tentative ticker of SSP.P will be the best way to move along this doggie on the Upper Puruni River.

That means “compliance and what-all heck,” John says. What-the-all heck is the price these days to raise public money: some $6 million off the bat once the currently named ETK of Guyana transfers Toroparu into the SSP ticker shell. Capital Research of Toronto and others provided cash for the shell in exchange for the chance of owning a seed stock in what essentially is a virgin security with looming cash flow on the books.

“I guess them diamonds could be material,” John R. Adams says, all wrinkly and genuinely intent on cooling this gold bar so we can take it back to the capital and show it to government minerals commissioners at a dinner. “Good thing we’re a gold company, though.”

One thing Mr. Adams has no intention of changing is his smelting sked: about 350 93-percent-gold ounces a month for a gross of about $315,000 a month. The math is not important here right now.

The company president that John Adams just hired to work in-country and out-country with his Colorado partner (that CEO attorney guy Richard Munson from Centennial, Colorado looks like Gary Cooper), is none other than way-tall, way-smart and way-smooth geo-man Abraham Drost, formerly of Sabina Silver.
“We get asked all the time, why bother with the alluvial when we are most excited about showing a new zone of mineral that could extend back to the Brisas del Cuyuni concession in Venezuela’s Brisas-Las Cristinas District,” Mr. Drost says as we gape at sculpted trenches 4 meters deep and stretching across hundreds and hundreds of meters.

“It suits our purpose. Guyana is a nation that will see double its gold output this year from 2008 – more than 300,000 ounces. It means that for two years we have been a royalty paying mid-sized permit holder. That counts for a lot here,” says Drost, who likes the full name, Abraham.

Does it really matter, folks out there in investor land? (No, not Abe’s name.) I mean, that smelting spectacle that John Adams puts on for bankers and lawyers and commissioners – does it really matter? Or is it just a gong show for the bankers and the ordinary folks who attend gold conferences?

‘Commish, one more wish’

I asked the acting CEO of the Guyana Geology & Mines Commission, William Woolford. Mr. W. Woolford was trained in Canada as a mining engineer and runs a staff of about 50 at the government commission in Georgetown.

“You know, this year, gold will account for more money than sugar. Or rice. It becomes the No. 1 export,” Mr. Woolford tells me. He’s wearing thick black glasses and sipping a coconut water. “Now, I can tell you our national rules on mining are simple. A 5 percent NSR (a royalty paid to government coffers). Good corporate governance. But there is still a process.”

Right now, the mid-scale gold permit from the commission is just good enough for John Adams’ alluvial digs. But once Abraham Drost’s hard rock operation hits the 140-mile road hard, the details and fine print of a full-scale mining operation loom large. Approvals for a 5,000-ton-per-day saprolite cyanide mill.

Also needed: solid and bankable specs for a 20,000 ton-per-day flotation mill. Hydro-power capital expenditures that easily could surpass $100 million. Environmentals. Community. “Yes, producing gold already has them well in the door,” Geology Commissioner Mr. Woolford says.

“There are many things along the way that ETK people have done, and are given credit for,” Mr. W.W. says. One of those things, we learn after a visit to Prime Minister Hinds up the block, is cultivating that hydro-electric power we talked about.

Oh yeah, and that money thing. That $6 million when the virgin SSP starts trading sure is gonna go fast.

As for the virgin shell, bankers expect Canada exchange officials and securities enforcers to have run this doggie through their own regulatory mill by early November. After that happens, Mr. Drost says the North American investor audience will see how the new Sandspring Resources trades on a comparative scale.

If the stock stays put at a projected 35 cents with a total of 80 million post-issue shares, Toroparu’s gold in the ground is worth about $9 an equivalent ounce vs. as much as $60 or so per ounce for fast-swelling Guyana Goldfields (TSX: T.GUY, Stock Forum), whose property we could see faintly from the air. (This favorable and cheap metric is according to Mr. Drost’s figures.)

Personally, I don’t think the new SSP stock will trade for 35 cents or 40 cents for more than a few dang-all minutes. Who in their right mind would sell a virgin security with a legacy project in a friendly nation where the beer is always frosty? Right?

Duck into the shade for one of those frozen papaya sticks on the streets of this gritty capital city, emerge 5 minutes later and SSP will be 50 cents, a buck and more. At least, this driven ETK team and their supporting seed investors hope.

Until then, we here will be tracking the metrics, reporting about this startling tour in detail and providing Guyana data from the gold and copper property up in the tropics here, but all of that will be in that other report – the one subscribers pay for: Ticker Trax™.

http://www.stockhouse.com/Columnists/2009/Oct/23/Guyana-s-gonzo-gold-field