Corporate
EXECUTIVE SUMMARY
Sacre-Coeur Minerals, Ltd. is a TSX-V junior resource company with a substantial portfolio of highly prospective hard-rock gold properties in Guyana South America. Included in this portfolio is the Million Mountain Zone 1 interim NI 43-101 compliant resource of 500,000 tr oz Au. The Company is now cash self-sufficient as a result of net cash flow generated by gold production from its alluvial deposits and from its contract drilling and drill support services group.
The Company has been exploring for gold in Guyana South America since 2005. It has narrowed its exploration focus to two major holdings, together comprising 859 sq km of the most highly prospective elements of its original portfolio. These two large blocks of properties known as the Lower Puruni Block, which includes the Million Mountain properties, and the Northwest District Block are both prime targets for hard-rock gold resources, and contain large volumes of alluvial material. Both areas have long histories of gold production dating back to the 1800's.
Hard-rock Gold Exploration
The Company has developed an initial NI 43-101 compliant gold resource on Zone 1 of its Million Mountain Properties included in the Lower Puruni Block of 451,000 tr oz Au (12,119,285 tonnes @ 1.0 g/t Au Measured, and 2,175,278 tonnes @ 0.9 g/t Au Indicated). Since completion of the interim resource estimate, an additional 40 core holes have been drilled. These will be additive to the total resource when the estimate is next updated. The Million Mountain Zone 1 resource body appears to have been offset by a series of post mineralization faults. Work is now being undertaken to resolve the direction and magnitude of displacement to target offset portions of the body for further drill testing to expand the Zone 1 resource.
Ongoing exploration has identified eight additional highly anomalous zones along a 20km East - West structural trend occurring on the Company's Lower Puruni holdings. Scout drilling has been conducted on some of these anomalies, including Zone 9, which has returned near-surface values including 13.6 meters @ 4 g/t Au (including 0.55 meters @84.26 g/t), and a 1 meter sample across a surface outcrop which returned 45 g/t Au.
Strategic Shift in Emphasis
From inception, the Company has relied on capital markets to supply equity funding for an exclusive focus on hard-rock exploration. While defining major hard-rock deposit(s) remains the Company's over-arching goal, difficult market conditions for junior resource companies in general, and for SCM in particular as a result of the cancellation of the buyout by Severstal have changed the financial environment. The Company has always sought to maintain a tight share structure relative to its industry peer group (currently 51.4 million shares issued and outstanding and 56.6 million fully diluted). In order to continue to aggressively pursue expansion of its current resource as well as additional discoveries, while minimizing shareholder dilution, the Company has embarked on a strategy of maximization of internal cash generation through:
- Production of alluvial gold from its substantial deposits,
- Contract drilling utilizing two of its three drill rigs and crews, while reserving the third rig for its ongoing hard-rock exploration programs, and
- Potential production of existing hard-rock gold resources
From alluvial gold production and existing drilling contracts, the Company is currently generating CAD $500k - $600k per month in net positive cash flow.
Use of this internally generated cash will be to:
- Maximize hard-rock resources from existing portfolio of properties
- Fund pre-feasibility/BFS investigation of potential for developing existing shallow hard-rock gold resources (high grade core of MM Zone 1, and possibly MM Zone 9) to produce 30 - 50k oz/yr each for four to seven years.
- Fund strategic acquisitions, including corporate M&A of synergistic targets and/or further property acquisitions
Alluvial Gold Production
The Company has identified eight zones of alluvial gold deposition in the vicinity of its base of operation in the Puruni District. It has commissioned production of alluvial gold at the target rate of nominally 1,000 cu meters per day. Recent performance of the alluvial production is as follows:
- Average Daily Throughput - 823 cubic meters per operating day
- Average Daily Gold Production - 6.1 tr oz Au per operating day (24hrs)
- Average Cash Cost of Production - $524.77 / tr oz Au
- Net Cash Operating Margin @ $1,700 Au - $1,175 / tr oz (before royalty)
- Royalty @ $1,700 / oz Au price - $117 / tr oz
- Net Cash Margin After Royalty @ $1,700 / oz Au - $1,058 / tr oz Au
Gold produced is sold in dore bullion form to the Guyana Gold Board at London PM fixing on the date of settlement. Though alluvial gold production levels are currently modest, the output from a single production unit is currently contributing approximately CAD $160,000 per month in net cash flow to the Company. As procedures are continually refined, output per production unit is expected to rise further. The Company also contemplates adding additional production units in the future to incrementally increase alluvial gold production and sales.
Contract Drilling
The Company currently owns three late model Atlas Copco Exploration Products wireline core drills complete with tooling. It operates these drills entirely with its own local crews trained specifically for the Guyana work environment. The Company's drill programs have enjoyed a very high level of performance over the years, and have attracted the interest of many other exploration companies seeking contract drilling services from the Company. Two of the Company's drills, complete with crews have now been contracted out on what are expected to be long term engagements at least through the end of 2012. The third drill and crew will remain committed to the Company's ongoing exploration drilling needs. For so long as the market for contract drilling remains favorable, the Company plans to capitalize on its available equipment and local knowledge to continue to generate significant net cash flow. Net cash flow from contract drilling and support activities for the next twelve months is expected to be steady at CAD $300k - $400k per month.
Potential Hard-rock Gold Production
The Company has begun an internal pre-feasibility analysis of the potential for placing the higher grade, near surface core of the Million Mountain Zone 1 resource into production. The concept being investigated would limit initial mining to higher grade mineralization occurring in saprolite, utilizing a nominal 3,000 tpd modular portable processing plant. Annual production would be targeted at 30k - 50k tr oz per year, which has the potential for generating CAD $20 mil - $40 mil per year for a period of four to seven years. Preliminary estimates of capital development costs are CAD $20mil - $25mil. If internal pre-feasibility is positive, as it appears now, a third-party bankable feasibility study will be promptly commissioned. The Company envisions a combination of equity and debt financing for project development. The proportionate ratio of the two will be determined based on market conditions prevalent at the time.
In addition to Million Mountain Zone 1, the Company believes that Million Mountain Zone 9 also holds the potential for near term development of hard-rock production similar to that envisioned for Zone 1. Additional drilling to develop an NI 43-101 resource for Zone 9 will first have to be completed. This drilling, as well as feasibility work for both deposits is expected to be funded from operating cash flow.
Conclusion
We believe it is in the best interest of our shareholder's for the Company to focus on building cash reserves organically through production and sale of alluvial gold and from contract drilling and support services initially. From cash flow generated by these activities, our strategy will be to examine and, if justified, develop hard-rock gold production from the existing resource on Million Mountain Zone 1, and possibly from Million Mountain Zone 9. Also funded by cash flow from operations, expansion of the existing gold resource at MM Zone 1, as well as ongoing hard-rock exploration on the Company's current portfolio of properties will be continued. As working capital balances permit, and as opportunities present, the Company plans further growth through M&A with synergistic targets and/or additional property acquisitions.
Forward Looking Statements
Statements in this presentation that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Sacre-Coeur Minerals, Ltd. does not assume the obligation to update any forward-looking statement.
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