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OMAI GOLD MINES CORP. (OMG.V)

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Company description

Omai Gold Mines Corp. (TSXV:OMG) is a gold focused exploration and development company with assets in Guyana, a South American jurisdiction that has seen noticeable M&A activity recently (Guyana Goldfields-Zijin $323M in 2020, GoldX-Gran Colombia $252M in 2021). The company’s primary project is the Omai gold project, located in the Guiana Shield, a prolific Greenstone Belt. This fully owned project includes the past producing Omai gold mine. This was once the largest primary producing gold mine in South America, generating over 3.7Moz Au between 1993 and 2005 from two large open pits, with a record annual gold production of 356,000oz Au in 2002. As a result of the low gold price at the time (less than US$400/oz Au), the operator (Cambior Inc, acquired in 2006 by IAMGOLD> IAG.NYSE, IMG.TO) decided not to invest further in resource expansion or exploration at Omai, and relocated key equipment to another, much larger mine (Rosebel Mine in Suriname).

The closure left a lot of gold resources in the ground, with lots of known targets to explore and the potential to use more modern exploration techniques to further expand resources. This is exactly why management believes it can prove up significant resources and build a mid-tier to Tier one asset. The Omai management team consists of a very experienced group of executives and geologists, with the most notable names being Chairman Renaud Adams and President and CEO Elaine Ellingham. Renaud Adams is also the President and CEO of New Gold (NGD.TO). Both Elaine (as interim President and CEO) and Renaud (President and CEO) made an impact at Richmont Mines as both were instrumental in expanding the Island Gold Mine and the ultimate sale of Richmont Mines to Alamos Gold in 2017 for US$770M. Most interestingly, he also was the general manager of the currently producing 250koz Au per annum Rosebel gold mine in nearby Suriname for IAMGOLD from 2007 to 2011 (when Adams managed it the annual production was over 400koz Au pa), so he knows a thing or two about operating gold mines in the region. Elaine and Renaud were also both senior executives at IAMGold during this period.

President and CEO Elaine Ellingham is a very experienced geologist with an MBA, having worked in various positions at junior and major mining companies, but also with the TSX in corporate finance. She is a director of Alamos Gold, Almaden Minerals and the PDAC. As interim President and CEO of Richmont Mines she led a successful exploration program at the Island Gold Mine in Ontario that delineated a new resource at depth, and consequently changed the focus of the company, which in turn led to Renaud Adams coming in to manage the following expansion of the mine. Ellingham has been working as a consultant since 2005, with clients ranging from mining companies to private equity groups. Besides Ellingham and Adams, somebody very familiar with the Omai project is exploration consultant Dr. Linda Heesterman PhD, who was the regional exploration manager at Omai from 2005 to 2010. Omai Gold Mines also has several experienced Latin American geologists working in their geological team, knowing everything about local situations, which is always a good thing to have.

The Omai project contains the Wenot and Fennell deposits, the Broccoli Hill and Blueberry Hill targets nearby and a land package containing many more exploration targets. The Wenot deposit hosts a NI43-101 compliant, 1.6 million ounce deposit consisting of a pit constrained 703.3koz @ 1.31g/t Au Indicated and 940koz @ 1.50g/t Au Inferred resource estimate, which was announced recently on January 4, 2022. The company drilled 16 holes to define this resource, but was also able to tap into the huge historic database to integrate 21,541m of drilling spread out over 549 diamond drill holes. Notwithstanding this, the Wenot drilling is far from completed, and this drilling also showed that this initial resource is open along strike and at depth.

The Fennell deposit sports a non NI 43-101 compliant historic resource statement completed on it in 2007, containing about 1.4Moz Au @ 2.5g/t Au, conservatively capped at 15g/t Au to exclude high grade intercepts. When uncapped, this historic resource number rises to about 2.5Moz Au @ 3.95g/t Au. As the old Omai mine operation produced much more gold than anticipated (3.7Moz vs 2.7Moz based on the FS at the time), and intercepts came in as high as 1m @ 2458g/t Au, management expects to prove up a robust underground NI43-101 compliant resource at Fennell in 2022, only needing 4-5 verification holes as the quality of historic drilling and sampling was excellent. On top of this, management has seen strong indications for a similar geologic scenario as Aurora’s Rory’s Knoll, which extends to 2km depth.
Omai Gold Mines has a current cash position of about C$3.0M, and the first phase of the exploration program is fully funded. Most of the current capital will be used for exploration and resource expansion, and management has set an ambitious goal of 4 to 5Moz Au, which doesn’t seem that unrealistic when considering the Wenot resource, the quality of historic drilling at Fennell and the amount of quality drill targets at Omai. Last but not least, Sandstorm and Silvercorp are both significant and strategic shareholders of the company, with the presence of Sandstorm being of particular interest as they often invest in assets with realistic production potential.

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