Guyana Goldfields: Application Of A Lesson Learned

Guyana Goldfields: Application Of A Lesson Learned

| About: Guyana Goldfields (GUYFF), https://seekingalpha.com/artic...ation-lesson-learned

On surface, Guyana Goldfields (OTCPK:GUYFF) is a rare success story, which has been told aplenty here on Seeking Alpha and elsewhere. In very general terms, the company is typically described as a stable producer with a remarkable asset and an attractive organic growth perspective. We partially agree with this assessment, and we certainly acknowledge the flawless execution of this company in developing the Aurora gold mine in Guyana so far. However, by the same token, we would like to caution investors and point to a risk factor not commonly recognized in said commentary; a risk factor which has led to the demise of another hopeful junior miner not long ago, and which the market has started to price in as evidenced in recent share price underperformance.

The release of the updated reserve, Q1 results, and the expansion feasibility study provides a set of data points which allows for an assessment of the current state of operations, and the strategy to manage said risk factor going forward. In this article, we would like to pull these data points together and formulate our current investment thesis for Guyana Goldfields after weighing up the potential risks and rewards.

Commercial Operation and Q1 Results

In our review of 2016 results for subscribers, we already made note of the company's strong first full year of commercial production, culminating in a particularly strong Q4 by practically all operational metrics. The 9.3% decline on ounces produced in Q1 would suggest a step backward and has in fact caused some critical remarks in some commentary, but in our view, this is a very superficial view and ignores a set of underlying metrics which in actual fact indicate further improvements in mine performance.

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