LONDON () -- On Monday, Greystar Resources [AIM:GSL; TSX:GSL] CEO David Rovig put his case to investors at the here in London. However, it is hardly imperative that he drum up extra support for the company's shares, as they have put in a stellar performance of late.
Since Greystar was last and readers were reminded of the company's potential, its shares have climbed from the 300-400 pence range to well and truly clear 500 pence and bring 600 pence within sight.
Naturally, Greystar shares have benefited from the excellent run in the gold price, but their advance has also been underpinned by the progress that the company has made with its Angostura gold project in Colombia and by the market's gradually improving political risk perception of Colombia itself.
There is to be no let up in the pace of project development. A new resource estimate is expected by Rovig to be ready by middle of next month, and a scoping study is well underway. This study is targeted for completion sometime in July, and should be a precursor to a full feasibility study beginning later in the year.
What can investors expect from the updated resource estimate? A material increase is likely, as there are now 12 rigs turning on the Angostura site, drilling a mix of step out and infill holes. Some holes can be both; those that are drilled at a suitable angle intersect along their trajectory both known veins and new ones.
The current resource estimate for the Angostura deposit is 5.8 million ounces in the indicated category and 4.5 million ounces in the inferred. Given that this was based on around 112,000 metres of drilling, and that data from close to 40,000 metres of additional drilling will be incorporated in the new estimate, then an approximately proportional increase might not be unreasonable to anticipate.
This would put the updated resource at 7.8 million ounces indicated plus 5.6 million ounces inferred, an increase that would be unlikely to displease the market. In reality, a slightly less than proportional increase is likely, for no other reason than some of the drilling that has been undertaken will increase the reliability of the resource rather than its size.
Moreover though, there should be more to come, as drilling of Angostura is still ongoing and will likely be sufficient to support a further resource increase in due course. Drilling of peripheral areas may also raise the proportion of oxides in the resource, which is desirable as oxides are cheaper and easier to process than sulphides.
Usefully, Greystar is confident that the average grade of deposit will increase both with the immediately upcoming resource update and the one after that, as the nature of mineralisation at Angostura is such that denser drilling tends to identify high-grade vein intersections.
According to Rovig, the scoping study is being based on an operation producing 300,000-500,000 ounces per annum, processing roughly 40,000 tonnes of ore per day. This makes Angostura a sizable project and one that might one day attract the attention of a major, particularly if the resource keeps on getting bigger.
Comfortingly for investors, Rovig also reports that community relations and environmental considerations in the Angostura area have not yet presented any consequential issues. This will be a particular relief for anyone still a bit jittery about Colombia.
The shareholders of any company with a gold project of this size stand, as has been demonstrated over the last half year or so, to reap rewards from further rises in the gold price, and these seem likely.
But in addition, continued resource increases, completion of a scoping study on Angostura and movement towards a full feasibility study can add value to Greystar shares in the coming months.