“[The issues] should be resolved in the near term while costs should continue to decrease as the mine is optimised,” RBC said in a post-visit note.

Guyana (TSX: GUY) has seen its shares slump 31% since the start of this month. Its market capitalisation was around C$882.6 million (US$653.5 million) this week.

The company recently increased its all-in sustaining cost guidance for calendar 2016 for Aurora from US$670-720/oz to $740-760/oz while maintaining its production target of 140,000-160,000oz. Higher mining costs and expenses related to capital equipment purchases have underpinned the overall rise in AISC.

Guyana Goldfields is weighing investment in an increase in milling capacity next year to 8,000 tonnes per day from the current 5,000tpd.

“The mill continues to perform well and has achieved record throughput levels subsequent to quarter end,” the company said. It milled 177,300t in October, producing 13,900oz (166,800oz annualised). “Mill optimisation efforts, in particular related to carbon management and the acid wash system, are ongoing and are expected to result in a meaningful improvement in recoveries moving forward.”

RBC observed: “Recoveries are currently running at around 91% which is below design levels of 94%. Management attributes 75% of this to issues with the carbon circuit which is being fixed now and the remainder due to a decision to process at a coarser grind.

“The coarser grind results in a loss of about 1% which is more than offset by higher production levels.

“Costs are trending lower and the company is targeting a 20% reduction into 2017 due to optimising the labour count, transitioning to owner operated fleet [ongoing now] and lower explosives costs.

“The expansion could be completed by the end of 2017 with a new ball mill the critical path item. A used one could expedite this but it has proved hard to find a suitable one.

“We believe this new plan can provide steady production growth into 2018.”

The company is also ramping up brownfields and greenfields exploration in a bid to build the resource inventory and add to mine life. It said mapping and surveying at brownfield targets close to the Aurora mine, and around the emerging Sulphur Rose deposit (existing resource about 500,000oz grading 1.25gpt), 20km north-east of Aurora, would generate more targets for drilling in 2017.

“We remain positive on the story with near term production growth, declining costs, and a renewed focus on exploration provides potential catalysts,” RBC said.

“Management expects grades to increase in Q4 and into 2017 with better grade control practices within the pit. New blast sensors help direct the highest grade material to the mill mitigating the issue in Q3 where some higher grade material was sent to the stockpile.”

External consultants had completed a study of the reserve model and confirmed that it was a “solid conservative estimate” with no changes necessary.

“We believe even a small amount of additional openpit ore could have a positive impact on the economics of the operation,” RBC said.

“Sulphur Rose could be a satellite operation.

“Guyana purchased a small mill [800-1000tpd] from Newmont for about $6 million which could be deployed at Sulphur Rose or another satellite deposit.”