Golden Saint Resources Executive Chairman Interview Q4 FY14

Golden Saint Resources (LON:GSR) is a relatively new addition to the Alternative Investment Market and holds three Exploration Licences in Sierra Leone.  Its primary focus is on becoming a diamond and gold producer with near term diamond cash flow seen as a first priority.

Golden Saint Resources is led by its founder and now Executive Chairman Cyril d’Silva, a Singaporean born entrepreneur with extensive experience of working in West Africa and a broad network of business contacts in South East Asia. Cyril d’Silva is aided by board members including David McDonald who has over 20 years’ experience in Business Law and Simon Lawton who has extensive experience as a Finance Director.

Following its first 12 months as a London listed stock, Executive Chairman Cyril d’Silva has taken time out during a London visit to discuss various aspects of the business, including, its management, business model, operating in Sierra Leon, diamond market, investment overview and market sentiment.

Q1. Briefly, could you set the scene with a brief background on Golden Saint Resources?

Golden Saint Resources (GSR.L) listed on AIM is a natural resources company with assets in Sierra Leone and is focused upon exploration licences prospective for diamond and gold in three districts (Tongo, Baja and Moa). GSR licences are extensive and total 340 km2 encompassing multiple areas which have a long history of artisanal and small scale diamond and gold mining in each region in addition to reported diamond deposits.

Known alluvial and hard rock diamond deposits are located within a reasonable distance of each region and all are considered prospective for both alluvial and hard rock (kimberlite) diamond deposits. Sierra Leone is politically stable and is attracting world class investment groups not only into its diamond industry, but also gold, iron ore, bauxite and heavy minerals. Nearby examples of note are Koidu Holdings (ramping up diamond production to 500k carats per annum); and Amara Mining developing the Baomahun gold mine (currently 2.8m ounce gold resource).

In addition to its exploration licences, GSR has formed Golden Saint Diamonds Ltd which sponsors local artisanal miners supplying them with mining equipment and water pumps. As such GSR is not only able to realise near term revenue from its own alluvial mining but also through the purchase of diamonds from the artisanal and small scale miners at favourable prices for them. This is only one part of GSR’s extensive corporate and social responsibility program and fits closely with our belief that commercial and social returns should go hand-in-hand in frontier markets.

On the ground in Sierra Leone, GSR is assisted by its Senior Resident Geologist Ernst Gbappi who has in excess of 10 years’ experience in the mining resource industry in West Africa; Dr. Alimamy Wurie former Director of Mines for the Sierra Leone Ministry of Mineral Resources; and Sierra Leone Managing Director Timothy Bangura who has many years experience of artisanal diamond mining and small scale precious minerals and gold dealing. Golden Saint Resources feel that some of our major strengths lie within our strong local team and their knowledge and not dependencies upon expats to bring the business forward.

Q2. Could you please explain the Golden Saint business model and mission?

Golden Saint Resources has a two part strategy to establish the Company as a successful and profitable diamond and gold producer in Sierra Leone. First, to identify gold and diamond assets on all of the Exploration Licence areas; and second, to generate near-term revenue through the export of diamonds and gold.

One of the primary objectives for the GSR management team is to realise a steady stream of cashflow for the company and to achieve this through prioritising the production and export of both diamonds and gold through GSR’s diamond and gold washplants; GSR will also achieve early revenues through the trading and procurement of rough diamonds from the local Sierra Leonean cooperatives schemes whom GSR sponsor.

In order to maximise shareholder value GSR will seek employ a mine to market model by cutting and polishing most of its rough diamonds thus increasing their value and margins significantly. As well as facilitating value for GSR shareholders through growth, GSR intends to offer its shareholders direct exposure to what it believes to be a rising commodity by offering GSR’s cut, polished and certified diamonds to shareholders first. In accordance with its beliefs that stakeholders at all levels should benefit, GSR will also offer these diamonds for sale to GSR shareholders at discounted rates.

GSR has some very high potential alluvial diamond assets which may be able to generate significant revenues in a short space of time and once these are being successfully monetised, GSR intends to utilise some of these revenues to fund exploration upon some of its high priority kimberlite targets to prove that they are diamondiferous. Essentially this is meant to be a self-funding model which is meant to avoid repeated shareholder dilution to fund exploration drilling etc.

A similar strategy will also be employed for GSR’s gold assets – that of realising revenues from small-scale alluvial gold production and utilising part of these revenues to organically fund gold resource drilling. If necessary GSR would also be open to considering alliances with partners to help speed progress on these gold projects.

In addition, GSR highly values its relationships with local communities and abides by a philosophy of ensuring that local Sierra Leoneans should strongly benefit from progress. GSR hopes that through its extensive primary school education programs and sponsorship of local small scale miners that we will help enfranchise, elevate and empower local communities.

Q3. Why the focus on Sierra Leone? And, how do you find operating in Sierra Leone both with local stakeholders and the authorities?

GSR initially focused upon Sierra Leone because it is one of the most prolific diamond producing regions in the world and this combined with its investor friendly and pro-mining environment provided strong motivation reasons for GSR to apply for our current exploration assets. It is also worth noting that Sierra Leone is now one of the fastest growing countries in Africa and has an encouraging fiscal regime (3.5% royalty on precious stones) and no statutory free carry government interest.

GSR has had extremely positive experiences dealing with local stakeholders and due to facts such as our in-country management team being made up of local Sierra Leoneans, our investment and sponsorship of local mining operations bringing immediate benefits to local communities and most of all our successful sponsorship of 13 schools in the Baja regions has meant that we are continually being approached by the people of new mineral rich regions wishing to work with us.

GSR also has excellent relations with the government of Sierra Leone and as disclosed in the IPO document the Current Minister of Justice and Attorney General has a 15% interest in Golden Saint Resources (Africa) Ltd.

Q4. Could you please provide a summary of the projects Golden Saint Resources is interested in?

GSR has the following projects:

• Tongo – alluvial diamonds with 5 priority 1 alluvial targets, 37 kimberlite dyke targets and 14 kimberlite pipe targets. Bulk diamond sampling work will begin here soon. The Tongo licence is 53.42km2 and situated in Kenema district.

• Baja - alluvial diamonds with 5 priority one alluvial targets, 79 kimberlite dyke targets and 4 kimberlite pipe targets. Bulk diamond sampling work will begin here soon. The Baja licence is 240.11km2 and situated in Kenema and Bo districts.

• Moa – gold exploration potential plus alluvial diamonds. Moa is a priority 1 target for our gold washing plants. Moa Licence is 46.45km2 and is located in Kenema district and 3 alluvial diamond areas.

• Makeli – here GSR is sponsoring local small-scale miners within some highly prospective alluvial gold targets. GSR has recently provided them with two gold washing plants and water pumps.

Q5. How do you view the current marketplace for diamonds and its outlook?

• GSR views the current and future marketplace for diamonds as excellent. Prices of both rough and polished diamonds are high and continue to increase driven by global demand especially from Asia with China and India being at the forefront of diamond demand growth.

• With continuous decline of rough diamond supply due and growing demand GSR sees the outlook for diamond prices as extremely positive and with low costs, high margins and a strong presence in Asia GSR feels that it is in a prime position to capitalise upon global diamond demand and especially for rarer coloured diamonds which GSR is hoping to open up a supply chain for.

Q6. The AIM has many listed juniors in this sector, as an investment what makes Golden Saint Resources different as an investment proposition?

Most importantly GSR is close to realising first revenues and with operations nearing completion of first diamond and gold washplants GSR is closer to self-sufficiency. This means that as a mineral explorer generating its own cashflow, GSR’s model is a rarity amongst AIM juniors and rather than continual shareholder dilution through equity placings for exploration upside and general corporate overheads GSR is in a much stronger financial position.

In addition, GSR’s high margin, low cost model combined with high potential for immediate alluvial production as well as huge potential kimberlite exploration upside all contribute strongly to GSR’s investment case.

Q7. Since listing on the AIM in July last year the Golden Saint Resources share price has ranged from around 3.6p to 12.50p, what do you make of the market sentiment relating to Golden Saint and do you feel the current share price is a fair refection of where the company is at?

Market sentiment relating to Golden Saint is growing strongly and this is due in part to strong market views that over time diamond prices will continue to grow strongly and due to this many investors are seeking direct exposure to diamonds through underlying equities such as GSR. With GSR’s unique model aiming for self-sufficiency and also through the shareholder buying discounts offers direct exposure to the commodity itself rather than solely potential growth.

• GSR’s stock has recently seen hugely increased buying volumes in and prior to recent interest some of the initial share sales below the IPO level were caused by a few shareholders who had been with and supported the Company for the last three years and who took most of the initial risks by investing in the Company in the pre-IPO days when there was no certainty that the Company would admit to AIM. GSR wishes wish to extend our thanks to these shareholders for their past support. These departing shareholders reflect only a small portion of GSR's shareholder base and a majority of shareholders have chosen to continue to support the Company. We also wish to extend a warm welcome to new shareholders that have recently bought GSR shares through the market and look forward to more new shareholders joining our Company.

• GSR feels that with many key milestones quickly nearing completion that we will soon be in a strong position to add value for shareholders through imminent further exports of diamonds and the realisation of revenues from these stones once they are cut and polished. There is of course the potential for finding high value rare coloured and larger stones too and well as the possible ‘blue-sky’ exploration of the kimberlite pipes. There is a lot to come and we strongly feel that the current price is not a fair reflection of where it should be, however, we are sure that in due course this will change as GSR continues to develop and put out newsflow.

Q8. What can Golden Saint Resources shareholders look forward to over the next 12 to 18 months?

Golden Saint shareholders can look forward to interesting results from our bulk sampling exercise and sponsorship of artisanal miners and the end of this phase the results of these should be very interesting as we are confident of the areas that we are operating in. 

New Equipment to process the bulk sampling at a quicker rate is currently under consideration and a decision on acquiring these would be made in the near future.  As the company’s production matures and its mines to market concept takes a more solid foundation, GSR will be positioned more as a glamour stock.

All current cut and polished diamonds will be made available first to shareholders through the Golden Saint Diamond Club and it is the intention that almost all diamonds will be GIA Certified. Shareholders can soon look forward to revenues due from first batches and eventually further exports of diamonds upon a regular basis and more revenues from these with hopefully the odd special surprise stone thrown in.

Thanks Cyril for taking the time to discuss the various business aspects and for sharing your thoughts.

The interviewer holds shares in Golden Saint Resources (LON:GSR)