It is no secret that Wits Gold, the junior gold developer and explorer, is on the acquisition trail and the unsuccessful completion of purchasing Evander from Harmony Gold has not been a deterrent.
The market does not ascribe full value to our large resource base and we remain dependent on capital raising exercises from our shareholders for cash flow. A producing mine can assist us in funding our exploration pipeline, and as a producer, our shares will be rerated and increase in price accordingly, says Wits Gold CEO, Philip Kotze.
“While the combination of our assets positions us as the worlds fifth largest gold resource holder, which in total equates to 157.2 Moz of gold and 271 Mlb of uranium oxide, our status needs to shift from explorer and developer to producer,” he continues.
“We believe there are numerous acquisition opportunities in the market and right now we are looking at Great Basin Gold‘s Burnstone operation, which is currently on care and maintenance,” explains Kotze.
Controversy regarding the reasons for Burnstone‘s failure continues to circulate in the market and its use of mechanised mining is at the forefront. Kotze, however, says the mine is aligned with Wits Golds’ strategy owning and developing shallow mines in South Africa. “We understand the mine and we understand mechanised mining, and we believe that no company will be able to operate this mine as successfully as we will.” Kotze served on the board of Great Basin Gold for a short period of time and therefore has good insight into the property.
The acquisition of Burnstone would immediately change Wits Golds status from explorer to producer while raising its overall gold ounce targets. “We have good management capacity with a proven track record and have access to funding (US$100 million) to ramp the mine up to full production. However, we will not overpay for the asset, and have entered the bidding process set up by the owners of Burnstone. Our bid, based on a detailed due diligence currently in progress, will be based on getting the best returns for our shareholders.”
According to Burnstone owner, Great Basin Gold, the mine can be described as a shallow, semi-mechanised mine with reefs starting at 358 m below surface. It has proven and probable reserves of 6.4 Moz and 12.2 Moz of measured and indicated resources. Its capacity is capable of delivering an average annual gold production of 160 000 oz at cash costs of US$650 over 25 years.
80% of the mines capital has been spent to date and production ramp-up imminent. All of its mining licences have also been secured.
Outside of Burnstone, Kotze notes that It is only a matter of time before all the majors sell off their non-core assets. This will lead to substantial restructuring where remaining farm boundaries will be removed to take advantage of local infrastructure.
This means the revival of single operations that are smaller, but more efficient and profitable without significant overhead costs. The result? A new listed mid-tier gold sector with vast investor opportunity and Wits Gold is poised to be an active participant.
At the opposite end of the scale, Wits Gold could sell certain of its exploration assets to the majors who may be looking to extend their mines lifespans, as the companys project areas are strategically located adjacent to operating mines.
Wits Golds’ four assets DBM, Bloemhoek, Robijn and Beisa are in the heart of South Africa’s gold mining territory and are surrounded by numerous operating mines, including Harmony‘s Joel, , Bambanani and Unisel mines, as well as Gold Fields‘ spin-off Sibanye Gold‘s Beatrix mine, which reported a fire today at its Beatrix 4 Shaft. The synergistic opportunities for us in the near future will be huge, Kotze states.
The company’s most advanced exploration project, DBM, will be a shallow underground mine comprising a vertical twin shaft system to 660 m extremely shallow in South African gold mining terms with average gold production expected to be 200 000 ozpa over an 18-year life of mine. Production is expected to peak at 246 777 oz at 5.5 g/t during year nine and first gold production is expected 47 months after shaft sinking commences. The PFS estimates production cash costs of US$628/oz (R5 526.34/oz) with peak capital funding of R2.37 billion.
“If our expectations go according to plan, we will commence with shaft sinking and underground development in the first quarter of 2014 and the construction of the metallurgical plant two years later. We want to deliver first gold in 2018. The company has already applied for the necessary mining right, which it is hopeful of being granted before middle of 2013.”