New Dawn Mining Corporation, a TSX-listed and Canadian-based mining junior focused on gold in Southern Africa, has moved its Turk mine in Zimbabwe from care and maintenance to active mine development. And through a new three-mine strategy, the group aims to treble its pre-shutdown production to between 35,000 and 50,000 ounces a year.
In an April 2009 interview with Mining Review Africa, company president and CEO Ian Saunders said that limited production had started at Turk mine. Shipment of gold to Rand Refineries in South Africa has begun, and the first two deliveries of a combined 1,086 ounces provided working capital of more than US$900,000. “We will be in full operation by May,” he estimated.
“When Zimbabwe ran into serious trouble, in early 2008, we first cut back development by some 50%, and by the middle of 2008 had stopped stoping and had gone into an almost full development mode,” Saunders says.
“When the Zimbabwean Reserve Bank still had not paid us for our delivered gold by October we went onto care and maintenance at Turk mine. We spent the time on general repairs maintenance, and we went through major training campaigns for safety and awareness. This meant that when we were ready to come on line again this year, we were a far more efficient operation with all the previous niggles ironed out.
“We never retrenched anyone, we never put anyone on unpaid leave, but our workforce did drop from 850 to about 550. We did not lose critical skills, but we do have 300 fewer mine labourers,” he says.
“Now that the new Zimbabwean financial regime is showing signs of working, we have sufficient capital, from payments received so far for gold delivered to date, to purchase three months of consumables. We put in the orders for immediate delivery and we have finished the detailed planning.
“We expect to be mining 11,000 to 12,000 tonnes a month by September this year. This will bring us back to the pre-shutdown production level of 14,000 to 15,000 ounces of gold a year, when the mine was placed on care and maintenance last October,” Saunders says.
At this stage New Dawn intends introducing another five jack hammer teams every six to nine months until the mill is operating at full capacity. “We believe that the mining infrastructure to mine and hoist 17,500 tonnes a month is basically there, and we simply need to provide the required manpower,” he adds. “Mining and hoisting at this monthly rate will yield between 22,000 and 23,000 ounces of gold a year, and should be achieved by early 2011.”
This is where New Dawn’s three-mine strategy comes in.
“This three-mine strategy is something that we have been developing over time, and it came from the need for critical mass to achieve a decent cash flow,” he says.
“We have struggled to become a serious medium-to large-scale mining operation. Now we have developed the strategy of having three mines inside one,” Saunders explains. “We can right-size the full infrastructure by treating them as three separate operating sections (or mines) under one mining umbrella with a central treatment facility.
“Mine One will be what was the old Turk Central, now called the Main Vertical Shaft (MVS); Mine Two will be the Armenian shaft; and Mine Three will be the Angelus shaft. They are all at different stages of development right now.
We’ve almost finished the module at MVS, we’re about 80% through the upper part of the module at Armenian, and we are just starting the module at Angelus,” Saunders says.
Over time, New Dawn is aiming for an increase from 20,000 to 23,000 ounces of gold in 2011 to 35,000 to 50,000 ounces a year within another two to three years. “That starts to become a respectably sized mine.”
Towards the latter part of next year, when New Dawn is approaching the 17,500 tonnes a month mining rate at Turk mine, the company will be giving serious consideration to the next phase. “We’ll look at the long lead items that we require to get to the higher production figure – a mill, locomotives or whatever we have to change underground,” Saunders explains.
“Bearing in mind our three-mine strategy, as well as the whole infrastructure that we have upgraded, we know we have the infrastructure to handle an output of 35,000 to 50,000 ounces. We also now know that the orebody is there to support it. The issue is how quickly we will be able to ramp it up.
“There is no point in rushing things,” he adds. “If you want to be successful, bring things along in a steady, methodical and efficient fashion. That is why we have a three-year US$10 million investment programme that we are looking at to get us beyond the 17,500 tonnes a month, fully funded out of operational cash flow.
No date has been set yet for the actual start of the US$10 million programme. “We’ve done some conceptual studies and we’ve thought about it,” Saunders confirms, “but we’ll worry about the new starting date once we get to 17,5000 tonnes a month.”
Another significant factor is that, with a gold price of around US$900 an ounce, Turk mine’s margins are going to be about US$500 an ounce. “There should be ample money to put into other exploration, and we have a very interesting portfolio of properties within Zimbabwe,” Saunders says.
“Three years ago when Zimbabwe was really unwinding, we made a strategic decision to start to accumulate high quality ground,” Saunders reveals. “We have now developed four gold properties, and this is where we will be focusing in going forward. By June we will have a detailed technical report on all the external exploration properties on which we intend to focus.”
New Dawn, which listed in June 2008 and raised US$6 million, gave the question of listing on a stock exchange a great deal of thought. “Early last year we believed that we had a great asset, good management, and a good history, and that Zimbabwe was about to recover,” Saunders says.
“We debated as to whether we should wait for the recovery of Zimbabwe and then list, or list first and then have a credible platform for the recovery. “We made the decision that the best strategy was to list prior to the Zimbabwe recovery,” he continues, “so we deliberately targeted very sophisticated institutional investors that would take a medium-to long-term view, and would understand the risks and rewards we offered. Once the capital was raised we would have the platform when Zimbabwe was recovering, as opposed to only then starting to go through the very long process,” Saunders explains.
Part of these funds allocated to Zimbabwe would be devoted mainly to drilling and development of the Angelus shaft (the third mine), as management is convinced that the MVS and Armenian operations, under a recovering Zimbabwe, would be self-funding and would not need any fresh capital injection.
Turk mine’s proven and probable reserves above 12 level stand at 1.25 million tonnes at 3.96 g/t for a yield of 160,000 ounces of gold. Its measured and indicated resources are at 4.7 million tonnes at 4.98 g/t for a yield of 756,600 ounces, and it has a further inferred resource of two million tonnes at 5.6 g/t for a yield of 331,700 ounces.
“I believe that Turk mine has a three to five million ounce orebody,” Saunders says. “It’s a world class orebody. Remember, it’s already mined half a million ounces, it has another 1.3 million ounces available, and there’s at least a two million ounce potential there – that’s already four million ounces,” he points out.
Life of mine is currently estimated at about 12 years, at a production rate of 14,000 ounces of gold year, which adds up to the 160,000 ounces of proven reserves. If it were to ramp up even to 24,000 ounces a year, the life of mine based on current proven reserves only would be six years, which is typical for this type of mine.
“While the historical grade of Turk mine was about 5.5 g/t, New Dawn’s internal cut-off for mining purposes now is about 2.0 g/t. “We think the best way to treat this mine with the current gold price and technical regime, is to mine at 4.0 to 4.25 g/t,” Saunders observes.
“Zimbabwe has become quite a difficult place to estimate costs, and they are still being determined, but we think that there will be a definite cost change in Zimbabwe,” he says. “Historically the cost per ounce has been somewhere between US$225 to US$250, but we now expect it to come in at between US$350 and US$400.
“The long and the short of it is that Zimbabwe is a tremendous mining country,” Saunders notes. “It’s been neglected for ten years, and it first has to get back to where it was. Then it can start to benefit.
“There’s always the question of political risk. The way we see it is that there are various issues to be worked out with the government, and we need to work together for the mutual benefit of government and the mining industry, thereby creating a successful future for Zimbabwe,” he concludes.