Great Basin Gold (GBG) is poised to launch production which will reach 254,000 ounces a year at its Burnstone mine in South Africa by 2011, and has definite prospects to reach far beyond that level in the medium to long-term future.
In an interview with Mining Review Africa, GBG president and CEO Ferdi Dippenaar says that multiple access points to reef were established at Burnstone during March 2009, and work had started on the development on-reef and on the establishment of working places. “Obviously this pre-development, involving the creation of mining blocks, is of critical importance. Following some initial production from these development activities, we built up to have the blocks ready to start mining proper in early May.”
Situated in Mpumalanga some 80 kilometres south-east of Johannesburg, Burnstone has all its permitting in hand. “We have everything,” Dippenaar assures. “The mining rights were granted in October 2008 for 20 years, after which an extension can be obtained. This is basically automatic, and would be for 20 or 30 years, based on updated technical reports, feasibility studies and the life-of-mine plan.
“We expect to produce about 40,000 ounces of gold in 2009 which will be mined and stockpiled on surface at the mill site,” Dippenaar says. “We started on the civil works for the mill earlier this year as we move into the construction phase. The plan is to have the mill operational by the end of March 2010, and we intend to start feeding stockpiled ore into the mill by the end of that month.
“Next year and 2011 will see output of about 200,000 ounces each, and this will rise to the mine’s planned 254,000 ounces a year. It will actually increase to 300,000 ounces a year for a period later in the life of the mine.”
The three basic aspects of the mine – the vertical shaft, the decline and the mill – will have been completed somewhere between the end of the March quarter and the end of the June quarter next year.
“At this stage the shaft is probably about a month ahead of schedule, which is great. The plant is running on time. Everything should be there and the mills should be on site and in their cradles by the end of February 2010. The decline is probably close to a month behind schedule because of some water problems we experienced, but this can be caught up easily,” Dippenaar says.
“By June 2010 the decline will have holed with the vertical shaft, and all the shaft infrastructure will have been completed,” he adds. “From that stage the decline becomes your second outlet for the life of mine. The decline, the vertical shaft and the plant will be in operation at this stage.”
The current resource at Burnstone stands at 13 million ounces, of which about 10.9 million ounces is in the measured and indicated category. Of this, 4.5 million ounces is provable and probable. “Our plan is to do more infill drilling, which will result in more measured and indicated ounces being converted to proven and probable. We are definitely finding more,” Dippenaar emphasises.
“We redesigned the mine. The shaft is large enough, but in terms of scheduling, the size of the winders, skips and the plant had to be upgraded to handle roughly 175,000 tonnes a month, which would give us our 254,000 ounces a year over about 19 years,” he explains.
“Looking further ahead, we are working on an updated resource statement. The indications are good. It definitely looks like an increase in total resources, just based on the drilling that has been done over the last year.”
Dippenaar refers to another factor which, although it is not GBG’s thinking right now, could be relevant in the future. “As soon as we have the mine up and running and things are going well, we can potentially plan for a production increase. Very simply, we are going to be using the vertical shaft for men, material and rock-hoisting, so we’re going to have the whole decline as a spare. This offers a very definite opportunity.”
There are thus opportunities for future expansion, but Dippenaar says, “The main issue now is for us to start and progress our mining. That will give us a lot more confidence in terms of mining method, recoveries, stoping width …. everything. This is why it’s a bit early to start arm-waving.”
As far as capital expenditure is concerned, Burnstone is a shining example of keeping within budget, which was calculated at US$178 million up to commercial production, and life-of-mine capital expenditure of US$224 million.
“We spent US$53 million by the end of 2008,” Dippenaar says, “and we are set to be spending another US$124 million to June 2010.”
As far as meeting these financial commitments is concerned, Great Basin Gold finds itself in an excellent position. “We announced in February that we had raised Cd$130 million, which effectively translates to roughly US$100, and we also have project funding of US$60 million.” The cash cost for Burnstone has been calculated at US$319/oz. “We have also calculated an all-in cost, which includes mineral taxes, royalties and federal income tax. That comes to US$118/oz over the life of mine,” Dippenaar says. “And then the amortisation depreciation is US$58/oz. This gives us a grand total cost of US$495/oz. It is not that common to encounter a project like Burnstone which is so comfortably on time and within budget.”
OTHER AFRICAN OPPORTUNITIES
Looking outside South Africa, Great Basin Gold is involved in early stage gold projects in two other African countries, one in Mozambique and the others in Tanzania.
In Mozambique, it has entered into a joint venture with G S Minase Refinaria (GSR) to establish a gold exploration and mining business which will give GBG the exclusive right to explore all GSR’s properties. The company has an 80% interest in the venture, and has committed to exploration expenditure of about US$2 million over three years on the Tsetsera property, which is located 80 kilometres south of Manica, in Mozambique.
Field work on the ground in Mozambique started in July 2007 and an initial soil sampling and ground geophysics programme was completed. “In the last year we undertook basic mapping, trenching and grab samples, and a technical report is being prepared,” Dippenaar says. “Follow-up exploration is underway this year, and an initial drill programme will be designed subject to available funding.” Regarding Tanzania, GBG acquired the remaining 63% of Rusaf Gold for US$22.9 million. The company is involved in three projects there: Lupa in the south-west, Lake Victoria in the northwest and Kikugwe in the central-southern area.
“We have undertaken drilling programmes on all three properties,” Dippenaar says. “We will probably need another year of drilling, followed by a prefeasibility status report, then a bankable feasibility study (BFS), followed eventually by a decision to mine. It will take three to four years before we can make any decisions to mine in both Mozambique and Tanzania,” he says.
“The Lupa region in Tanzania has returned the best results over the past year, and when we start drilling again it will probably be in that area. The drill rig is the truth machine. This is what determines our confidence in a given area, and the indications look good for both for Mozambique and Tanzania, but for the Lupa region in particular. If there’s money to be spent, Lupa would be the priority.”
In general terms, Dippenaar believes GBG just needs to put its two main projects into full production. “Hollister Mine in Nevada, USA, which is in its second year of production, is going well; and then we need to deliver Burnstone,” he says.
“If we deliver Burnstone by June 2010 as planned, we will have two projects up and running on the low side of the cash cost curve, fully funded, and making lots of money. We want to be in a situation where we will have paid out all our capital, repaid all our debts, and then have cash which we can return to our shareholders. I believe that if you want to distinguish yourself in the current environment, you should be going back to your shareholders and returning money,” he concludes.