The last completely new gold mine to be built on the East Rand was the Welgedagt mine established in 1948, and while a lot of new shafts were subsequently incepted in this area over the years it has been over half a century since a genuine new mine was established there. Now construction has begun on Aflease’s Modder East gold project, with the company having approved the initial development stages. Considering that the East Rand makes up part of the world’s greatest gold province and accounts for 24% of all the Witwatersrand Basin gold ever recovered – the Wits Basin accounts for 90% of all the gold recovered in South Africa – it is surprising that it has taken so long to find a new mine in the East Rand.

Modder East is located less than 40 km from Johannesburg and is adjacent to the area being mined by Petrex, a subsidiary of Bema Gold Corporation. Petrex has mined a tribute area of the Modder East property, and Aflease Gold has access to the data accumulated, meaning that it is able to ascertain the mining conditions and knows what to expect with its orebody. With Bema unlikely to be a long-term holder of what for it is a small asset in the East Rand, Aflease Gold as the only other gold company active in the area is best placed to play the major role in consolidating and developing its potential. An independent postulation of the resource remaining in the East Rand put it at 15 million ounces of gold at a grade of 5.4 g/t.

The original Modder East mine that occupied the site of the current project, which coincidently is within line of sight of Aflease Gold CEO Neal Froneman’s home, mined the Main Reef from 1920 to 1962 and produced 8.3 million ounces of gold. When this reef was mined out that operation came to an end, but the Kimberley and Black Reefs were left untouched. Between 1982 and 1991 there was some mining at Modder East by Subterranean Mining that mainly involved reclaiming old Main Reef pillars. In 1991 General Mining explored for the Black Reef and Kimberly Reef by drilling 10 holes. The majority of these holes intersected the targeted reefs. In 1994 Harmony drilled three holes. The Harmony holes missed the Black Reef shoreline deposit. In 2001 New Kleinfontein drilled an additional three holes. Over the last three years Aflease Gold has drilled in excess of 22,000 m of exploration drilll holes in the target area.

The project was sold to the old Afrikander Lease for R100 million (US$14 million) in 2003. The closely spaced infill drilling program conducted by Aflease Gold has provided a total resource in excess of three million ounces of which two million of those ounces are in the inferred category and 1.3 million ounces are classified as probable reserves.

greenfield 1

Aflease Gold CEO Neil
Froneman launches the
construction of the
Modder East project.

“There is huge upside potential,” Camden Geoserve’s Peter Camden-Smith says, having worked as a contractor on the project for Aflease Gold. “We are investigating the canalised UK5 and UK9A Kimberley Reefs. The Black reef is the primary target but the UK9A has already proven to be excellent secondary target.

The stratigraphy of the East Rand at Modder East consists of Black Reef, beneath which lies the Kimberley Reef conglomerates, then the Bird Reef, the Livingstone Reef, and then the mined out Main Reef.

The mine will exploit an orebody with a depth of around 300 m dipping gently at approximately 4O. The reef width is about 50 cm but the planned stope width is one metre. The average recovery grade over the life of mine is about 4 g/t.

Development of the 2 km long surface decline to access the orebody is expected to commence in August. The portal entrance (box-cut) has already commenced and from its start will take some 18 months for the decline to reach a depth of 300 metres below surface. All off-reef development will be done using trackless mining equipment. On-reef development will be done using hand held rock drills. The ore body is well suited to normal conventional breast stoping. Ore will be removed to surface in 50 tonne trucks. At full production the mine will employ in excess of 1,000 people.

“After the original Modder East others hunted for a mine in this area but did not find it,” Camden-Smith says. “It required perseverance and a commitment to a full drilling campaign.”

The drilling campaign undertaken by Aflease Gold at Modder East cost some R6.3 million (US$0.9 million) and in 2005 the project began its feasibility study. Surface exploration drilling at Modder East is nearing completion. Only eight holes will be drilled in 2006.

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Aflease Gold CEO Neil Froneman
drives the excavator in the sod
turning ceremony for Modder East
.

“Our internal feasibility study is already complete and the external feasibility study will be finished in the third quarter of this year with this being undertaken independently by an external party,” Froneman says. The pre-feasibility study on Modder East, completed in 2004, envisaged an 100,000 ounce a year mine with a life of mine of 10 years producing gold at a cash cost of US$220/oz. Construction capital was estimated at R300 million (US$42 million).

Froneman says there are some reasons that Modder East is the first new mine to be built in a gold field that had been widely regarded as extinct, and those have little to do with current high gold prices. “This project was conceived when the gold price had not yet risen,” Froneman says. “We will not duplicate inefficiencies of the past and we also do not expect Modder East to be a single occurrence.”

Aflease Gold was formed when the old Aflease merged its New Kleinfontein assets with those of Sub Nigel, and has a pipeline of high margin low cost projects that it plans to develop to produce gold at a cash cost of less than US$300/oz. In addition Froneman says that these projects have low technical risk and are based on shallow deposits of less than 1,000 metres below surface. On average South Africa’s gold producers are now mining well below 1.6 km underground.

“All our resources are within 1,000 m from surface, and one should note that a mine at 200 metres can mine gold at 3-4 g/t and an equivalent mine at 3,000 metres deep would have to mine at 15-20 g/t to provide the same return,” Froneman says. Modder East will not be affected by the water that has been allowed to flood the East Rand Basin to a depth of approximately 700 metres from surface.

Aflease Gold is aiming to become a mid-tier gold producer with annual production of 500,000 ounces and it plans to achieve this by advancing Modder East to production by 2009, and then through its exploration and development of its current assets and through external growth. The plan is that Modder East will pour its first gold in the third quarter of 2009.

Currently Aflease Gold’s resource potential is 16 million ounces with Modder East contributing one million in addition to its Samrec verified 3.03 million ounce total resource. The company has detailed exploration programmes aimed at enabling the other 12 million ounces from New Kleinfontein, Turnbridge, Holfontein, Sub Nigel and Ventersburg to be realised.

Sub Nigel has a 117 year history and produced 416 tonnes of gold at 15 g/t over that time. The Ventersburg property, which is located near existing operations of the Free State gold field, which in total has produced 311 million ounces of gold, has a reef that dips at 35O and exploration drilling there will start in the third quarter of this year. The orebody extends from a depth of 400 to 1,000 metres and historical exploration in this area included 70 boreholes.

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Camden Geoserve’s Peter
Camden-Smith says
who has worked on the
exploration of Modder
East for Aflease Gold.

Aflease Gold also has a 65,685 hectare exclusive prospecting license in the Kunene region of Namibia, located near the Etosha game reserve some 400 km northwest of Windhoek. Surface sampling at the Gelbingen site on this license indicated a gold grade of 3 g/t, and 2.7 g/t was obtained in a borehole at a depth of 45 metres. Aflease Gold sees Namibia as offering exciting shallow mineral potential and it has not been well explored for gold, with the emphasis having been more on copper in the past.

Aflease Gold says that the production associated with a resource of 16 million ounces would be in the region of 450,000 ounces per year.MRA