HomeGoldModder East is Gold One's flagship

Modder East is Gold One’s flagship

Gold One International, a combination of South African gold development company Aflease Gold and Australian gold exploration and development company BMA Gold, has created a potential international gold business with its flagship mine on the brink of production.

The company also claims a portfolio of growth prospects intended to take it to 500,000 ounces a year gold production over the next five years.

Neal Froneman

Gold One president
and CEO Neal

“That is our vision,” Gold One president and CEO Neal Froneman says, “but it is not set in concrete. We certainly have the assets to do it, but success will hinge on our ability to explore and develop mines in that period. We believe it is a realistic vision,” he adds.

“The new company, the first to have a dual primary listing on both the Australian Securities Exchange and the JSE, should be very favourably positioned in the international market,” Froneman claims. “Being listed in Australia positions us as the fifth largest company by resources on the Australian Stock Exchange, and our visibility as a gold company changes dramatically.”

Gold One’s assets include Aflease Gold’s new Modder East mine on the Witwatersrand near Johannesburg, which is on track to pour its first gold towards the end of 2009; a gold resource of more than 15 million ounces; and a number of gold exploration and development projects in South Africa, Namibia and Mozambique.

Modder East has been in development since 2002. “I dare say it is one of the best gold projects in South Africa because of its shallow nature, structural simplicity and resultant low cost of mining once it starts production,” Froneman says. “Because the grades are medium, we are going to end up with what will probably be one of the lowest cost underground producers in the world at about US$250/oz.”

Modder East processing plant

The flagship Modder East
processing plant as it
neared completion.

Gold One’s Modder East mine has tended to be under the radar. “We’ve been developing it slowly but surely and, despite difficulties such as having to develop a mine through water-bearing dolomites, we are slightly ahead of schedule.”

Modder East will be the first new East Rand gold mine to come into production in 60 years. The mine has a resource of 3.67 million ounces and a reserve of 1.36 million ounces with planned output of just over one million ounces in its first phase.

The mine has an indicated resource of 29 million tonnes at a grade of 2.84 g/t which would yield 2.6 million ounces, and an inferred resource of 15 million tonnes at a grade of 2.1 g/t, which would yield over one million ounces.

“We will produce 20,000 ounces at Modder East this year, and production will rise to 140,000 oz in 2010. It will be at steady state of 180,000 ounces a year from 2011,” Froneman says. “Life-of-mine for the first phase is eight years. Obviously, however, having a resource that’s bigger than the reserve, I believe that stakeholders can look forward to an increasing life of mine.”

Froneman says that phase two is what was called the wide reefs, which underlie the black reef horizon that will be mined in phase 1. “We are doing the engineering work. If the economics are positive it can extend the life of mine significantly.

“Modder East has a construction capital cost of R820 million,” Froneman says. “This will cover us for phase 1, which should be on time and on budget.”

Modder East cons

Construction of the permanent
headgear of the Modder East
vertical shaft.

In comparison, Gold One’s Sub Nigel project is small for a start, producing 6,000 tonnes per month (tpm). “We do, however, see a much bigger future production profile, but it will be dependent on the successful delineation of resources,” Froneman says.

The initial Sub Nigel project has been approved, and the re-opening of Sub Nigel is based on an earlier resources statement of 310,000 ounces in the indicated category and 420,000 ounces inferred. “We started blasting there in mid January, and this is the ore we’re sending through the Modder East plant commissioned in April,” Froneman says.

“The initial throughput of 6,000 tpm can grow in the medium term to 12,000 tpm, and we already have a 20,000 tpm model in the back of our minds, which should be achievable in two to three years’ time.”

It’s still early days at the company’s Ventersburg project in the Free State. “We are converting some of the project’s 4.65 million ounce resource into the indicated category, and we look forward to completing a feasibility study by the end of 2009,” Froneman says.

Moving out of South Africa, Gold One has two strong possibilities in neighbouring countries. One is the Etendeka project, a 64,000 hectare property in Namibia. “Being a greenfields exploration project, it’s very early days to quantify anything at this stage, but it is an exciting prospect,” he says. “We’ve had to cut our coat according to the cloth in terms of the capital markets having changed so dramatically; it will probably be at least a year before we can give any indication of future possibilities at Etendeka.”

Modder East mine

The sinking sun over
Gold One’s Modder
East mine

Another exciting prospect is the Tulo property, right in the north of Mozambique about 20 kilometres from Lake Malawi. “We have acquired a mining licence and have established access and an initial camp in the area. There is a lot of alluvial gold which we will mine initially just to finance the project and help fund further exploration,” Froneman says. “We want to access the site off the shores of Lake Malawi, and we have already identified a harbour position.”

He emphasises that the Etendeka and Tulo initiatives will not be allowed to distract Gold One from its core projects of Modder East and Sub Nigel. “They will be progressed as and when appropriate.”

Froneman’s view is that the future for gold is quite rosy. “It is the one commodity that has stood up very well in the current meltdown, and I think people will return to it as a store of wealth.

“What also excites me about gold is that it is as scarce as ever. There aren’t new projects with huge amounts of gold coming into production, which makes it precious, and the demand is increasing, especially in Asia and India. That bodes very well for a good gold price.

“The current credit crisis has made it more difficult to raise capital, and investors are a lot more selective at the moment, but I believe that gold as an industry has been a lot less affected than say platinum, copper or zinc.”