The investment is in two projects — one to accelerate the exploration and development of the heap leach potential at the company’s Mpumalangabased subsidiaries, TGME Limited and Sabie Mines, and the other to re-open the high-grade Five Shaft at its Buffelsfontein Mine in the North West province.
The Mpumalanga project — which stretches across about 70 km of strike along the gold belt from south of Sabie to north of Pilgrim’s Rest — stems from the strategic decision to re-focus capital expenditure from underground projects in the region to higher-return, lower-risk surface mining opportunities.
“We have had a focused exploration programme in Mpumalanga for quite some time, and have developed a model that focuses on entirely different technology relating to heap-leaching, which is used around the world for treating low-grade surface deposits,” Miller explains. “Geological investigations over the past two years have outlined the potential to define one million ounces of resources and 733 000 ounces of reserves,” he adds.
“To confirm these conceptual findings we have instituted a R130 million (approx. US$ 18.5 million) capital programme which includes metallurgical testing, geophysical studies, geochemical studies, designs, test pads, and so on,” says Miller, “and there will be two major milestones to measure our success.”
First milestone will be a middle-of-the-race feedback session — that is the pre-feasibility study, which has just been started and is targeted for completion by March 2008. “Results to date have exceeded our expectations, but the decision to move ahead will only follow completion of the pre-feasibility next March,” he reveals.
MPUMALANGA BFS BY Q1 OF 2009
“The pre-feasibility will obviously re-define our programme going forward, as we will then be in a position to act on information in which we have a much higher level of confidence. Assuming the results are as good as we expect, we will immediately move into the second major milestone — a full bankable feasibility study (BFS) which would be completed by March 2009, when the decision to mine will be confirmed,” Miller points out.
“Should the BFS prove successful, we would be looking at a peak production of 250 000 ounces per annum by 2011,” he states. “One must bear in mind, however, that this involves mining to a depth of only 10m – if we go down another 20m,” he adds, “we may well be able to more than triple that life of mine to around the 20-year mark.”
A total of 15 sites have been identified, and three sites will be used as pilot projects for testing purposes once the environmental requirements have been met and approved by the Department of Minerals and Energy (DME). At the Elandsdrift site this involves removing the contaminated tailings from the Elandsdrift Creek as part of a rehabilitation programme, transferring them onto test heap leach pads, and then extracting the gold economically, which could not be done without the heap leach pads.
“Once they have been commissioned, the pilot projects will help us to understand such aspects of the operation as costs, time of construction, materials and leach characteristics, and to identify any challenges we will have to face,” says Miller. “We will then have a clear picture of what needs to be done when we start building the 12 big heap leach pads,” he continues.
“Total capital and operating expenditure for the next six years is estimated to be in the vicinity of R1 billion, and is expected to generate turnover of around R3 billion,” Miller confirms.
Permitting is the big problem. “You have to bear in mind that heap leach technology is relatively new to South Africa, people do not understand it, and there is a lot of scepticism,” he points out. “We expect the first permit to be granted by the end of this year, after which the others should be routine,” he adds.
“The advantage of the heap leach method is that it is used around the world in environmentally sensitive areas as the only means of recovering low grade gold in a sustainable way,” says Miller. “In addition,” he continues, “you have nowhere near the risk from an environmental and safety point of view that you have in any other form of underground mining.”
RE-OPENING OF NUMBER FIVE SHAFT
The second project involves the re-opening of the highgrade Number Five Shaft at Simmer’s Buffelsfontein operation in the North West province at a cost of R170 million.
In March 2005 the Number Five Shaft was damaged by a seismic event, the mine tipped over, it lost one of its best high-grade sources of ore and went into liquidation. Simmers resumed underground operations in December 2005, but the damaged Number Five Shaft remained inaccessible.
“In conjunction with the DME, we conducted risk assessments in terms of re-opening the shaft safely and economically,” Miller explains. “We then engaged independent auditors to review the whole reserve / resource situation, and that report came out in May, confirming the estimates of the reserves — definitely high-grade — as well as what it would cost us to tackle the project. We went ahead and raised the capital needed to repair the shaft and be back into production by the first quarter of 2008,” he says.
Production at Five Shaft is due to commence in the current financial year, and is expected to deliver 12 000 ounces by March 2008 at a cash cost of US$ 378 per ounce.
Buffelsfontein’s large resource base features measured and indicated resources of more than 11 million ounces, coupled with excellent conversion potential. “At the time we took over we were compelled to write about 1 million ounces out of the books,” Miller reveals. “Now, working from that zero base we have managed to bring about 700 000 ounces back onto the books, as verified by the independent auditors.”
EXCITING PRODUCTION AND INCOME
This is expected to extend the life of the mine, which currently stands at 20 years. The re-opening of Five Shaft will result in a 5% increase in the overall life of mine grade; an improvement in peak production forecast to 318 000 ounces by 2014 / 15; and a 12.5% increase in total life of mine ounces from 4.5 million to 5.1 million.
“Our R170 million investment will give us a life of mine cost of about US$450 an ounce,” according to Miller. “This covers the various aspects of getting the mine up and running again — we have the shaft running, the tunnels are all open, we are into the stopes, and we are ready for production,” he enthuses.
“This leaves simply operating costs — that’s the advantage of having a mine that’s built already,” Miller exclaims. “Everything is there, and although equipment had to be repaired, fixing it is a lot cheaper than building it from scratch.”
Potential income from Five Shaft is exciting. “Taking a long-term gold price of US$600 an ounce, this gives us a margin of US $150 an ounce for 700 000 ounces, which amounts to US $105 million (more than R750 million),” he calculates. “And working on a gold price of US$650 an ounce, we would be clearing US$200 an ounce for 700 000 ounces. This would amount to US$140 million (R1 billion) in margin and $455 million (almost R3.5 billion) in turnover,” Miller concludes.