Johannesburg, South Africa — 08 July 2013 – Witwatersrand Consolidated Gold Resources Limited (Wits Gold) has announced that it is the sole preferred bidder for the Burnstone gold mining operation near Balfour, in the Mpumalanga province of South Africa
Burnstone is wholly owned by Southgold Exploration (Pty) Limited, a subsidiary of Great Basin Gold Limited (GBG), and is currently on care and maintenance under business rescue proceedings.
Wits Gold CEO Philip Kotze said: “Following an intensive due diligence by the Wits Gold team and the submission of our business plan, we are very pleased to have been selected as the sole preferred bidder, and look forward to our offer being accepted when the plan is put to vote on 11 July 2013”.
The acquisition of Burnstone is in line with Wits Gold’s strategy of owning and developing shallow mines in South Africa and is an important step in the company’s development. Moving to producer status will serve as a solid platform with which to start generating free cash flow for shareholders.
The acquisition provides shareholders access to: a shallow, multi-million ounce gold reserve; substantial investment in underground infrastructure and development; a fully operational metallurgical plant; and a near-term cash-generative asset.
Chairman Adam Fleming comments: “Wits Gold has indicated for some time that we would want to return value to shareholders through dividends, and I see this as a first step in moving towards achieving that goal. What we will acquire at Burnstone is an asset where some 80% of the capital has already been spent and state-of-the-art infrastructure put in place. This significantly reduces the project risk and time until production can commence. I believe this represents excellent value for Wits Gold shareholders.”
The key terms of Wits Gold’s offer for Burnstone, disclosed in the business rescue plan, are:
payment of $7.25 million on transaction completion; reduction of the operation’s total existing debt by 55%; and provision of up to US$100 million over time by Wits Gold as working capital to support the chosen production plan, in the form of a shareholder loan to be paid back on a preferential basis from operating cash flow.
Kotze added that Wits Gold had developed a new, underground mining plan for Burnstone, which was realistic, deliverable and aimed to ensure maximum benefit for all stakeholders. The plan allowed for flexibility in the production approach and this would be confirmed once the transaction had been finalised.
The mine is currently under care and maintenance, where the bulk of the labour force has been retrenched. This allows Wits Gold to gradually build up production in a phased approach, with a commensurate cost profile. The company will also undertake to continue with relevant social initiatives to enable sustainable development of the affected communities in the vicinity of the mine.
Source: Wits Gold.