Johannesburg, South Africa — 22 March 2013 – Witwatersrand Consolidated Gold Resources Limited (Wits Gold) “’ which has a primary listing on the JSE and a secondary listing on the TSX “’ is preparing a bid for the Burnstone gold mine in South Africa, which is in a business-rescue programme. The company is also keen to bid for AngloGold Ashanti’s Navachab gold mine in Namibia, says Wits Gold CEO Philip Kotze.
Burnstone has been idled while business-rescue practitioners find a buyer. The mine was on the cusp of being ramped up to full production but was stalled by operational problems. The business rescue started in September last year after the owner, Great Basin Gold, ran out of money.
Five approved potential buyers are bidding for the asset and three more are awaiting approval. Unconfirmed reports suggest Russia’s Renova and a Chinese company are on the list.
In a statement issued here, Wits Gold said it had spent R20 million on a diligence study of Burnstone, which mines the channelised Kimberley Reef near Balfour in Mpumalanga.
The hard work has been done by Great Basin, which built a metallurgical plant, a decline shaft and a vertical shaft at the mine.
Wits would need to raise capital by issuing shares in about August, Kotze said, adding that Burnstone was too debt laden for Wits to incur debt to buy the asset. “Our challenge is to not overpay for the asset. If we get it at the right price we can make a real success of Burnstone. Otherwise we are quite happy to walk away,” he added.
One criticism of Burnstone is that the long-hole stoping mining method is wrong.
Some mining experts have suggested that the nature of the reef is better suited to conventional mining to reduce dilution.
Kotze said Wits would use conventional mining at the stopes and use machines for development. Trials would continue on long-hole stoping at some parts of the mine where the reef was thickest.
Wits plans a different underground development model to that of Great Basin “’ one that would take three years to complete. The focus, once it is in production, is to generate cash to return to shareholders, making Wits an attractive dividend play for investors.
The second asset Wits would like to acquire is AngloGold’s Navachab mine, which joint interim AngloGold CEO Srinivasan Venkatakrishnan says is up for sale, with the process starting this month.
The purchase of one or both of these mines should result in an upward re-rating of Wits’s share price, Kotze said.
Wits will complete a bankable feasibility study in September to build a new gold mine at its shallow De Bron-Merriespruit deposit near Welkom in the Free State. The project, with life-of-mine capital of US$680 million, would be funded with debt and equity in a 60:40 split, Kotze added.
Source: Wits Gold. For more information, click here.