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Figure of R16 billion based on gold price of $1 500 an ounce
Web Exclusive: Free State gold project could be worth R16 bln
Wits Gold completes Bloemhoek viablity study for gold project
September 8, 2009
By Justin Brown
Wits Gold’s Bloemhoek gold project in the Free State could be worth as much as R16.1 billion if the gold price reached $1 500 an ounce (R11 310), Wits Gold announced on Tuesday.
The price of gold in US dollars was last quoted at $1 004 an ounce. Wits Gold said at a gold price of $800 an ounce could value a Bloemhoek mine at R2.6 billion, at a gold price of $975 an ounce the project would be worth R6 billion and at a $1 250 an ounce gold price the venture could be worth R11.3 billion.
The company said the underground mine at Bloemhoek could require a total life of mine capital of R7.8 billion including R320 million for sustaining capital.
“It is estimated that operating costs will be R529 a ton, whilst first reef production could be achieved 48 months after the commencement of shaft sinking, “ Wits Gold added.
Including the five-year ramp up period, the mine was expected to operate for 23 years with an average annual production in excess of 220 000 ounces of gold and cash cost estimated at $406 an ounce.
The pre-feasibility study illustrated that mining was both technically and economically viable at Bloemhoek, which is situated adjacent to the Beatrix gold mine near Welkom in the southern Free State, the company said.
Wits Gold said the viability study was based on an indicated mineral resource in the Bloemhoek area of 39.9 million tons at an average extraction of 7.17 grams of gold per ton of rock containing 9.2 million ounces of gold. Much of this gold resource is at depths of between 1.3 kilometres and 2.4 kilometres. The company said it had a probable gold reserve of 5.4 million ounces.
“Should the company complete a bankable feasibility study over the area, Harmony Gold has an option to acquire a 40 percent stake in the project by refunding 40 percent of the historical exploration costs since April 2004 and contributing 40 percent of the capital required to build the new mine,” Wits Gold said.
“Should Harmony decline to participate in the development of Bloemhoek, Wits Gold will have the option to either progress the project along or negotiate the terms with another operator,” the company added.
Wits Gold is listed on the JSE with a secondary listed on the Toronto stock exchange.
The company has been granted 13 prospecting rights which cover 102 512 hectares adjacent to existing mines in South Africa.
Prior to the Bloemhoek study, the company had an indicated resource of 19.9 million ounces and an inferred resource of 131.9 million ounces.
Wits Gold’s shares on the JSE on Tuesday were untraded from the last trade of R60, which valued the company at R1.7 billion.
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