| Thu 5 Jul 2007, 15:28 | | GBG - Great Basin Gold`s Burnstone Project Optimis |
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GBG
GBG
GBG - Great Basin Gold`s Burnstone Project Optimisation Study Recommends
Increase In Production By 19% To 254,000 Ounces Per Annum
Great Basin Gold Limited
(Incorporated in Canada and registered as an External Company in South Africa)
(External Company Registration number 2006/021304/10)
Share code: GBG & ISIN: CA3901241057
("Great Basin Gold")
GREAT BASIN GOLD`S BURNSTONE PROJECT OPTIMISATION STUDY RECOMMENDS INCREASE IN
PRODUCTION BY 19% TO 254,000 OUNCES PER ANNUM
July 5, 2007, Vancouver, BC - Great Basin Gold Ltd. (TSX: GBG; AMEX: GBN; JSE:
GB Gold) ("Great Basin Gold" or the "Company") announces that the Optimization
Study undertaken on its Burnstone Project in South Africa has been completed
with the results being included in a updated Feasibility Study ("Optimised
Feasibility Study ") which will be filed on www.sedar.com.
Based on the Optimised Feasibility Study, annual average production is planned
to increase by 19% from 214,000 ounces per annum to 254,000 ounces per annum.
Since the initial feasibility report filed in May 2006, additional surface
exploration drilling and mine planning has taken place. Inclusion of Area 2 for
consideration of mining, and expansion of Area 1 have increased the available
ounces of gold that can be accessed for development and extraction at the
Burnstone Project from 2.4 million ounces to 3.5 million ounces, an increase of
46%.
Using a long term gold price of US$550/oz, an exchange rate of South African
Rand (ZAR) 7.50 to the US Dollar and using a discount rate of 5%, the Burnstone
Project has a Net Present Value (NPV) of US$322 million and an Internal Rate of
Return (IRR) of 24%. This is significantly higher than the NPV of US$138 million
and an IRR of 18% reported for the May 2006 Feasibility Study. This excludes an
amount of approximately US$22 million, which is available from historical
project capital expenditure as a tax offset against project earnings.
The current study takes into consideration a higher tonnage being milled and
recent inflationary pressures experienced by the industry. A measure of
conservatism was built into working costs, increasing by 6% from US$36.63 per
tonne to US$38.77 per tonne. The combination of a slightly lower grade and
higher cost escalation factors resulted in cash costs increasing by 15% from
R57,256/kg to R66,091/kg; in US$ terms, cash costs increased by 11% from
US$254/oz to US$283/oz.
The need for a larger metallurgical facility and the construction of a second
decline has resulted in development capital costs increasing by US$60 million,
from US$114 million to US$173 million. With the life of mine of the operation
being extended by 5 years from commencement of the project, from 14 to 19 years,
maintenance capital has increased from US$29 million to US$65 million.
Ferdi Dippenaar, CEO and President commented,
"We are extremely pleased with the results of the Burnstone Optimisation
Study. In all measures, the returns on the project have improved
significantly. We are continuing with exploration in Area 4, which we
expect to add further to our resource base.
A large portion of Area 2 has not been included in the current production
schedule. Infill drilling will continue and we are confident that more
ounces will become available for mining from that region. In both
instances, the additional ounces will be mined from the planned
infrastructure. This will favourably impact on the ongoing working and
capital cost of the project.
Any shortfall in funding will be bridged with the approved project
financing facility of US$56 million (ZAR400 million) we have available,
that carries no hedging commitments."
With the updated resource information that was available at the time of the
report and derived from the additional drilling, Turgis Engineering were tasked
to update the mining plan and reserve statement, and include those resources in
Area 2 that met or exceeded the mining criterion as part of the mining plan.
Area 1 is the primary mining plan area and all resources included in the
previous Feasibility Study were in Area 1. For the Optimised Feasibility Study,
Area 1 was re-evaluated, the mine design was improved and proven technology
incorporated. This mining region is planned to be accessed through a single
decline shaft for personnel and equipment with a vertical shaft with a depth of
495 metres being used for the hoisting of reef and waste.
The infill drill program implemented for Area 2 increased the mineral reserve,
creating a relatively consistent production rate over the Life of Mine (LoM) of
the project. The Area 2 reserves will be accessed through a twin decline for
personnel and equipment as well as the extraction of reef and waste.
The two operations are in close proximity and will share surface infrastructure,
systems and business services.
This Optimised Feasibility Study was preceded by the May 2006 Feasibility Study,
which was based on 2005 exploration results and cost estimates. The results of
the Optimised Feasibility Study are summarized in the following tables and
compared to the May 2006 results:
LONG TERM ECONOMIC ASSUMPTIONS
Gold Price US$ - 550 per ounce
ZAR - 132,600 per kilogram
Exchange rate ZAR/US$ - 7.50
Proven and 24.1 million tonnes @ 4.5
probable reserves grams of gold per tonne
or 3.5 million ounces
For the May 2006 Feasibility Report, reserves containing a total 2.4 million
ounces were used, while the Optimised Feasibility Study is based on proven and
probable reserves containing 3.5 million ounces of gold - an increase of 46%.
FINANCIAL RESULTS
All-in capital and US$355 per ounce
operating costs ZAR 82,917 per kilogram
Cash on mine operating US$283 per ounce
costs ZAR 66,091 per kilogram
IRR 23.5%
NPV (5%) US$322M
NPV (10%) US$156M
Payback 4 2/3 years after mill
start-up
PROJECT CAPITAL COST ZAR (million) US$ (million)
Mine development 985 131
Process plant 254 34
Tailings 61 8
Sub Total 1,300 173
LoM Capital 487 65
Total Project Capital 1,787 238
Compared to the May 2006 Feasibility Study, overall capital expenditure per
ounce has increased by 15% from US$60/oz to US$69/oz. Mine Development capital
costs have increased by US$2 per ounce from US$48/oz to US$50/oz. Due to the
extension in Life of Mine from 14 to 19 years, the LoM capital cost has
increased from US$12/oz to US$19/oz.
OTHER INDICATORS
Metallurgical Recovery 95%
Recovered Gold (LoM) 3.3 million ounces
Average Annual Gold 254,000 ounces during mill life
Recovery
Pre-production period 4 years to end of 2009
Mill start-up (100,000 Jan 2010
tonnes per month)
Mill full production @ 8.5 years to March 2020
175,000 tonnes per month
Life of Mine 19 years including 4 years pre-
production
Full employment +/-2500
OPERATING COSTS ZAR/tonne milled US$/tonne
Mining 252.26 33.64
Milling 36.18 4.82
Administration and other 2.34 0.31
costs
Total 290.78 38.77
Operating costs are increased by 15%, from ZAR254 per tonne, to ZAR291 per
tonne, mainly to provide for a higher inflationary cost scenario.
MINERAL RESOURCES
Category Cut-off Tonnes Gold Contained
Cm g/t Grade Gold
g/t Ounces
Measured 300 32,047,000 8.48 8,736,000
350 26,221,000 8.99 7,582,000
400 21,045,000 9.69 6,555,000
Indicated 300 11,869,000 5.13 1,958,000
350 9,262,000 4.53 1,348,000
400 8,245,000 4.28 1,135,000
Total Measured & 300 43,917,000 7.57 10,694,000
Indicated
350 35,483,000 7.83 8,930,000
400 29,291,000 8.17 7,690,000
Inferred 300 4,542,000 11.09 1,620,000
350 1,442,000 12.94 600,000
400 836,000 15.18 408,000
MINERAL RESERVES at 4.0 g/t cut-off and fully diluted
Category Tonnes Gold Contained
Grade Gold
g/t Ounces
AREA 1
Proven 17,478,000 4.69 2,636,000
Probable 1,158,000 4.49 167,000
AREA 2*
Proven 3,975,000 3.75 479,000
Probable 1,525,000 3.97 194,000
Proven 21,453,000 4.52 3,115,000
Probable 2,683,000 4.19 361,000
TOTAL PROVEN & 24,136,000 4.48 3,477,000
PROBABLE RESERVES
*Note to Mineral Reserve Table: The cut-off grade of 4 g/t (in-situ stope
grade) has been applied to Area 2 in the same way as Area 1. The grade stated in
the mineral reserve is a RoM or Head Grade and includes dilution and gold
losses. Although the average RoM Grade from Area 2 is less than 4 g/t and is
close to the cut-off grade, the average grade in-situ stope grade of the areas
mined in Area 2 is 4.81 g/t; therefore, this Area can be mined profitably and is
included in the mineral reserve.
The Technical Report on the Optimised Feasibility Study is based on a full
review of the results of the components by Derek Rance, P.Eng., of the
international mining consultants Behre Dolbear & Company, who is an independent
qualified person as defined by National Instrument 43-101. Individual components
of were completed by South African consulting firms, including:
- Mineral resources were updated by GJ van der Heever, Pr.Sci.Nat., GeoLogix
Mineral Resource Consultants (Pty) Ltd.
- Mineral reserves, mine planning and design aspects were developed by Turgis
Consulting (Pty) Ltd., under the supervision of Clive Brown, Pr.Eng.
- Mill process and plant design work was done by MDM Ferroman, and
metallurgical testwork by Mintek Laboratories, all under the supervision of
David Dodd, SAIMM, of MDM Ferroman.
- Environmental & permitting, tailings, water supply and infrastructure
studies were conducted by Knight Piesold (Pty) Ltd. and other
subcontractors, under the supervision of Joanna Goeller, Environmental
Impact Assessment Practitioner and R.J. Scheurenberg, Pr,Eng.
Great Basin Gold has two advanced stage gold projects in two of the world`s best
gold environments. In addition to its Burnstone Gold Project in South Africa`s
Witwatersrand Goldfield, the Company holds a 100% interest in the Hollister
Property on the Carlin Trend in Nevada, USA.
For more information on Great Basin and its projects, please visit the Company`s
website at www.grtbasin.com or call Investor Services at +27 (0) 11 884 1610 or
within North America at 1-800-667-2114.
Ferdi Dippenaar
President and CEO
No regulatory authority has approved or disapproved the information contained in
this news release.
Cautionary and Forward Looking Statement Information
All information contained in this press release relating to the contents of the
Optimised Feasibility Study, including but not limited to statements of the
Burnstone project`s potential and information such as capital and operating
costs, production summary, and financial analysis, are "forward looking
statements" within the definition of the United States Private Securities
Litigation Reform Act of 1995. The information relating to the possible
construction of conveyor, grinding and leaching plant facilities also
constitutes such "forward looking statements." The Optimised Feasibility Study
was prepared to quantify the Burnstone project`s capital and operating cost
parameters and to determine the project`s likelihood of feasibility and optimal
production rate. The capital and operating cost estimates which were used have
been developed based on detailed capital cost to production level relationships.
The following are the principal risk factors and uncertainties which, in
management`s opinion, are likely to most directly affect the ultimate
feasibility of the Burnstone project. The mineralized material at the Burnstone
project is currently classified as a measured and indicated resource, and a
portion of it qualifies under Canadian mining disclosure standards as a proven
and probable reserve, but readers are cautioned that no part of the Burnstone
project`s mineralization is not yet considered to be a reserve under US mining
standards as all necessary mining permits would be required in order to classify
the project`s mineralized material as an economically exploitable reserve.
Although final feasibility work has been done to confirm the mine design, mining
methods and processing methods assumed in the Optimised Feasibility Study,
construction and operation of the mine and processing facilities depend on
securing environmental and other permits on a timely basis. Authorization has
been received for bulk sampling. Additional permits, when required, have yet to
be applied for and there can be no assurance that required permits can be
secured or secured on a timely basis. Although costs, including design,
procurement, construction and on-going operating costs and metal recoveries have
been established at a level of detail required for a feasibility study, these
could be materially different from those contained in the Optimised Feasibility
Study. There can be no assurance that these infrastructure facilities can be
developed on a timely and cost-effective basis. Energy risks include the
potential for significant increases in the cost of fuel and electricity. The
Optimised Feasibility Study assumes specified, long-term prices levels for gold.
The price of this metal is historically volatile, and the Company has no control
of or influence on its price which is determined in international markets. There
can be no assurance that the price of gold will continue at current levels or
that it will not decline below the prices assumed in the Optimised Feasibility
Study. Prices for gold have been below the price ranges assumed in Optimised
Feasibility Study at times during the past ten years, and for extended periods
of time. The project will require major financing, probably a combination of
debt and equity financing. Although interest rates are at historically low
levels, there can be no assurance that debt and/or equity financing will be
available on acceptable terms. Other general risks include those ordinary to
very large construction projects, including the general uncertainties inherent
in engineering and construction cost, the need to comply with generally
increasing environmental obligations, and accommodation of local and community
concerns. South African mining tenure laws require that significant economic
ownership in Burnstone be held by historically disadvantaged peoples and for
which ownership rights the Company may not be significantly compensated. The
economics of the Burnstone Project are sensitive to the US Dollar and South
African Rand exchange rate and this rate has been subject to large fluctuations
in the last several years.
Date: 05/07/2007 15:28:38 Produced by the JSE SENS Department.
