| Mon 2 Feb 2009, 9:00 | | AFO - Aflease Gold Limited - Strategic and operation update |
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AFO
AFO
AFO - Aflease Gold Limited - Strategic and operation update
Aflease Gold Limited
(Incorporated in the Republic of South Africa)
(Registration number 1984/006179/06)
JSE Share code: AFO
ISIN: ZAE000075867
International Prime QX (OTCQX): AFSGY
("Aflease Gold")
STRATEGIC AND OPERATION UPDATE
Highlights
* Modder East successfully developed through water-bearing dolomites
* Modder East development has intersected the quartzite layer which is situated
just above the reef horizon
* The first gold pour at Modder East remains on track for Q4 2009
* Modder East processing plant nears completion
* Sub-Nigel 1 successfully commissioned on schedule and within budget
* Ventersburg declares first indicated resource of 1.437 million ounces
* Unanimous Aflease shareholder approval obtained for Gold One transaction
* R38m capital raise concluded in January 2009 on favourable terms
AFLEASE CONFIRMS NEAR-PRODUCTION STATUS AND MAKES SIGNIFICANT STRATEGIC ADVANCES
Johannesburg, 2 February - Aflease Gold (JSE code AFO) said today it had
made significant progress towards building the company into an international
business with the capacity to become a substantial mid-tier gold producer.
Chief executive Neal Froneman noted that last week`s first ore hoist at its
successfully recommissioned Sub-Nigel mine, coupled with the on-track
development of the Modder East project which is scheduled to pour its
first gold in the fourth quarter of this year, had confirmed the company`s
status as a near-term producer.
"While our primary focus is on the successful completion of our flagship
Modder East project we are also continuing to develop other growth
opportunities in our portfolio. In addition, we are only a few weeks away
from achieving our other major strategic objective, which is the
externalisation of the business through the creation of Gold One
International," he said.
Aflease Gold shareholders have unanimously approved the transaction in
terms of which the Australian company BMA Gold will, after its inward
listing on the JSE, acquire all the shares in Aflease Gold through a scheme
of arrangement. The combined business will be known as Gold One International
and will have a dual primary listing on the Australian Stock Exchange and the
JSE. One of the last material conditions outstanding for the transaction is
Aflease Gold`s bondholder approval, which will be sought at a meeting to be
convened in due course.
Froneman also said the company was planning to raise a total of R120 million
by the middle of 2009 to fully fund its current projects. It has already
raised R38 million of this amount, at a premium to its current share price,
through the first tranche of an innovative share acquisition arrangement
with Trinity Asset Management.
AFLEASE CONTINUES TO GROW TECHNICAL AND OPERATIONAL CAPACITY
With the imminent start up of the Modder East processing facility later
this year, Johann Mouton has been appointed as vice president metallurgy and
Mike Phillips as metallurgical manager.
Johann is a qualified metallurgist with over 20 years` experience who
previously held senior management positions at Harmony and more recently
Uranium One. Mike has a higher national diploma in extraction metallurgy
and holds a BCom from Unisa. He has extensive gold plant experience for
both surface tailings reclamation operations and underground hard rock gold
plants.
With development on track to expose the first reef at Modder East Mike
Baynes has been appointed as mineral resource manager - Modder East.Mike
holds an honours degree in geology and has 20 years` experience in both gold
and platinum exploration and operations. He has spent the past six years on
the East Rand basin, where he gained experience in reef types similar to the
ones to be mined at Modder East.
OPERATIONAL UPDATE
Modder East gold project
* Access development
A significant milestone was achieved with the successful completion of the
development of all three of the main access ends (Main Decline, Return Airway
and Decline West) through the water bearing dolomites. During the last week of
December 2008, all three ends intersected the quartzite layer at the expected
elevation, which led to a significant reduction in the time required to probe
the rock ahead of the face for the presence of water. All three main access
ends are now fully into the quartzite layer.
Since January 2008, 5 700m of coverdrilling has been done in the main decline,
4 484m in the Return Airway and 3 800m in the Decline West. A total of 458
water intersections was encountered, three of which were in excess of 70 000
litres per hour. During this period, 1 800 tonnes of cement and 207 tonnes
of chemical grout were injected to seal these intersections, at a total cost
of R13.9 million.
As a result of the water intersections, 314 full production days were lost
in the Main Decline, and 248 days were lost in the Return Airway, while 165
days were lost in the Decline West.
Thanks to the amelioration initiatives that management put in place, and the
successful development through the dolomites, mine startup has largely been
unaffected with the first gold pour expected to take place in Q4 2009. The
rate of production build up has however been slowed and still as reported
earlier, annual production during 2009 will be 20 000oz and 140 000oz in 2010
with steady state production of 180 000oz being achieved by 2011.
Not a single water intersection took place uncontrolled, and at no stage
was there a risk of flooding of the underground workings.
The trackless decline development has now advanced a total of 1 866m since
the start of the project and is only 187m from the first footwall drive.
The dedicated Return Airway which is on the critical path to the position
from where the first reef raise will be developed, has advanced to a position
approximately 18m above the reef horizon, which equates to less than 100m of
development to the position of the first reef raise.
The Decline West, which was started in June 2008 to provide contingency and
flexibility following the delays experienced as a result of the water
intersections, has advanced faster than expected, and a total of 324m has
been developed since July 2008.
* Wide Reef resource
The company continues to explore the possibility of mining the much wider
reefs of the blanket- and channel faces, dubbed the Wide Reefs, by means of
trackless mining methods. Minxcon is undertaking an extensive study to
confirm the feasibility of this project.
The blanket and channel faces are positioned just below the BPLZ and can
therefore be accessed from the existing footwall development to deliver
tonnage in addition to what was forecast in the bankable feasibility study.
* Vertical shaft
The 6.5m diameter vertical shaft, which is being sunk by Grinaker-LTA,
experienced lower than expected advance rates, partly due to the cautious
approach adopted to the possibility of water intersections. Commissioning
of the shaft is scheduled for Q3 2009, and while this date is later than the
original forecast, it will not have an adverse effect on the production
buildup, since development of the shaft was started a year ahead of schedule.
The shaft has reached a depth of 247m from surface and will be 345m deep
when completed. The shaft will be connected to the current decline
development and will provide the primary access for personnel to the
underground workings. It will also be used for downcast ventilation purposes.
* Metallurgical processing plant and tailings disposal facility
Construction of the processing plant is well advanced and it is expected
that the plant will be commissioned in April 2009 after which it will treat
underground Sub-Nigel ore and other low grade surface sources until the
startup of Modder East stoping.
Only one critical delivery is outstanding, namely the girthgear for the 5m
diameter semi-autogenous mill. Delivery ex China is expected by end February
2009.
Construction of the tailings facility has started and satisfactory progress
is being made. Recent inclement weather has affected the bulk earthworks and
may impact on this facility.
* Standby electricity generation capacity
The company has commissioned 3MVA of standby electricity generation capacity
during January 2009. Modder East, being a shallow mine, has low energy
requirements and the standby capacity is adequate to guarantee the safety of
employees and equipment. The installed capacity is sufficient to keep the
undergound workings ventilated and free from risk of flooding in the event
of a total power interruption from the national grid.
* Unit costs
Management remains vigilant in its endeavours to constantly find the best
cost/benefit options, but the continuous escalations in prices cannot be
escaped. As a consequence, the company regularly updates its working cost
estimates and based on the latest price indications has as at December 2008
increased its working cost estimate from R244/tonne published in June 2008 to
R255/tonne. This translates to a cost of R58 000 per kg of gold produced.
At the assumed R/US$ exchange rate of R7.50/US$, this translates to less
than US$250/oz.
Background information on Modder East can be obtained from the SRK Competent
Person`s Report dated October 2008 contained in the Gold One International
pre-listing statement, a report titled An Independent Technical Report on the
Modder East Gold Project, located near Springs, Gauteng Province, Republic of
South Africa dated August 31, 2006 as amended October 26, 2006 compiled by
SRK Consulting and a SENS announcement titled Aflease Gold Announces an Enlarged
180 000 Oz Per Annum Modder East Gold Project. Both the report and the
announcement can be accessed via the Aflease Gold website (www.gold1.co.za).
Sub-Nigel 1 project
The Sub-Nigel mine has been successfully recommissioned, below budget and
as scheduled.
* Phase 1
On 18 June 2008 Aflease Gold approved the first phase of the recommissioning
of Sub-Nigel at a capital cost of R28.9 million after a detailed study showed
a reasonable return for a relatively small investment in infrastructure.
Phase 1 was officially completed on 27 January 2009, when the first ore was
hoisted, with a saving of approximately R5 million of the budgeted cost.
The relatively large saving was due to the innovative approach taken by the
project team, which used to use available resources and infrastructure to
complete the project. Production ramp-up will now take place as planned over
a four month period, to produce 6 000 ounces of gold per annum from a production
rate of 6 000 tonnes of ore per month at a steady state cash cost of R138 000
per kg.
The project utilises the current infrastructure at Sub-Nigel which is in
excellent condition and access stoping areas from existing development. The
ore from Sub-Nigel will initially be processed through the Modder East plant
which will have excess capacity until the latter reaches full production in
2011.
The recommisioning of Sub-Nigel has also created the opportunity of establishing
an underground training centre for the training of production teams which will
later be deployed at Modder East. The establishment of the training centre is
well underway, and screening of applicants will start shortly, with the first
training crews expected to be introduced in May 2009, two months before the
first ledging (the preparation for reef mining) is scheduled to start.
* Phase 2
A second phase during which mine production will be increased to 12 000 tonnes
per month will follow the successful implementation of Phase 1. Work on this
phase is expected to start in the second half of 2009.
Management has sufficient confidence in the long term viability of the
Sub-Nigel project area to have begun the procurement of some of the long lead
time items for the metallurgical plant. In anticipation of delineating further
resources and applying for regulatory approval, the mill for the proposed Sub-
Nigel plant has been ordered. A third phase could potentially see run of mine
production increase to 20 000 tonnes per month, and will follow the successful
implementation of Phase 2.
Ventersburg project
In February 2008 Aflease Gold announced a new SAMREC (South African Code for
Reporting of Mineral Resources and Mineral Reserves) compliant inferred mineral
resource estimate for its Ventersburg 1 project, located approximately 25km
southeast of Welkom in the Free State Goldfields. The Ventersburg 1 prospecting
permit covers an area of approx-imately 9 760 hectares and is located 18km from
Harmony Gold Mine # 2 shaft and 25km east of President Steyn Gold Mine # 2
shaft, both of which are currently mining the `A` Reef.
In its update released in June 2008, Aflease Gold announced that the inferred
resource had also been made Canadian National Instrument 43-101 (CI 43-101)
compliant.
The company is now also declaring both a SAMREC and CI 43-101 compliant
indicated resource of 8.73 million tonnes at a grade of 5.12g/t for an indicated
resource of 1.437 million ounces, from its Ventersburg I Project, using a cut-
off of 400cmg/t.
During 2009, the company will focus on further upgrading the inferred resource
to indicated.
About Aflease Gold
Aflease Gold is a South African gold resource company listed on the JSE.
The company owns the Modder East Gold project, currently under construction,
as well as the Sub Nigel, New Kleinfontein, Turnbridge and the Holfontein
Gold projects, all on the East Rand; the Ventersburg Gold project in the Free
State Goldfields, the Etendeka Gold project in Namibia and the Tulo concession
in Mozambique. Aflease Gold was formed in January 2006 through the reverse
takeover of Sub Nigel Gold Mining Company Limited by New Kleinfontein Mining
Company, then a wholly-owned subsidiary of Uranium One Inc.
For further information, please contact:
Neal Froneman
Chief Executive Officer
Aflease Gold Limited
Tel +27 (11) 726 1047
www.gold1.co.za
Cautionary Statement
This News Release includes certain "forward-looking statements" and "forward-
looking information". All statements other than statements of historical fact
included in this release including, without limitation, statements regarding
future plans and objectives of Aflease Gold are forward-looking statements (or
forward-looking information) that involve various risks and uncertainties. There
can be no assurance that such statements will prove to be accurate and actual
results and future events could differ materially from those anticipated in such
statements. Important factors could cause actual results to differ materially
from Aflease Gold`s expectations. Such factors include, among others, the actual
results of exploration activities, actual results of reclamation activities, the
estimation or realization of mineral reserves and resources, the timing and
amount of estimated future production, costs of production, capital
expenditures, costs and timing of the development of Modder East and new
deposits, availability of capital required to place Aflease Gold`s properties
into production, the ability to obtain a listing in Europe, Australia or North
America, conclusions of economic evaluations, changes in project parameters as
plans continue to be refined, future prices of gold and other commodities,
possible variations in ore grade or recovery rates, failure of plant, equipment
or processes to operate as anticipated, accidents, labour disputes and other
risks of the mining industry, delays in obtaining governmental approvals,
permits or financing or in the completion of development or construction
activities, Aflease Gold`s hedging practices, currency fluctuations, title
disputes or claims limitations on insurance coverage, Although Aflease Gold has
attempted to identify important factors that could cause actual results to
differ materially, there may be other factors that cause results not to be as
anticipated, estimated or intended.
There can be no assurance that such statements will prove to be accurate as
actual results and future events could differ materially from those anticipated
in such statements. Accordingly, readers should not place undue reliance on
forward-looking statements. Aflease Gold does not undertake to update any
forward-looking statements that are included herein, except in accordance with
applicable securities laws.
In addition, this news release uses the terms "indicated resources" and
"inferred resources" as defined in accordance with the SAMREC Code (South
African Code for Reporting of Mineral Resources and Mineral Reserves prepared by
the South African Mineral Resource Committee) (SAMREC) under the auspices of the
South African Institute of Mining and Metallurgy effective March 2000 or as
amended from time to time and where indicated in accordance with the Canadian
National Instrument 43-101 - Standards for Disclosure for Mineral Projects.
A mineral reserve is the economically mineable part of a measured or indicated
resource demonstrated by at least a preliminary feasibility study. This study
must include adequate information on mining, processing, metallurgical, economic
and other relevant factors that demonstrate at the time of reporting that
economic extraction can be justified. A mineral reserve includes diluting
materials and allows for losses that may occur when the material is mined. A
proven mineral reserve is the economically mineable part of a measured resource
for which quantity, grade or quality, densities, shape and physical
characteristics are so well established that they can be estimated with
confidence sufficient to allow the appropriate application of technical and
economic parameters to support production planning and evaluation of the
economic viability of the deposit. A probable mineral reserve is the
economically mineable part of an indicated mineral resource for which quantity,
grade or quality, densities, shape and physical characteristics can be estimated
with a level of confidence sufficient to allow the appropriate application of
technical and economic parameters to support mine planning and evaluation of the
economic viability of the deposit.
A mineral resource is a concentration or occurrence of natural, solid, inorganic
or fossilized organic material in or on the earth`s crust in such form and
quantity and of such a grade or quality that it has reasonable prospects for
economic extraction. The location, quantity, grade, geological characteristics
and continuity of a mineral resource are known, estimated or interpreted from
specific geological evidence and knowledge. A measured mineral resource is that
part of a mineral resource for which quantity, grade or quality, densities,
shape and physical characteristics can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic
parameters to support mine planning and evaluation of the economic viability of
the deposit. The estimate is based on detailed and reliable exploration,
sampling and testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes that are
spaced closely enough to confirm both geological and grade continuity. An
indicated mineral resource is that part of a mineral resource for which
quantity, grade or quality, densities, shape and physical characteristics can be
estimated with a level of confidence sufficient to allow the appropriate
application of technical and economic parameters to support mine planning and
evaluation of the economic viability of the deposit. The estimate is based on
detailed and reliable exploration and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings
and drill holes that are spaced closely enough for geological and grade
continuity to be reasonably assumed. An inferred mineral resource is that part
of a mineral resource for which quantity and grade or quality can be estimated
on the basis of geological evidence and limited sampling and reasonably assumed,
but not verified, geological and grade continuity. The estimate is based on
limited exploration and sampling gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes. Mineral
resources which are not mineral reserves do not have demonstrated economic
viability. Investors are cautioned not to assume that all or any part of the
mineral deposits in the measured and indicated resource categories will ever be
converted into reserves. In addition, "inferred resources" have a great amount
of uncertainty as to their existence and economic and legal feasibility. It
cannot be assumed that all or any part of an inferred mineral resource will be
ever be upgraded to a higher category. Under South African rules, estimates of
inferred mineral resources may not form the basis of feasibility or pre-
feasibility studies or economic studies except under conditions noted in the
SAMREC Code.
Investors are cautioned not to assume that all or any part of an inferred
resource exists or is economically or legally mineable. Exploration data is
acquired by the Corporation and its consultants under strict quality assurance
and quality control protocols.
No stock exchange, securities commission or other regulatory authority has
approved or disapproved the information contained herein.
Date: 02/02/2009 09:00:07 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
