| Tue 8 Sep 2009, 10:00 | | WGR - Wits Gold Completes A Pre-Feasibility Study On The Bloemhoek Project |
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WGR
WGR
WGR - Wits Gold Completes A Pre-Feasibility Study On The Bloemhoek Project,
Southern Free State Goldfield
Witwatersrand Consolidated Gold Resources Limited
(Incorporated in the Republic of South Africa)
Registration Number 2002/031365/06
JSE Code: WGR
ISIN: ZAE000079703
TSX Code: WGR
CUSIP Number: S98297104
(`Wits Gold` or `the Company`)
WITS GOLD COMPLETES A PRE-FEASIBILITY STUDY ON THE BLOEMHOEK PROJECT, SOUTHERN
FREE STATE GOLDFIELD
Wits Gold is pleased to announce the completion of a pre-feasibility study
("PFS") on its Bloemhoek project ("Bloemhoek"). This has illustrated that mining
is both technically and economically viable at Bloemhoek, which is situated
adjacent to the Beatrix Gold Mine, near Welkom in the southern Free State
goldfield. The PFS was completed under the guidelines of the South African Code
for Reporting of Mineral Resources and Mineral Reserves ("SAMREC Code") as well
as the Canadian National Instrument 43-101 and has resulted in the conversion of
Indicated Resources into Probable Reserves. The study was undertaken by the
independent consultants, Gordon Cunningham and Tim Spindler (the "Qualified
Persons") from Turnberry Projects (Pty) Ltd., with mine design and scheduling
input from Ukwazi Mining Solutions (Pty) Ltd. The Qualified Persons have
verified the technical contents of this news release. A National Instrument 43-
101 compliant technical report is being finalised and will be filed on SEDAR
within 45 days.
The PFS was based on an estimated Indicated Mineral Resource in the Bloemhoek
area of 39.9Mt at an average grade of 7.17g/t, containing 9.2Moz of gold. This
Mineral Resource was estimated at a cut-off gold value of 300cm.g/t for the
Beatrix and Kalkoenkrans, where a three dimensional geological model illustrated
that these conglomerate reefs occur at depths of 1300 - 2400 metres below
surface. This Mineral Resource was previously disclosed in the National
Instrument 43-101 technical report entitled "Witwatersrand Consolidated Gold
Resources Limited: Mineral Properties in the SOFS Goldfield, South Africa" dated
May, 2009. The technical report is available at www.sedar.com and on the
Company`s web site at www.witsgold.com.
Wits Gold currently owns 100% of the Prospecting Rights to Bloemhoek. Should the
Company complete a bankable feasibility study over the area, Harmony Gold Mining
Company Limited ("Harmony") has an option to acquire a 40% stake in the project
by refunding 40% of the historical exploration costs since April 2004 and
contributing 40% of the capital required to build the new mine. Should Harmony
decline to participate in the development of Bloemhoek, Wits Gold will have the
option to either progress the project alone or negotiate terms with another
operator.
Applying the geological model, the PFS considered a number of alternative shaft
positions, mine designs and production profiles. The results from these
production schedules were subsequently input into a series of financial models
in order to compare the potential returns from each of these options. Based on
this approach, the optimum result envisages the sinking of a twin shaft system
to 1951 metres with the deeper areas being accessed by systems of declines. A
remote vertical ventilation shaft has been included in the schedule to reduce
underground development to remote blocks of reef. Similar to other standard
mining operations in South Africa, the layout comprises a system of footwall
haulages, cross-cuts to reef at 180 metre intervals, inter level reef raises and
breast stoping by conventional means. Significant mechanisation of the operation
is not considered suitable due to the narrow mining width. All aspects of the
proposed mine design are based on well established current mining practice for
neighbouring and similar orebodies.
The conversion of Indicated Resources to Probable Reserves results from the
application of appropriate modifying factors for the mining method selected.
These take into account dilution and losses relating to all aspects of the
mining process and inter alia, include allowances for low grade reef
development, a minimum mining width of 115cm, waste from in-stope gullies, minor
geological losses and an expected Mine Call Factor. This process resulted in the
definition of an estimated Probable Reserve of 31.6Mt at a plant head grade of
5.3g/t Au, containing 5.4Moz of gold. No Inferred Resources were included in the
conversion of Resources to Reserves.
The following tabulation summarises the planning process followed to progress
from the Indicated Resource to the Probable Reserve.
Mt Au g/t Tonnes Moz
(000`s) Au
Indicated Mineral Resource 39.900 7.17 286.230 9.200
Geological Discounts -0.660 -0.03 -3.710 -0.117
Mineral Resource 39.240 7.20 282.520 9.083
No-design Blocks -11.099 6.34 -70.344 -2.262
Mineable Resource 28.141 7.54 212.176 6.821
Design Losses -2.879 6.55 -18.859 -0.606
Mining Losses -0.758 7.65 -5.800 -0.186
Mineable Resource less Losses 24.504 7.65 187.517 6.029
Stoping Dilution 4.616 - - -
Gulley Footwall Dilution 1.922 - - -
Diluted Reef Development 0.598 - - -
Diluted Mineable Resource 31.640 5.93 187.517 6.029
Mine Call Factor - - -18.752 -0.603
Probable Reserve 31.640 5.3 168.765 5.426
This Reserve calculation is based on an underground mine layout for Bloemhoek
that will require a total life of mine capital expenditure of R7 664 million
(approximately US$958 million) including R320 million (US$40 million) for
sustaining capital. However, initial or peak funding will be considerably lower
at R3 528 million (US$441 million). It is estimated that operating costs will be
R529/tonne (US$66/tonne), whilst first reef production could be achieved 48
months after the commencement of shaft sinking, as a result of mid-shaft loading
from the upper levels during shaft sinking.
The ore will be delivered to an on-site Carbon In Leach gold recovery plant that
will recover 95% of the contained gold delivered to the plant (based on the
achieved plant performance from neighbouring mines). Including a five year ramp
up period, the mine is expected to operate for 23 years with an average annual
production in excess of 220 000oz of gold and cash costs estimated at US$406/oz.
A number of financial alternatives have been estimated for the PFS based on
different gold price scenarios. The results of this exercise are as follows:
Gold Price US$800 US$975 US$1250 US$1500
Pre-Tax IRR 12.2% 19.1% 27.1% 32.9%
NPV (5%) R2 584m R5 957m R11 255m R16 073m
(US$323m) (US$745m) (US$1 407m) (US$2 009m)
At a gold price of $975/oz, an exchange rate of R8.00 per US$ and a State
Royalty of 1.5% on revenue, the project has an IRR of 19.1% and the NPV (5%) is
R5 957 million (US$745 million).
A sensitivity analysis of the major input variables as shown below indicates
that the financial model for Bloemhoek is most sensitive to gold price and
grade.
Parameter Change in Base case Change in
Parameter Parameter
Gold Price -20% +20%
NPV @ 5% (before Tax) R2 198m R5 957m R9 715m
(US$275m) (US$745m) (US$1 214m)
IRR (before Tax) 11.3% 19.1% 25.0%
Opex -20% +20%
NPV @ 5% (before Tax) R7 502m R5 957m R4 412m
(US$938m) (US$745m) (US$551)
IRR (before Tax) 21.5% 19.1% 16.3%
Capex -20% +20%
NPV @ 5% (before Tax) R6 981m R5 957m R4 932m
(US$873m) (US$745m) (US$617m)
IRR (before Tax) 23.8% 19.1% 15.5%
Grade -20% +20%
NPV @ 5% (before Tax) R2 198m R5 957m R9 715m
(US$275m) (US$745m) (US$1 214m)
IRR (before Tax) 11.3% 19.1% 25.0%
SCOPING INVESTIGATION
In addition to the PFS, a scoping level investigation or preliminary assessment
was completed to evaluate the impact of upgrading the Inferred Resources into an
Indicated category. The scoping level investigation has suggested that such an
upgrade could increase the Probable Reserve to 32.2Mt at an average grade of
5.72g/t containing 5.9Moz at a cut-off gold value of 300cm.g/t. At a gold price
of $975/oz, an exchange rate of R8.00 per US$ and a State Royalty of 1.5% on
revenue, this would have the effect of increasing the IRR to 22.8% and the NPV
(5%) to R7 753 million (US$969 million).
Inferred Resources are considered too speculative geologically to have economic
considerations applied to them that would enable them to be categorised as
Mineral Reserves. There is no certainty that the Inferred Resources will be
upgraded to the Indicated category or that the above benefits to the IRR and NPV
of the Bloemhoek project will be realised. Additional drilling, assaying, and
metallurgical testing may result in reclassification of a portion of the
Inferred Resources to a Measured and Indicated Resource category
NATIONAL INSTRUMENT 43-101 STATEMENT
The conversion of Indicated Resources to Probable Reserve was made on 3
September 2009 based on the Indicated Resources quoted in the May 2009 NI43-101
technical report of Snowden Mining Industry Consultants Inc. ("Snowden"). This
conversion process considered a geological loss to account for minor faulting
and sedimentological factors as per the Snowden, May 2009 report. Furthermore,
it was also recognised that certain areas would not be accessible or payable
whilst other areas were part of the overall planning system, but were excluded
on the basis of infrastructural requirements.
A number of different dilution factors were applied during the conversion of
Indicated Resources to Probable Reserves. These included dilution for the waste
rock mined during reef development, with tonnages being calculated for each reef
raise. Further dilution was included to account for over-breaking during stoping
by adding 15cms to the channel width or to 100cms, whichever the greater.
Further in-stope gully dilution was calculated from the footwall waste removed
in each scraper gully at 30 metre panel intervals.
These geological and mining factors result in a combined in-stope dilution of
27%. No further dilution factors are deemed necessary; whist a mine call factor
of 90% was applied.
ABOUT WITS GOLD
Wits Gold is a Johannesburg based gold and uranium exploration company with a
primary listing on the JSE Securities Exchange in South Africa and a secondary
listing on the TSX in Canada. The Company has been granted thirteen Prospecting
Rights which cover 102 512 hectares adjacent to existing mines in the southern
Free State, Potchefstroom and Klerksdorp goldfields of the Witwatersrand Basin.
Prior to the Bloemhoek PFS, these combined areas contain a SAMREC and NI43-101
compliant Indicated Resource of 103.3Mt at 6.0g/t Au (19.9Moz) and an Inferred
Resource of 530.3Mt at 7.77g/t Au (131.9Moz). In addition, these Prospecting
Rights also contain an Inferred Resource of 211.1Mt at an average grade of
0.22kg/t U3O8 (104.5Mlbs).The immediate exploration strategy for Wits Gold aims
to add value through improved Mineral Resource definition by additional drilling
in a number of priority projects.
FORWARD LOOKING STATEMENTS
Certain statements in this news release may constitute forward-looking
information within the meaning of securities laws. In some cases, forward-
looking information can be identified by use of terms such as "may", "will",
"should", "expect", "believe", "plan", "scheduled", "intend", "estimate",
"forecast", "predict", "potential", "continue", "anticipate" or other similar
expressions concerning matters that are not historical facts. Forward-looking
information may relate to management`s future outlook and anticipated events or
results, and may include statements or information regarding the future plans or
prospects of the Company. Without limitation, statements about the development
of the mine at Bloemhoek, required capital expenditures, the time required for
the mine at Bloemhoek to enter production, the length of time the mine at
Bloemhoek will operate at full production, the annual production of gold at the
Bloemhoek mine, the benefits of upgrading the Inferred Resources to the
Indicated category, and other related statements are forward-looking
information.
Forward-looking information involves known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company to be materially different from the future results,
performance or achievements expressed or implied by such forward looking
information. Such risks, uncertainties and other important factors include
among others: economic, business and political conditions in South Africa;
decreases in the market price of gold; hazards associated with underground and
surface gold mining; the ability to attract and retain qualified personnel;
labor disruptions; changes in laws and Government regulations, particularly
environmental regulations and Mineral Rights legislation including risks
relating to the acquisition of the necessary licences and permits; changes in
exchange rates; currency devaluations and inflation and other macro-economic
factors; risk of changes in capital and operating costs, financing,
capitalisation and liquidity risks, including the risk that the financing
required to fund all currently planned exploration and related activities may
not be available on satisfactory terms, or at all; the ability to maximise the
value of any economic Resources. These forward-looking statements speak only as
of the date of this document.
You should not place undue importance on forward-looking information and should
not rely upon this information as of any other date. The Company undertakes no
obligation to update publicly or release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this document or
to reflect the occurrence of unanticipated events except where required by
applicable laws.
For further information please contact:
Dr. Marc Watchorn
Chief Executive Officer
Tel: +27 11 832 1749
Mr. Hethen Hira
Investor Relations
Tel: +27 11 832 1749
Johannesburg, 8 September 2009
Sponsor: PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Date: 08/09/2009 10:00:01 Produced by the JSE SENS Department.
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