| Wed 13 Jun 2012, 14:00 | | WGR - Witwatersrand Consolidated Gold Resources Limited - Wits Gold completes |
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WGR
WGR
WGR - Witwatersrand Consolidated Gold Resources Limited - Wits Gold completes
positive pre-feasibility study on the De Bron-Merriespruit project
Witwatersrand Consolidated Gold Resources Limited
(Incorporated in the Republic of South Africa)
Register Number 2002/031365/06
JSE Code: WGR
ISIN: ZAE000079703
TSX Code: WGR
CUSIP Number: S98297104
(`Wits Gold` or `the Company`)
WITS GOLD COMPLETES POSITIVE PRE-FEASIBILITY STUDY ON THE DE
BRON-MERRIESPRUIT ("DBM") PROJECT, SOUTHERN FREE STATE GOLDFIELD
Highlights of the positive pre-feasibility study
* Shallow underground mine design comprising a twin shaft system to
660 metres
* Indicated Resource of 26.7Mt at 5.8g/t Au (4.99 Moz), containing
Reserves of 23.5Mt at 4.05g/t Au (3.1 Moz)
* Average annual production of 200 000oz of gold over an 18 year life
of mine
* Production cash costs US$628/oz
* First gold production 47 months after shaft sinking commences
* Peak initial capital required of ZAR2.37 billion (US$296 million at
ZAR8/US$)
* At ZAR400 000/kg Au (US$1 555/oz & ZAR8/US$) pre-tax NPV (5%)
ZAR7.3 billion (US$913 million), IRR 28.0%
* Semi-mechanised option increases IRR to 31.2% (at the above prices)
and pre-tax NPV (5%) to ZAR10.3 billion (US$1.3 billion)
* Additional shallow Inferred Resources of 5.97Mt at 5.7g/t Au (1.1
Moz) readily mineable from current mine design - drilling to be
fast tracked prior to definitive feasibility study
Wits Gold is pleased to announce the completion of a positive pre-feasibility
study ("PFS") on its De Bron - Merriespruit ("DBM") Project, situated south
of the mined out Merriespruit Gold Mine, six kilometres south of the town of
Virginia in the southern Free State goldfield, South Africa. The study has
illustrated that mining at DBM is both technically and economically viable.
Wits Gold owns 100% of the Prospecting Rights to the DBM Project. 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 was undertaken by the independent
consultants, Jim Pooley and Jon Hudson ("the Qualified/Competent Persons"),
from Turgis Mining Consultants ("Turgis"). These independent
Qualified/Competent Persons have approved 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 of this news release.
The DBM deposit contains an estimated Indicated Mineral Resource of 41.8Mt at
an average grade of 5.5g/t gold (7.5Moz). This Resource was estimated at a
cut-off gold value of 300cm.g/t for the Beatrix, Kalkoenkrans, B and Leader
Reefs where a three-dimensional geological model illustrated that these
conglomerate reefs occur at depths between 480 and 1 350 metres below
surface. This Mineral Resource Estimate was previously disclosed in the
National Instrument 43-101 technical report entitled "Witwatersrand
Consolidated Gold Resources Limited: Mineral Properties in the DBM Project,
South Africa" dated February, 2012. This technical report is available at
www.sedar.com and on the Company`s website. The Mineral Resource Estimate was
prepared by George Gilchrist, who is a full time employee of Snowden Mining
Industry Consultants ("Snowden") and independent of Wits Gold. Mr Gilchrist
is a Qualified Person as defined by National Instrument 43-101. Mr Gilchrist
is a registered Professional Natural Scientist ("Pr.Sci.Nat") with the South
African Council for Natural Scientific Professionals (SACNASP) and has more
than six years of experience in gold exploration and mineral resource
estimation.
The PFS was intentionally based on that portion of the Resource which is
generally less than 1 000 metres below surface and which contains an
Indicated Mineral Resource of 26.7Mt at 5.8g/t gold (4.99Moz). Applying the
geological model, the PFS considered a number of alternative primary access
configurations, 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 these results, two options have been selected for further
investigation prior to the commencement of a feasibility study.
The first option ("Option 1") is based on standard conventional breast mining
practices in the Witwatersrand Basin, while the second option ("Option 2")
investigates a semi-mechanised variation of the down-dip mining methodology
currently practised in the platinum mining industry of the Bushveld Complex.
For both options it is envisaged that a twin shaft system will be sunk to
660m with top production level commencing on 560m, from where a twin decline
system will provide access to the deeper parts of the ore body. For both
options the off-reef infrastructure has been developed using trackless
mechanised equipment to facilitate a rapid production build up with
conventional on reef development in order to minimise dilution. A system of
off- reef trackless footwall haulages are developed on strike below the ore
body. For Option 1, cross-cuts to reef will be spaced at 180 metres with on-
reef raises and conventional breast stoping completing the layout.
Option 2 differs from Option 1 in that the on-reef development and mining is
done on dip as opposed to on strike. The mining method for Option 2 involves
closely spaced pre-developed on reef raises (spaced 30m apart) which improves
orebody understanding and allows for selective mining and improved gold
extraction. The mine design for Option 2 is flexible and amenable to
alternating between conventional and long hole stoping. The advantage of the
long hole stoping method is that, where applicable, it allows for the mining
of a narrower channel which will have the effect of an increased head grade.
Wits Gold considers that Option 2 therefore has the potential for improved
safety through a better understanding of the orebody, and a potential
reduction in the number of workers on the rock face. The hybrid mining
methodology, alternating between conventional and long hole mining, warrants
further investigation prior to the feasibility study.
The Company, together with Turgis, recognise that the long hole variation to
the dip mining technique for Option 2 is as yet not an established gold
mining practice for the Witwatersrand Reefs and it has therefore not been
used for the conversion of Indicated Resources to Probable Reserves. Instead,
the conversion of Indicated Mineral Resources to Probable Mineral Reserves
results from the application of modifying factors using the conventional
mining method in Option 1.
The following tabulation summarises the planning process followed to progress
from the Indicated Resource used in the PFS mine design to the Probable
Reserve. Note that the Probable Reserve is included in the Indicated Mineral
Resource.
Mt Au g/t Tonnes Moz
Au
Indicated Mineral 26.7 5.81 155.2 5.0
Resource*
Minus no-design 5.3 5.04 26.8 0.9
blocks
Mineable Resource 21.4 6.01 128.4 4.1
Minus design 2.7 6.01 16.4 0.5
losses
Minus mining 1.1 6.01 6.4 0.2
losses
Mineable Resource 17.6 6.01 105.6 3.4
less losses
Stoping dilution 4.1 0 0 0
Gulley footwall 1.5 0 0 0
dilution
Reef development 0.3 0 0 0
dilution
Diluted Mineable 23.5 4.50 105.6 3.4
Resource
Mine Call Factor** 10.6 0.3
Probable Reserve 23.5 4.05 95.0 3.1
*The Indicated Mineral Resource included 4% geological losses
**Mine Call Factor planned at 90%
This Reserve calculation is based on an underground mine layout for DBM that
will require a total life of mine capital expenditure of ZAR5.4 billion
(approximately US$680.4 million) including ZAR144.6million (US$18.1 million)
for Stay-in Business (SIB) capital. However, peak initial funding will be
considerably lower at ZAR2.4 billion (US$ 295.8 million). It is estimated
that the operating cost will be R629/tonne (US$78.6/tonne), whilst first reef
production could be achieved 47 months after the commencement of shaft
sinking. Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
The ore will be delivered to an on-site carbon-in-leach gold recovery plant
that will recover 96% of contained gold delivered to the plant. Including a
five-year ramp-up period, the mine is expected to operate for 18 years with
an average annual production in excess of 200 000oz of gold and cash costs
estimated at US$628/oz.
A number of financial alternatives have been estimated for PFS Options 1 and
2. The NPV and IRR are pre-tax and after 5% royalty. Based on different gold
price scenarios the results of this exercise are as follows:
Gold R300 000 R350 000 R400 000 R450 000 R500 000
price
per kg
Option IRR 15.3% 22.2% 28.0% 33.1% 37.6%
1
NPV (5%) R2 553m R4 903m R7 275m R9 651m R12 030m
Option IRR 19.4% 25.6% 30.9% 35.5% 39.7%
2
NPV (5%) R4 602m R7 356m R10 145m R12 942m R15 739m
At a gold price of R400 000/kg (US$1 555/oz at R8.00 per US$) and a state
royalty of 5% on revenue, Option 1 has an IRR of 28.0% and an NPV (5%) of
R7.3 billion (US$909 million), while Option 2 has a potential IRR of 30.9%
and an NPV (5%) of R10.2 billion (US$1.3 billion). The financial results for
Option 2 are at this stage only considered to be indicative of the potential
as further analysis needs to be done on the down-dip mining method. Based on
the improved IRR values as well as the potential safety benefits, it is the
intention of the Company to thoroughly research the viability of the down-dip
mining method during the feasibility study stage.
A sensitivity analysis of the major input variables as shown below indicates
that the financial model for DBM is most sensitive to gold price and grade.
Parameter Base - 20% Base Case Base + 20%
Gold Price
Pre-tax NPV R3 487m R7 275m R11 078m
(5%)
Pre-tax IRR 18.2% 28.0% 35.9%
Opex
Pre-tax NPV R8 825m R7 275m R5 735m
(5%)
Pre-tax IRR 31.1% 28.0% 24.6%
Capex
Pre-tax NPV R8 091m R7 275m R6 459m
(5%)
Pre-tax IRR 34.3% 28.0% 23.2%
Gold grade
Pre-tax NPV R3 487m R7 275m R11 078m
(5%)
Pre-tax IRR 18.2% 28.0% 35.9%
NATIONAL INSTRUMENT 43-101 STATEMENT
The conversion of Indicated Resources to Probable Reserves was made on 8th
June 2012 based on the Indicated Resources quoted in the February 2012 NI 43-
101 technical report by Snowden Mining Industry Consultants Inc. ("Snowden").
The Indicated Resource declared by Snowden considered a geological loss of 4%
to account for minor faulting and sedimentological factors as per the Snowden
February 2012 report. Furthermore it was also recognised that certain
portions of the reefs would for geotechnical reasons not be mined due to the
small vertical separation between them.
The modifying factors used for the conversion of Indicated Mineral Resources
to Probable Mineral Reserves include waste dilution of 28% and planned ore
extraction losses of 18%. This includes dilution from stoping, in-stope
gullies and on-reef development and allowances for geotechnical constraints,
a minimum mining width of 90 centimetres, minor geological losses (4%) and a
Mine Call Factor of 90%. This process resulted in the definition of an
estimated Probable Mineral Reserve of 23.5Mt at a plant head grade of 4.05g/t
gold, containing 3.1Moz of gold. No Inferred Mineral Resources were included
in the conversion of Resources to Reserves.
ABOUT WITS GOLD
Wits Gold holds 14 new order Prospecting Rights over 1 195km2 in the southern
Free State, Potchefstroom and Klerksdorp goldfields. The Company is currently
focused on fast-tracking two advanced projects, DBM and Bloemhoek, located
next to each other in the southern Free State goldfield and adjacent to the
Beatrix gold mine operated by Gold Fields, and the Joel gold mine operated by
Harmony. On 22 February 2012 the Department of Mineral Resources accepted the
Company`s application for a Mining Right for gold, silver and uranium over
its advanced Prospecting Rights areas in the southern Free State goldfield,
which include the DBM, Bloemhoek, Robijn and Hakkies Project areas. The
granting of the Mining Right is expected over the next 12 months, once the
Company complies with requirements in terms of the Minerals Act, such as
obligations in terms of feasibility studies, environmental impact assessment
as well as Social and Labour Plan commitments. Once granted, a Mining Right
is valid for a period of 30 years and renewable for a further period as
required.
For further information please contact:
Philip Kotze
Chief Executive Officer
Tel: +27 11 832 1749
Hethen Hira
Executive: Corporate Development & Investor Relations
Tel: +27 11 832 1749
www.witsgold.com
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Johannesburg
13 June 2012
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", "likely", "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 the DBM Project, the required
capital expenditures, the time required for the mine at the DBM Project to
enter production, the length of time the mine at the DBM Project will operate
at full production, the annual production of gold at the DBM Mine 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; labour 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, capitalization 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 maximize 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.
Date: 13/06/2012 14:00:02 Produced by the JSE SENS Department.
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