Witwatersrand Consolidated Gold Resources Limited
(Incorporated in the Republic of South Africa)
Register Number 2002/031365/06
JSE Code: WGR
TSX Code: WGR
CUSIP Number: S98297104
('Wits Gold' or 'the Company')
JOHANNESBURG, June 13, 2012 /CNW/ -
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.
|Indicated Mineral Resource*||26.7||5.81||155.2||5.0|
|Minus no-design blocks||5.3||5.04||26.8||0.9|
|Minus design losses||2.7||6.01||16.4||0.5|
|Minus mining losses||1.1||6.01||6.4||0.2|
|Mineable Resource less losses||17.6||6.01||105.6||3.4|
|Gulley footwall dilution||1.5||0||0||0|
|Reef development dilution||0.3||0||0||0|
|Diluted Mineable Resource||23.5||4.50||105.6||3.4|
|Mine Call Factor**||10.6||0.3|
*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 price per kg||R300 000||R350 000||R400 000||R450 000||R500 000|
|NPV (5%)||R2 553m||R4 903m||R7 275m||R9 651m||R12 030m|
|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%|
|Pre-tax NPV (5%)||R3 487m||R7 275m||R11 078m|
|Pre-tax NPV (5%)||R8 825m||R7 275m||R5 735m|
|Pre-tax NPV (5%)||R8 091m||R7 275m||R6 459m|
|Pre-tax NPV (5%)||R3 487m||R7 275m||R11 078m|
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.
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
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.