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DRDGOLD might suspend ERPM mine
Allan Seccombe
Posted: Thu, 23 Oct 2008
[miningmx.com] -- DRDGOLD might have to stop underground production at its ERPM gold mine because of water issues, the company said in its September quarter results that showed production flat at 70,861 oz quarter-on-quarter.
High carbon dioxide levels at the South West Vertical shaft -- dedicated to pumping water from the Central Wits Basin -- killed two workers in September. It has led to a halt of pumping operations in October.
The source of the carbon dioxide is unknown and the ventilation systems in place are unable to clear it. It will take time and money to step up ventilation at the shaft, something DRDGOLD does not have in abundance.
But a solution might present itself in the form of Central Rand Gold, a newcomer on the South African gold mining scene and which is due to start production from reefs long dormant immediately south of Johannesburg.
CRG
wants to install columns that will provide 30 cubic metres of ventilation per second from surface, allowing it to access the pumping station in safety and resume operations so that the shafts and tunnels of its mines to the west of ERPM remain dry.
"Nothing is finalised yet, but we are in talks to reach a temporary arrangement," said CRG COO Michael Sullivan. Time is of the essence because in four days the pump station will be flooded necessitating the expensive construction of a pump station higher up the shaft.
"We are trying to get all the agreements in place with the Department of Minerals and Energy," Sullivan said.
DRDGOLD wants all responsibility and costs to pass over entirely to CRG so that it will not be accountable in anyway for the future of that shaft, CEO Designate Niel Pretorius told Miningmx.
The rising water levels in the Central Wits Basin threaten in coming days to decant into the contiguous Hercules Basin, into which water
from melted cooling ice at the main working areas at ERPM is pumped.
The increased pressure in the Hercules Basin because of fresh inflows of water means the pumps at ERPM's sole production shaft at Far East Vertical (FEV) will be unable to cope and clear that shaft of water.
One solution is to stop sending 2,100 tonnes of ice down FEV every day but then rising temperatures in the un-cooled
working areas makes it unsafe to send workers underground.
DRDGOLD "may have no other option for the time being than to suspend drilling and blasting operations."
ERPM’s underground operations produced 10,899 oz of gold in the September quarter, a far cry from the 17,684 oz in the same period a year ago. Cash operating costs have leapt to $1,062/oz from $647 a year earlier.
It was clear from management comments at a results presentation the mine does not feature massively in DRDGOLD's future, even if the water issue is resolved. The mine could either be put into care and maintenance or sold to a small group, which could operate it as their sole asset, but investors would need around R400m to buy and then recapitalise the mine.
Pretorius said a planned extension of the mine to incorporate the nearby Sallies 1 piece of ground has been shelved because the ground was not amenable to a decline, the cheapest option to access the reef.
An
analyst said it was good news for the company that the expensive and difficult ERPM underground operation appeared to be on the verge of closure, allowing management to focus on the more lucrative surface operations.
ERPM forms a collection point for the underground water that flows from old workings further to the west and immediately south of Johannesburg, where Central Rand Gold is reviving mining operations.
DRDGOLD is emphatic that its suggestion that it might have to stop underground work at FEV is not designed to blackmail the government into increasing a pumping subsidy or to hit back at the state for safety stoppages.
DRDGOLD spends about R40m a year pumping the water. The government has on average provided R8m/year towards that cost. The state contributed R22m towards the R35m programme to install concrete plugs to protect the ore body.
“This is not primarily a cost issue. This is DRDGOLD putting its hands up and flagging a problem
that it cannot deal with by itself any longer. It needs the Department of Minerals and Energy, the Department of Water Affairs and Forestry, labour and other mining companies to come and assist it,” said spokesman James Duncan.
Outgoing CEO John Sayers said: “We will have to investigate what possibilities there may be to resume drilling and blasting at a later stage but it would seem that the necessary upgrade to FEV Shaft’s pumping capability could be both lengthy and costly.”
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