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Afgold to decide on Sub-Nigel soon
Sandile Mchunu
Posted: Wed, 18 Jun 2008

[miningmx.com] -- THE Aflease Gold (Afgold) board will decide early next week whether to resume operations at the dormant Sub-Nigel mine, CEO Neal Froneman said on Wednesday.

“We should have a board’s decision on the Sub Nigel early next week,” Froneman said at Afgold’s annual general meeting.

Sub-Nigel was acquired from a company of the same name in 2006. Sub Nigel brought its Sub Nigel/Spaarwater mines as well as the greenfields Ventersburg project to the deal.

The Modder East mine, which is under construction, Sub-Nigel and Ventersburg could all, if they come into production, lift annual gold output at Afgold to 500,000 oz, chief operating officer Izak Marais has said.

At last year’s AGM, Froneman told Miningmx the Sub-Nigel mine would be in production in the middle of 2008 and that it needed a capital injection of R75m to generate steady state production of 30,000 to 40,000 oz/year.

Six months later, Marais said the Department of Minerals and Energy had requested changes to Afgold’s social and labour plans at Sub-Nigel before granting mining rights.

It would take between three to six months to bring the mothballed Sub Nigel into production, Marais said.

Froneman has had his hands full in the past year. He resigned as Uranium One CEO in February this year as the company told the market it would again miss production targets.

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Uranium One was the largest shareholder in Afgold with a 71% stake. It has since sold a 29% stake worth $89m in the junior gold company to a consortium led by African Global Capital and including Mvelaphanda Holdings.

Talks on the sale of the remaining portion to the same consortium stumbled after the option to buy those shares lapsed. Uranium One acting CEO Jean Nortier has said talks are continuing.

There was speculation in April that Froneman was one of the people involved in the consortium, but on Wednesday he denied having any role in that transaction.

“It’s not true but I wish it was. I’m not involved at this stage. I do support the transaction because Mvelaphanda Holdings and African Global Capital enable us to have quality shareholders entering the company,” said Froneman.

“Their experience is critical to the success of the company.”

Soaring costs in the mining sector are unlikely to de-rail the development of the Modder East gold mine, which is due to begin production in the first half of 2009, Froneman said.

“It’s true that mining costs are astronomical nowadays. However, Afgold is not exposed to the same costs as other big mining companies. Our focus is on shallow, which has lower costs than deep-level mining,” he said.

According to a report released by PriceWaterhouseCoopers on Tuesday, revenues for the top 40 global mining companies grew by 32% while their costs increased by 38% in 2007.