THE one quarter improvement in the dollar gold price this year – but only about 14% in rand terms – has brought the metal’s junior miners out of the shadows in the last month; predictably, some might say.
The most public of noises was the slightly effervescent comments of Neil Warburton, CEO of White River Exploration (WRE), an unlisted company in joint venture with Harmony Gold on a property that borders the South African firm’s Target mine in the Free State province.
WRE said on September 8 that an initial resource estimate suggested it had found “one of the world’s largest unmined gold resources” and intended to complete a pre-feasibility study ahead of a UK and Johannesburg listing next year (which may involve a capital raising).
Whilst this provides another option for investors who like to gamble on mining exploration plays – assuming any are left – the true feelings of Harmony regarding the prospect on its doorstep have yet to be ventilated, especially considering it is planning to spend hundreds of millions of rands developing another huge gold prospects, the Golpu project, and Hidden Valley, both in far-flung Papua New Guinea.
Well actually, we do know something of what it is thinking. In a statement to the JSE, Harmony told the market to cool its boots as it would not incorporate the discovery’s reserves, estimated to be about 11.5 million ounces, until more work had been done of the feasibility.
Nonetheless, the fact that WRE is considering coming to the market suggests new found confidence in the gold market, and mining in general one suspects. Goldman Sachs thinks gold equities are due another boost. “We believe there is still significant upside (on spot) as they are pricing in about 10% lower gold prices against spot,” it said.
Another gold equity to re-emerge has been Central Rand Gold.
Its operations are situated near Johannesburg where the combination of the lower gold price, the cost of de-watering its shafts, and a lack of working capital have sent the firm teetering during the last few years. It survives by treating third party gold bearing ore at its mills; its underground mines are flooded.
It said earlier this month that a strategic investor might put $4m (R58m) into the company whilst it was also chasing up additional equity from investors, an option that required shareholders to approve the suspension of their pre-emptive rights over share issues.
Some $70m (R1bn) is also being raised by Cadiz Corporate Solutions in an effort to resuscitate the Blyvooruitzicht mine on the west Rand near Carletonville. The mine had been closed by Village Main Reef, a company founded by Bernard Swanepoel, after DRDGold failed to make it work.
Peter Skeat, who failed to get Galaxy Gold off the ground in its attempts to re-start the Agnes mine near Barberton in 2008, is behind the plan having incorporated a new company, Blyvoor Gold. “I don’t see any fatal flaw here unless it is under-capitalisation,” said Peter Major, a mining consultant to Cadiz. “I really think this is going to fly,” he said.
Stonewall Mining, an Australian-listed firm, also received a fillip lately after it was awarded $12.6m (R184m) following arbitration that ruled the termination of a 2014 takeover by Shandong Qixing Iron Tower had contravened regulations.
Stonewall is hoping to bring the TGME gold mines near Pilgrims Rest in Mpumalanga province back to life. The Chinese firm pulled out of the company in the teeth of gold bear market after many of its compatriots invested billions of rands buying Gold One, Taung Gold and Wesziwe Platinum.
Whether the gold bull market now will bring back new Chinese investment is yet to be seen. Central Rand Gold didn’t manage to attract any of three Chinese investors to recapitalise it last year although in the platinum sector, Chinese private equity has bought control of Eastern Platinum.
