GBG targets 200,000oz, eyes exploration

Allan Seccombe | Wed, 03 Feb 2010 11:20

[miningmx.com] -- GREAT Basin Gold is on track to produce 200,000 oz of gold this year from mines in South Africa and Nevada, which will allow it to start reviving exploration programmes, said chief operating officer Johan Oelofse.

The Burnstone mine in South Africa will begin production in mid-2010 adding 82,000 oz of low-cost gold to JSE- and TSX-listed Great Basin. The Hollister gold and silver mine in Nevada, which now has access to its own mill, is forecast to produce 118,000 gold-equivalent ounces this year.

“That means for this year Great Basin will produce 200,000 oz and then start generating cash to develop some of its other alternatives,” Oelofse said in a presentation at the Mining Indaba in Cape Town.

One of the main areas of focus will be to explore around the large Hollister project to grow that project, he said.

Great Basin CEO Ferdi Dippenaar told Miningmx the next area of focus for the company was its exploration project in Tanzania, where first-pass drilling has revealed an ore body of sufficient size but insufficient grade.

Two targets have been identified for further drilling once Burnstone is up and running, he said.

Great Basin has also bought the old Esmeralda mine in Nevada, primarily for its mill to remove the high toll treatment charges from its cost line at Hollister. The mill will cut production costs to $110/oz from $250/oz treatment charges at Newmont. It is dewatering old mine workings to investigate the viability of re-mining underground.

The mill has been refurbished and is currently operating at 250 tonnes/day and will ramp up to 350 tonnes/day by the end of this quarter. Hollister has a stockpile of 48,000 oz.

At Burnstone, one of the concerns investors have is about the effect of state power utility Eskom’s proposed annual electricity tariff hike of 35% over three years. Deep-level gold miners have raised the prospect of a blow-out in costs, with Harmony Gold, for example, warning that its electricity costs will rise to R3bn a year from R900m now.

Burnstone is a relatively shallow underground mine and doesn’t need to install refrigeration to keep working places cool. It will also not use as much electricity as deep-level miners when hoisting rock some 400 metres to surface.

Electricity now makes up seven percent of Burnstone’s costs and if Eskom’s tariff increase is approved by the relevant authorities, this will rise to 11% of costs, adding $14/oz to costs projected to be around $392/oz over the life of mine, said Oelofse.

Eskom will deliver 25 MVA to the mine in the second quarter, which is enough to start up the project. Agreements have been reached with Eskom to increase this to 52 MVA, which is sufficient for the life of the project. The plant has capacity to produce 254,000 oz/year based on a head grade of 4.2 grams/tonne.

Great Basin needs to spend another $88m up to June at Burnstone to bring it into production. The project is fully capitalised, with Great Basin raising $140m last year.