WEST Wits Mining said on Thursday it had agreed a R875m loan with two South African banks which replaces an earlier facility.
The new loan, signed with Absa and Nedbank, replaces an Absa/IDC loan and gives the gold junior “enhanced flexibility”, it said in a statement.
As part of the arrangement, West Wits will hedge half of its proposed 70,000 ounces a year production of the Qala Shallows, a mine near Johannesburg.
Rudi Deysel, MD of West Wits, said the hedge provided the company with put options. In effect, this allows the company not to exercise the hedge in a rising gold price situation. It comes though at a premium for putting the put options in place. Deysel said the company had opted not to put call options, a so-called collar, in place.
West Wits Mining, listed in Australia, made headlines last year after unveiling the mine – Johannesburg’s first in about 15 years. Mining descends to only 850m underground at its deepest, and starts at 35m. That gives Qala Shallows a cost breakeven of about $1,200/oz.
The plan is after a track record for commercial production is bedded down this year, the mine will ramp up to become free cash flow about two years later.
There are also plans to increase production from Qala Shallows to 200,000 oz a year, but the firm isn’t financed for that and requires further licence grants, said Deysel in a previously article by Miningmx.
