[miningmx.com] — CENTRAL Rand Gold (CRG) has completed its trial mining phase and is now developing underground infrastructure to “ensure that sustainable production can commence’.
That’s according to CEO Johan du Toit who, in the interim report for the six months to end-June, said the updated mine plan was for the production of a total of 476,190 ounces of gold over a mine life of 12 years.
He estimated the average operational cash cost including water pumping at $582/oz and capital costs at $173/oz – for a total production cost of $755/oz.
That production forecast is way below the original predictions made by CRG for its redevelopment of operations on various old mines around Johannesburg.
The share price remains near its all-time low, because of these revised production numbers and the huge discount at which CRG was forced to hold its recent rights offer to raise $36.4m to stay in business.
That rights offer was pitched in June at the equivalent of 22.4 cents per share, at a time when the share price was trading on the JSE at a 12-month low of 60c compared with a 12-month high of 490c. CRG shares currently trade at around 25c.
CRG’s initial aim was to start gold production in 2009 at a rate of 100,000 oz/year, which would be built up to 1m oz/year by 2012.
That was revised last year to a plan calling for 20,000 oz to be produced in 2009 and an average of 40,000 oz to be mined annually for the first seven years of mine life.
During the six months to June, CRG managed to produce 3,368 oz of gold .
Aside from getting the mining process right, the biggest threat to CRG’s future is rising underground water levels in the Central Rand basin which, if not dealt with, will flood CRG’s proposed mining area.
Said Du Toit: “In broad terms there is an understanding between all stakeholders on an interim solution which will include the construction of a submersible pump station at 400m below surface; the refurbishment of the existing high-density sludge plant and the construction of a pipeline connecting the western and central basins.
“The Minister of Water Affairs Buyelwa Sonjica, speaking at the Agri SA water conference in Johannesburg on August 11, confirmed that the South African government recognised that as 70% of the mining area in the Witwatersrand district is currently ownerless, the liability to resolve the acid mine drainage problem would reside with the state, requiring a contribution of approximately R145m.
“The remaining 30% liability would be funded by existing active mining operations in the area.’
Du Toit said: “To limit the extent that the water will rise above the 400m below surface level, the company has placed an order for submersible pumps which are the project’s longest lead time items.
“The initial payment of $1.3m (R10m) will form part of CRG’s total committed contribution of $5m.’
CRG lost $17.3m in the six months to June, compared with a loss of $14m in the first half of 2009.
Du Toit said 46 CRG support staff had taken redundancy packages, cutting the support payroll costs by 28%, while the Killarney head office had been closed to reduce overhead costs.
According to John Meyer, analyst for UK institution Fairfax, CRG “is working to reduce costs but still has a long way to go to prove that it has an economical and viable proposition’.
