Renowned gold bull flies to defence of Wits Gold

[] – ADAM Fleming, the media-shy chairman of Witwatersrand Consolidated Gold Resources (Wits Gold), has published an unusual letter to shareholders in which he termed the decline in the company’s share price “anomalous”.

He also described sentiment among investors towards the South African gold industry as unduly negative, and said he would buy shares in Wits Gold at its current levels. The company is trading at R18/share down from R144.50/share in 2008.

A subsequent announcement to the JSE said Fleming had bought 280,000 shares in Wits Gold at an average price of R17,99/share, worth R5m.

Fleming owns in excess of 20% of Wits Gold, a company which has 14 new order prospecting rights over properties in South Africa’s southern Free State, Potchefstroom and Klerksdorp goldfields containing 157 million ounces of gold, as well as uranium.

It also has a near-term development assets – De Bron Merriespruit and Bloemhoek – which are located in the southern Free State goldfield.

In a letter, Fleming set down a common belief among so-called gold bugs regarding the eternal attraction of the metal. It was the same mineral from wherever in the world it was mined and had remained the currency of choice “since the dawn of time” having retained its purchasing power.

“Despite this, the stock market, now and then provides extreme value opportunities. As chairman and a major shareholder of Wits Gold … I believe our shares fall into that category,” Fleming said.

“With the market currently valuing our resource at less than 50 US cents, and our reserves at below $8 per ounce of gold, it is therefore my intention to purchase shares from time to time at around current market levels which I believe to be anomalous,” he added.

The last time Adam Fleming made a public statement to the JSE, it was at the launch of Wits Gold. “I think we’re in the foothills of a major gold run,’ he said at the time. The gold price was then about $600/oz.

However, as the gold price has steadily risen year-after-year, the share price of Wits Gold has fallen, an outcome thought to relate to frustration with progress on its exploration properties.

At the time of its listing, Wits Gold provided investors with low-risk exposure to the spot price of gold owing to its ‘optionality value’. The subsequent development of gold-backed exchange traded products have offered a similar exposure to investors, but with higher liquidity.

Earlier this year, Wits Gold joined Pan African Resources in a R1.7bn bid for Harmony Gold’s Evander Gold Mines. Subsequently, Wits Gold withdrew from the transaction leaving Pan African Resources to snap up the mine for R1.5bn.

Since then, Wits Gold has been seeking cash generating assets which it wants to run in tandem with the relatively near-term development of De Bron-Merriespruit.

Philip Kotze, CEO of Wits Gold, said this strategy was intact, and that the company had kicked the tyres of Burnstone, an underground mine in Mpumalanga province currently owned by Great Basin Gold, a failed gold junior which is now the subject of business rescue proceedings.

“It is something [Burnstone] we have looked at,” said Kotze. “We can’t say much about the mine because the company is in business rescue proceedings,” he added. Kotze said the company was also on the lookout for other opportunities but that it would not overpay.