[miningmx.com] — GOLD One International was looking to more than double its gold output with the purchase of Rand Uranium, saying it would prioritise setting-up a sizeable gold business before developing the acquisition’s uranium assets.
The gold junior announced on Thursday it would acquire total control of Rand Uranium in a $250m cash transaction.
Rand Uranium has since its creation in December 2008 focused on the establishment of a plant to treat the by-product uranium sourced from Harmony’s erstwhile Cooke underground and surface gold operations.
While the uranium project has failed to make significant headway due to funding constraints, Rand Uranium did continue with the gold mining business, producing 163,000oz in 2010 at a cash cost of $1,222 per ounce.
Gold One’s flagship asset, the shallow-level Modder East mine on the East Rand, is on course to produce 120,000oz of gold in 2011 at an estimated cost of $417/oz.
The company expects the mine to hit peak-production of around 170,000oz per year in 2013.
Gold One CEO Neal Froneman said the company was planning to invest R200m in Rand Uranium’s gold assets during the first 18 months following the acquisition to improve grade and reduce costs, aiming to knock 20% of the current underground operating costs of R1,000/tonne.
“The shaft infrastructure (at Cooke) is significantly underutilised,’ said Froneman. “Last year it produced from (an average of) 88,500 tonnes of underground ore per month, when in fact it has a design capacity of 500,000t per month.’
According to Gold One figures, the Cooke shafts and surface operations contained a total resource of 13.46 million ounces and a grade of 1 gram per tonne (416.73 tonnes of ore).
Froneman said the Cooke shafts shouldn’t be viewed as low-margin assets, as it would be able to compete with Modder East on price once the uranium operations became part of calculations.
“This is not a marginal business,’ said Froneman. “The moment when you develop uranium as a co-product it (costs) goes down to (around) $400/oz.
“We want to make sure we establish a solid gold business first, but the uranium side forms an important part of realising the potential of this deal.’ He said the assets, which has been mined for over 20 years, could remain feasible for at least another 15 years.
Work on the planned uranium plant would begin in 2013, according to Froneman, with operations due to commence in 2015.
Rand Uranium said in February it was hoping to conclude a R2.8bn financing deal for the uranium plant before the end of the third quarter. Uranium prices and equities have since, however, plummeted in the wake of the massive Japanese earthquake and tsunami and subsequent Fukushima nuclear crisis.
It was envisaged at the time that the plant would produce about 2 million pounds of uranium annually at an operating cost of $23/lb, over a 15-year economic life.
Said Rand Uranium CEO John Munro: “Fukushima did a lot of damage; our conclusion was that to find funding in this market would’ve been exceptionally hard.’
Munro said it was “unlikely’ for him to stay involved in the business once the takeover has been completed.