[miningmx.com] — WITWATERSRAND Consolidated Gold Resources (Wits Gold) said on Wednesday it might spin out its De Bron/Merriespruit (DBM) project which is nearing development, arguing it would unlock the value of its remaining exploration assets.
Speaking to journalists and analysts during a site visit to the group’s core shed in Potchefstroom, Wits Gold CEO Marc Watchorn said the DBM project, tucked between Harmony’s Merriespruit and President Brand mines as well as Gold Fields’ Beatrix mine in the Free State, was almost ready to be developed.
The company plans to complete a pre-feasibility study before the definitive feasibility study, which is expected by the end of 2012. The mine, which would take an estimated 32 months to be developed, could be in production by late 2015.
Watchorn said the group has got enough cash to make it through the feasibility study.
“We’re a group of mainly geologists trying to get our foot on the asset, our job is understanding deposits,” he said, pointing to the fact that Wits Gold already has the information of 88 boreholes which intersects multiple reefs. The average reef width is 102cm.
The major enabling factor for the creation of a feasible mine, Watchorn said, was the addition of the Merriespruit portion, bought from Harmony Gold last year. “We’ve got a mine here now; that’s the bottom line.’
Watchorn said the group was keen to move away from being perceived as an exploration counter which tried to make hay from resources that were too deep to mine.
Based on the results of a scoping study completed in June, DBM would have a 25-year life-of-mine, estimated to produce 2.9Moz at an average of 150,000oz per year, requiring peak funding of some R1.6bn. Average cash costs is estimated to be around $569/oz – which would make the mine among the lowest cash cost producers in South Africa, comparable to Gold One’s Modder East mine and Great Basin Gold’s Burnstone.
Also, with the mineable ore body being at a depth of between 500m and 1,000m, DBM would count as one of the shallowest gold mines in the country.
Watchorn said that following the bank feasibility study, the company would have three options to take the development of DBM forward.
This included selling the project, or undertaking a joint venture with an operating partner.
“With the lack of people knocking on our door, we could decide to move it (DBM) into a separate company, staffed with its own developing team,’ he said. “That would also unlock some value to our shareholders for the other (exploration) projects, which attracts no valuation at the moment.’
SHARES UNDER PRESSURE
Wits Gold’s share price closed at R47.90 yesterday, well down from its annual high at R65 in October.
Asked whether there existed investor appetite for the building of new gold mines in South Africa, Watchorn said he was regularly presenting the company on roadshows in North America and the United Kingdom to gauge appetite, which was “quite strong’.
“Because we’re not raising money we don’t have analysts covering us,’ he said. “We need the opinion of third parties for people to understand the stock. Those who know us by this stage know we do things straight and simple. We’ve never made outrageous promises and have always achieved what we’ve set out to achieve.’
One analyst who is following the stock is Jim Taylor of Renaissance Capital. In a research report dated June 24, he maintained the group’s target price of R70 per share.
