[miningmx.com] — SINCE the early Eighties many mining entrepreneurs have tried to make money by reopening old gold mines on the Witwatersrand. Only one – Loucas Pouroulis – has ever succeeded. And that was temporary. His former Consolidated Modderfontein operation hit an extensive, very high-grade payshoot but it was eventually mined out.
The latest contender is Central Rand Gold (CRG) and the collapse in its price over the past year – from R12 to around 290c/share currently – tells the story in a nutshell. CRG’s initial aim was to start gold production in 2009 at a rate of 100 000oz/year and build up to 1m oz/year by 2012. The latest plan calls for just 20 000oz to be produced this year, with an average of 40 000oz/year to be achieved during the first seven years of mine life.
The reason is only 270 000oz of gold have so far been converted into the category of “probable’ mining reserves of the total estimated resource of 35,6m oz that CRG reckons remains to be mined from old mines such as CMR, City Deep and Crown Mines. Reason for that is CRG has clearly had a lot of trouble convincing independent mining consultants Snowden its proposed mining plans are viable.
The harsh facts of life discovered by those mining entrepreneurs in the Eighties were that the “old timers’ did a pretty thorough mining job the first time around. If they left anything behind there was a good reason for it – usually because the ground was very difficult to mine.
Second, mine working costs have shot up and removed almost all the benefit of higher rand gold prices that were supposed to make reopening them again profitable.
I think CRG shares should be avoided.