[miningmx.com] — WHAT is it about old gold mines that triggers such conviction amongst some mining entrepreneurs that they can be restored to sustainable economic life?
The closest comparison I can find is failed restaurants. No matter how often the old dog gets shut down some other maitre d’ will come along who believes he can run it differently and better.
The other applicable adage is probably the one about comebacks in the boxing ring which holds that, “they don’t come back’.
The resurrection men are now working on the former Agnes and Barbrook mines near Barberton in Mpumalanga where mining operations first started in the 1880’s.
Both mines have been through the hands of a string of owners and shut down several times over the past 20 odd years.
Agnes has now been re-opened and will shortly be listed on the JSE by entrepreneur Peter Skeat who bought the mine for R18m in December 2008 when it was put up for auction.
Agnes’ previous owner was Mzi Khumalo’s Metallon group which bought the mine in 2004 announcing big plans to grow production from 22,000oz of gold annually to 60,000oz annually. It never happened.
The dormant Barbrook mine is now to be listed on the Australian Stock Exchange through Vantage Gold Fields (previously known as Eastern Gold Fields) which intends raising up to A$30m through the initial public offering (IPO).
Vantage owns two other projects near Barberton which are the operating Lily mine and the dormant Worcester mine.
Barbrook was previously owned by Caledonia Mining Corporation into which it was sold by former owner Stefan Hayden who also owned the Eerstelling gold mine near Polokwane.
I see from Caledonia’s website that, since giving up on Barbrook, it has moved onto easier tasks such as running the Blanket gold mine in Zimbabwe.
Hayden remains CEO while Caledonia’s chairman should be well known to South African investors – he’s Rupert Pardoe, former Anglo American financial director and former deputy chief executive of Absa.
Pardoe now keeps a very low profile. Last time I tried to interview him he told me he was not looking for “that kind of publicity.’
The success rate for bringing old South African gold mines back to life is lousy. Reason is it always turns out to be a far harder exercise than anticipated by the ever-optimistic promoter.
For the most recent examples of this I suggest you read the archived articles on this website regarding Central Rand Gold, Pamodzi Gold, Aurora Empowerment Systems, First Uranium and Simmer and Jack Mines.
At best, it’s a long hard slog that takes a lot more time and consumes far more capital than initially estimated.
Many have tried, few have succeeded. I can think of only one who really cracked it which was Loucas Pouroulis with Consolidated Modderfontein (Cons Modder) in the early 1980’s but even that was temporary.
Cons Modder hit an extensive “mother lode’ or “jewel box’ of very high grade Black Reef but that was eventually mined out.
Skeat is highly-rated as an entrepreneur and a hands-on mining man. He’s also as tough as nails.
This is the man who played the major role in bringing Brett Kebble’s business empire down despite being on the receiving end of full-scale intimidation from Kebble and his allies.
But even Skeat failed in his attempt to resurrect the former Ergo dump retreatment operation through ASX-listed Mintails.
Ergo now belongs 100% to former minority partner DRDGold which is making steady – but slow – progress in getting the project to perform to specification despite the group’s huge experience in dump retreatment operations.
Skeat, with considerable justification, blames his former Australian partners – in particular former Mintails chairman Bryan Frost and sidekick Richards Revelins – with whom he got into bed to develop Ergo.
But a number of investors hold Skeat accountable for not doing enough to sort out the corporate mess inside Mintails once he saw it was going pear-shaped.
Skeat’s reply to me on this allegation in December 2008 was that, “regarding Bryan Frost I had a choice – once I realised things were not going well – which was to fight him or step aside.
“I stepped aside because I have had enough conflict in my life recently through the confrontations with Brett Kebble and Neal Froneman.’
Mintails shares plunged from around A$0.60 to around A$0.02 where they have languished for the past couple of years.
Skeat reckons this time it will be different. He’s in full control of Agnes – now named Galaxy Gold.
His plan is to use large scale mechanised mining techniques instead of the conventional stoping methods traditionally employed on the greenstone gold mines found around Barberton.
That gold mining around Barberton can be done successfully has been proven by Pan African Resources which produces about 100,000oz annually from its Barberton Mines operations and made a profit of ₤4.4m in the year to June.
But the entire gold mining sector in South Africa faces a number of industry-wide challenges at present in addition to the ones particular to the junior operators such as shortage of finance.
Those include soaring cost levels being boosted by rising Eskom power charges as well as labour costs being driven up by a militant work force now used to demanding and getting pay increases above ruling inflation rates.
Revenues have also been capped by the strength of the rand against the US dollar which has robbed the SA mines of much of the benefit of the rise in the dollar gold price over the past 18 months.
Hopefully, that may be changing with gold back around R295,000/kg – the highest level in over a year.
Pan African Resources has also been through hell on the security front because of illegal miners infiltrating its operations on a large scale through the network of old tunnels and workings which honeycomb the mountainous Barberton region.
So, when you get your hands on the respective IPO documents from Galaxy and Vantage Goldfields, make sure you read the section detailing the risks to the business very carefully.
