Great Basin Gold Expanding Resources at Burnstone
By Paul White
17 Mar 2007 at 01:04 PM GMT-04:00
resourceinvestor.com
JOHANNESBURG (ResourceInvestor.com) -- Great Basin Gold [AMEX:GBN; TSX:GBG; JSE:GBG], a Canadian gold exploration company, has no currently producing mines, but has two projects running in parallel, which are at advanced stage exploration. Both are located on prolific goldfields, namely the Witwatersrand in South Africa and the Carlin Trend in Nevada, United States. Both will be underground operations and should start production at about the same time.
Great Basin Gold’s aim is to acquire, explore and develop precious metal deposits and once in production to become a mid-tier gold producer. Its initial target is 500,000 ounces gold equivalent per year, which should be achieved once their two projects reach full production in two to three years, and then to grow to one million ounces per year by developing high-margin projects, focused exploration and acquiring high value companies and assets.
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The Burnstone Project
The Burnstone Project is the bigger of the projects and is located on the south-eastern section of the Witwatersrand Basin known as the South Rand Goldfield. The property lies south-west of Harmony Gold’s [NYSE:HMY; JSE:HAR] Evander mines and about 80 kilometres south-east of Johannesburg. The area has access to good infrastructure, skilled labour and mining expertise.
Great Basin Gold operates the project through its wholly-owner South African subsidiary Southgold Exploration, which in turn has 100% interest in Burnstone Gold. A feasibility study was completed in May 2006 and identified an optimal production rate of 214,000 ounces gold per year over a 14-year mine life with a ROR of 18.3%. Indications are that the production rate could be increased in time by some 15% to 30%.
The Burnstone deposit comprises an 18-kilometre long, north-west trending mineralized corridor in the Kimberley Reef series, the central portion of which has been uplifted and a significant portion of the reef lies at a relatively shallow mining depth (for Witwatersrand gold) of between 250 to 800 metres. The Kimberley reef is mined at Evander and on a number of other mines throughout the east, central and west rand. It tends to be a moderate to low-grade reef with patchy development and values in places.
The current drilling program aims to update the information contained in the May 2006 feasibility study to produce a new value and economic model of the deposit. To date the program has added 582,000 ounces of gold to the Measured and Indicated resource categories and 219,000 ounces to the Inferred category. At a cut-off grade of 4 grams per tonne (g/t), measured and indicated resources stand at 35 million tonnes ore grading 8.2g/t and containing 8.9 million ounces (256 tonnes) of gold. Most of the work to date has been focused on Area 1. Area 2 is continuous with Area 1 and should add further resources to the proposed mine.
Sinking is underway on a decline shaft that will provide access to and bulk sampling of the orebody. This will be followed by a vertical shaft for hoisting ore once production starts in 2009 at a nominal process capacity of 125,000 tonnes per month with 95% metallurgical recovery.
Estimated costs are based on a gold price of $450 per ounce, a rand/dollar exchange rate of 7:1 and 100% equity financing show: capital costs $145; operating cash costs $37 per tonne milled; cash costs $254 per ounce; total costs of $323 per ounce.
The projects main sensitivities are the gold price and the rand/dollar exchange rate.
All requirements of the South African regulatory system have been completed. A Black Economic Empowerment (BEE) partner, Tranter Gold, is in place headed by the highly respected Sipho Nkosi who is also a director of Burnstone and CEO designate of the newly created mining company, Exxaro Resources [JSE:EXX] (merger of Kumba Resources [JSE:KMB] and Eyesizwe Coal).
All exploration rights for the property have been granted and application for the mining right will be submitted once the bulk sample has been evaluated.
The Hollister Development Belt Project
The Hollister Development Belt (HDB) project covers about 5% of the Hollister Property (previously Ivanhoe Gold) that lies about 80 kilometres from the town of Elko, Nevada on the north-east part of the Carlin Trend, a prolific gold-producing belt. Production is expected to start in late 2008.
Mineralization is associated with a high-grade gold-silver vein system and three veins are being evaluated for production. In mid-2002, Grand Basin Gold enterer into an arrangement with Hecla Mining [NYSE:HL], whereby Hecla could earn a 50% working interest in HDB by funding a $21.8 million advanced exploration and development program and a paying a royalty based on the gold price once production starts.
Evaluation of HDB is based on a 520 tonne per day underground operation at a price per ounce of $450 for gold and $7 for silver. Planned annual production is 150,000 ounces gold and 760,000 ounces silver (about 161,000 ounces gold equivalent) over a 5.9 mine life, and a ROR of 78%.
Cost estimates are: capital $41 million, operating cash costs $188 per tonne milled and $213 per ounce gold equivalent and a total cost of $258 per ounce gold equivalent.
Management
The respective project management teams are comprised of people with considerable mining and mine-related experience. The Burnstone project is managed by a number of ex-Harmony Gold senior people, some who left when Harmony’s bid for Gold Fields [NYSE:GFI] failed.
Share Price
The current (March 16) price of Great Basin Gold on TSX is C$2.50 which is up 4.2% for the week, 14.7% over the past four weeks, 30.9% over the last 13 weeks and 15.2% year on year.
Disclaimer: Paul White is employed by the U.S. State Department at the Consulate General in Johannesburg, South Africa. Opinions and views expressed in the above article are his alone and in no way reflect those of the United States Government or the U.S. Embassy and Consulates in South Africa. |
