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Accord with AMCU sets mechanised gold junior on new growth path

Vantage's Barbrook gold operation in Barberton.

Vantage's Barbrook gold operation in Barberton.

8th April 2014

By: Martin Creamer

Creamer Media Editor

  

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NELSPRUIT (miningweekly.com) – An accord with the feared Association of Mineworkers and Construction Union (AMCU) has become a tailwind of growth for South African gold junior Vantage Goldfields, which has already invested R710-million in Barberton's Lomshiyo valley and where it plans to spend considerably more.

After suffering a severe setback when AMCU’s illegal strike shut the company down for seven weeks shortly after its listing on the Australian Stock Exchange (ASX), Vantage is now relishing constructive engagement with the union, which will form a key part of upcoming expansion, in sharp contrast to the aggression the union shows on South Africa’s platinum belt, where it has been on strike for 11 weeks.

With a net asset value of $57-million on its balance sheet, Vantage last month raised A$12.5-million on top of the $30-million raised four years ago when it listed on the ASX, where its share price has since plummeted from 40c a share on listing to 2.9c a share now.

The three-year loan at 16%, extendable to five years, gives the company the wherewithal to carry out its expansion and keep its gearing at just under 25%.

Not yet tax paying but only royalty paying, Vantage is currently on track to hit the 45 000 oz/y mark in the next 18 months.

However, that will be dependent on the gold price, government policy and power supply from Eskom.

“If those three things align, we’ll have a chance of moving forward,” Vantage CEO Michael McChesney told Mining Weekly Online, which formed part of a media group visiting the company’s Lily and Barbrook gold mines in the Barberton goldfields, an historic area where additional gold mines are on several drawing boards.

McChesney, who has been mining in the Barberton goldfields for the last quarter century, has developed a sound relationship with the Lomshiyo community, from which 90% of the 800-strong workforce is drawn and where its broad-based black economic-empowerment partnership is focused.

Former Anglo American executive chairperson Kuseni Dlamini, a nephew of the chief, is a shareholder, together with the workforce and the community, where prince Zwelithini Dlamini plays a leading role.

“We don’t have migrant labourers. We draw our workforce from our own communities,” Vantage nonexecutive director Dr Willo Stear pointed out to the visiting media.

“And they go home every night to their wives and children,” added operations director Mike Begg, who is credited with setting up the dialogue with AMCU that has led to ongoing progress.

When Mining Weekly Online went underground at Lily mine, AMCU members were hard at work, even though Vantage is not paying the union's much-vaunted entry-level-wage demand of R12 500 a month.

While the nearby Barberton Mines' deep, high-grade and labour-intensive mines mill 300 000 t/y with 2 500 employees, Vantage’s shallow, low-grade and mechanised mines mill more than 500 000 t/y with 800 employees.

Barberton’s head plant-feed grade is 10 g/t, its costs are R2 400/t, whereas Vantage’s grade is 2.5 g/t and its costs are R600/t, rendering similar margins.

“We are a high volume, low-grade but also low-cost operation,” McChesney explained.

Last year’s all-in sustaining costs were $1 200/oz, which are expected to decline to $1 000/oz when the 45 000 oz production level is reached at the end of next year.

Vantage has 4.7-million resource ounces in the ground compared with the three-million of Pan African's Barberton Mines.

Many of the company’s shareholders are international investment houses headed by individuals with South African connections.

Vantage projects manager Dr Tony Parry told Mining Weekly Online that the company was able to get gold recoveries of up to 85% in laboratory testwork using available technology.

Barbrook, created during the heydays of the now-defunct Rand Mines group, is one the way to becoming a higher margin operation than Lily.

“The dog days of Barbrook are over,” Parry said, adding that technology would be installed soon to push up recoveries.

Like the London- and Johannesburg-listed Pan African next door, Vantage is aspiring to be an eventual 100 000 oz/y producer and, once it is in steady operational state and generating strong cash flow, it is not ruling out the possibility of a JSE listing.

Edited by Creamer Media Reporter

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