JOHANNESBURG (miningweekly.com) – JSE- and TSX-listed gold explorer turning producer Witwatersrand Consolidated Gold Resources (Wits Gold) is confident of being able to begin gold production at the Burnstone mine in the next 18 months.

The company is also confident of attracting a cornerstone investor to fund not only Burnstone but also its Free State ambitions.

Moreover, the first phase of Burnstone’s return will be achievable at a cost considerably less than the $100-million originally envisaged.

The plan is to get the mine up and running as a 50 000 oz/y producer in the next 18 months and then move to 100 000 oz/y in Phase 2.

“I’m really confident we’re going to be able to get into production,” Wits Gold chairperson Adam Fleming told Mining Weekly Online in an exclusive interview.

“We are talking to a number of potential investors and we are confident that we will have a cornerstone investor in the company who will be able to take us not only through Burnstone, but also through our other ambitions as well.

“The people we’re talking to are looking at possible investments in the projects and also into the company.

“We want to dilute as little as possible, consistent with someone who shares our long-term vision and who has the pockets. Certainly the money will come from overseas,” Fleming said.

Wits Gold’s developmental ambitions also take in the De Bron-Merriespruit (DBM) gold project, which is close to bankable.

Although not as shallow as Burnstone, DBM has appealing grades.

“Murphy, for once, was on our side and the grades are all near the surface not at the bottom of the mine. I think DBM’s got the potential to be as exciting as Burnstone,” Fleming told Mining Weekly Online.

Forty per cent of Wits Gold’s assets are single drop shaft prospects with some only 300 m to 500 m deep.

Fleming credited Wits Gold CEO Philip Kotze with “a magical deal” in acquiring Burnstone, because what Wits Gold is buying for an initial outlay of $7.5-million is an asset that has $800-million invested in it.

It is an effective 10c-to-the-dollar deal for a project that is 90% complete.

Very conservatively, Burnstone is said to have between a million ounces and 1.5-million ounces of gold at recovered grades of close to 4 g/t.

Earlier this year, the Southgold shareholders who owned Burnstone voted overwhelmingly in favour of all issued shares being transferred to Wits Gold as part of a business rescue plan.

Burnstone is currently on care and maintenance, which is allowing Wits Gold to start afresh and become a success at all levels.

The company also has a longer-term Free State asset in Bloemhoek, which is on the other side of the De Bron fault and which is effectively the extension of Sibanye Gold’s Beatrix gold mine.

There is also potential for interaction with Harmony Gold’s Joel gold mine, and in both instances, Wits Gold holds important constituent parts in a natural potential consolidation of assets.

TRADING AT A DISCOUNT

Wits Gold’s 10-million ounces of gold reserves are currently valued at a mere $30-million, or only $3 a reserve ounce.

“It’s because people don't believe that we’ll ever get the funding to develop these assets and we’re pretty confident we’re going to be able to obtain the funding,” Fleming said.

Several hundred metres of reef have already been opened at Burnstone.

“There’s probably a ton-and-half of gold lying on the floor. We could mine tomorrow, but we also need to develop.

“We’ve just done a Competent Person’s Report on our first phase of development and I can tell you that the returns are very exciting but the key metric for us is to under promise and over deliver,” Fleming added.

GOLD

Fleming concedes that the short-term view of gold is not at all bullish but he has an exuberant long-term view on the price of the precious metal, which he believes will rise, in time, to far higher levels.

“You have several banks calling it down to $1 000/oz. We have to just live through these tough times.

“It’s in a lot of people’s interests that gold does not go up. It’s the only currency that cannot be printed,” Fleming commented to Mining Weekly Online.

“People say gold is just gold but actually we all know that gold is a precious material and up until 1971, the world’s monetary system still had a connection to gold.

“For 40 years we’ve been running on a fiat system, which basically means that politicians are in charge of the currency.

“It’s like cats being put in charge of the fish larder. I know and you know that the value of money has fallen regularly.

“Since 1913, the dollar’s purchasing power has fallen by 95%, the pound has fallen by 99% and even the Swiss franc has fallen and a lot of paper currencies have disappeared.

“People forget this, but there have been several iterations of the Deutsche mark and several iterations of the French franc.

“I am sure somewhere down the road there is a Far Eastern currency coming that will have some connection with gold and that will end up certainly providing some competition to the dollar.

“The dollar is like a one-legged man in the bar. At least he can stand on one leg. Most of the other members in the bar are completely sodden and they’ve fallen off their feet.

“Gold will eventually become the core of the world’s monetary system again and the politicians will have to give up control of money because they have too many conflicts of interest. They need to be re-elected every five years.

“Hopefully the rand will take the strain and we mine in rand and get our income in dollars, so a strong rand is not helpful for South African mining even though it may be helpful for a lot of other things.

“So I can’t help myself but ask for a little bit of help of a weak rand just while we go through a period before gold really goes to much higher levels, which I firmly believe it will,” Fleming commented.

CONFIDENCE IN SOUTH AFRICA

The UK-based former Harmony Gold chairperson, who has been investing in South Africa since 1991, also has strong confidence in the future of South Africa.

“When you come here, you’re hit by a wall of energy, and where there’s change, there’s opportunity.

“When I first came here in 1991, you could lie on the road between Pretoria and Johannesburg and smoke a cigarette between each car passing. Now the roads are grid locked.

“The point is there’s been massive economic empowerment over the last 15 to 20 years.

“Whatever criticism people may have, this country is completely different to what it was in 1991.

“I can remember when there were elections people were saying there was going to be a revolution. Well the revolution was wholly positive.

“Then people said when Mandela retires it’s going to be the end. And then it was when Mbeki retires and now it’s when Mandela passes away and when Zuma comes in.

“Every time, there’s a wall of worry. Okay, South Africa is not growing as fast as other sub-Saharan countries and it needs to think why that is the case.

“But to the doubters I would say that what is happening here is a growing political maturity. I’m not so gloomy. The energy here is tangible,” Fleming added.

In the nineties, Fleming was involved in the establishment of the Kalgold operation and then Harmony Gold, which acquired 20 other gold mines and created a new low-cost regime.

He was then crucial in taking exploration start-up at Wits Gold from scratch, under Marc Watchorn, to having the fifth-biggest gold resource in the world, that also has large uranium resources in tow.

“There will be an exploration bull market somewhere in the future, but it’s not now”, which is why Kotze, who worked with Fleming from the Kalgold days, has been tasked with taking Wits Gold from being an exploration company to being a gold producer.