With gold losing none of its investor appeal, mining prospects once considered uneconomical are once again in favour, as Alan Swaby learns.
It’s certainly not true to say the streets of Johannesburg are paved with gold but just over 100 metres below some suburban streets, gold could soon be mined in substantial quantities.
South Africa has long lost its place as the most prolific gold producer—these days, China, Australia and the US are all ahead. But gold still exists and with a price of around $1,200 an ounce, old mine lease areas once considered unprofitable are once again viable concerns.
Around Johannesburg, gold is found in an area known as the Witwatersrand Basin which was once an enormous inland sea, with many rivers and streams feeding it from its vast margins. Gold deposits in the hinterland are thought to have been eroded by these feeder river systems and swept along until they reached the Witwatersrand sea in the form of pebble bed conglomerates.
The initial gold discovery in 1886 became known as the Main Reef Leader and was remarkably consistent in terms of its grade. The Main Reef Leader is one of the most important ore bodies of the Central Rand Goldfield, giving up 9,000 tons of gold between 1897 and 1984, when escalating costs and declining gold prices finally brought the industry to a virtual standstill.
“The reefs we are now mining,” explains Patrick Malaza, CFO of Central Rand Gold, “were worked until the 1970s by Rand Mines. In those days, gold was $35 per ounce and Rand Mines was only interested in high grade ore, delivering up to, say, eight grams of gold per ton of ore. We are mining reefs that have an average of four grams of gold and we would still be profitable if the yield was as low as 1.5 grams.”
Although most of the mines around Johannesburg suffered the same fate and were closed down in the 1960s and 1970s, geological students of the University of Witwatersrand led by Professors Viljoen and Viljoen were still given access to the workings in order to receive a hands-on, practical aspect to their university studies. It was on such a field trip that attractive quantities of gold were discovered below previously worked levels. In 2002, Viljoen and Viljoen introduced the concept of a reinvigorated Central Rand Goldfield to Rand Quest Syndicate (RQS). In 2007, RQS—an Australian venture capital concern—confirmed the data and applied for prospecting and mining rights, raising £75 million on the London Stock Exchange. The following year it was restructured into what we now recognise as Central Rand Gold (CRG).
CRG’s holdings are extensive, stretching along a 40 kilometre line running south to north-east around six to eight kilometres to the south side of the city. In total it has new order rights to prospect and mine a 200 square kilometre area. So far, only one small zone has been tackled in order to prove the viability of the reserves, establish mining costs and, above all, verify that the ore could be extracted safely.
Most of South Africa’s gold is mined at deep levels but as the reefs lie at an angle of about 35 degrees, they naturally enough, have to strike the surface at some point. CRG’s operations are unique in the area, in that the ore is accessed via a 900 metre spiral incline that intersects the reef at around 125 metres below ground.
Historically, gold mining has relied on vast numbers of labourers drilling shot holes into the rock face and then clearing the blasted material. CRG uses a highly mechanised underground mining method, where very little of the work relies on manual labour. The reef is accessed via a five metre wide tunnel, 5.3 metres in height, with cross-cuts developed from the incline to intersect the reef at about 11.5 metre vertical intervals.
With approximately 50 per cent of the run-of-mine feed made up of low grade ore or waste and an absolute capacity of 18,000 tons per month in the gold extraction metallurgy plant, CRG has opted for a process of ore beneficiation where waste is removed on surface and the low grade feed is upgraded prior to being processed. In this way, the plant is achieving 95 per cent recovery of gold and reducing operating costs per ton of ore.
On top of the £75 million raised in 2007, CRG is currently in the throes of raising £20 million-plus to finalise the mining and processing equipment it needs and to provide working capital. One of the significant changes to be made to currently employed plant is the addition of an optical ore sorter which uses automated optical identification and pneumatic pulse sorting of processed ore.
“One of the main concerns we had,” says Malaza, “was whether we could work the mine safely. The rock above us is honeycombed with tunnels and it was necessary to prove there was sufficient stability within the rock structure to cut further openings with impunity.”
While the operational challenges are no more than would be expected on bringing a project such as this to fruition, behind the scenes Malaza and the other directors have been facing a completely unexpected commercial challenge. The government, in its desire to broaden economic participation of historically disadvantaged South Africans and improve cascading of benefits to surrounding communities, lays special BEE (black economic empowerment) conditions into the granting of mining permits and licences. As such, when applying for new order rights to mine the site, CRG was obliged to take on a BEE partner—in this case Puno Gold Investments, which has a 26 per cent holding in the mining operation. However, relations between CRG and Puno are far from harmonious and a wrangle over shareholder contractual obligations has been ongoing since 2008.
“The outcome will soon be determined by arbitration,” says Malaza. “So far, legal actions have gone in our favour and are having no impact on the progress of the project.”
In relative terms, the new generation gold mine in Johannesburg won’t employ anything like the number gold mining once did but the venture is nevertheless important for the region. “The jobs we’re generating,” says Malaza, “are largely skilled positions but the spin off to other local businesses via the procurements we make are far more economically important to the area.”
