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Joburg-based Wits Gold is confident that it has a new gold mine after drawing resources at its shallow De Bron-Merriespruit South project in the Free State. By Colin Chinery

NEWSHALLOW

I N O F F E R I N N G

California bags the best gold rush songs but South Africa has produced the most gold - a third ever mined, all but a fraction from

the Witwatersrand Basin reaching from east of Johannesburg down through the Free State.

But it doesn’t come easily. South Africa mines at the world’s furthest depths, and the deeper you go the richer the ore uncovered. And while the Wits Basin still has enormous reserves, development has been hampered by the costs of accessing the ore bodies generally located at depths greater than 3km.

Even so, with few new gold strikes around the world that can be turned into profi table mines, South Africa’s gold miners are planning to dig deeper than ever before to get access to rich veins.

But deep mining is dark like a journey to the centre of the Earth. At 3,461 meters, the depth of AngloGold Ashanti’s Mponeng mine in the West Wits area is 11 times the height of the Eifel Tower. Rock temperatures can reach 65 degrees centigrade. It is also dangerous – an average of 11 deaths every month - and costly.

But now Joburg-based Wits Gold is confi dent that it has a new gold mine after drawing resources at its shallow De Bron-Merriespruit South project in the Free State, increasing its total indicated resource at the project by 52 percent to 5.9-million ounces.

Within this the JSE and TSX- listed gold and uranium explorer has identifi ed a shallow, high-grade part of the ore body, delineating an indicated resource of 2.4 million ounces with a grade of 8g/ton, with a further 1.7 million inferred ounces at a similar grade. (The difference between indicated and inferred ounces is the degree of confi dence that those ounces are there - with the latter the lowest level of certainty).

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Results of a scoping study are due in April and a bankable feasibility study should be completed in the third quarter of next year. “I really think we’ve got a new mine here,” says Wits Gold CEO Marc Watchorn.

The average gold production in the Witwatersrand basin occurs beyond 2km, while this deposit is relatively shallow, starting at 500m below surface and going down to about 1.25km. And for the fi rst time, Wits has declared a uranium resource at the project, where it has an indicated 6.1-million pounds of U3O8.

Indications are that all the higher grades of gold are close to the 500m sub

crop, and good grades at shallow depths is music to investor’s ears, with the potential for early capital repayment. Two shallow South African gold mines that have been successful recently are the ASX and JSE-listed Gold One’s Modder East mine on the East Rand, and the TSX and JSE-listed Great Basin

Gold’s Burnstone mine in Mpumalanga.Wits Gold’s De Bron-Merriespruit (DBM)

project has similar geometries to Modder East, which although shallower, is not as large as DBM‘s 2.5-million ounces at 8 g/t. Although it must be kept in mind that the DBM project has a total indicated resource of nearly 6 million ounces. And while the Burnstone resource might be larger, its reef is narrower than the DBM reef which has multiple superimposed layers that offer fl exibility.

It was a year ago that Wits Gold discovered that its De Bron project had the makings of a shallow mine, but lacking critical mass it made a deal with Harmony Gold’s Merriespruit south. Wits bought Harmony’s 40 percent in the De Bron project for R275m, paid for in shares, along with a R10m deposit to secure access to Harmony’s Merriespruit property.

I really think we’ve got a new mine here

WITS GOLD CEO MARC WATCHORN

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Wits Gold FEATURE

Wits will pay Harmony R51m in May for ownership of the property which features heavily in the upgraded resources

Wits Gold began in 2005 when it acquired mineral rights on the three major gold mining companies; AngloGold Ashanti, Gold Fields and Harmony in different areas of the Wits Basin adjacent to their mining leases.

“We are an exploration company,” says Wits Gold’s Investor Relations Manager Hethen Hira. “After we acquired the data we put together geological models

and identifi ed project areas. These are multi million ounce underground areas, and we prioritise them based on their depth. And that’s where we are with the DBM project - between 500 and 1,000 metres below surface. Our key project will be up and running in three years time. Wits Gold’s defi ning feature is that we have mineable shallow resources that can be brought to account in a short time frame.”

With the long-term decline of South Africa’s gold production seeing output fall from 427,981 kg in 2000 to 204,923 kg in

Wits Gold’s defining feature is that we have

mineable shallow resources that

can be brought to account in a short time frame

WITS GOLD’S INVESTOR RELATIONS MANAGER

HETHEN HIRA

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2009, what are the job implications for the De Bron-Merriespruit South project? “We had a discussion at the recent Mining Indaba in Cape Town. We were talking to a group that sank 1,000 metre shafts who estimated it would take about one- to two-years’ to sink the shaft and in the process employ about 400. Mining itself would depend on the resource blocks, but we could safely say direct 1,000 jobs. And as mature mines close, skilled labour becomes available.”

In mining, investment is substantial and lead times long. “It’s mainly timing. It takes time to drill boreholes, evaluate the data, do pre-feasibility studies and get resource statements out. Environmental work can take over a year.

“There will always be a demand for gold, with a likely increase in investment here and in the platinum sector. We are targeting our shallow projects, which will get to production

quicker after the feasibility stage, and as there is going to be increased investment, especially where the resources are known to exist.”

Might investment be deterred by periodic threats of nationalisation from within sections of the ruling ANC? “The nationalisation call is rhetoric put out by people who want to get attention. The country sticks by its constitution, and this says that if property rights are taken away the owner must be compensated. The Government so far has stuck to its constitution and I don’t think it has the means to compensate. So we don’t see it as a threat at this stage.”

In Wits Gold’s 2010 annual report, chairman Adam Fleming said much of the painstaking work of an exploration company happened behind the scenes, with little to get investors excited about. “Scanning for non-existent press releases from Wits Gold,” said Fleming,”is about as much fun as watching paint dry.”

Well now the paint is drying, and patient investors like what they are seeing. END

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