G-khan
04-17-2003, 11:19 PM
A new mantra has emerged at South Africa’s gold-mining houses. And it comprises just two words: organic growth.
All of the country’s five biggest producers of the yellow metal are pumping hundreds of millions of rands into expansion projects, a development one analyst says will stabilise South Africa’s production at around the 400 t/y mark in the short to medium term.
Chamber of Mines records show that, from a peak of 1 000 t in 1970, South Africa’s yearly gold production declined to 603 t in 1990.
Since then, output has plonked by a massive 34,5% to just under 400 t/y and, until the unveiling of the growth projects, industry watchers were forecasting the decline to continue.
HSBC Securities gold and platinum-group- metals analyst Allan Cooke says the main factor behind the expansions is a higher US-dollar gold price, which has combined with a weak rand to widen companies’ margins and boost their resources and reserves.
“It is a feature of the gold-mining industry worldwide that, when the price is high, not many acquisitions take place, and companies wishing to grow usually do so organically,” says Cooke.
“When the gold price is high, it is difficult to find targets for acquisition, and those companies that buy existing operations or companies are likely to overpay,” he adds.
Cooke points out that increased resources and reserves resulting from a firming gold price spurred the gold-mining groups to relook at projects they had shelved.
“The longer the gold price stays in the mid- to higher-$300 range, the greater the possibility of shelved projects being implemented,” he adds.
Rice Rinaldi Securities mining analyst Ian Ballington says that expansion projects in the South African gold-mining industry are an appealing option, given the nature of the orebodies.
“We are fortunate in that we have extensive orebodies, and some of our mines have been operating for up to 100 years, while, in some countries, gold is found in small deposits which can sustain oper-ations for one or two decades only,” he tells Mining Weekly.
“The gold-mining companies sank the shafts at existing mines years ago, and it makes more sense to invest locally in developing the orebodies at these mines than to sink new shafts elsewhere”.
The ‘organic growth’ mantra was repeated when each of South Africa’s five biggest gold- mining groups – AngloGold, Gold Fields, Harmony, Durban Roodepoort Deep (DRD) and black businessman Patrice Motsepe’s African Rainbow Minerals Gold (ARMgold) presented their financial results for the last quarter of 2002.
AngloGold, South Africa’s number-one producer, has announced that the dramatically-higher rand gold price has contributed a further 11,6-million ounces – or 30% – to its South African gold reserves, resulting in the possible development of six deep-level mining projects.
The potential projects will be presented to the group’s board of directors later this year.
If they get the nod, the projects will be implemented at the TauTona, Tau Lekoa, Moab Khotsong and Mponeng mines.
The gold-mining giant is currently undertaking three capital projects in South Africa – at TauTona, Mponeng and Moab Khotsong.
Last year, it completed an expansion project at Sunrise Dam, in Australia, while another expansion at the Cripple Creek and Victor operation, in the US, is nearing completion.
The three projects in South Africa and the expansion under way at Cripple Creek and Victor will yield an additional 13-million ounces over their operating lives.
The South African projects have a combined budget of R5,53-billion, states AngloGold, adding that it is also mulling over two expansion projects in Australia and Brazil, with the capacity to add another 5,5-million ounces of gold to its production base.
Gold Fields, one of the first companies last year to hint that organic growth would be preferable to acquisions, has reinforced this view by announcing a significant increase in its exploration spend and a pipeline of growth projects.
The organic-growth pipeline generally involves brownfields projects in South Africa, where it produces nearly three-quarters of the four-million ounces it mines yearly, and Ghana and Australia, which account for 14% and 13% of output respectively.
Gold Fields has cash on hand of R504-million and liquid listed investments of more than R1- billion, which could be used to finance the envisaged expansion projects.
The group has launched a feasibility study into the expansion of 9 and 10 shafts at Driefontein mine, where the prospect of building declines below 50 level is also being investigated.
At Kloof, prefeasibility studies are at an advanced stage for the Kloof Extension Area and the Eastern Boundary Area.
In Ghana, the study for the reconfiguration of Tarkwa mine has been completed, and an investment decision is expected by June.
The envisaged project relates mainly to changing mining and processing configurations and taking over mining from contractors.
At the smaller Damang mine, exploration drilling has been undertaken to define the conglomerate-style mineralisation across the property.
In Australia, a scoping study will be completed soon, and a feasibility study is likely to proceed on the best processing and mining configurations at the St Ives operation.
Gold Fields’ exploration budget for 2003 has been increased to $20-million from last year’s $16-million.
The group’s executives say the increased exploration spend should enable the group, which is South Africa’s second-largest gold producer, to make strategic moves into those regions where it currently does not operate.
Harmony Gold Mining CE Bernard Swanepoel confirms that South Africa’s third-largest producer of the yellow metal, which has completed 23 acquisitions in the past seven years, has now shifted the accent on to “building rather than buying” because of the high gold price.
Harmony’s most-recently announced project, Doornkop South Reef, is part of the Randfontein operations, and has a 6,6-million-ounce resource and an estimated operating life of 20 years.
The project, started and stopped several times by its previous owners, is essentially a shaft-deepening exercise.
It is being undertaken in partnership with an empowerment group called African Vanguard Resources.
Another organic-growth project, the R280-million development of a decline below the Tshepong North stope, is being undertaken with ARMgold to provide an additional 167 000 oz/y over an eight-year operating life.
Harmony’s and ARMgold’s joint-venture company, Freegold, has also approved the extraction of the shaft pillar at Nyala Shaft, at a cost of R67,4-million.
This will allow for an operating life of seven years and recovery of 560 000 oz.
Harmony will also pursue organic-growth projects in other parts of the world, states Swanepoel.
DRD is to spend R500-million on growth projects, says investor relations GM Ilja Graulich.
This figure does not include the R65-million allocated to the Blyvooruitzicht expansion project, currently under way, and the R17-million set aside for the medium-grade project at the Hartebeestfontein operation, now close to completion.
In addition to driving organic growth, the huge capital outlay will be used to decrease costs and risk and increase productivity.
ARMgold, South Africa’s only listed black- controlled gold producer, has reported that it will use its R2,1-billion cashpile to fund organic-growth projects and to acquire new properties “at prices which are right”.
In addition to the Tshepong North and Nyala Shaft projects, the Freegold joint-venture company is restructuring St Helena gold-mine.
On its own, ARMgold will be spending R7- million until mid-year to repair Number Three Shaft at Orkney mine, in a project which will initially generate 27 000 oz/y.
Research into different mining methods to improve recovery of the orebody is currently under way.
Two new projects are being considered by Freegold, including completion of the sinking of Tshepong South – which was suspended in 1999, when it was within 120 m of its design depth – and the resumption of operations at Joel mine.
Tshepong South’s reserves and the required capital investment are being evaluated, while the orebody at Joel mine, which was successfully restructured into profitability last year, is being re-evaluated, with positive initial results.
Avgold, which owns and operates Target gold-mine and recently sold Eastern Transvaal Consolidated, is continuing with operation work in the Paradise area immediately north of Target mine, in the Free State.
A mine-design prefeasibility study using an updated geological model and the latest mineral- resource estimate is under way, and is expected to be presented to the company’s board before the end of June.
Ballington tells Mining Weekly that the upshot of current organic-growth initiatives could be increased production levels in future.
But he hastens to add that the “increases will not be huge, and total production will probably start to decline from the expected somewhat higher levels around 2008, as some of the mining groups’ other mines run out”.
In the long term, production will remain stable around current levels, predicts Ballington.
Cooke shares this view and adds that South Africa is unlikely to surrender its position as the world’s leading gold producer any time soon.
http://www.miningweekly.co.za/min/news/breaking/?show=34892
All of the country’s five biggest producers of the yellow metal are pumping hundreds of millions of rands into expansion projects, a development one analyst says will stabilise South Africa’s production at around the 400 t/y mark in the short to medium term.
Chamber of Mines records show that, from a peak of 1 000 t in 1970, South Africa’s yearly gold production declined to 603 t in 1990.
Since then, output has plonked by a massive 34,5% to just under 400 t/y and, until the unveiling of the growth projects, industry watchers were forecasting the decline to continue.
HSBC Securities gold and platinum-group- metals analyst Allan Cooke says the main factor behind the expansions is a higher US-dollar gold price, which has combined with a weak rand to widen companies’ margins and boost their resources and reserves.
“It is a feature of the gold-mining industry worldwide that, when the price is high, not many acquisitions take place, and companies wishing to grow usually do so organically,” says Cooke.
“When the gold price is high, it is difficult to find targets for acquisition, and those companies that buy existing operations or companies are likely to overpay,” he adds.
Cooke points out that increased resources and reserves resulting from a firming gold price spurred the gold-mining groups to relook at projects they had shelved.
“The longer the gold price stays in the mid- to higher-$300 range, the greater the possibility of shelved projects being implemented,” he adds.
Rice Rinaldi Securities mining analyst Ian Ballington says that expansion projects in the South African gold-mining industry are an appealing option, given the nature of the orebodies.
“We are fortunate in that we have extensive orebodies, and some of our mines have been operating for up to 100 years, while, in some countries, gold is found in small deposits which can sustain oper-ations for one or two decades only,” he tells Mining Weekly.
“The gold-mining companies sank the shafts at existing mines years ago, and it makes more sense to invest locally in developing the orebodies at these mines than to sink new shafts elsewhere”.
The ‘organic growth’ mantra was repeated when each of South Africa’s five biggest gold- mining groups – AngloGold, Gold Fields, Harmony, Durban Roodepoort Deep (DRD) and black businessman Patrice Motsepe’s African Rainbow Minerals Gold (ARMgold) presented their financial results for the last quarter of 2002.
AngloGold, South Africa’s number-one producer, has announced that the dramatically-higher rand gold price has contributed a further 11,6-million ounces – or 30% – to its South African gold reserves, resulting in the possible development of six deep-level mining projects.
The potential projects will be presented to the group’s board of directors later this year.
If they get the nod, the projects will be implemented at the TauTona, Tau Lekoa, Moab Khotsong and Mponeng mines.
The gold-mining giant is currently undertaking three capital projects in South Africa – at TauTona, Mponeng and Moab Khotsong.
Last year, it completed an expansion project at Sunrise Dam, in Australia, while another expansion at the Cripple Creek and Victor operation, in the US, is nearing completion.
The three projects in South Africa and the expansion under way at Cripple Creek and Victor will yield an additional 13-million ounces over their operating lives.
The South African projects have a combined budget of R5,53-billion, states AngloGold, adding that it is also mulling over two expansion projects in Australia and Brazil, with the capacity to add another 5,5-million ounces of gold to its production base.
Gold Fields, one of the first companies last year to hint that organic growth would be preferable to acquisions, has reinforced this view by announcing a significant increase in its exploration spend and a pipeline of growth projects.
The organic-growth pipeline generally involves brownfields projects in South Africa, where it produces nearly three-quarters of the four-million ounces it mines yearly, and Ghana and Australia, which account for 14% and 13% of output respectively.
Gold Fields has cash on hand of R504-million and liquid listed investments of more than R1- billion, which could be used to finance the envisaged expansion projects.
The group has launched a feasibility study into the expansion of 9 and 10 shafts at Driefontein mine, where the prospect of building declines below 50 level is also being investigated.
At Kloof, prefeasibility studies are at an advanced stage for the Kloof Extension Area and the Eastern Boundary Area.
In Ghana, the study for the reconfiguration of Tarkwa mine has been completed, and an investment decision is expected by June.
The envisaged project relates mainly to changing mining and processing configurations and taking over mining from contractors.
At the smaller Damang mine, exploration drilling has been undertaken to define the conglomerate-style mineralisation across the property.
In Australia, a scoping study will be completed soon, and a feasibility study is likely to proceed on the best processing and mining configurations at the St Ives operation.
Gold Fields’ exploration budget for 2003 has been increased to $20-million from last year’s $16-million.
The group’s executives say the increased exploration spend should enable the group, which is South Africa’s second-largest gold producer, to make strategic moves into those regions where it currently does not operate.
Harmony Gold Mining CE Bernard Swanepoel confirms that South Africa’s third-largest producer of the yellow metal, which has completed 23 acquisitions in the past seven years, has now shifted the accent on to “building rather than buying” because of the high gold price.
Harmony’s most-recently announced project, Doornkop South Reef, is part of the Randfontein operations, and has a 6,6-million-ounce resource and an estimated operating life of 20 years.
The project, started and stopped several times by its previous owners, is essentially a shaft-deepening exercise.
It is being undertaken in partnership with an empowerment group called African Vanguard Resources.
Another organic-growth project, the R280-million development of a decline below the Tshepong North stope, is being undertaken with ARMgold to provide an additional 167 000 oz/y over an eight-year operating life.
Harmony’s and ARMgold’s joint-venture company, Freegold, has also approved the extraction of the shaft pillar at Nyala Shaft, at a cost of R67,4-million.
This will allow for an operating life of seven years and recovery of 560 000 oz.
Harmony will also pursue organic-growth projects in other parts of the world, states Swanepoel.
DRD is to spend R500-million on growth projects, says investor relations GM Ilja Graulich.
This figure does not include the R65-million allocated to the Blyvooruitzicht expansion project, currently under way, and the R17-million set aside for the medium-grade project at the Hartebeestfontein operation, now close to completion.
In addition to driving organic growth, the huge capital outlay will be used to decrease costs and risk and increase productivity.
ARMgold, South Africa’s only listed black- controlled gold producer, has reported that it will use its R2,1-billion cashpile to fund organic-growth projects and to acquire new properties “at prices which are right”.
In addition to the Tshepong North and Nyala Shaft projects, the Freegold joint-venture company is restructuring St Helena gold-mine.
On its own, ARMgold will be spending R7- million until mid-year to repair Number Three Shaft at Orkney mine, in a project which will initially generate 27 000 oz/y.
Research into different mining methods to improve recovery of the orebody is currently under way.
Two new projects are being considered by Freegold, including completion of the sinking of Tshepong South – which was suspended in 1999, when it was within 120 m of its design depth – and the resumption of operations at Joel mine.
Tshepong South’s reserves and the required capital investment are being evaluated, while the orebody at Joel mine, which was successfully restructured into profitability last year, is being re-evaluated, with positive initial results.
Avgold, which owns and operates Target gold-mine and recently sold Eastern Transvaal Consolidated, is continuing with operation work in the Paradise area immediately north of Target mine, in the Free State.
A mine-design prefeasibility study using an updated geological model and the latest mineral- resource estimate is under way, and is expected to be presented to the company’s board before the end of June.
Ballington tells Mining Weekly that the upshot of current organic-growth initiatives could be increased production levels in future.
But he hastens to add that the “increases will not be huge, and total production will probably start to decline from the expected somewhat higher levels around 2008, as some of the mining groups’ other mines run out”.
In the long term, production will remain stable around current levels, predicts Ballington.
Cooke shares this view and adds that South Africa is unlikely to surrender its position as the world’s leading gold producer any time soon.
http://www.miningweekly.co.za/min/news/breaking/?show=34892