Great Basin heats up Burnstone

Great Basin Gold (GBG-T, GBN-X) plans to immediately get the permitting ball rolling after a recent feasibility study concluded that a 1.5-million-tonne per year underground mine could be supported at the Burnstone gold project, 80 km southeast of Johannesburg, South Africa.

Plans at Burnstone call for conventional mining of narrow-reef gold mineralization via a decline and a vertical shaft. The first stage of development would see a 4.5-metre-by-4.8-metre decline cut to allow for a 26,000-tonne bulk sample, and subsequent worker and equipment access. Thereafter, a 7.5-metre diameter production shaft would be sunk.

Ore would be subject to conventional crushing and semi-autogenous grinding and ball milling. Gold would be liberated by gravity separation and carbon-in-leach treatment prior to refining. Running at the planned rate, and expected 95% recovery, production would come to 2.2 million oz. gold over 14 years, with annual production of 214,000 oz. at full steam.

The scheme focuses on proven and probable reserves in Area 1, which amount to 15.9 million tonnes grading 4.65 grams gold per tonne, for 2.4 million contained ounces. The reserve is contained in a measured and indicated resource at Area 1 totalling 29 million tonnes running 7.63 grams gold, or 7.1 million oz. Both estimates are based on a cutoff grade of 4 grams gold.

Operating and cash costs are forecast at US$36.63 per tonne and US$254.42 per oz. The mine is expected to generate around US$26 million in average annual cash flow, and US$287 million over its life. At a gold price of US$450 per oz., Burnstone delivers an internal rate of return of 18.3%, with a pre-tax net present value of US$138.9 million (at a 5% discount rate).

The project carries a price tag of US$144.5 million, including US$114.3 for the mine, US$22.8 million for the mill, with the remainder for tailings and waste-rock storage and water supply.

The base case scenario assumes 100% equity development financing, and no debt leverage.

The proposed operation would employ around 2,000 people.

Great Basin recently wrapped up a bought deal involving 11.2 million shares at $2.25 apiece for gross proceeds of $25.2 million. Another $10-million private placement of like-priced shares is expected to close shortly. The funds will go toward construction of the surface facilities and decline, which are pegged at around $25 million.

Gold at Burnstone occurs in the Kimberly reef, one of four principal mineralized horizons in the Witwatersrand goldfield. In all, the project comprises four gold-rich areas along an 18-km, northwesterly trending corridor of ancient river channels. Faulting is believed to have lifted the central part of the corridor to depths of 250 to 750 metres. This is shallow in comparison with other Witwatersrand deposits, which can exceed depths of 1 km.

Combined, the four areas are home to a measured and indicated resource of 36.6 million tonnes grading 5.35 grams gold, or 6.3 million oz., at a 4-gram cutoff. Another 13.2 million tonnes of inferred material grades 10.8 grams gold. Mineralization is just 30-65 cm thick, and the resource calculations were made using grades diluted to a width of 1 metre.

Drilling indicates that areas 1 and 4, to the southwest, are continuous, and areas 2 and 3, along the same northwesterly trending corridor as area 1, constitute the same deposit.

Great Basin is working on a deal to bring in privately held Tranter Investments, a black economic empowerment group, as a partner at Burnstone. The agreement is aimed at fulfilling black empowerment ownership requirements set out under South Africa’s new mineral tenure legislation.

Last year, the pair agreed that Tranter would take a stake in Great Basin’s wholly owned subsidiary Southgold Exploration; Southgold owns the Burnstone property. The deal requires that Tranter, which comprises a group of South African black professional investors, restructure to include a variety of historically disadvantaged groups.

Great Basin still needs to finalize a mining royalty with the government.

T.N.M. Nugget

BURNSTONE GOLD PROJECT

OWNERSHIP: Great Basin Gold 100%; working on BEE partnership with Tranter Investments.

PROPERTY:400 sq. km, 80 km southeast of Johannesburg, on the Witwatersrand basin

AREA 1 RESERVES:

15.9 Mt grading 4.65 g/t gold, contained in a resource of 29 Mt at 7.63 g/t gold.

Project-wide M+I resource: 36.6 Mt at 5.35 g/t gold; Inferred: 13.2 Mt at 10.8 g/t gold.

ECONOMICS:Capital cost of US$144.5 million, 18.3% rate of return and net present value of US$138.8 million, based US$450/oz. gold.