Great Basin boosts Hollister resource, lines up debt for Burnstone

Vancouver – Trial mining and underground drilling at Great Basin Gold‘s (GBG-T) Hollister project in Nevada have increased the gold resource there while the company works to finalize a US$129-million debt facility to finish building its Burnstone mine in South Africa.

Hollister, which is on the Carlin trend near Elko, is now home to 1.01 million measured and indicated tonnes grading 40 grams gold per tonne and 294.6 grams silver per tonne, as well as 939,200 inferred tonnes carrying 45.95 grams gold and 93.2 grams silver. Combined, the resources host 2.7 million oz. gold and 12.4 million oz. silver.

Nine months of trial mining, including channel sampling and delineation drilling for stope development, has “significantly improved” Great Basin’s understanding of the lateral and vertical continuity of the vein systems at Hollister. As such the company imposed more stringent parameters to its measured and indicated classifications, which it says results in a more conservative approach to resource categorization more closely related to what is observed underground and therefore is more useful in mine planning.

The end result is that measured tonnage decreased but grade increased, indicated tonnage increased due to reclassification, and inferred tonnage increased both from reclassification and expansion drilling. And the measured and indicated silver grade is significantly higher than the inferred grade because the more widely-spaced drill holes in inferred areas are prone to missing the high-grade silver-selenide naumanite shoots that are caught when drill density increases.

Great Basin has not yet determined the depth extent of the vein system. For the resource calculation, inferred resources were constrained to roughly 380 metres below surface.

The company continues to drill while developing underground access to the two main vein structures. The drill program is focused on probing extensions of the Gwenivere and Clementine vein systems to the west, northwest, and at depth. Great Basin also wants to test the Blanket zone, an area of more disseminated mineralization in the volcanics that overlie the Gwenivere-Clementine system. The company has three drill rigs turning on the property.

Great Basin’s other main project, the developing Burnstone gold mine, is on the other side of the world. In the Witwatersrand Basin of South Africa, roughly 80 km southeast of Johannesburg, Burnstone will be a shallow underground mine producing 274,000 oz. gold annually for 14 years.

Building the mine is expected to cost US$178 million; Great Basin’s black economic empowerment partner for the project, Tranter Gold, is responsible for its 26% of the cost. That leaves Great Basin on the hook for US$134 million. The company has already spent almost half of that (US$70 million) and recently announced “significant progress” in finalizing a syndicate of banks to provide the rest of the funds.

Specifically, Investec Bank is arranging a US$106-million senior debt facility and a US$23-million standby debt facility for cost overruns. The facility will have a maximum term of seven years and requires Great Basin to enter into a hedging facility with the lenders for 300,000 oz., which amounts to roughly 20% of Burnstone’s expected production during the loan term.

Development work is well underway at Burnstone, with multiple access points to the mining block currently being established to allow the company to start stockpiling reef tonnage in late 2009. By the beginning of May the project had seen 2,247 metres of decline development and 233 metres of shaft sinking completed. The development schedule targets mill commissioning in June 2010.

And the company answered a nagging question regarding commissioning and production when it announced an agreement with Eskom, South Africa’s national electrical utility, for power supply. Eskom struggles to provide sufficient power for the country but, given the importance of the Burnstone project to the development of the Dipalaseng municipality, agreed to take on the new customer. Great Basin just accepted a US$14.6-million agreement to develop power supply to Burnstone, which involves rehabilitating an existing line and building a new section.