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MEI Online: Commodities: Metallic Ores: Gold: Latest News: March 28th 2007


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:: South Africans Scramble to Process Waste Dump Gold

Gold mining firms in South Africa are rushing to reprocess mountains of waste while gold prices remain buoyant, boosting production and adding to the bottom line. Reprocessing mining waste is not new, but a rallying gold price has given fresh impetus to extracting small amounts of gold in crushed, processed ore that has been discarded. "The stuff that's on surface, it's low-hanging fruit in a strong rand gold price environment," an analyst said. "Right now these guys are just making hay while the sun shines."

Some modern waste dumps with tiny amounts of gold are only now economically viable after the local gold price nearly doubled over the past two years, outpacing the dollar gold price with an added boost from a weakening local currency. Digging into the mountains of waste is especially attractive in South Africa, the world's biggest gold producer, where firms have to dig deeper and deeper to tap fresh deposits "It's really like building a brand new gold mine but for a fraction of the cost," Harmony Chief Executive Bernard Swanepoel told Reuters. "This is the one place where the gold price makes a real fundamental difference to a project because of the short lead time."

While burrowing 3 km (1,9 miles) below the surface to build a new underground mine takes 10-15 years, setting up a processing plant for waste dumps can be done in two years. The trend has swept up both junior producers and the big players, like the world's fourth and fifth biggest gold producers Gold Fields and Harmony respectively.

Harmony is in the midst of pre-feasibility studies for a project that could cost R1,2-billion and would reprocess between 1,5-million and 3-million tons a month. It aims to produce 400 000 to 450 000 ounces of gold per year from waste starting as early as 2010. Gold Fields is in a more preliminary phase. "There are possibilities and they're being looked at. There's nothing quite on the cards yet, but it's certainly something we're looking at currently," spokesman Willie Jacobsz said. Two years ago, just before the major spike in gold prices, AngloGold Ashanti, the world's third biggest gold producer, closed its Ergo operation after it reprocessed 870-million tons of waste over a 25-year life. But the firm is still treating tailings elsewhere and produced 113 000 ounces of surface output at its Vaal River operation last year.

The first wave of waste reprocessing in South Africa took off in the 1980s after a spike in the gold price, but that targeted older sand dumps that had grades of up to 1,5 g of gold per ton. Once those dumps were exhausted, reprocessing tapered off. When newer mills were able to grind ore into finer particles, this increased gold extraction and therefore left much less metal in more modern liquid "slimes" waste dams.

Many current projects are targeting 0,2 to 0,4 g per ton, which is tiny compared to underground grades that can be as high as 10 grams a ton. But with costs low, the margins can be very high, with Harmony's Swanepoel expecting cash costs of about R80 000 per kg for his project compared to a current local gold price of R150 000 per kg. "It is a real potential money spinner... you can effectively achieve a financial payback in two or three years (after start-up)," he said. Many projects rely on a rosy outlook for gold prices for the next several years, analyst Steve Shepherd at JP Morgan said. "If one can foresee a gold price of between R150 000/kg and R200 000/kg into the future, I'm pretty sure this would work," he said. "But it's important to remember there is a substantial up-front investment required, which presents considerable risk despite what may be attractive operating economics."

Reprocessing makes up a key segment of some smaller players, such as DRDGOLD Ltd, whose surface operations are its most profitable activities. Its Crown tailings operation made a cash operating profit of R46-million in the quarter to end December, while the firm as a whole sunk to a net operating loss from continuing operations of R3,5-million. The higher gold price has prompted the company to seek to expand the reprocessing business, Strategic Development Officer Ilja Graulich said. "We have looked at dumps in the past that we would like to mine and we weren't too sure about spending the capital, but with a higher gold those returns are there and we can start digging into those dumps," he said.

Simmer & Jack Mines Ltd, through its First Uranium unit, plans to reprocess tailings at the Buffelsfontein mine formerly owned by DRDGOLD. The operation is expected to have a life of 14 years, producing both uranium and gold, while Simmers itself has a test tailings project at Elandsdrift in eastern Mpumalanga province. "There are other tailings dams in the area and, depending on how Elandsdrift works out, we'd look at them too," spokeswoman Gail Strauss said.




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