Witwatersrand Consolidated Gold Resources (Wits Gold) was today announcement the sole preferred bidder for the Burnstone gold mining operation near Balfour, in South Africa’s Mpumalanga Province.The announcement comes as no surprise. Wits Gold CEO Philip Kotze has made so secret of his intentions to acquire a mine which will enable the company to move from an explorer and developer to a producer – quickly. And despite the controversy regarding its mechanised mining methodology, Kotze has stated that he believes in the mining method, and can make it work. This has always make Burnstone the ‘perfect fit’ for the Wits Gold portfolio. Burnstone is wholly owned by Southgold Exploration, a subsidiary of Great Basin Gold Limited (GBG), and is currently on care and maintenance under business rescue proceedings. Kotze says: “Following an intensive due diligence by the Wits Gold team and the submission of our business plan, we are very pleased to have been selected as the sole preferred bidder, and look forward to our offer being accepted when the plan is put to vote on 11 July 2013”. The acquisition of Burnstone is also n line with Wits Gold’s strategy of owning and developing shallow mines in South Africa and is an important step in the company’s development. Moving to producer status will serve as a solid platform with which to start generating free cash flow for shareholders. The acquisition provides shareholders access to a:
- shallow, multi-million ounce gold reserve;
- substantial investment in underground infrastructure and development;
- fully operational metallurgical plant; and
- near-term cash generative asset
The key terms of Wits Gold’s offer for Burnstone, disclosed in the business rescue plan, are:• payment of $7.25 million on transaction completion; • reduction of the operation’s total existing debt by 55%; and • provision of up to US$100 million over time by Wits Gold as working capital to support the chosen production plan, in the form of a shareholder loan to be paid back on a preferential basis from operating cash flow. Kotze further states that Wits Gold has developed a new, underground mining plan for Burnstone, which is realistic, deliverable and aims to ensure maximum benefit for all stakeholders. The plan allows for flexibility in the production approach and this will be confirmed once the transaction has been finalised. The mine is currently under care and maintenance, where the bulk of the labour force has been retrenched. This allows Wits Gold to gradually build up production in a phased approach, with a commensurate cost profile. The company will also undertake to continue with relevant social initiatives to enable sustainable development of the affected communities in the vicinity of the mine.