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FROM RAGS TO RICHES
The Pamodzi Gold (Pamodzi) legacy is quickly turning into a story of imminent success as it steadily works its way to becoming a 1mozpa gold producer within the next 24 months. While acquisitions remain a substantial portion of achieving its gold ounce target, organic growth within its current operations, including Orkney and President Steyn, is set to place the assets much higher up the value chain.
Chief operating officer, Tony Murdoch Eaton, and chief financial officer, Martin Schermers, talk to Laura Cornish about the internal and external growth profile of the company, whose current annual production capacity has reached
420 000ozpa.
PRESIDENT STEYN
Its most recent acquisition from Thistle Mining, the President Steyn mine in the Free State gold fields, could become one of Pamodzi's most exciting evolutionary prospects.
While the first six months is being dedicated to a turnaround strategy for improving safety and R150m worth of equipment revamping and implementation, what comes after this period holds a lot of excitement for the company, says Murdoch Eaton.
Under its previous management, President Steyn was largely neglected, especially in terms of maintaining infrastructure. Although its current plant capacity is 120 000tpm, throughput declined, to settle at about 70 000tpm.
"There is huge potential for growth on this resource, and now that we have attracted and secured a skilled management team, the value which will come from this 8g/t asset is vast," Murdoch Eaton explains.
The President Steyn mine will initially contribute 145 000ozpa of gold, with the potential of increasing this to the order of 175 000ozpa.
Pamodzi has already identified two additional specific, major potential areas of expansion, which will add significantly to the mine's current eight-year lifespan.
GOLDEN TRIANGLE (NO. 9 SHAFT)
While this shaft is currently not producing, Pamodzi estimates capital expenditure in the region of R340m for the project to access known reserve areas which will yield up to 10g/t.
It will start as a shaft-deepening project, whose reserve figures have already been identified following the completion of a pre-feasibility study, the group is now ready to take the project to bankable feasibility study (BFS), which is expected to be completed within the next six months.
ELDORADO REEFS (NO. 3 SHAFT)
The Eldorado reefs ore body constitutes the same ore body as Harmony's Target mine.
Geological study work has been completed. The grades are similar to Harmony's Target mine, and given its nature, will be developed as a fully mechanised mine. A mine plan needs to be hung on the resource. Again a complete BFS needs to be undertaken on this project, and is expected to have a capital cost of around R400m.
Both projects could be extended to depths of about 2000m. While the current plant would have to be expanded to cope with the additional capacity emerging from these two projects, Schermers notes that another possibility would be to construct a new plant directly on site.
ORKNEY
Having claimed full ownership on February 27, Pamodzi is in "full swing" to ramp this project from its current seven-year life to at least 12 years.
Schermers explains that while Orkney requires a revised safety strategy focus as well, the 5g/t ore body fits into the Pamodzi bracket quite well.
Under the Harmony stable, the mine's capacity ran at about 60 000tpm, Pamodzi aims to increase this to 100 000tpm (from mid 2009).
Capital expenditure of R120m has been dedicated to Orkney for 2008, which will primarily be used for development purposes to get into new, inaccessible areas.
As it currently stands, Orkney will contribute 150 000ozpa of gold.
EAST RAND OPERATIONS & THE NORTH WEST SHAFT
Over the past two or three years, the East Rand operations (eight-year lifespan) have been a struggle, however the 320kmē lease area holds immense amounts of blue sky potential area between the ConsModder, Nigel and Grootvlei areas.
Schermers explains that the main challenge on exploring the untapped underwater resource, to depths of between 1200m and 1500m is pumping the additional underground water to surface, and finding a suitable off-take for the additional water.
The North-West shaft is one of the East Rand's upcoming, newest projects - first production is expected towards the end of this month.
The North-West shaft is an old shaft, going down to a depth of about 1800m and was closed in the 60s, but still has 2.6mt in ore reserves at 3.69g/t above the current water level.
The project has a six-year lifespan, with a budgeted capital expenditure of R21m over the life of the project.
Says Murdoch Eaton: "Because the East Rand basin's gold grades are relatively low, it remains viable as a high volume asset. This shaft will contribute towards volume tonnages."
Pamodzi is re-equipping the shaft to a depth of approximately 400m, the shaft will add between 30 000t and 35 000t to the East Rand profile, increasing total underground production from 90 000tpm to 125 000tpm.
The other exciting new project on the East Rand for 2008 will be resuming open-cast mining on the Cons Modder area.
This are expected to start towards the end of this year, contributing an additional 25 000tpm to 35 000tpm.
There is an additional two/three other shafts within the East Rand mining area that Pamodzi is examining to start mining in the mid-term future.
The East Rand operations contribute 150 000ozpa of gold to the Pamodzi portfolio.
WEST RAND OPERATIONS
What started as a single open-cast pit, mining the black reef, the West Rand operations have grown substantially since then. However, they still remain Pamodzi's smallest ounce contributor. Their current lifespan is about five years, excluding any expansion or exploration.
Extending no deeper than 232m at boundary of the 1300ha area, current project work includes drilling on a 1km outcrop which extends the size of the open cast area.
The ore body is being extending to the south, which will eventually become an underground operation says Murdoch Eaton.
The extended area has reef widths of between 2m and 6m, and mining on the new open-cast area should commence towards the end of this year.
Tonnage capacity will increase from 15 000tpm to 40 000tpm.
Both mining experts say that Pamodzi is in discussions with Harmony to potentially acquire property which lies adjacent to the West Rand operations - and which could expand the size of the project, which contributes about
20 000ozpa of gold.
Pamodzi's current organic growth plan is not enough, says Schermers, the company will need to make between two or three additional relatively large-scale acquisitions, which will not be funded so largely on issuing shares.
The market can expect another acquisition this year. The company is simultaneously gearing up towards increasing its BEE status back to about 50% once Harmony exits its 32% stake in about a year. Pamodzi Resources, Pamodzi Gold's BEE partner, will then exercise its right to acquire those shares, returning Pamodzi Gold to its original 50.1% black ownership status.
Click here to visit site: www.pamodzigold.co.za
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