Australian money and South African skills have combined to recommission West Rand dump-retreatment operation Mogale Gold, and to retrieve it from judicial management. Julie Walker visited the site.
Mogale is owned by listed Australian company Mintails, which has a market capitalisation equivalent of R350m. Mintails' CEO, Dick van der Walt, says that Mogale is a fully black-empowered subsidiary. Its business is dump reclamation: the plant is located on the site of the former West Wits opencast gold mine close to Randfontein Estates Gold Mine's Millsite and to Lindum Reefs.
Several years ago, DRD Gold bought the surface assets of the West Wits operations; these were later onsold to Mogale, whose principal shareholder at the time was the SA Export Development Fund. A low gold price, strong rand and early problems resulted in Mogale being placed under judicial management in November 2003. "It was important not to allow the company to be liquidated, because it would have resulted in the permanent loss not only of many jobs, but also of the mining rights," says Van der Walt. The plant continued until September 2004. The custodians of the judicial management process, led by Allan Pellow of Westrust, sought to preserve the mining authorisation, and invited interested parties to develop a plan to relaunch Mogale.
Atomaer, an Australian technology and process company with a branch in South Africa, took the lead role in defining a turnaround strategy for Mogale, and compiled a business plan with the objective of succeeding. The plan included environmental management processes, which in turn solved another West Rand basin problem - too much water pumped from underground by mines at great cost, but for no market. Monitoring of dumps requires large volumes of water, but the water has to meet acceptable standards before it can be discharged into the environment. Atomaer's process meets this requirement.
The plan also included the addition of ore reserves, and upgrading of the plant to be able to treat 220 000tpm - 170 000t of sand and the balance slimes. The team secured 305mt of tailings, of which 145mt (Durban Roodepoort Deep and Rand Leases dumps) is compliant with the Australian resource code JORC and forms phase 1 of the turnaround plan. "Atomaer contributed to the technological competence, but it was clear from the start that Mogale would not be a test for new technology, just for enhancements," says Van der Walt. His background lies with the BEE company, Acorn Gold, which held title to some of the resources which have been acquired by Mogale.
Another problem is about to be solved. West Wits never had a deposition site; current arisings can be fed onto Harmony's dumps 38 and 39 for the next five years, but the potential exists to refill the opencast pit with as much as 90mt of retreated tailings. A parallel scenario arises in respect of the Lindum Reefs pit too. "The technical team must demonstrate the cyanide destruction capacity before this can be permitted. But because we will not have to buy water from Rand Water, and we are confident that we can meet the Department of Water Affairs' discharge standards, it will be a very cost-effective way of dealing with a number of problems at once." The scope exists to build four super-dump sites for deposition, especially when phase 2 of the turnaround kicks in.
These pointers were enough for Mintails to issue a prospectus and to raise A$15m (about R60m at the time) through the issue of shares at 20c. Some of the proceeds were used to take Mogale out of judicial management (creditors got 10c; post-judicial management creditors everything), and to refurbish the plant to be able to treat 220 000tpm. The plant was restarted on slimes towards the end of April under mine manager, Mike Phillips, who was originally with Atomaer. "Every pipe, pump, valve and cable needed replacing, and even as we worked, replacement items were still being stolen," says Phillips. Nevertheless, sand began to be treated in May, in June, Mintails treated 60 000t of material; and in July, 130 000t, from which 2 410oz of gold were recovered. The circuits were kept separate until the sand had been remilled.
The production target is 3 750oz of gold per month. As Van der Walt notes, actual operation differs from the neat orderliness of the spreadsheet plan. There are pockets of high and of low grade, foreign material and "preg-robbers" (which collect gold that is then not recoverable) in the dumps. The tonnage target should be reached by the end of this month as the process beds down. Once proof of concept is achieved, Mintails will proceed with Phase 2 - the processing of 1.4mtpm of material through a new plant from the other 160mt of tailings dumps. "In phase 1, we expect a head grade of 0.6 to 0.68g/t. Phase 2 will run at about 0.42 to 0.45g/t. Through cycloning and flotation, we would upgrade the feed to reduce the mass to about 600 000tpm. This beneficiation would increase the feed grade to 0.7g/t, and gold production would rise from 45 000ozpa to 120 000ozpa. Cash costs would decline from $352/oz to $315/oz," says Van der Walt. The operation would be similar to the Chemwes plant at Stilfontein.
Phase 1 will undergo an evaluation period of 6 to 12 months, and it would take another year to 18 months to construct a 1.4mtpa plant. Van der Walt says Mintails is crunching the numbers on whether it might make more sense for Mintails to jump straight to 240 000ozpa in the second stage of development. This would speed up the unlocking of value within Mintails. While on the radar, the vision of a 'Wergo" or West Rand equivalent of the highly successful Ergo, is some way off. BEE credentials and a fully operational system make Mogale an attractive partner.
MLI Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
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