STONEWALL Resources is restarting mining at some of the 40 closed gold mines around Pilgrim’s Rest and Sabie in Mpumalanga, bringing a cautious but active approach to an area mined for more than 100 years.
Stonewall, which has mining and prospecting rights covering 43 old mines, reverse listed on the Australian bourse in November, and it is "considering" a listing in Johannesburg, company CEO Lloyd Birrell said on Friday.
Stonewall produces about 11,000oz a year of gold from tailings, and plans to raise this to 40,000oz this year. It estimates it will produce 205,000oz from four operations by the end of 2016.
Junior gold miners have a poor track record, with Pamodzi Gold, Great Basin Gold and First Uranium failing to survive. Some, like Galaxy Gold and Central Rand Gold, are still in production, but well below what executives had led the market to expect. Others, like Simmer & Jack, sold all their assets, and their shares were suspended on the JSE.
Stonewall bought the Transvaal Gold Mining Estates from Simmers for R25m, but it incurred costs of tens of millions of rand in assuming liabilities and environmental costs. Mr Birrell declined to give specifics on the full costs.
Mr Birrell was CEO of Galaxy in 2009, but resigned in February 2010 after differences with the board on the strategy to mine the old Agnes mine in Barberton.
"We are not going to do the same things that Simmers or Galaxy did. We are going to be relatively small scale and conservative, operating a number of mines to get to our target, " Mr Birrell said.
"Before everyone writes us off, they should give us an opportunity to see what we can do," he said, acknowledging the investor scepticism over start-up junior mining companies.
To ensure Stonewall did not follow in the footsteps of its failed peers, Mr Birrell said it was drilling where it was going to mine and was not setting overambitious resource or production targets.
"We are making an operating profit, so we don’t need money from our shareholders. We have an extensive drilling programme to raise our resources to 5- or 6-million ounces from 2.8-million ounces, and we have feasibility studies under way," he said.
If Stonewall is to hit its target of 40,000oz on an annualised basis by the end of this year, it has to begin mining soon.
The first mine to come into production will be Beta at Pilgrim’s Rest. The cost to re-equip the mine and start mining is about $12.5m and the operation will generate 45,000oz a year. Stonewall may need to ask its shareholders to fund this capital, but it will use money generated from this and other operations to fund its growth plans, keeping shareholder dilution to an absolute minimum.
Next in line are Vaalhoek, Rietfontein and Glynn’s. The mines are well mapped and have development in place, which will allow Stonewall to quickly open new working areas to access ore.
To date, Stonewall has been treating tailings to prove its metallurgical processes on what Mr Birrell described as some of the most difficult ore it could find. The gold in eastern South Africa is found in greenstone deposits and it is locked up in sulphides, making it difficult to extract economically. Stonewall is looking at a range of processes, including ultrafine grinding of its ore, roasting, and even biological oxidation.