Hong Kong-listed Taung Gold will submit several applications to the Department of Mineral Resources in March to start development of its R7bn Evander gold project in Mpumalanga, it said with the release of its interim results to September.
The Evander project would represent a significant capital investment at a time when SA’s biggest gold miners are reluctant to make long-term investments because of a weak gold price as well as regulatory uncertainty. Taung Gold bought the Jeanette project near Allanridge in the Free State and the Evander assets from Harmony Gold Mining. The Evander project consists of the mothballed No6 shaft of the old Winkelhaak mine and undeveloped Twistdraai property south of it.
In 2011, 87% of Taung was bought by Wing Hing, a Hong Kong-registered company with a Chinese gold mine, for $580m (then almost R5bn), which analysts said at the time seemed a very high price for projects that Harmony had not considered to be viable.
Anglo American sank two shafts at Jeanette in the 1950s, but grades were lower than at its other projects and the khaki shale above the gold-bearing reef, which makes the ground highly unstable, presented serious technical difficulties.
Winkelhaak was closed after only 13 years’ mining because it was unprofitable.
Taung Gold said it would submit its amended mining right application for Evander with its environmental impact assessment, social and labour plan, mining work plan and application for an integrated water-use licence at the same time.
The February 2016 bankable feasibility study for Evander, conducted by Turnberry Projects, showed that at an initial capital cost of $579m, Evander could produce about 309,000oz of gold a year at full steam at an all-in cost of $724/oz, with payback within 3.6 years of first production.
The prefeasibility study for Jeanette updated in March and led by Minxcon showed it could be developed at an initial cost of $759m, with payback within 6.9 years
The internal rate of return would be 17.6% after tax.
Taung’s next step for the Jeanette project, after registering the mining right granted in June, would be to consider beginning a bankable feasibility study. The prefeasibility study for Jeanette updated in March and led by Minxcon showed it could be developed at an initial cost of $759m, with payback within 6.9 years from first production and a 20.3% aftertax internal rate of return. It would produce gold at an all-in cost of $542/oz.
Taung said Jeanette had a probable reserve of 7.21-million ounces of gold, adjusted for mining methods needed to eliminate the technical risks of the khaki shale.
The reef was amenable to mechanised mining, which was reflected in the average head grade of 11.52g a tonne. Taung said that instead of trying to support the khaki shale, which had been tried unsuccessfully before, it planned to mine it out and use it to backfill working areas.
Taung Gold had no debt at end-September and cash of 33.8-million Hong Kong dollar ($4.3m). It did not respond to a question about its funding plans for Evander. At a recent presentation, CEO Neil Herrick said MCC International, a subsidiary of Metallurgical Corporation of China, would assist with raising debt from Chinese banks.