WGR-Wits Gold Completes a Positive Scoping Study on the DBM Project in the southern Free State Goldfield

Witwatersrand Consolidated Gold Resources Limited
(Incorporated in the Republic of South Africa)
Registration Number 2002/031365/06
JSE Code: WGR
ISIN: ZAE000079703
TSX Code: WGR
CUSIP Number: S98297104

('Wits Gold' or 'the Company')

JOHANNESBURG, June 23, 2011 /CNW/ -

Highlights of the Scoping Study

  • Shallow underground mine design comprising a 700 metre vertical shaft for men and materials and a conveyor decline for rock transport
  • Based on Indicated Resources of 34.5Mt at 5.3g/t Au (5.9Moz) The same reefs host Indicated Resources of 17.0Mt at 0.16kg/t U3O8 (6.1Mlb)
  • First production 32 months after initiating construction
  • Production rate of 80 000 tonnes of ore per month
  • Average recovery of 150 000 oz/yr for the first 10 years of full production
  • Life of mine 25 years with total production of 2.9Moz Au at an average grade of 4.4g/t recovered.
  • Peak capital required ZAR1.59 billion (US$227m at ZAR7/US$)
  • Cash costs of production US$569/oz
  • At ZAR275 000/kg Au (US$1 222/oz & ZAR7/US$) pre-tax NPV (10%) ZAR2.08 billion (US$298 million), IRR 26%, payback 6 years
  • At current gold price of ZAR325 000/kg Au (US$1 444/oz & ZAR7/US$) pre-tax NPV (10%) ZAR3.54 billion (US$506 million), IRR 35%, pay back 5 years

INTRODUCTION

Wits Gold is pleased to announce positive scoping study results for its shallow De Bron - Merriespruit South ("DBM") project situated adjacent to the Merriespruit Gold Mine, south of Welkom. The study was undertaken independently by Andrew Pooley (the "Qualified Person") from Turgis Consultants with the participation of Chris Jones from Snowden Mining Industry Consultants. It was completed under the guidelines of the Canadian National Instrument 43-101 ("NI 43-101") and is based on an Indicated Resource of 34.5Mt at 5.3g/t Au (5.9Moz) that occurs in the same reefs as an Indicated Resource of 17.0Mt at 0.16kg/t U3O8 (6.1Mlb). Mineral resources are not mineral reserves and do not have demonstrated economic viability. The study has also considered the potential contribution that could be made by the conversion of Inferred Resources of 25.0Mt at 5.2g/t Au (4.2Moz) and 11.9Mt at 0.14kg/t U3O8 (3.7Mlb), but the Inferred Resources are not included in the economic model presented below. A NI 43-101 report summarizing the results of the scoping study will be filed on SEDAR at www.sedar.com within 45 days of this press release.

GEOLOGY AND MINERAL RESOURCES

The mineral resources for the DBM project were estimated for the Beatrix, Kalkoenkrans, B and Leader Reefs, where these conglomerate reefs occur at depths of 500 - 1250 metres below surface. These resources are disclosed in a NI 43-101 technical report entitled "Witwatersrand Consolidated Gold Resources Limited: Mineral Properties in the DBM Project, South Africa", prepared by George Gilchrist of Snowden Mining Industry Consultants dated April,6 2011 which is available on SEDAR at www.sedar.com. The samples from the DBM drilling programme were assayed at Anglo American Research and SGS Laboratories, both of which have ISO accreditation.

In view of the close vertical association between the Beatrix and Kalkoenkrans Reefs, it is assumed that the higher grade Kalkoenkrans Reef will be selectively mined rather than the overlying Beatrix Reef. The only exception will occur in areas where these two conglomerates are directly superimposed, so that they can be exploited in a single mining cut. Based on an assessment of the rock mechanics, it is concluded that the Kalkoenkrans, B and Leader Reefs will be exploited as discrete, separate bodies. All of these reefs dip consistently at 12-18 degrees towards the northwest and have been dissected into a number of coherent structural domains by syn-Ventersdorp faults.

MINE DESIGN

A combination of the gold grade distribution and a three dimensional wireframe model provided the basis for a number of different mine designs for the DBM project. At this preliminary stage, financial modeling indicated that optimum returns are likely to be achieved by establishing a shallow underground mine design comprising a 700 metre vertical shaft served by a 12 degree conveyor decline. The scoping study anticipates a preliminary production model for the DBM project, based on similar mining operations in South Africa, using footwall haulages, cross-cuts to reef at 150 metre intervals and conventional breast stoping by hand held rock drills and scraper winches. Ore generated in the stopes will pass via boxholes into cross-cuts from where it will be loaded by load haul dumpers on to trucks for transfer to the decline ore pass system. The ore will be transported to surface by a conveyor feeding a purpose built carbon in leach (CIL) plant for crushing, milling and gold recovery. The complementary vertical shaft will be used for men and materials, whilst additional ventilation will be provided by raise boreholes, drilled from surface.

FINANCIAL MODEL (assuming an exchange rate of ZAR7/US$ and based on the Indicated Resources only)

This scoping study has been based on a monthly production rate of 80 000 tonnes of ore, provided mainly from the Kalkoenkrans and Leader Reefs, in addition to 24 000 tonnes of waste material. First production is scheduled for 32 months from the commencement of site construction, with an average of 150 000oz Au per year for 10 years following the achievement of full production. The peak capital required will be ZAR1.59 billion (US$227 million), whilst operating costs are projected at ZAR559/tonne with cash costs of US$569/oz. Assuming the exploitation of the Indicated Resources only, the life of mine (LOM) will be 25 years, during which a total of 2.9Moz Au will be produced.

At a gold price of ZAR275 000/kg (US$1 222/oz at an exchange rate of ZAR7/US$), the DBM project has a pre-tax NPV (10%) of ZAR2.08 billion (US$298 million), an IRR of 25.8% and a payback of 6 years. However, at the current gold price of around ZAR325 000/kg (US$1 444/oz at an exchange rate of ZAR7/US$), the pre-tax NPV (10%) increases to ZAR3.54 billion (US$506 million) with an IRR of 35.2% and payback of 5 years.

A sensitivity analysis of the major input variables indicates that the financial model for the DBM project is most sensitive to capital expenditure, time to production, production rate, gold price and grade. Consequently, the possibility of reducing the time for mine development into the shallow higher grade sectors of the orebodies will be evaluated during the pre-feasibility study that has been recommended by the Qualified Person.

IMPACT OF CONVERTING INFERRED RESOURCES

By comparison with other Witwatersrand projects on similar tabular reefs, the DBM project has been densely drilled, with the completion of 88 boreholes over the 15 square km area. However, some 40% of the resources are currently in the Inferred category, where they occur mainly in peripheral areas along the subcrop positions of the reefs with the overlying Karoo Sequence, as well as immediately east of the De Bron Fault. An integral part of the scoping study was to examine the financial effect of including these Inferred Resources within the LOM plan for the DBM project. The results suggest that due to the large size of the DBM resource, the conversion of the Inferred Resources and therefore extending the LOM will have a positive impact on the financial model.  An appropriate drilling programme has been recommended.

POTENTIAL CONTRIBUTION MADE BY URANIUM

Exploration drilling at the DBM project has indicated the presence of consistently elevated uranium grades in the Leader Reef. However these are diluted by lower grade Kalkoenkrans and B Reefs, resulting in an Indicated Resource of 17.0Mt at an average of 0.16kg/t U3O8 (6.1Mlb). As part of the scoping study, the possible economic contribution of these uranium resources has been considered. The preliminary results indicate that there could be some economic benefit by exploiting these average grades. The pre-feasibility study will investigate the benefit of handling and treating the Leader Reef separately.

COMMENTS

In response to the results of the scoping study, the CEO of Wits Gold Dr Marc Watchorn said, 'We are delighted with the extremely positive outcome of the Turgis study, which justifies our earlier statements that DBM is likely to be South Africa's next shallow gold mine. We intend proceeding immediately with a pre-feasibility study in the anticipation of further optimising the mine design and financial returns. We appreciate the patience of our shareholders, but realise that the time is now right to investigate any opportunity to extract maximum value from this world class resource'.

FORWARD LOOKING STATEMENTS

Certain statements in this news release may constitute forward-looking information within the meaning of securities laws.  In some cases, forward-looking information can be identified by use of terms such as "may", "will", "should", "expect", "believe", "plan", "scheduled", "intend", "estimate", "forecast", "predict", "potential", "continue", "likely", "anticipate" or other similar expressions concerning matters that are not historical facts.  Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding the future plans or prospects of the Company.  Without limitation, statements about the development of the mine at the DBM project, the required capital expenditures, the time required for the mine at the DBM project to enter production, the length of time the mine at the DBM project will operate at full production, the annual production of gold at the DBM mine and other related statements are forward-looking information.

Forward-looking information involves known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward looking information.  Such risks, uncertainties and other important factors include among others: economic, business and political conditions in South Africa; decreases in the market price of gold; hazards associated with underground and surface gold mining; the ability to attract and retain qualified personnel; labor disruptions; changes in laws and government regulations, particularly environmental regulations and mineral rights legislation including risks relating to the acquisition of the necessary licences and permits; changes in exchange rates; currency devaluations and inflation and other macro-economic factors; risk of changes in capital and operating costs, financing, capitalization and liquidity risks, including the risk that the financing required to fund all currently planned exploration and related activities may not be available on satisfactory terms, or at all; the ability to maximize the value of any economic resources.  These forward-looking statements speak only as of the date of this document.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date.  The Company undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events except where required by applicable laws.

Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd


 

For further information:

Dr. Marc Watchorn
Chief Executive Officer
marcw@witsgold.com
Tel: +27 11 832 1749

Mr. Hethen Hira
Investor Relations
hethenh@witsgold.com
Tel: +27 11 832 1749

www.witsgold.com

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