Vancouver-based major
Shareholders of Western Areas approved Placer Dome’s acquisition of the mine for US$235 million and future payments based on production.
“The closing of this transaction is a turning point for Placer Dome, for Western Areas — and for the South African gold industry, for which it is the largest outside investment of its kind,” says John Willson, president of Placer Dome. “The joint venture will be truly that — an effort by Western Areas and ourselves to bring about improvements that will make South Deep an extraordinarily successful mine.”
South Deep is scheduled to enter commercial production by 2002, and Placer Dome’s share will weigh in at 375,000 oz. gold per year. Cash production costs are pegged at US$185 per oz.; total costs, at US$215 per oz.
In the meantime, Placer will add 300,000 to its coffers annually from Western Areas’s existing operation.
Western Areas is mining the upper VCR and Elsburg reefs, which represent the South Deep deposit’s updip extension. Minable reserves here were last reported to be 16 million tonnes grading 11 grams gold per tonne, or 5.8 million contained ounces. Mining is expected to continue for another 14 years before this portion of the deposit is exhausted.
Average cash production costs for the Elsburg and VCR reefs are US$200 per oz. Placer’s share of the cash flow from this operation will fund its portion of the development costs at the South Deep project, which have been estimated at US$150 million.
At last report, the property contained a proven and probable reserve of 235 million tonnes grading 7.8 grams gold per tonne, equivalent to 59.3 million contained ounces gold. Of this, South Deep accounts for 52 million oz. The calculations were based on a gold price of US$260 per oz. and a cutoff grade of 4.2 grams. The total mine life is estimated at 79 years.
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