Caledonia acquires two South African producers

Toronto-listed Caledonia Mining has completed transactions to acquire two companies with operating gold mines in South Africa for a total of $49.1 million.

Caledonia can acquire a 100% interest in Barbrook Mines from two private South African companies for $11.8 million in cash and $28.7 million in Caledonia shares.

In the second deal, Caledonia has signed an agreement to acquire a 94.5% interest in Eersterling Gold Mining for $5.8 million in Caledonia shares upon closure of the agreement plus $2.8 million in cash or Caledonia shares due seven months after closing. Eersterling is a public company on the Johannesburg Stock Exchange.

The Barbrook mine property, situated in the Barberton greenstone formation in eastern Transvaal province, comprises 4,300 hectares and extends for 24 km along strike.

Barbrook operates a 1,000-tonne-per-day metallurgical plant capable of treating both non-refractory and refractory ores. Most of the current mill feed comes from open-pit sources, supplemented by underground ore which is partially refractory. In due course, as underground development progresses, the bulk of the mill feed will come from underground.

An investigation into the viability of heap-leaching low-grade, open-pit ore is under way.

Geological consulting firm Watts Griffis & McOuat has calculated a mineral resource of 12.6 million tonnes at 5.84 grams gold per tonne, most of which is situated above the main adit level. These reserves are equivalent to 2.3 million oz. gold.

Proven and probable reserves are calculated at 270,000 tonnes of open-pit oxide material grading 1.9 grams and 361,000 tonnes of underground sulphide material grading 3.81 grams. Also present is an indicated and inferred resource consisting of 2 million tonnes of open-pit oxide material grading 1.22 grams and 10 million tonnes of underground sulphide material grading 6.94 grams.

These estimates do not take into account the potential of the western half of the property, nor that of the area below the main adit level. “The potential for further development is very exciting for us,” Caledonia President Christopher Harvey tells The Northern Miner.

Two holes, drilled to a depth of 305 metres below the main adit level, returned values of 16.25 grams over 1.1 metres and 5.81 grams over 3 metres, respectively, thus confirming the continuation of mineralization at depth. Harvey says other mines in the area are operating at depths of up to 1,372 metres.

The Barbrook mine is forecast to produce 40,000 oz. in 1995, increasing to 80,000 oz. in 1997 using the existing plant and the proposed heap-leach facility. Current projections show that the company will be largely self-financing through this period, with production costs likely to be less than $US200 per oz. With such a large mineral resource, additional studies have been initiated with a view to increasing the capacity of the mine after 1997.

The Eersterling mine is in the Pietersburg greenstone belt in the northern Transvaal, on the site of the first gold discovery in Southern Africa. The claims cover about 19,000 hectares and extend for a distance of about 25 km. Watts Griffis & McOuat estimates that the property contains 1.9 million tonnes grading 5.9 grams. Several other mineralized zones, some of which are refractory, have been identified but are not included in the resource estimate.

Eersterling is equipped with a 25,000-tonne-per-month metallurgical plant capable of treating non-refractory ores. The plant treats about 12,000 tonnes per month, yielding 15,000 oz. on a yearly basis.

The mine is forecast to produce 20,000 oz. in 1995 (following construction of a refractory ore treatment circuit). Production is expected to reach 30,000 oz. in 1996 at an operating cost of US$250 per oz.

Caledonia has 23.6 million shares issued, with warrants and options outstanding for a further 1.8 million shares. The company has $8.5 million in cash with no outstanding debt other than an unsecured convertible debenture for $17.3 million due in December, 1999.

Both deals are subject to regulatory approval and due diligence reviews.