Vancouver Seeking to become a mid-tier gold producer, Great Basin Gold (GBG-V) has broaden its scope from the Carlin trend in Nevada to the prolific Witwatersrand basin region of South Africa.
The Hunter Dickinson-led junior has inked a deal allowing the company the right to purchase a private South African entity, which holds an option to earn an 80% stake in the Burnstone gold property. Covering 400-sq-km of ground in the Witwatersrand goldfields, the property lies 100-km southeast of Johannesburg and hosts an indicated and inferred resource of 34.7 million tonnes grading 15.53 grams gold per tonne.
Under the deal, Great Basin can exercise its option and complete its purchase of the South African company by paying US$3.25 million in cash, issuing 21 million shares and 10.5 million warrants in two staged tranches. The fist stage, which gives Great Basin a 49% stake in the company, involves US$2 million, 10 million shares and 5 million warrants payable by April 30 of next year. The junior can then acquire the remaining 51% by issuing 11 million shares and 5.5 million warrants by the end of January 2004. A US$1.25 million is due on signing a definitive agreement and the warrants are exercisable at US$0.75 for one year. Great Basin has also agreed to fund an initial US$1.5 million exploration program and is required to issue additional shares depending on the amount of gold reserves and production costs slated in an up coming feasibility study on the project.
The new program entails infill drilling with the results incorporated into the bankable feasibility study.
In Nevada, Great Basin’s Ivanhoe gold property, hosts an inferred resource of 719,000 tons grading 1.29 oz gold/ton and 7.0 oz silver/ton. Idaho-based Hecla Mining (HL-N) is funding project development as part of an earlier deal. The partners are focussing on the Clementine-Gwenivere vein system in the Hollister portion of the property. Hecla can earn a half-stake in this portion by spending US$21.8 million on a 2-stage development program. The first part consists of a US$10.3-million program of underground development and drilling aimed at upgrading the resources into reserves. The second, US$11.5-million stage will attempt to develop the vein systems.
Great Basin envisions a 5-year underground operation capable of mining 600 tons per day and treating ore at a local mill. This would result in production of 170,000 oz. gold and 920,000 oz. silver annually. Cash costs are pegged at US$114 per oz. gold-equivalent, with total costs slated at US$134 per oz. gold-equivalent.
The economic model uses 50% mining dilution and carbon-in-leach processing with recoveries of 95% for gold and 90% for silver. Underground mining costs are estimated at US$55.50 per ton, and toll-mining charges would be US$25 per ton. The capital cost for the proposed mine is projected to be US$22 million.
Hecla is currently completing engineering and permitting work to facilitate an underground drive into the gold veins. The company has one year after receiving the permits to complete stage-one of the program. The company then has 45 days in which to begin phase 2, which has the timetable of another year. Once a final agreement is signed, Hecla will issue 2 million warrants to Great Basin and, in return, receive 1 million warrants in the Hunter-Dickinson-led junior. Hecla will also issue 1 million warrants upon completion of each work stage, and Great Basin will match that with 500,000 of its warrants.
The resource comprises seven veins hosted by Ordovician Valmy Formation rocks thrusted over younger carbonate rocks.
Great Basin has current working capital of $17 million, no debt, and 47 million shares outstanding.
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