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JULY 2014 • E&MJ; 51 www.e-mj.com S I B A N Y E G O L D Sibanye may have proved itself in manag- ing costly deep level mines, but Burnstone, a relatively shallow deposit with complicat- ed geology, may be harder to master. Burnstone has already brought one company to its knees and forced another to seek a white knight to come to its res- cue. Construction began in 2006 by Canada-listed Great Basin under the stewardship of CEO Ferdi Dippenaar. It soon ran into trouble, producing only 38,000 oz of gold before being placed on care and maintenance in mid-2012. Great Basin went into business rescue and Burnstone was acquired by Wits Gold. "If we fail at Burnstone, then that's the end of Wits Gold," Wits CEO Philip Kotze told Miningmx in July 2013. "We have got an opportunity to reposition this mine. It was certainly the lowest risk mine that we could get into operation by a long way," he said. By December, however, Kotze's opti- mism had given way, as he told Business Day : "We are in difficult times now, if you look at where the markets have been for the past year. There's not a lot of capital around." Sibanye now hopes to turn this diffi- cult asset into a profitable mine. Although the price for Wits Gold was relatively mod- est, it will require a formidable invest- ment to return Burnstone to production. "Burnstone was acquired at virtually no cost but Sibanye needs to spend around R1.3 billion ($123 million) over the next 3-4 years to bring the mine to life again," said Kobus Nell, resource analyst at Stanlib. The mine has 6.4 million oz of reserves and a 21.7-million-oz resource. Nell said Burnstone is a high-risk asset that is difficult to mine because of very thin channel widths and highly carbona- ceous rock, with a high-dilution risk. According to previous owner Great Basin Gold's website, which at the time of this writing was still up, Burnstone consists of placer deposits hosted within coarse- grained sediments deposited in braided stream channels on broad river plains. Economic gold concentrations commonly extend for several kilometers down the dip, and for up to 50 km along strike of the sed- imentary rock units. Gold occurs as detrital grains in nugget-like shapes and secondary re-crystallized grains, ranging in size between 0.005 and 0.5 mm in diameter. "The issue in the case of Wits Gold originally was more around a lack of pro- ject capital to see the development through," said Nell. "The type of mine development that they opted for was sup- posed to bring positive cash flows for- ward, but never materialized due to their inability to manage the underground dilu- tion factor." This left the company in a position of not having enough operational cash flow to fund further development, he added. "Froneman has, however, shown the ability to turn assets around, but some still question the level of sustainability. The strategy on Burnstone may be to try and run a very lean operation, gain access to low hanging fruit and deliver much improved results. However, sus- tainability is dependent on further reserve development. This requires capi- tal that could conflict with Sibanye's 'high dividend paying' proposed strate- gy," said Nell. A central question to Burnstone's return to production will be whether it will continue to use a narrow stoping mechanized mining method that was ini- tiated by Dippenaar. It was the move to mechanization—at odds with the conven- tion of labor intensive mining in South Africa—that was ascribed to Burnstone's cash drain that eventually sunk Great Basin. Dippenaar through a spokesman declined to comment. "The reason why the previous com- panies failed was because of the mining method used," said Sibonginkosi Nyanga, equity research analyst at Imara S.P. Reid Stockbrokers. "Dilution resulted in more waste being sent to the mill resulting in very low yield. The long-hole stoping method failed and I think there is a need for a change in the mine design and mining method. The conventional breast stoping might do the trick and a switch in the mining Koos Barnard, vice president of Driefontein, says the mine produced up to 2 tons of gold a month in its heyday. Complex geology has defied mechanization and Driefontein still relies on traditional hand drilling. Sibanye plans to use the same methodology at Burnstone. EMJ_pg50-52_EMJ_pg50-52 7/1/14 2:52 PM Page 51