Johannesburg - Broad-based black economic empowerment consortium Iningi Investments is to acquire an initial stake in President Steyn Gold Mine (PSGM) in South Africa's Free State province.
PSGM, which was previously listed on the Johannesburg Stock Exchange, was acquired in 2001 by Canadian company Thistle Mining. Thistle is currently listed on London's AIM.
In terms of the deal, Mindserv, a wholly owned South African subsidiary of the company that owns PSGM, has concluded a shareholders agreement with Iningi - to be renamed Lefa La Gauta - for the BEE group to acquire an initial 15 percent equity stake.
Thistle said in a statement on Thursday that although the transaction is not expected to have a material impact on the financial condition of the company, it is a necessary step for PSGM to qualify for the grant of new order mining rights in South Africa and as such, its strategic significance is critical.
PSGM will also be able to benefit from the significant mining credentials and skills that members of the consortium possess.
Iningi and PSGM will each appoint three representatives to a Conversion and Transformation Committee that will be mandated to steer the process to convert old order mining rights to new order mining rights.
Iningi was established as an independent, fully-owned BEE consortium of individuals, companies, and trusts with the aim of positioning itself within the minerals industry through investments and carefully picked strategic alliances for the benefit of all its stakeholders.
The shareholders of the consortium are Lefa La Gauta - to be renamed Lefa La Lefatshe; JuliMvula Investments; Plumbago; Disability Empowerment Concerns Trust; Management and Professionals Trust; and Monontsi Joseph George Mzondeki.
Mzondeki is a Member of Parliament serving in the Labour Committee as well as the Public Service & Administration Committee and is a resident of Welkom in close proximity to PSGM's operations.
The shareholders of Iningi possess vast experience of the South African mining industry.
Once the PSGM mine cash flows have stabilised, attention will shift to two growth projects. A feasibility study for the Golden Triangle Project, estimated to be completed during the first quarter of 2007, is under way.
Access to the project area will be provided from current mine infrastructure. Should this project prove viable, it will provide rapid and capital efficient access to a mineral resource of 4.9 million tonnes containing an estimated 1.3 million ounces of gold.
Exploration work will also start on the Eldorado Reef Project early in 2007. Exploration costs are estimated at $6.9 million or $3.00 per estimated resource oz, to be funded from available PSGM generated cash flows.
PSGM produced 165 277 and 175 490 ounces of gold in 2004 and 2005 respectively and forecast gold production for 2006 is approximately 143 000 ounces.
Cash costs for 2006 are forecast to be $550 per ounce, and total costs are expected to be in the range of $590.
The company is unhedged and for the first nine months of 2006 it realised an average spot price of $600 an ounce.
Production for 2007 is expected to be 155 000 to 160 000 ounces at a cash and total cost of $520 to $535 and $560 to $575 assuming a rand to US dollar exchange rate of R7.00.
PSGM has a measured and indicated gold resource of 50.9 million tonnes at a grade of 8.86 grams per ton, projected to yield 14.49 million ounces of gold.
PSGM's proven and probable gold mineral reserves as at March 2006 - which can be exploited from existing albeit old infrastructure consisting of five shafts - total 8.27 million tonnes, estimated to yield 2.2 million ounces at a grade of 8.55 grams per ton. - I-Net Bridge