Gold Mining Waste

Written By Luke Burgess

Posted March 27, 2007

BALTIMORE, MD – With gold production in South Africa currently at an 84-year low, mining firms working in the region are scrambling to do everything in their power to boost production and add to their bottom line…even reprocessing mountains of waste material.

Last week, the South African Chamber of Mines reported that gold production fell by 7.5% in 2006, taking it to its lowest level since the great mining strike of 1922!

Gold production in South Africa totaled only 275.1194 tons last year…significantly lower than the 297.3116 tons produced in 2005.

The Chamber of Mines, which represents about 85% of South Africa’s production, attributed the drop in production to the lower gold grades that were being mined. Despite a 1.5% increase in the amount of total ore processed, the chamber reported a 9.3% decrease in the average grade mined…hence the decrease in production.

In the fourth quarter of 2006 alone, South Africa’s gold production fell by 3.1% quarter-on-quarter to 75.0871 tons, while on a year-on-year basis this figure was 9.3% lower than the last quarter of 2005.

To help combat the decline in production, many mining firms are seriously looking to reprocess waste material.

One Man’s Mining Waste is Another Man’s Gold

It’s certainly not pretty…

…but this tailings pond (owned by Rochester Resources Ltd., a company that I visited in Mexico earlier this month) contains roughly 0.6 grams per ton (g/t) gold and 30 g/t silver. And this waste material can be reprocessed at any time. At present, however, Rochester will be focused on processing the ore they’re mining from their property, which has an average grade of about 14 g/t gold-equivalent.

Nonetheless, reprocessing mining waste can be done. And with gold prices at $660 an ounce and still signaling higher, a fresh impetus has been spurred in extracting these small amounts of gold in crushed, processed ore that has been discarded.

Truth is, reprocessing mining waste is nothing new. The first wave of waste reprocessing in South Africa took off in the 1980s after a spike in the gold price, but that targeted older sand dumps that had grades of up to 1.5 g/t.

Once those dumps were exhausted, reprocessing tapered off. When newer mills were able to grind ore into finer particles, this increased gold extraction and therefore left much less metal in more modern liquid waste dams.

But now some modern waste dumps in South Africa that contain tiny amounts of gold have become economically viable after local gold prices nearly doubled over the past two years.

Digging into the mountains of waste is especially attractive in South Africa, the world’s biggest gold producer , where firms have to dig deeper and deeper to tap fresh deposits.

Bernard Swanepoel, Chief Executive of Harmony Gold Mining Company Ltd., the fifth largest gold producer in the world, recently commented on reprocessing mining waste saying, "It’s really like building a brand new gold mine but for a fraction of the cost. This is the one place where the gold price makes a real fundamental difference to a project because of the short lead time."

You see, burrowing several miles below the surface to build a new underground mine can take up to 10, or even 15 years. But setting up a processing plant for waste dumps can be done in two. Plus there’s no expensive, time-consuming exploratory work that needs to be done.

The reprocessing trend has swept up both junior producers and the big players.

Harmony is in the midst of pre-feasibility studies for a project that will cost roughly $165 million and would reprocess between 1.5 and 3 million tons a month. The company aims to produce 400,000 to 450,000 ounces of gold per year from waste starting as early as 2010.

Reprocessing also makes up a key segment of some smaller players, such as DRDGOLD Ltd., whose surface operations are its most profitable activities. The company’s Crown tailings operation made a cash operating profit of $6.38 million in the quarter to end December.

Many current projects are targeting gold values in the 0.2 to 0.4 g/t range, which is tiny compared to underground grades in South Africa that can be as high as 10 g/t. But with costs low, the margins can be very high.

Many of these projects rely on a rosy outlook for gold prices for the next several years. But with gold prices over $1,000 an ounce, these projects would certainly work well.

Until next time,

sig

Luke Burgess
Gold World

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