Theta Gold Mines Ltd (ASX:TGM) (OTCMKTS:TGMGF) looks set to become a key player in the South African mining industry through plans to begin operations at open pit and underground mines in the Eastern Transvaal Gold Fields.
In order to unlock at least 6 million ounces of gold resources, the company plans to start four mines within five years to build an annual production profile of more than 160,000 ounces.
The latest milestone in TGM's strategy is a maiden underground pre-feasibility study (PFS) for the TGME Underground Project that uncovered extensive flat high-grade narrow reef systems that can be mined economically.
This PFS demonstrated that the use of modern mechanised mining and metallurgy could deliver strong project economics for the Beta, Frankfort, and CDM mines, all of which form part of the Central Northern area and are now collectively referred to as TGME Underground Project.
Theta Gold has demonstrated, through the first phase underground PFS, excellent project economics for what it believes to be only a small portion of the underground resource and will continue to build up its mining reserves during the year by progressing Rietfontein and other mines through to PFS level, while concluding detailed designs for the Phase 1 UG Project.
Chairman Bill Guy said: “At Theta Gold, the resource pipeline into the future is strong, and the scale of the potential resources and the geology in South Africa should not be underestimated.
“The company will soon be a key player in the South African mining industry, a sector that has produced more tons of gold than any other country when measuring gold bullion tonnage.
“Over 40% of the world’s gold has come from the small corner of South Africa that we call home.”
Optimise development strategy
Guy added: “Now that the company has generated a PFS for the TGME Underground Project, we can optimise our development strategy based on confident numbers.”
The PFS shows that the narrow high-grade reef system can be mined with modern mechanised mining techniques (safer, increased productivity and minimum dilution), and that the gold can be recovered utilising modern metallurgical technologies (Ultrafine grinding and Intense CIL).
This proof of concept is part of de-risking the underground projects.
PFS based on only 16% of gold resource
The PFS is based on only 16% of the 4.5 million ounces gold underground gold resource and incorporates only three mines out of a total 43 historical mines across the project area.
It also considered only measured and indicated resources for initial inclusion in production and reserve conversion.
The inferred resources of these phase 1 mines, together with more than 40 historical mine sites under management, will be systematically studied and incorporated into future production modelling.
This is a very positive early step to developing the goldfield.
The initial study focused on the easy access of 684,000 ounces gold in the measured and indicated categories of the TGME Underground Resource for the Beta, Frankfort and CDM areas.
The team achieved a conversion factor of 63% from resource to mining reserve in those areas.
A further 3.5 million ounces gold of inferred resources is available to be upgraded to the measured and indicated resource categories and potentially a portion could be converted into mining reserves.
Compelling financials
The TGME Phase 1 Underground Project, which excludes the open pits, has compelling financials based on a forecast gold price average of US$1,570/ounce and a ZAR/USD exchange rate of 15.9. These include:
- Pay-back period from first gold 13 months;
- Pay-back period from start of mining 22 months;
- 419,000 ounces gold delivered to plant over initial Life of Mine (7.67 years);
- By the third year, production over 60,000 ounces gold/year (recovered);
- US$241.2 million EBITDA over LoM;
- Internal rate of return (IRR) 82%;
- US$91.2 million net present value (NPV); and
- US$905/ounce gold all-in sustaining cost (AISC) over LoM, bottom quartile for South Africa producers.
It estimates total LoM capital expenditure of US$79 million including:
- Peak capex for first three years of US$37 million (oxide and backfill plant and beta mine development);
- Year 4 of US$27 million sulphide circuit and Frankfort and CDM mine development; and
- US$15 million of remaining capital to develop and sustain operations.
New CEO’s development strategy
The company has a five-year plan targeting four mine developments - Theta open-pit Starter Project (MR83 only), Theta open pit extension (MR341) and the Rietfontein and Beta underground mines.
This four-mine strategy provided a clear growth plan with a combined open pit and underground resource of over 2.75 million ounces.
The detailed work on Frankfort, Beta and CDM UG mines, together with Theta Phase 1 OP, has further enhanced this strategy.
TGM will expand further regarding this wider scope during the second quarter of 2021.
The 'New CEO’s Development Strategy' later in April will review how the underground and open pit mines will be combined to organically grow the production profile.
Rietfontein PFS in third quarter
Guy said: “The team will complete the Rietfontein PFS in quarter three of this year.
“The mining reserve from Rietfontein can then be brought into the updated PFS to further increase the production profile."
UG Plant
The UG-Plant will be able to accommodate a variety of ore sources, incorporating different streams that require different treatment solutions, while sharing front-end (crushing) and backend (CIL, elution, gold room, tailings) infrastructure.
It will also be further expandable with modular additions, and the CIL section will also be shared with the 50,000 tons per metres Theta Open Pit plant (oxide ore plant).
The existing Process Plant will be upgraded and refurbished to treat ore from Beta.
Frankfort ore will be concentrated via Dense Media Separation (“DMS”) at the shaft and only the concentrate will be trucked to the Process Plant.
The ore from CDM mines will also follow the same process route as Frankfort ore.
The existing tailings facility will be re-commissioned for the first phase, while for subsequent phases the CIL Tailings will be pumped into the mined-out workings of the Beta mine adjacent to the Process Plant as backfill.
Potential upgrading of mined ore from Beta and CDM via XRT or DMS is under investigation and not factored in but this could potentially further increase gold production.
More detailed studies will be conducted to refine the design.
The planned recovery rate of 84% is based on the test-work to date.
A team of experts are working on the plant solutions, and assurance checks have been put in place.
The company will employ reputable EPCM partners for detailed design and construction of the project.
Core project
Theta Gold Mine’s core project is next to the historical gold mining town of Pilgrim’s Rest, in Mpumalanga Province, some 370 kilometres northeast of Johannesburg by road or 95 kilometres north of Nelspruit (Capital City of Mpumalanga Province).
The company is currently focussing on the construction of a new gold processing plant within its approved footprint at the TGME plant, and for the processing of the Theta Open Pit oxide gold ore.
The company aims to build a solid production platform to over 160,000 ounces per annum based primarily around shallow, open pit or adit-entry shallow underground hard rock mining sources.
Theta Gold holds 100% issued capital of its South African subsidiary, Theta Gold SA (Pty) Ltd, which in turn holds a 74% shareholding in both Transvaal Gold Mining Estates Ltd (TGME) and Sabie Mines (Pty) Ltd.
The balance of shareholding is held by Black Economic Empowerment entities.