Great Basin sees chances for growth
Allan Seccombe
Posted: Fri, 13 Jun 2008
[miningmx.com] -- GREAT Basin Gold is actively exploring two African gold regions as it works towards bringing two projects into production, changing the rating of the company and clearing the way for corporate activity, said CEO Ferdi Dippenaar.
Whether that corporate activity sees Great Basin taken over, particularly for its Hollister project in Nevada, or Great Basin making a move on someone else will only become clear in time. One thing that is clear now is that Dippenaar is keen for the projects to come into production, resulting in a much improved change in Great Basin’s rating.
 we’ll look to other companies for consolidation 
Exploration companies generally trade at a 0.7% premium to their net asset value, while junior producers trade at a 1.4 to 1.6% premiums. Looking at the market capitalisation value per resource ounce in the measured and indicated category, Dippenaar said the value of juniors was $75/oz and junior producers $170/oz. “There’s a huge re-rating that could take place for Great Basin when we bring our two projects into production. It will upgrade the currency with which we can transact and we’ll look to other companies for consolidation,” Dippenaar told Miningmx. “There are lots of opportunities out there because there are some brilliant projects, but the companies that own them are in a corner because of the sub-prime issue and liquidity problems that are making it difficult for explorers and juniors to raise capital.” There has been much speculation in the market that Great Basin could be a takeover target by a North American gold miner and Newmont in particular. Both sides are tight lipped about the matter. There are burgeoning relations between the two companies; with Great Basin having toll treated 5,000 tonnes of ore at Newmont’s nearby Midas mill and putting a second similar sized batch through the plant in June. The first batch produced 4,644 oz of gold and 42,539 oz of silver. It doesn’t make sense for Great Basin to build its own mill just yet, with the Hollister mine’s six-year life, but if further exploration proves up treble the current one million ounces of mining reserves, then the company would look at installing its own mill, Dippenaar said. Great Basin will spend $14m exploring Hollister this year, using four surface drills and five underground. “We think there are still a few discoveries to be made,” he said. Great Basin is talking to Newmont about taking steady state production of up to 15,000 tonnes of ore a month, but if this doesn’t pan out, there are some seven other mills in 150 mile radius that could take the material, said chief financial officer Lou van Vuuren.
“The indications are that Newmont has the spare capacity,” he said, adding the Midas plant might need to be tweaked to take into account the relatively high amount of free gold in Hollister’s ore. Newmont had to shut the Midas mine for four months in 2007 after a fatal accident there in June. It has taken some time to bring back into production. If Great Basin were looking to buy a mill, this would be an obvious starting point. Great Basin expects Hollister to produce 80,000 oz of gold by the end of 2008 and reaching its capacity of 150,000 oz next year. At Burnstone in South Africa, Great Basin will begin a 26,000 tonne bulk sampling process in the September quarter rolling over into the December quarter. This sample could be treated at the nearby Evander mine owned by Harmony, Dippenaar’s former employer. Great Basin hopes to secure its mining licence in October, which will mean bulk sampling will roll seamlessly into mining. Great Basin will test long-hole stoping as an alternative to the hybrid method of mining it was initially considering for the shallow Burnstone mine. This would mean a far more mechanised – and safer -- mine, bringing with it the associated costs of sourcing equipment. “We are revisiting those numbers… but we don’t expect the total cost for the mine and plant to increase significantly,” van Vuuren said. The initial capital cost estimate for the mine was $174m, which will be funded from cash flows from Hollister as well as internal cash. There is also a $57m loan from Investec, which has yet to be utilised. Great Basin has no debt on its books and this could be another option for raising funds. In Tanzania, Great Basin is exploring two greenstone prospects either side of AngloGold Ashanti’s Geita mine as well as a third. The company is spending $7m, which is above the $8m Rusaf, which Great Basin acquired, has spent. Great Basin could declare a resource at the one or two of the properties near Geita by the end of the year, Dippenaar said. In Mozambique, Great Basin has an early stage exploration project not far from Pan African Resources’ Manica prospect. First phase drilling is expected to start there by year end. Great Basin needs to spend $2m over three years to earn 80% of the project. It also has the warrants to increase to 21% from 15% its stake in Kryso, which plans to have a bankable study into a project in Tatjikistan in the third quarter of this year. There is a separate exploration programme in Alaska.
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