Otjikoto gold project underway, mining prospects look bright

By Farai Diza
February 2013
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B2Gold’s Board of Directors (BoD) has given the green light for the commencement of the Otjikoto gold mine project, following the project’s robust results from its feasibility study, according to the company’s recent media statement.

The Otjikoto gold project site is located about 300km north of Windhoek and is 92% owned by Toronto-based B2Gold while the remaining 8% is owned by a local black empowerment group, EVI Gold. The property has excellent infrastructure and drilling, and thus far, has outlined water on site well in excess of the life-of-mine requirements.

The BoD has accepted the project’s feasibility study and has thus instructed the management to implement the study’s recommendations in order to develop and bring it to commercial production.

This development is good news for the Namibian mining industry as well as the country’s economy. That’s because the mining industry is one of Namibia’s significant employer and one of the biggest contributors to the country’s gross domestic product (GDP).

According to the media statement, the project has excellent exploration potential. An aggressive exploration drilling programme continues on the success of the high grade Wolfshag zone discovered in late 2012, which is adjacent to the planned Otjikoto pit. These positive results indicate significant exploration upsides and the potential to outline additional resources, which could lead to the expansion of through-put capacity and an increase in annual average gold production.

A trade-off study with metallurgical test-work was conducted to evaluate the optimal processing design for the project. Based on the findings of the metallurgical test-work, the study recommended utilising a whole ore carbon in leach recovery system rather than the previous concept of utilising a flotation recovery circuit.

B2Gold has also announced the acceptance of a commitment letter from Macquarie Bank Limited of a financial package to the tune of $150m (approximately N$ 1,344b) worth of secured loan facility. This has given the company the financial clout it needs to undertake the project.

“B2Gold’s strong financial position and anticipated future operational cash-flows, combined with the recently signed committed facility term sheet, are expected to provide the company with sufficient financial resources to bring the Otjikoto project into production, as well as fund all additional expenditure projected for 2013,” explains the company’s media statement.

The project will be developed as an open pit mine with an initial life-of-mine of 12 years, based on the probable minerals. In addition, the recent high grade discovery indicates that the potential to expand the reserves and mill through put a capacity, which could facilitate and increase an annual gold production.

The pre-production capital cost estimate for the Otjikoto project’s processing plant and infrastructure was compiled by the project management team. The team was supported by the primary feasibility consultant; DRA Mineral Projects Ltd and other feasibility study (FS) engineering contractors who significantly contributed to the capital cost estimate form and basis. DRA Mineral Projects Ltd provided the plant process and infrastructure capital costs.

VBKOM Consulting Engineers Namibia, on the other hand, provided the form and basis for the surface mining capital costs inclusive of the mining equipment and mine development costs while Epoch Resources (Pty) Ltd provided the designs and quantities for the tailing pond cost estimates, according to B2Gold.

B2Gold has set the current average annual production for the first five years at approximately 141 000 ounces of gold per year at an average operating cost of $525 (approximately N$4 704per ounce. For the life-of-mine, approximately 112 000 ounces of gold per year at an average operating cost of $689 (approximately N$ 6173) per ounce has been set.

“The total pre-production capital costs are estimated to be $244.2m (approximately N$ 2,188.02b), which includes working capital for supplies, taxes and owner’s costs. The mine plan is based on probable mineral reserves of 29.4million tonnes at a grade of 1.42g/t containing 1 341 000 ounces of gold at a stripping ratio of 5.59:1 to be mined over an initial 12-year period. All necessary Government permits and licenses have been received, construction has commenced and its completion is expected in the fourth quarter of 2014 when mill production begins,” states the release.

The plant facility and support infrastructure will be built to support a plant expansion from the initial processing capability of 2.5 million tonnes per annum to three million tonnes with minimal additional capital expenditure. The financial modelling for the Otjikoto project indicates robust economics. At a gold price of $1 550 (approximately N$13 888) per ounce, the project is anticipated to yield a positive after-tax of $243m (approximately N$2 1,773b) at a discount rate of five percent.

According to B2Gold, the project’s site development will take place all year round, utilising a workforce of experienced Namibian nationals; trained and supervised by Namibian and expatriate supervision. Many of the expatriate supervisors have worked on previous successful projects associated with B2Gold and the Bema Gold Corporation.

The company has also set up a corporate social responsibility programme that will see communities in the Otjikoto project area immensely benefitting from the mining initiative.

Projects include scholarships to previously-disadvantaged students, as well as a support framework to the Namibian Institute of Mining and Technology, which is a partnership with the Cheetah Conservation Foundation meant to monitor and protect endangered species. Other projects include the identification of potential small to medium enterprises (SMEs) within the communities where the company’s workers live; the support of educational needs through the Ministry of Education (MoE); the support of programmes that help at-risk teens; as well as the provision of equipment and facilities to support local medical needs.

With its proven technical team, a strong operational performance, financial strength and high quality development and exploration projects, B2Gold believes it is well positioned to continue its rapid growth as an intermediate gold producer from existing projects. PF