Minerals industry consultant Venmyn Rand started the year on a high note, following its securing of several contracts for gold projects in the Democratic Republic of Congo (DRC), Ethiopia and Tanzania.
Venmyn director Neil McKenna reveals that these con-tracts are a result of a resurgence of interest in gold in these countries.
The company has been involved in a competent person’s report (CPR) for Canadian gold miner Banro’s Namoya project, in the DRC, two preliminary economic assessments for the National Mining Corporation, in Ethiopia, a CPR and a prefeasi-bility study for exploration company Tanzanian Royalty and a CPR that assisted Tanzania-focused Kibo Mining’s listing on the JSE.
One of the company’s 2011 projects in the gold sector was for junior gold operator Taung Gold. Venmyn compiled a CPR for the operator’s assets, which were reverse-listed on the Hong Kong Stock Exchange after building contractor Wing Hing International Holdings acquired Taung for $580-million.
Venmyn’s strategic advice to clients includes suggestions on issues such as how to create lower cutoff grades in relation to higher gold prices.
“This has measurably increased the resource and reserve base of many of our clients and has significant impli-cations for mine design, the economics of projects and the life-of-mine of older operations,” highlights McKenna.
Meanwhile, he expects that gold will be a strong contributor to the company’s earnings and attributes this to the uncertainty in the eurozone, instability in the Middle East and a potential economic bubble in China, since periods of economic uncertainty are typically boom periods for the gold sector. He believes the high gold price will result in the acquisition and reinvestigation of sought-after projects.
McKenna believes that South Africa’s gold industry needs to showcase new projects in what he calls the industry’s ‘state of decline’.
He attributes the decline to government’s perturbing mining policies that have recently been widely publicised and have come to be seen as a tenure risk by investors.
“Investment is being hampered by uncertainty regarding govern-ment mining policy and security of tenure. Once this uncertainty has been removed, there is potential for investors to return to South Africa’s gold sector,” suggests McKenna.
He also points out that, although the price of gold has increased significantly, rand strength, high labour and energy costs, as well as the effects of industrial action in the gold-mining sector, have counteracted the potential advantage.
Meanwhile, McKenna says Venmyn has employed its prop-rietary gold valuation curve in the course of valuing many of its early-stage gold projects.
These curves have been devel-oped in-house and are based on a significant database of previous and recent transactions. The curves are available for use by Venmyn or to buy.
“This valuation technique plots various projects according to their resources and value per ounce and is used to provide an indicative value of a project. It assists in determining the fair value of a project that has declared resources and reserves,” notes McKenna.