JOHANNESBURG (miningweekly.com) – Johannesburg- and New York-listed Sibanye Gold was reviewing options to bring the idled Burnstone mine back to life from a “zero base”, in a R7-million deal senior VP for business development Richard Stewart described as a “no-brainer”.

The embattled Mpumalanga-based gold mine presented an “exciting” opportunity to capitalise on historic lessons learnt and to develop a low-cost, growth accretive operation capable of boosting Sibanye’s gold portfolio.

Following the R407-million takeover of Witwatersrand Consolidated Gold Resources (Wits Gold) in April, Sibanye planned to leverage its extensive historical knowledge to build a “fit-for-purpose” operation.

The group, which earmarked an initial R180-million over 15 months for infrastructure capital when the Wits Gold deal closed, was currently upgrading its due diligence study to a detailed life-of-mine plan, due for completion in the first quarter of 2015.

Stewart said Sibanye had "derisked the Burnstone opportunity” by reviewing and gaining detailed understanding of the orebody, applying appropriate and well-understood mining methods and compiling an “achievable” ramp-up profile benchmarked against similar operations, besides others.

The mine had failed owing to a number of factors, including an incorrect resource model and the use of an inappropriate mining method for the complex structure, which led the previous owners, Great Basin Gold (GBG), to mine the “wrong” sections at a “huge” loss, he believed.

Sibanye would institute conventional breast mining technology and narrowly focus on selective, higher-grade sections after redoing the mine resource model and targeting higher-grade areas earlier.

The group would also move to shallower mining, at between 250 m and 1 000 m, and lower output targets from 200 000 oz/y of gold to between 80 000 oz/y and 100 000 oz/y.

“This is not a historic mine we want to restart – we are starting to develop the mine around the orebody from a zero base,” Stewart explained, adding that four years of predevelopment with limited stoping would be undertaken.

Sibanye had “pushed the button” on the buyout of the suspended mine after completing its four-month detailed technical due diligence – one of the company’s longest ever investigations – and securing the outcomes of Wits Gold’s nine-month review and the decades of information and lessons available on the mine.

Further, more than R500-million and ten years of exploration to reef development had been undertaken by GBG behind the mine and the mine had all necessary operational licences and permits already in place.

“The price we paid [and the favourable] funding criteria – [basically] what we get out of the deal – it is a no brainer,” Stewart said.

The deal was secured on “extremely favourable” terms, with the mine set to boost Sibanye’s reach into the South Rand goldfield and drive the company's ambitions of shifting production into shallower gold-mining areas.

The shallower operation enabled lower operational cost, lower seismicity and undemanding capital.

The transaction would close as soon as GBG parent company, Southgold, emerged from business rescue.