JOHANNESBURG (miningweekly.co.za) – Stressed South African gold assets were presenting acquisition opportunities for the dormant JSE-listed Village Main Reef, To The Point's Bernard Swanepoel told Mining Weekly Online on Wednesday.

Swanepoel said that, while the strong rand was the cover-all explanation for gold-mining stress, yesterday's gold price of R240 000/kg remained more attractive than the R140 000/kg of two years ago.

"The rand becomes a nice blanket explanation, but there have been significant cost problems and the net result of all that is that there are lots of assets that are either loss-making or the assets don't fit comfortably in certain companies.

"From my perspective, I feel as though I've seen this scenario before and one could either realise synergies or realign assets."

He said that Village could function as a bottom-feeder acquisition vehicle – "like so bottom that it's quite muddy down there," he quipped.

There was good money to be made and many jobs to be saved, as Durban Roodepoort Deep and Harmony of 15 years ago had shown.

"One would not bring a recipe of 15 years ago to a reality of today. Maybe what will work today is a different approach, but clearly some of these assets simply can't tolerate the costs that come with the way people typically go about mining.

"If you are on a low-grade, lossmaking mine, then anything that doesn't help you to bring out the next ton safely is a wasteful overhead.

"Making money is always a great idea, but saving jobs, truly, unashamedly, is also a worthwhile pursuit.

"But one would have to be very careful to decide on what you are going to do differently. If the orebody is mined out, and the cost structure can't be improved, then why go there.

"But there would be companies from which you would take over a shaft and back yourself to take 20% out of the cost structure.

"I would say from a distance - and I clearly have been a bit of spectator - that if two years ago you offered us R240 000/kg two years into the future, we would all have clapped our hands and said, ‘happy days are here again'.

"In the last six months the rand has been painful, but if you take a slightly longer view, the gold price has gone up a lot and clearly what has happened is that costs have gone up faster than the gold price," Swanepoel said.

Village's original plan was to raise capital to improve its balance sheet by way of a rights offer to shareholders, but that was abandoned owing to a JSE ruling prohibiting cash being put into the company without it being part of a clear growth strategy. Village thus remains a curtailed operation and its funding continues to be by way of shareholder loans.

The company has been using its majority To The Point Growth shareholder to seek out prospective opportunities. To The Point has been retained on a success fee basis capped at 0,5% to advise Village and to source potential deals.

Swanepoel told Mining Weekly Online that currently those main opportunities were in gold in South Africa.

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