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  • Gold One Reaches Milestones, South African Operations To Shine 0 comments
    Sep 30, 2013 12:31 AM

    Gold One (ASX: GDO, JSE: GDO) has in the past two months hit several milestones towards its South African operations.

    Key amongst these are reaching a two year wage deal with labour unions and its agreement to secure a 17% interest in major South African gold producer Sibanye Gold (JSE:GFI, NYSE:GFI, NASDAQ:GFI).

    It has also received the final prospecting right to purchase the underground deposits and selected surface assets of Pamodzi Gold East Rand and has penned in its first gold and uranium resources of 8.68 million ounces of gold and 22.1 million pounds of U3O8 for the Cooke 4 Shaft.

    This builds on the performance for the half year ended 30 June 2013.

    Operating Review

    In the six months to 30 June 2013, Gold One produced 130,061 ounces of gold compared to 125,856 ounces in the comparative period.

    However, this was impacted by a sharp decline in the gold price during the period which reduced revenues leading to a negative cash flow of A$2 million.

    For the June 2013 quarter, the company achieved the following its highest ever quarterly production of 68,208 ounces, equalling a 10% increase on the previous quarter's production and reflecting the steady build up across the company's operations.

    Operational profitability is expected to improve further as Modder East reaches steady state production levels later this year, further reducing unit operating costs.

    The Cooke Underground Operation is strongly focused on achieving its turnaround strategy and the realisation of uranium coproduction.

    Post the significant restructuring at the Cooke Underground Operation late last year, the operation is better positioned for improved performance.

    The company also implemented perational and structural measures necessary to ensure that it both operates sustainably in a lower gold price environment and improves operational efficiency in the long term.

    This has resulted in a drive to increase production levels across all operations and focusing on cost management by reducing non-value adding activities.

    Gold One's major shareholder, BCX Gold Investment Holdings, has also increased its stake in the company to over 90%. BCX Gold has to date invested approximately A$700 million to acquire its stake in Gold One and has further supported Gold One through unsecured shareholder loans.

    Recent quarter highlights

    Since then, Gold One has reached an agreement to exchange its 74% interest in Newshelf 1114 Proprietary Limited for a 17% interest in Sibyane, which has a market capitalisation of 9 billion rand (A$971 million).

    Sibanye is produce 1.35 million ounces from its Kloof, Driefontein and Beatrix operations in the West Witwatersrand and Free State Gold Fields in 2013, making it one of the largest gold producers in South Africa and among the top 10 global gold producers.

    Notably, its robust dividend policy to return between 25% and 35% of normalised earnings to shareholders will provide substantial cash flow for Gold One.

    Newshelf 1114 holds 100% of the Cooke 1-3 Underground Operations and Randfontein Surface Operations (Rand Uranium) as well as 100% the Cooke 4 Underground Operation (Ezulwini Mining).

    The planned merger will allow for improved production flexibility, capital allocation, synergies in management coordination and procurement and other benefits of integration and adjacency, all of which will assist in optimising the operations

    Gold One and its 72%-owned subsidiary Goliath Gold Mining (JSE: GGM) have also received the final prospecting right to purchase the underground deposits and selected surface assets of Pamodzi Gold East Rand.

    Notably, this allows it to start exploring and delineating the well-known down-dip Kimberley Reef extension to the Modder East Operations that has the potential to substantially increase its current 10-year mine life.

    Lastly, but not least, Gold One has recorded a maiden gold and uranium resources of 8.68 million ounces of gold and 22.1 million pounds of U3O8 for the Cooke 4 Shaft in South Africa.

    It also declared a Reserve of 0.37 million ounces of gold and 1.96 million pounds of U3O8.

    Along with its existing uranium plant, Cooke 4 offers the opportunity to unlock the value of the Cooke 1-4 shafts' joint underground resources through shared synergies and the implementation of the uranium co-product strategy.

    Analysis

    Gold One has put in place the pieces needed to grow its South African operations, particularly its Modder East Operations.

    This is poised to grow through the acquisition of the well-known down-dip Kimberley Reef extension that can be accessed utilising Modder East's existing infrastructure.

    In addition, the two year wage deal ensures that production from its Cooke 1-3 Underground Operations and Randfontein Surface operations would continue while positioning the assets for their upcoming merger into Sibanye.

    Sibanye had the strong cashflow, management expertise and existing asset portfolio to leverage the synergistic opportunities in these projects with its existing Beatrix, Kloof and Driefontein mines.

    In turn, Gold One will not only retain exposure to its projects from a 17% stake in Sibanye, it will also gain exposure to the South African company's projects.

    Last but not least, majority-owned subsidiary Goliath Gold offers a substantial exploration portfolio within one of the most prolific historic gold producing regions in South Africa.

    Proactive Investors is a market leader in the investment news space, providing ASX "Small and Mid-cap" company news, research reports, StockTube videos and One2One Investor Forums.

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