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Investment Indicators from Peter George Issue No. 72 East Rand Basin
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| Aside: Financial crisis is the lifeblood of gold. Lack of it brings tough times to those who battle to extract it from the ground. Yet the industry has lasted for 120 years. Production peaked at 1000 tons in 1970 - a year before Nixon 'demonetized' the dollar. The 'Financial Establishment' pretends to express the effects of Nixon's actions from an OPPOSITE perspective. They say Nixon 'demonetized' gold. That of course is logically impossible. The word 'money' comes from the Latin word 'moneta' which means 'a mint' - a place where 'money' is coined. Once a piece of paper loses its 'minted gold backing', it ceases to be 'money'. It simply becomes a piece of worthless FIAT paper. To the contrary, gold always remains 'money'. |
On January 2, 1902 the Star newspaper published its first post-war edition. It was of course 'post' the Anglo-Boer war of 1899 -1901. Its editorial of January 3 shared Struben's confidence in the prospects which lay ahead.
"One cannot breathe the air of Johannesburg today without feeling instinctively that a great future is in store for it, that the possibilities of development in the case of the cardinal industry of the place (gold) are almost unlimited, and that the growth of that industry must imply corresponding development in every other direction, commercial, industrial, and agricultural."
In the course of time there would be numerous occasions when difficulties arose threatening the industry's future. Pessimists claimed the reefs were probably only:
'deposits along the edge of a stream course'
And that they would:
'peter out at shallow depth'.
One such naysayer was the acclaimed American geologist Gardner Williams, author of a well-known book entitled: 'Diamond Fields of South Africa'. In a recently published history of the period by J.R.F. Handley entitled:
'Historic Overview of the Witwatersrand Goldfields'
Handley describes how Williams:
'held great sway and influenced the slow move into the Witwatersrand by Cecil Rhodes'.
He further describes how Dr Hans Sauer asked Williams his opinion of the new goldfield. Williams reply will go down in geological history as the all time wrong call:
"Dr Sauer, if I rode
over these reefs in America, I would not get off my horse to
look at them. In my opinion they are not worth hell room."
The best and most specific estimate of future potential was made
by a man called 'Bleloch' in 1901. Without knowing anything about
the full extent of the greater basin, he projected an eventual
output totaling 676m ounces, equivalent to 21,000 tons of gold.
By 1995 the three fields he knew about when he made the forecast
- the Central, West and East Rand - had collectively produced
19,800 tons. Today the greater Witwatersrand encompasses a semi-circular
arc of 440 kilometres which includes 7 separate goldfields. In
order of discovery they were:
1. The Central Rand
2. The West Rand
3. The East Rand
4. The West Wits Line
5. The Klerksdorp Goldfield
6. The Free State Goldfield
7. The Evander Goldfield
Since inception the entire basin has yielded over 50,000 tons of gold at an average grade of 8,39gms per ton. That compares with total world production since the beginning of recorded time, estimated at less than 150,000 tons. [Of that amount, Central Banks purportedly carry 32,000 tons on their books. That includes gold since lent to bullion banks and sold - now hanging round the necks of Indians].
Current grades on South African mines are down to 5gms but higher values invariably persist at depths down to 4,000 metres in most of the above fields. There are also new areas of potential. Some - like the SOUTH DEEP extension of Western Areas - are already in production. This is a project which South African quoted company Western Areas, shares with Placer Dome of Canada. In the words of Handley it is likely to be:
"The mine of the twenty first century"
It promises to reveal a 70m ounce deposit at an average recovered grade of 10gms a ton. Ways for investors to participate will be discussed later.
The South African Chamber of Mines believes the known future potential of the Wits basin approximates to a further 40,000 tons of gold. Extracting this gold will involve challenges. They include greater depth, higher temperatures, and often lower grades. They also involve the excitement of discovering completely new fields. The process requires filling in the gaps on the outskirts of the basin. Promising extensions include the 'Potchefstroom Gap', and 'Bothaville Gap'. One particularly exciting find has been the Burnstone Project in the South Rand Basin. Here latest indications point to a 280 ton deposit (9m ounces) grading 10,6gms a ton 'in situ'. (In the ground) It extends from surface to a maximum depth of 3,000 metres, and could result in the opening of the first major mine in this area - after 117 years of exploration. It pays to persevere! Nearby further work is being done by a bunch of Canadians - Great Basin Gold - where there could be an even more promising deposit with up to 17m ounces, equivalent to 530 tons.
Although clearly only a 'thumbsuck', author Handley puts the size of these finds at 20,000 tons - 50% of the total 40,000 tons which the Chamber of Mines believes still lie underground. In relation to what has been mined to date - the 50,000 tons mentioned earlier - a 40,000 balance suggests an ultra long term resource rivaling what has been gained from the ground in the last 120 years. What a deposit!
1. THE PURPOSE OF THIS EXERCISE
The above facts and
figures may be of interest to those with a love of history -
the writer included. But, unless we learn the lessons, facts
are of little value. In this context, Handley begins with an
observation which could prove appropriate:
"New developments depend usually on a few stalwart people...DRIVEN by a desire to find and exploit."
The stark contrast between the attitudes of optimists and pessimists reminds the writer of a statement by Alexander McClaren when describing the opposition faced by Joshua and Caleb in the Old Testament. They were attempting to persuade their fellow Israelites to face the 'giants' of the 'Promised Land'.
"One bold push forward, and their feet would tread on their inheritance. But, as is so often the case, courage oozed out at the last decisive moment, and cowardice, disguised as prudence, called for 'further information', that cuckoo-cry of the faint-hearted."
The history of South African mining in the Wits Basin is peppered with short-term challenges, crises and interventions - both from inside and outside. Some revolved around the nature of the reef. The most threatening often affected the price of the metal. They stemmed from the fact that gold is - and always has been - money. There have therefore been numerous occasions throughout the last 120 years when international central banks - even whole countries - have intervened in ways which dramatically changed the price of gold, for better or worse. Sometimes their actions were simply intended to contain the price within a range. In face of rising costs, miners then came under severe pressure.
The industry faces a repeat situation today but a brief study of past events over the 120 year life of the Witwatersrand Basin, demonstrates three constants in the cut and thrust of fluctuating fortunes:
1. The South African mining industry has always found new ways to mine deeper, cheaper and smarter. Therefore the conduct of operations at depths of up to 4,000 metres can and will become 'routine'. The deposits which exist will eventually be opened and extracted.
2. Attempts by central banks to cap the price of gold have always failed - and will do so in the future. Methods and motives are already under investigation. The damage they are causing to the emerging nations of Africa will ultimately be exposed and terminated.
3. Finally, for investors there always remains Rothschild's adage for timing a market purchase:
"Buy when there's blood in the street"
The South African gold share market is presently in one of those down cycles but opportunities abound. This report focuses on one of the SEVEN existing goldfields - the EAST RAND. The writer believes time and circumstance dictate the need for a closer look at ways in which the EAST RAND Basin could be brought back to life. Before doing so one needs to be persuaded that the current crisis in the gold market is of limited duration - that it is a time to buy and not to sell.
This report also analyses 3 exciting South African gold plays available right now including:
- A cheap entry into one of the only (quality) companies with a price half its NPV.
- An update with further reasons to buy AFLEASE.
- A look at AFLEASE's exciting
new deal announced today.
More follows for Subscribers:
We encourage you to access the full report at Peter George's website with a view to becoming a SUBSCRIBER. The address is: www.investmentindicators.com
Aug 23, 2005
Peter George
tel:
021-700-4880
cell: 082-806-3147
Contact
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