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African Consolidated Resources has over the last decade, raised more than US$70 million, with the majority of that capital being put into the development of mineral ground in Zimbabwe.Some of that money was put to good use, but 10 years on the company still has neither production nor cash flow to show for it. But that’s about to change, as it angles for Zimbabwe’s biggest open pit gold mine.

Last year there was a change of management and, with it, a new strategy. The company will now turn itself from a cash-hungry explorer into a cash-generative mining and development company.

To that end, the new management team has focused on the flagship 84-hectare Pickstone Peerless gold mining project, which is located 100 kilometres southwest of the capital, Harare.

The property has historically produced over 400 000 ounces of gold and the new African Consolidated team is keen to bring it back into production in short order.

In September 2012, the company announced a significant upgrade to total resources at Pickstone Peerless from just over 500 000 ounces to 3,2 million ounces of gold.

Furthermore, trial mining conducted at Pickstone Peerless has now given African Consolidated an intimate understanding of the mineralogy at the project. It also contributed to the completion of a definitive feasibility study for the oxide cap of the deposit in June of 2013.

“As Zimbabwe charts its future direction towards reintegration into the global community, the company is positioned to be a major force in the local gold sector which may lead to further consolidation opportunities in the country”, said Mr Craig Hutton, African Consolidated chief executive.

“Whilst recognising the future opportunities, our focus and energy will foremost be on building Zimbabwe’s largest ever open pit gold mine and rewarding the company’s shareholders.”

An oxide operation at Pickstone Peerless will produce substantial cash flow for the company while it pre-strips the sulphide component of the deposit to ready it for full scale mining.

African Consolidated duly commissioned SRK Consulting to confirm the 3,2 million ounce Joint Ore Resources Committee resource estimate ahead of the completion of a pre-feasibility study on the sulphide open pit.

That pre-feasibility study was completed in early December 2013 and resulted in the declaration of a one million ounce provisional mineral reserve based upon a baseline pre-feasibility scenario and a gold price of US$1 300 per ounce.

Fourteen different production scenarios were evaluated as part of the study, with the optimum a plan to produce 100 000 ounces of gold per annum at peak production from a 250-metre open pit at an average all-in sustaining cost of below US$700 per ounce.

Using the currently defined provisional reserves, mine life is expected to be in excess of 10 years.  The study ascribed a net present value of US$186 million for the project and showed an internal rate of return of 56 per cent.

Now, the company reports that it is endeavouring to raise the US$27,3 million required to begin production on the oxides at a rate of 20 000 tonnes per month.

Thereafter, further capital will be required to expand production to 50 000 tonnes per month as part of the transition to sulphide ore.
While the markets remain difficult for junior miners, a major African bank has agreed to an indicative term sheet for the development of the project.

The term sheet is subject to the customary due diligence review and credit committee approval but, while the terms remain confidential at this stage, the company believes that the arrangement will provide sufficient capital to get the oxide project off the ground.

What’s more, the likelihood is that the arrangement with the bank can be extended when the switch to sulphide mining becomes necessary. — Minesite.