Shallow Reefs Gold in SA is WhyAfrica’s Pick Of The Week

The historic gold of Johannesburg still offers significant opportunities for innovative mining companies. Re-mining old dumps have become a great way of making good profits, while at the same time taking care of environmental issues. Image credit: WhyAfrica

Shallow Reefs Gold in SA is WhyAfrica’s Pick Of The Week

The Witwatersrand Basin in Johannesburg, South Africa, still offers significant opportunities for new gold mining companies. Shallow Reefs Gold in SA is WhyAfrica’s Pick of The Week.  

By Leon Louw, founder and editor of WhyAfrica      

Contrary to popular belief, there are still great opportunities for gold miners in and around Johannesburg in South Africa.

Several junior mining companies have, over the past 40 years or so, attempted to mop up the gold crumbs that remained in the wake of the greatest gold rush the world has ever seen. After gold was discovered in June 1884 in what is today Johannesburg, the earth has been blasted, mined, and processed almost non-stop. Many believe that the Witwatersrand Basin has reached the end of its life. Others are of the opinion that the best is yet to come.

No matter how you look at it, the world’s greatest goldfields continue to provoke debate and produce new theories.

The mainstream narrative is that gold mining in South Africa is a sunset industry. However, most geologist with a good knowledge of the Witwatersrand Basin says that half of the in-situ gold has not been brought to surface yet.

I recently spoke to a number of geologists, and they all believed that there are still large pockets of gold ore in the ground. The problem is not so much the depth of the remaining reefs (which is true, especially on the West Rand), or the low grades of what is left (which is also true), but most importantly, the lack of drilling holes in areas previously not explored to the full.

Moreover, there are shallow, low hanging fruits in and around the centre of the Witwatersrand Basin, that has not been utilised to its full potential. The presence of Zama Zama’s (illegal miners) operating across the city of Johannesburg is proof that there is still gold to be found.

A lack of funding, regulatory and political constraints, and rising costs have prevented exploration companies from taking on the risk and venturing into unknown territory.

The legendary South African geologists Morris and Richard Viljoen, and Rodney Tucker, published the article A review of the Witwatersrand Basin – the world’s greatest goldfield in 2016 in which they stated: “Although the Witwatersrand is a mature goldfield with declining production, it is estimated that it still contains six times more gold than the world’s second largest goldfield. Much of the remaining resource occurs at considerable depths, however, there are still opportunities for extracting some of this resource, as well as generally somewhat lower grade mineralisation, at moderate to shallow depth. The Basin thus remains a major exploration target.”

I have been following the re-mining and mopping operations  of small gold deposits in and around Johannesburg for more than ten years, and it continues to intrigue me. I visited and wrote several stories about Australian listed Mintails, who operated on the West Rand, and left a myriad of legacy issues for Pan African Resources (PAR) do deal with (PAR bought the Mintails operations recently). Companies like Australian listed West Wits, DRDGOLD and Sibanye-Stillwater continues re-mining the low-grade material in old tailings dams and mine dumps and has done so successfully for many years.

A recent addition to the gold mining club

The most recent addition to the gold mining club on the Rand, is a company called Shallow Reefs Gold, who’s target pipeline is the shallow deposits of the Witwatersrand Gold Basin. The company is focused on five initial projects and is in the process of finalising the Definitive Feasibility Study (DFS) on the first of these for a start-off production of between 50 000 ounces (oz) and 80 000 OZ a year.

WhyAfrica recently interviewed Mark Gilbert, Shallow Reefs Gold’s CEO to find out more about the legal aspects and regulatory concerns of such a massive and brave endeavour.

 

 

Mark, not too long ago there used to be a vibrant group of junior mining companies going after the leftovers in the Witwatersrand basin. Is that still the case? How does Shallow Reefs Gold intend bringing their projects into fruition?   

There are several small, near surface deposits owned by a broad range of private companies, individuals, and gold majors. The majors have made it clear that they have no interest in developing these assets as they are sub-scale. Moreover, these companies already have significant exposure to South African mining with most looking to diversify their risk offshore.

The other deposits that we know well are horribly underfunded and have so far proven unable to access the global capital markets which are providing almost all the capital to South African mining at present.

Shallow Reefs Gold’s (SRG) focus is on acquiring and developing some of these “smaller” gold deposits in South Africa with a focus on the Witwatersrand Gold Basin, the greatest gold field in the world that still holds the largest known gold resource globally.

SRG is raising capital to acquire, develop, and aggregate these assets and bring a sizeable gold mining company to market. SRG is owned and run by an experienced group of South African mining, legal and finance professionals and has a fully operational team in house that have been operating underground mines for more than 26 years.

SRG’s strategy is therefore different in so far as it is raising the capital and then acquiring the assets at scale with a fully operational mining business rather than taking small, sub-scale assets to market.

What does the process of applying for exploration and mining licenses in and around Johannesburg entail? Are there specific procedures, for example, to apply for a license to remine old mining dumps?

While inefficacies do exist in the legislative process for granting rights, our partner law firm NSDV have developed deep relationships with the key regulators in South Africa at all levels. They have an incredibly collaborative approach and work with the regulators instead of fighting them.

The industry has become far too litigious in its approach to the regulator and ultimately a regulator is simply a collective of people. Working with the regulators and the people inside them has proven to be a far more effective approach in obtaining licenses notwithstanding the capacity for improvement in the processes.

The process for obtaining licenses is straight forward and legislatively clear. South Africa operates on an administrative law basis which states that if you submit a compliant application the regulator must grant the license, there is no discretion. The key is therefore to submit clear, compliant, and accurate information. Sounds obvious, but often this escapes people.

Again, NSDV is critical, they ensure that all our applications are submitted in full compliance with all relevant sections of the applicable legislation and therefore do not suffer from back-and-forth debates that can eat up many months.

The application process for the three mineral rights being a Mining Permit, Prospecting Right and Mining Right are well set out in many other publications that can be sought online.

The mining of old dumps is a more nuanced issue. In terms of our legislation a dump can either be classified as a moveable or immovable dump. To be immovable the dump must, amongst other things, have “acceded” to the land (ie: become part of the land), have been abandoned or be associated to a lapsed right. Very often this means that there is vegetation growing on it, it has hardened and for all intents and purposes can be viewed as “solid ground”. A factual enquiry in most instances.

If a dump is immovable, it requires either a Mining Permit or Mining Right to mine and process the material.

Other dumps may be classified as moveable. In other words, a bare rock dump that can simply be picked up, loaded, and transported.

They have not become one with the land and in most instances, they are still being dumped on. If a dump can be classified as moveable, then no mining right is required, the dump is owned under common law and can be sold under contract.

Is the procedure to apply for re-mining historic tailings dams the same as what a company would go through to apply for a normal mining or exploration license?

It all depends on how one defines a “historic” dump. This is a technical legal query and requires much consideration and fact finding. There are varying points of view and interpretation and unfortunately not a simple answer. It depends on the factual status. (See above).

We are seeing a number of market participants abandoning their mining rights in respect of old movable dumps, although despite such abandonment, they still retain the provisions for rehabilitation as these will still need to be met in terms of South African environmental legislation. The lack of need for mineral rights does not exempt the owner from compliance with environmental legislation.

There are still significant gold deposits in parts of Gauteng that have been sterilised because of legal issues. For example, in the past, companies like Randgold built their processing plants on surface above rich deposits, and they never mined it. There are now disputes about land ownership etc, which makes it difficult to mine those deposits. How should a company go about being awarded the right to mine legally?      

The law in this regard is clear. Once South Africa converted from Old Order Mining Rights to New Order Mining Rights in terms of the MPRDA the ownership of all minerals vests in the state regardless of who owns the land.

The state, through the MPRDA and DMRE, grant qualifying entities with mineral rights to explore for and exploit these resources on the government’s behalf and the government earns a Mining Royalty payable by the mineral right holder for this right.

Now, the mineral right holder is required to engage with the land- owner and take all reasonable steps to come to an appropriate commercial arrangement to compensate the landowner for the mining activity to take place.

There are cases where the landowner, for whatever reason, is not willing to engage in such an arrangement. Although rare, it does happen.

In this case the law is again clear, the landowner cannot prevent access to the land by a mineral right holder as the mineral right has been granted by the state taking into account all interested and affected persons input including that of a landowner.

There is a mediation process contemplated in the MPRDA where the Regional Manager is called on to facilitate a settlement between the landowner and the mineral right holder.

And if unsuccessful, the mineral right holder can compel the land owner to provide access. This has been successfully tested in the South African court system.

So, the quick answer is that landowners cannot “sterilise” mineral resources although they can frustrate the process for a period which can be costly and frustrating.

There are, however, certain instances where mineral rights will not be granted, and resources will be sterilised. The most common example is where residential dwellings have, over time, encroached on the mineral resource and it is now not possible to practically access the resource without the expropriation of the dwellings. The law does not permit this, and those resources are now sterilised.

The proportion of South Africa’s mineral resources that are sterilised in this way are a tiny fraction of the total resource base to be all but irrelevant.

It must be noted that where mineral resources are more than 100m below residential dwellings and they can be accessed from non-sterilised land these can still be mined!

Two of the main issues on the Rand are illegal miners and water concerns. Although the Acid Mine Drainage (AMD) doesn’t receive as much media attention as it used to, it still exists. How would a company legally mitigate these risks when their aim is to unearth gold deposits here?

Illegal miners remain a challenge. However, they can only access the old and current workings of mining companies. There are huge untapped resources of gold in the Wits, for example, that are virgin unmined reef and as such largely inaccessible to illegal miners.

I say largely inaccessible because the illegal miners can extract those resources that are near surface down to the water table, maybe 10m to 20m below surface, again no more than scratching the resource and can for all intents be ignored. We have successfully moved onto a number of these properties and started gold extraction.

Once operating the usual challenges remain but for new mines this is a small problem as there are not significant old workings for the illegal miners to camp in.

Water issues are broken into two areas. Firstly, Water Use Licenses takes more than a year to obtain if one is lucky, but there has been a renewed focus on these by government and it must be said that the processes are improving, albeit slowly.

Furthermore, we apply the same engagement model we have with the DMRE and find that one can expedite these if you engage in a proactive manner with the regulator.

Secondly one needs to look at the issue of Acid Mine Drainage (AMD). Again, this is generally only a problem in areas of old workings and from our point of view these are largely to be avoided and do not represent the attractive areas of the Wits to exploit.

There are significant unmined areas which have no AMD issues as there are no old workings for the water to sit in and leach the sulphides out of the surrounding rock creating the AMD in the first place.

Any new mine needs to be careful not to drill into the old, flooded workings. These are, of course, incredibly well mapped and understood so it does not pose a real challenge to exploit the remaining significant unmined resources in the Wits if a company has done their research.

The underground world of Johannesburg is a labyrinth of tunnels (most illegal), with scores of Zama Zama’s mining illegally in these areas. How would a mining company with the goal of mining the pillars in these old workings, for example, go about it legally? How would you know where your license area ends and where the next one begins? And how would you manage the Zama Zama’s?

We have strong opinions that mining old pillar’s is not an attractive proposition, for the reasons you have outlined above.  The mineral right process is the same as for any other mine but the risk issues of extracting pillars and dealing with AMD in the older workings and illegal miners means that these should be simply avoided as it is not necessary to exploit them when so much unmined ground remains available in the Wits.

Knowing where your license ends is a challenge for all mines and was resolved many decades ago through accurate underground surveying. We have developed process over a long period of time to survey accurately where the underground mining activity takes place, and it is a relatively simple matter to ensure that you do not mine outside of your granted mineral right area.

In dealing with the illegal mining problem, we would rather not start with one in the first place as it is unnecessary in our opinion.

Companies like Mintails have left behind massive environmental legacies.  What are the legal requirements in terms of rehabilitation, water licenses, social and community issues etc. for any operation that intend to operate here? What would this company be expected to contribute financially and in terms of physical rehabilitation?

You are quite right, the challenges left by Mintails are truly catastrophic. There are a few key facts to recognise here though before all blame is allocated to Mintails.

  • The vast majority of the dumps were created over many years often dating back over a century.
  • Under our previous mining laws, there was no need for companies to provide for rehabilitation for environmental degradation and these liabilities rested with the state.
  • The assets that Mintails therefore acquired were generated by a number of mining companies before Mintails, most of which have been liquidated and can no longer be pursued for the liabilities they created.

The question then is who is responsible for these liabilities that start with the State when a new mineral right is granted over that material?

The State attempts to push that liability onto the new mining right holder by virtue of the new mining right application.

That being said, the enforcement of this by the government in the past, prior to the new regime coming into effect, has been poor without such rehabilitation funding being required. The State (largely as a result of legislation) therefore bears significant responsibility for the mess Mintails left behind and in fact that liability was originally a liability of the State as mentioned above.

I am personally of the view that given the government is already liable it should allow companies to rework and make provision for permanent storage of the reprocessed waste material when granting these rights as in doing so the mining activity of the old slimes dams actually reduces the environmental impact and improves the overall environmental damage already done if monitored and regulated effectively.

The State has run out of money and therefore commercial activity that is viable is really the only way that these dumps will ever be rehabilitated and moved to permanent and safe deposition sites in the coming years.

A sensible and practical partnership between State and mines would be by far the best solution to the problem.

What are the main challenges and pitfalls for junior mining companies that want to operate in this very tough business environment?

Attitude, approach, and access to foreign capital markets. Any junior mining company trying to raise capital in South Africa is almost certainly going to be disappointed. Unless you have direct relationships with the foreign capital markets or advisors with such relationships you are almost certainly doomed to failure as capital is the key ingredient missing in South African mining.

We have everything else. Mineral Resources and talented people.

Lots of people complain about the regulatory environment but as we outline above, we do not hold the same view.

We recently raised over USD400-million for a South African platinum project from Canada and Singapore proving that the money is available for good projects and good management teams all other issues notwithstanding.

High risk projects usually result in high rewards. Are there opportunities that we are missing? How much gold is still to found in the Witwatersrand?

The opportunity is absolutely enormous. The Wits still represents the largest, unmined, known gold resource on earth. Huge amounts of this gold remain near surface and at current market prices represent very attractive mining opportunities with significant structural benefits being such a well-developed gold mining country.

We have surplus plant infrastructure, surplus tailings infrastructure and a well-trained labour force along with a broad range of readily available technical skills from geology to engineering to metallurgy and all other key disciplines.

What the South African junior sector lacks desperately is capital and as alluded to earlier this is the key to be unlocked but it can and is being unlocked by teams in South Africa as we speak.

Will the remaining gold in and around Johannesburg ever be unearthed, or will it remain sterile?

We believe that huge amounts of it will be mined. We are moving into a commodity super cycle with an incredibly strong fundamental argument for precious metals. This has been happening slowly since 2008 and, notwithstanding volatility, we have seen a steady increase in precious metal prices over the last 13 years. We believe that this is primed to continue and accelerate.

This results in the risk / reward ratio continuing to move in favour of “high-risk” jurisdictions as we have seen with the significant capital flows in the DRC over the last few years. We have been mining in South Africa for 120 years through two world wars, the end of apartheid, the Anglo Boer wars, and many other disruptions. The pessimism is overdone.

As Warren Buffet says, be fearful when others are greedy and greedy when others are fearful. We believe the market is too fearful and that there are huge opportunities in the market.

The gold that will be mined will be the near surface and shallow resources previously ignored by the majors due to historical mining approaches, higher grades and size being available at depth.

Significant deep resources are likely to remain inaccessible until such time as technology allows far higher degrees of mechanisation as we are reaching the end of our capacity to move people to such incredible depths from a safety, heat and logistics point of view.

As and when technology allows there will be another boom in South African gold mining as our deep resources below 3km underground are enormous and untapped.

Leon Louw is the founder and editor of WhyAfrica. He specialises in natural resources and African affairs.        

WhyAfrica provides you with business intelligence that matters. Africa is our business, and we want it to be yours too. To subscribe to WhyAfrica’s free newsletter or digital magazine, and for more news on Africa, visit the website at www.whyafrica.co.za or send a direct message. WhyAfrica will launch its first ever digital magazine in November. If you are interested in contributing or advertising, please contact me at leon@whyafrica.co.za. To coincide with the first launch, we have a range of different packages and combo deals to give your company the greatest exposure to a rapidly growing, African readership.       

 

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