West Wits kicks off work to develop Qala Shallows gold mine

• West Wits ‘kicking off’ Qala Shallows with first equipment to head to site this week
• Updated DFS at current record gold prices to enhance project economics
• Plans afoot to expand initial 70,000ozpa project to 200,000ozpa

Special Report: The key steps to return one of the Witwatersrand Basin’s historic gold fields to production will start this week, with ASX listed West Wits Mining announcing ‘kick-off’ for its Qala Shallows project.

The 70,000ozpa development is the first step on the road to a potential 200,000ozpa production hub in the South African basin, the world’s most productive gold basin responsible for turning out more than 1.5Boz of the precious metal since 1886.

West Wits (ASX:WWI) controls more than 5Moz and recently executed a buyback agreement taking its stake in the Witwatersrand Basin project from 66.6% to 74%, giving the company more control over the project as commodity prices sit at record levels of more than US$3300/oz.

This week the first piece of equipment will be delivered to the Qala Shallows site as WWI progresses a DFS update to reflect improved economics from higher gold prices, with a lower peak funding requirement, shortened payback period and lift in NPV all expected to be delivered.

That’s as WWI finalises funds from a $14m placement for the project, which already boasts a post tax NPV of US$255m with an internal rate of return of 53% and payback of 4.1 years, on the production for nine years of 70,000ozpa at an all in sustaining cost of US$977/oz.

The gold price used for that study? Just US$1850/oz.

“It is with great excitement that we kick-off the Qala Shallows Project,” West Wits CEO Rudi Deysel declared on Monday. 

“The West Wits team undertook extensive preparatory work to ensure that the project will be delivered as a safe, productive and within budget operation. Service supplier agreements have now been executed with initial orders placed and the first piece of equipment to be delivered this week. 

“As West Wits Mining advances to becoming a gold producer, we will continue to focus on ways to realise the potential of the stunning Witwatersrand Basin Project to further grow the business we are starting.”

What’s changing?

Instructions have been issued to Bara Consulting to commence the review of the 2023 DFS on which the current Qala Shallows project is based, which used the aforementioned then consensus gold price with a cut-off of 2g/t based on an even lower price of US$1750/oz.

Clearly lower grades are now economic, with the exchange rate between the US Dollar and  South African Rand also becoming more attractive.

“An updated mine plan based on a lower cut-off grade which is warranted given the higher gold price environment compared to when the DFS was released. The higher gold price allows for the mining of ore previously not included in the mine plan,” WWI told the market. 

”This is expected to facilitate an increase to the ore reserves, as well as accelerate and increase the production profile as more ore is available for inclusion.”

While that goes on work is already starting to bring the mine to life. 

Work to take place over the next few months includes:

• Construction of box cut concrete roadway and ancillary preparation work on the decline;
• Finalising design for electrical system installation;
• Storehouse and workshop completion;
• Underground survey work; and
• Sliping and associated work around stopes to prepare for ore extraction.

While that goes on a PFS is on the cards to define ‘Project 200’, a plan to incorporate the broader WBP resource to expand the scale of the future development.

“West Wits Mining’s vision includes the growth of the WBP, considering the availability of the additional orebodies in the Main Reef and Bird Reef,” WWI said.

“With the imminent execution of prospecting right PR 10730 and pending approval of PR 10839, the Company aims to include additional Mineral Resources to our Project 200 scope.”

This article was developed in collaboration with West Wits Mining, a Stockhead advertiser at the time of publishing. 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.