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WWI’ve Got the Power: Grid power to cut costs, at West Wits’ Witwatersrand gold play
Mining
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The approval of power supplies from Johannesburg’s city grid will lead to a massive saving on energy at West Wits Mining’s 4.28Moz Witwatersrand Basin gold project, in a major boost for its economics.
Joburg City Power’s Planning Evaluation Committee has given approval for the supply of 7.5MVA bulk power to the company’s Phase-1 Qala Shallows development at a cost estimated to be around 75% less expensive than using diesel power generators.
Diesel will remain an important part of Qala Shallows, West Wits Mining (ASX:WWI) CEO and managing director Jac van Heerden said, ensuring constant power supply during load shedding and outages.
But securing grid power will help reduce costs and de-risk the early stages of the development.
“The 7.5MVA bulk power supply approval for the Qala Shallows Project is a significant milestone. Joburg City Power’s supply is estimated to be approximately 75% cheaper than using diesel power generators,” van Heerden said.
“Diesel power generators will remain an integral part of Qala Shallows’ power supply system, ensuring uninterrupted production during load shedding periods and other outages. However, access to grid power for the majority of operations will significantly reduce the projected electricity costs during the build-up phase and thereby further de-risk the project at a critical phase.”
Read beyond the headlines
While South Africa’s load shedding and power supply issues have been widely publicised, a more thorough analysis shows the picture is rosier for West Wits.
South Africa has over the past three years typically had adequate power generation for 18-22 hours a day.
And access to grid power will mean significant cost savings for the future gold miner when compared to remote operations running entirely on diesel.
A DFS released in August 2022 assumed total reliance at Qala Shallows on diesel power generation, with access to grid power enabling WWI to significantly lower costs during the initial 15-month build-up timeframe by six months or more.
WWI is also eyeing the potential of rolling out solar energy onsite.
The sunny South African climate is ideal for the technology and WWI’s preferred mining equipment supplier is already making big strides to develop battery operated yellow goods.
“In addition, West Wits has engaged with renewable energy suppliers to further reduce the reliance on diesel and mitigate the impact of higher electricity costs; this will ultimately enable the operation to achieve power security at the lowest power cost possible,” van Heerden said.
WWI says a mix of grid, solar and diesel power will be able to maintain uninterrupted production.
Investors bet big in shortfall issue
According to last year’s revised DFS, the first phase of its WBP known as Qala Shallows Phase-1, would deliver 55,000ozpa for 10 years with a steady state all in sustaining cost of US$962/oz.
Based off an initial ore reserve of 3.2Mt at 2.81g/t for 290,000oz, West Wits plans to expand the project further by tapping its high grade global resource of 4.28Mt at 4.58g/t and building it out to a mid-tier standard 200,000ozpa.
It is located in one of the world’s largest historic gold fields, responsible for producing more than 20% of the gold accounted for above the Earth’s surface and home to the Witwatersrand gold rush.
WWI will initially process ore via a toll treatment agreement with Sibanye-Stillwater and is in talks with project funders.
In the meantime investors have backed the story, shoring up WWI’s balance sheet with a $1.5 million placement and additional share purchase plan at 1.4c per share.
Sophisticated and professional investors have thrown their support behind the $35 million capped junior amid a bullish outlook for gold, helping West Wits raise $1.1 million after bids exceeded a $902,000 shortfall on the $1m SPP.
Excess bids had to be scaled back, with West Wits accepting $200,000 in addition to the SPP shortfall to raise $1.1m before costs.
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.
