Burnstone Gold Mine

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About Burnstone Mine

The Burnstone Property is located in the South Rand area of the Witwatersrand Goldfields, approximately 50 miles (80 kilometers) southeast of the city of Johannesburg and near the town of Balfour. The Burnstone Project has received all of the required permits to complete the development of the mine and commence full-scale underground mining. Block B and Block C, containing an estimated 280,000 oz and 231,400 oz of Au, respectively, will be the first areas of the ore body to be accessed and mined in the next 36 months. Underground access to the remaining areas of the ore body within the mine plan, is being developed.
Permitting

On February 17, 2009, Southgold Exploration (Pty) Ltd (“Southgold”) (100% subsidiary of the Company) was officially awarded the right to mine for gold, silver and aggregate in the Burnstone mining area for a period of 18 years from date of execution of the mining right, as well as renewal rights.

On October 5, 2010 the South African Diamond and Precious Metal Regulator (“SADPMR”) granted a Precious Metal Refining License to Burnstone for a period of 30 years authorizing the smelting, refining or changing the form of unwrought precious metal. This allowed the Company to commission the gold room in the metallurgical plant in late October 2010.

On October 18, 2010 the SADPMR granted an export license to Burnstone authorizing the export of gold and silver and thereby allowing for the sale of precious metal.
Commissioning of capital projects

The initial mine capital expenditure program has generally been completed and the mine has commenced with production build-up. Major capital projects that include the vertical shaft, metallurgical plant, decline, ventilation shaft and required surface and underground infrastructure have been commissioned by January 2011. The components of the mine required to enter commercial production have thus been completed and commissioned and therefore conclude the development phase of the project. Revenue and production costs will be recognized as from Q1 2011 with capitalization of further development costs as per the Company’s accounting policy.
Vertical shaft complex

The vertical shaft is intended primarily for rock hoisting, but is also equipped for the insertion and extraction of men and material. For this purpose, two winders have been installed. The 7.5 meter diameter vertical shaft, lined with 300mm concrete is designed for the extraction of rock at a rate of 206,000 tonnes per month. Shaft bottom (1,601 ft/488 meters) was reached in May 2010 which concluded the sinking phase of the project. The decline was also holed with the vertical shaft in Q2 2010, resulting in additional access to 40 level as well as improved ventilation.

The main equipping of the shaft commenced in Q3 2010 and was completed during Q4 2010. The focus was to first get the winders (personnel and rock) commissioned and licensed. Both were licensed on October 15, 2010 by the Department of Mineral Resources. Tipping arrangements on 40 Level through the temporarily ore pass was completed on October 30, 2010 and trial tipping started on November 2, 2010. The development of the remaining underground station infrastructure that includes another three ore passes, the settlers and a clear water dam commenced in November 2010 and will be completed in Q2 2011 which will allow the vertical shaft to operate at full design capacity.
Metallurgical plant

The metallurgical plant for Burnstone was designed for a production rate of 125,000 tonnes per month with an increase to 175,000 tonnes per month by adding a second ball mill in-line with the production profile of the mine. A combination of a Semi Autogenous Grinding (“SAG”) mill and Ball mill with a Carbon-in-Leach (“CIL”) process is used to maximize recoveries.

The completion of the plant terrace and site establishment by the construction contractors in February 2010 allowed for commencement of plant construction. An aggressive construction schedule was followed to ensure the plant was delivered as a fully integrated, commissioned unit by the end of 2010. The project encountered various challenges that included extraordinary rainfall, extreme cold winter as well as the impact on deliveries and contractors by the soccer world cup hosted in South Africa in July 2010.

Diesel powered generators were used for power generation during the construction phase, and will remain on site as future backup. The late delivery of permanent power to the site had a severe impact on the delivery schedule as commissioning of the major components could not commence without it. The crusher and the silo feed conveyer were commissioned on October 4, 2010 with crushed material being fed into the silo. Conveyers were run at low speed for the duration of the commissioning phase to ensure optimal performance prior to production.

The SAG and Ball mills were commissioned in October, 2010.

The tailings storage facility, inclusive of a bulk water storage dam was also completed in Q3 2010 to coincide with the commissioning schedule of the plant.

Gold slag recovered from the mills during the refurbishment process was used to commission the gold room in October, 2010. The first gold pour took place on October 31, 2010 with gold recovered through the gravity circuit. Commissioning of the gravity and CIL circuits as well as the thickener is now completed allowing for the uninterrupted processing of material starting in February 2011.

The plant has achieved its targeted rate for January 2011 of 90,000 tonnes milled. The current focus is to ramp up production and achieve a milling rate of 125,000 tons per month by July 2011.
General surface infrastructure
Power

The first phase for power supply to Burnstone consisting of 21 MvA, and on-site power reticulation has been completed and all facilities on site are now connected to Eskom power. Power supply to site will build-up to the required 51 MvA with the upgrade of the existing Eskom sub-station and feeder lines by the end of Q3 2011. Current Eskom supply is adequate to complete commissioning and to allow for the planned production build-up.
Ventilation shaft

The raise boring phase, or holing, of the ventilation shaft took place on May 12, 2010 and completes phase one of the ventilation shaft project. Phase one included the piloting and reaming of a 5.1-meter diameter, 305-meter deep vertical ventilation shaft, which will act as an up-cast shaft to provide sufficient ventilation for mining of blocks B and C, targeted over the next three years. Phase two of the project consisted of establishing support by lining the first 90 meters of the shaft with shotcrete as well as connecting three 720 kW surface fans. The installation and commissioning of the three 720 kW fans has been completed and these are now operational. The shaft will provide necessary ventilation for the underground workings well into the future.
Long Hole Stoping (“LHS”)

The LHS trial has been completed in Q4 2010, following 12 months experimenting with drilling, blasting and cleaning techniques. The progress made and results achieved during the trial period enabled the Company to implement LHS as the preferred mining method and develop a life-of-mine (“LOM”) plan based on this mining method. Our ore body also allows us to use LHS due to the relative flat dip (7 – 11 degrees) as well as the fact that we are mining at depths of 924 – 1,980 ft (280 – 600 meters) for the majority of the LOM. The development of standard drill rigs being able to drill the 50 ft (15 meters) extremely accurate also benefits this mining technique. The remainder of the equipment is also standard to the industry and includes load haul dumpers, dump trucks, roof bolters and single and twin boom drill rigs used for development in most underground mines throughout the world. The actual drilling, blasting and cleaning of the stope material is performed by a few specialized teams that have received the necessary training while the majority of the workforce focuses on development and support services to the mine.

* World class mining method, completely mechanised
* Shallow: no extra cost of refrigeration and high mining stresses
* On reef stoping
* Development is on reef
* Production build up is fairly quick
* Personnel free stopes
* No timber support in stopes
* Highly skilled teams
* Workforce has a minimum of Grade 10 qualification and the company uses English as the medium of communications

Underground development and production build-up

Good progress continues to be made to open up mining blocks B and C. A total of approximately 19,061ft (5,810 meters) of reef development had been completed for the year ended December 31, 2010 with 21,792 ft (6,644 meters) of reef development being completed to date.

Tons from reef development will be treated by the Plant but due to the added dilution associated with these tons, a relatively low head grade is being delivered to the mill. The rate of stoping will be increased as more stopes become available which will increase the blended head grade delivered to the Plant. Production build-up during 2011 to reach the planned Au ounces of 110,000 to 140,000 for the year will be dependent on achieving the planned rate of development as this will ensure required stopes being available to achieve production targets. Development rates will increase from a monthly average of 3,300 ft (1,000 meters) in Q1 2011 to 10,000 ft (3,000 meters) by the end of Q4 2010. As at December 31, 2010, approximately 197,000 ore tonnes from mining and development had been accumulated on the surface stockpiles at an average grade of 1 g/t. These tons are being co-mingled with development and stope tons mined in Q1 2011 to allow for a steady increase in the milling rate from 90,000 tonnes in January to 125,000 tonnes in July 2011. The blended head grade will also increase from 0.03 Au oz/t in Q1 2011 to 0.10 Au oz/t in Q4 2011.
Mineral Reserves & Resources

Mineral Reserves: Proven and Probable reserves increased by 55% to 6.4 million ounces in January 2011.

Mineral resources: Measured and Indicated resources increased by 3% to 12.1 million ounces in August 2010.

Mineral Reserves & Resources tables
Underground drilling

Drilling totalled 25,905 ft (7850 m) for the year, split between 4,907 ft (1,487 meters) cover and 20,998ft (6,363 meters) delineation drilling. The focus continues to be on Block C delineation and infill evaluation to support the mine plan.
Surface drilling

Surface drilling was aimed towards infill drilling in the initial mine plan area. Twenty-three surface diamond boreholes were completed during 2010. This drilling specifically targeted areas where better resolution structural data was needed. Work programs outside the mining right as well as investigations of sub-cropping mineralization in four areas are being reviewed.
Plans for fiscal 2011

Reef development remains the key to delivering the planned production build-up and will therefore be the priority focus for 2011. The 2011 production range of 110,000 to 140,000 oz of Au is therefore the result of the increased focus on reef development. Cash costs for 2011 are forecast in the range of US$520 – US$620/oz which includes the impact of the diluted grade from the additional reef development.

Completion of remaining mine infrastructure, above and below surface is also planned, which entails development on 40 and 41 level of the vertical shaft, close out of construction packages for the metallurgical plant, surface infrastructure and the completion of permanent power supply. The Company will also source, employ and train the necessary workforce and purchase the remaining trackless equipment required. A total of $90 – $100 million of capital is to be spent during 2011 with more than 90% attributable to underground development to support the production profile for the short to medium term. Meeting our production and development targets for 2011 will provide a solid foundation for the production target of 220,000 Au oz for 2012 with the average LOM production of 254,000 Au oz to be reached in 2013.

Reference for information:
www.greatbasingold.com/index.html?lf=1;pg=200