BACK TO BASICS

I started my mining career in the 1970’s. The world just abolished the gold standard and gold broke through the $50/oz barrier. I guess in those days it was more significant than breaking through $2,000/oz today. I worked in the deepest mine in the world and the deepest vertical shaft reaching 3,600m below surface was just commissioned.

Imagine this: The decisionmakers who signed off on the project (sinking a shaft down to 3,600m) only had a couple of drill holes, no SAMREC, JORC or NI 43-101 code and a fixed gold price to base their decisions upon. A whole lot of world firsts had to be negotiated successfully to complete this project. Not even the mining method was proven at that time, seismicity and heat were the major enemies. The lowering of the shaft for the rock hoist required slinging it down the mine and replacing the ropes on the winders of the main and sub vertical shafts because of the damage caused by the weight. This was done without losing any production time.

These guys were my tutors/trainers and supervisors, they took my hand and guided me through the process, not only to work with an uneducated workforce while learning a common language to give instructions, but also the knowledge and discipline required to work at those depths. Yes, Fanakalo was an instructive language, you do as you were told, your subordinates followed suit. Nobody questioned authority because there was no time or place to deliberate things. Face-shift-time was short, places were hot, tempers short. 4 hours of continuous hoisting to send down the workforce, and 4 hoisting them back to surface; 8 hours per day consumed to hoist workers left little time to put down material and hoist the empty cars to surface. (This was improved upon, but a topic for another day.)

We could trust the instruction givers, they came through a school where the older taught the young, there was a succession pipeline. When the workers started ageing, they brought their sons from home to take over. This transition usually took 2 to 3 years, to make sure the transition was smooth and the flow of money to the family back home sustained itself. That was the mantra. Sustainability. From the families back home to the shareholders, although everyone enjoyed this time of exceptional profit, they also understand that it was demanded in the long term as well. A hell of a lot changed in 1987 when the first strikes started, leading to the political transition in the 1990's.

The purpose of all of this: to mine gold and hoist it to the surface without losing any along the way. This maybe, explains the unexplained value of gold.

1 gram of gold per ton of ore can be expressed as 1 part per million. 1 gram of gold 8/9 times heavier than the rest of the particles among another 999,999. We were fortunate, we had about 30 to 60g/t on the working face, which got diluted down to 12 to 15g/t (head grade) by the time it reached surface. We were drilled mining economics 101. If you do not reach your MCF (mine call factor), you have to find those missing particles. At $41/oz every gram was precious, when it got to $800/oz greed became part of the equation. I cannot vouch who were the greedy ones, we just did our jobs. Towards the end of my stint, we produced 2 tons of gold per month, 500Kg from the working places I presided over. By then the gold price was down to $300/oz and every particle counted.

Fast forward to today: I recently did a due diligence for a liquidated gold mine. I was flabbergasted when I discovered that against a planned recovery rate of 89% (for <95% we would have been fired) the guys only recovered 62%. Over three years an average of 72%. That is despite external reports adivising them how to rectify the problem. Not all the problems but some significant ones. After 3 years of poor performance, they had 80Koz locked up in the heap leach pads against a debt of $50m. Do the math, nobody picked this up. The company was refinanced, most probably making huge promises and thanks to covid never recovered. The shareholders lost lots of money.

My question is: Where are all the consultants, advisors and other specialists advising funders and shareholders that advised this public listed company over that time? Where are the management and supervisors who worked on that mine during this time? Every quarter you find video after video of CEO’s and board chairman talking to investors and advisors about past, present and future. These interviews are filled with buzz words, industry jargon, and promises like: "we put our problems behind us and are ready to deliver" Nobody reports or inquires about the simple stuff, like MCF, recovery rates, it is just the bottom-line. Nobody actually talks in detail about sustainable profits, life of mine planning and replacement ounces. It could be that mining companies are managed by other professions and are not interested in where the next $ can be saved or produced.

To add insult to injury, digitization and collection of data became the most important topics for discussion. I doubt the MCF would be something being followed closely. I have not heard anybody for a long time saying our MCF was 95% last year and by implementing XYZ, we increased it to 98%. This is 3% more gold without adding any significant cost. ?