Great Basin Gold Brings Two Mines on Two Continents Into Production

By Kevin Michael Grace

For any company, especially a junior, bringing a single mine into production is an arduous task. Last year, Great Basin Gold Ltd celebrated two first gold pours, thousands of miles apart. So it’s no surprise that President/CEO Ferdi Dippenaar sounds like a man who’s had two great weights lifted from his shoulders. That accomplished, he now looks to the future. “By the end of the year,” he says, “we’ll reach a situation where even after capital expenditures, we’ll be cash-flow positive.”

The first gold pour was at Great Basin’s 69-square-kilometre Hollister Mine site on the Carlin Trend in Nevada. A June 2010 43-101 resource estimate shows 1.46 million ounces gold measured and indicated, 1.03 million ounces inferred and 11.6 million ounces silver measured and indicated, 16.5 million ounces inferred. A 2009 technical report forecast 120,000 ounces gold equivalent production annually, at a cost of $426 per ounce.

“We’ve encountered a number of kinds of mineralization,” Dippenaar reports. “But it is typically narrow-vein mining.” To date, Hollister has been subject only to what he calls “trial mining.” This is because “We’re trying to determine the number of ounces or tonnes that are available in this type of mineralization and plan the mining thereof.”

If channel sample assays from the Blanket Zone revealed in November are any indication, Hollister’s resource is much bigger than previously estimated. Samples taken every three metres over 57 metres revealed a low of 52 grams per tonne gold and 111.9 g/t silver and a high of 88,845.9 g/t gold and 63,494.1 g/t silver. Average values were 2,404 g/t gold, 2,723.9 g/t silver. “Unbelievable grades,” says Dippenaar. “We mined nearly 500 tonnes of the material, and it was sent away to the refiners because of the high value of gold content: nearly 15 ounces per tonne. Definitely bulk mining.”

So it’s trial mining for now, although Dippenaar promises, “This work we’re doing is taking a bit a time, but we believe it will stand us in good stead because we will have a better understanding of the ore body. If we encounter similar styles of mineralization, we’ll know what to do and mine it a lot quicker.”

Further exploration is planned for the Blanket Zone. “These are very interesting times at Hollister,” Dippenaar says. “We’ve always said it’s a highly prospective ore body, and we should continue finding more of it, and that seems to be happening.”

Great Basin’s second gold pour was at its Burnstone Mine in South Africa in October. According to a 2009 feasibility study, the mine has a life of 19 years, with 254,000 gold ounces per year produced (4.1 million ounces total) at a cost of $392 an ounce. Burnstone production was delayed because of recent deluge-like rains and a shortage of electricity to the plant (which has been dealt with). Dippenaar says, “We’re getting into the rhythm of pouring and shipping gold, sending it to the refinery and starting some revenue flowing into the company.”

So how long before Great Basin starts turning a profit? “It’s cash-flow positive now, on an operational basis. By the end of the year, we’ll reach a situation where even after capital expenditures, we’ll be cash-flow positive.”

Great Basin has a current market cap of $1.11 billion as of January 26, a day when shares rose 24 cents to $2.68. Even so, several analysts believe the company is significantly undervalued. Dippenaar comments, “It’s always tough talking about your own stock price. I believe it’s undervalued, but I also believe that as we start pushing out the results, the market will recognize that, and that will start affecting the stock price.”

Looking back over 2010, Dippenaar realizes that Great Basin has crossed a threshold. “Over the last year we kept talking about putting Burnstone into production, building a mine, construction, development—the words we used indicated work in progress.” Recently on site at Burnstone, he “made the point to our staff we’re not in construction mode any more but production mode.” He concludes, “And it dawned on them that their lives will change and the company will change, and that’s what we’re looking forward to.”

This article was posted by Will Roy on Thursday, January 27th, 2011 at 2:05 am.