Founded only seven years ago, South Africa-based gold exploration and project development company, Taung Gold, has come east in search of development capital as it looks to grow its African gold assets. Although the company is still in its infancy and has yet to produce any gold from its projects, its two flagship projects, Evander in Mpumalanga province and Jeanette in Free State province, both in the Witwatersrand Basin, are estimated to hold more than 23 million ounces of gold in total, according to South African independent mining consultants Minxcon.
“Although we are not a big company we have all the necessary controls in place,” said Steven Steyn, chief financial officer of Taung Gold. Small the company may be, with just one accountant assisting Steyn’s day-to-day responsibilities, it has attracted interest from Hong Kong-based gold and coal mine operator Wing Hing International Holdings, which is expecting to complete an acquisition of an 87% interest stake in the South African firm for up to $580 million by the end of August. The acquisition, which Steyn is confident will proceed smoothly, should provide the necessary investment to begin mine construction at the two flagship projects so that they can begin producing gold by 2015. In addition, the firm owns six further greenfield development sites in and around the Witwatersrand Basin.
The proposed acquisition comes at a promising time for both Taung Gold and Wing Hing International. Gold prices hit a peak yesterday at more than $1887 per ounce, according to Bloomberg. At the end of July this year, the price of gold had increased by 37.77% compared to last year.
In addition to the high price of gold, Steyn attributes the success of his company to its business model. Although mining engineers, mineral resource specialists and exploration geologists form the 42 strong staff-count of Taung Gold, the company outsources project research at both flagship and greenfield projects to recognised third parties in South Africa, while keeping close oversight on the overall process.
Steyn highlights the company’s strong balance sheet as its major selling point. The company currently holds more than $19.5 million in cash and has been entirely funded through equity to date. “We have enough cash in hand to go through pre-feasibility and bankable feasibility for both the flagship projects and to keep the exploration ticking over for the greenfield projects,” he noted.
As gold prices continue to rise, the projected production cost of just $322 and $397 per ounce at Jeanette and Evander, respectively, could see Taung Gold emerge as one of the lowest-cost gold producers in South Africa. “We do not currently generate any revenue, but once the construction work has been completed we will be able to produce more than 600,000 ounces of gold per year,” said Steyn.
While some may view Wing Hing International’s acquisition of Taung Gold as a backdoor listing for the latter, Steyn is adamant that the transaction was purely a logical meeting of minds. Should the acquisition go to plan, Taung Gold and Wing Hing International will both be hoping that the market for gold remains bullish long enough for them to cash in on demand for the precious commodity.
