Race to the bottom - deeper mines
Mark Wellesley-Wood of Ambrian Partners, London, UK, examines the South African gold industry and its move towards deeper mines.
Gold and the Witwatersrand in South Africa are tightly linked in the history of the country. Discovered in the early 1850s, the Witwatersrand conglomerate hosts some of the richest gold deposits formed in a steeply dipping basin.
The gold’s origin is debated but it may represent reworked detrital gold that formed on the shorelines of a basin 2,000 million years ago that was later folded into steep-dipping reefs that are known to extend below 6,000m. The extensive deposits are hosted in strong competent rocks, allowing mining to depths not practiced elsewhere.
‘Peak gold’ for the South African production was achieved in 1970. Since then, increasing volumes of mined ore have failed to compensate for the declining grades, which have fallen by nearly 10g/t. Gold production is now running at around 260t/year, which is the lowest it has been since 1922 and South Africa has been overtaken by China, Australia and the USA in terms of global gold production.
However, costs have increased with depth and South African mines are now high cost gold producers, as steel and electricity price rises and labour costs have not been offset by increased productivity or a weakening of the US dollar exchange rate. Hence, even the recent record high gold prices of over US$1,000/oz have failed to stimulate any supply response.
In contrast, the Wits Basin is far from being mined out. Total gold resources are estimated at 6,000t, and these deeper level reserves (between three and five kilometres) remain the world’s largest known gold reserves.
Deeper and down
Mining deeper poses several challenges. The first is the technologies required to operate in this increasingly hostile environment. The second is the immense capital costs of building shafts and associated underground development, as well as the huge quantities of electrical power to service these with refrigerated air, pumping and ore transport. Mines must also be safe.
The technological responses are available and are mostly proven in isolation, if not altogether. Much of this research was conducted at Wits University in the 1990s in the Deep Mine Project, sponsored by mining companies AngloGold Ashanti, Gold Fields and Durban Deep. The initiative, set out to prove the viability of working at depths of up to five kilometres below surface. The spin-outs from this research are only now coming into the commercial arena and becoming available to operators.
It may be that, on the basis of an operating cost per ounce of gold mined, going deeper will be cheaper. This may at first instance be surprising, but it shows that the grade of ore and productivity are more important than unit recovery/ton costs. It is important to remember that most of the South African gold mining infrastructure was installed in the 1960s and 1970s and is now largely inappropriate for modern working practices and mining methods. By combining access to higher grade resources, together with the ability to plan more modern layouts, considerable economic benefits are possible.
However, this does not take into account the capital costs, in the order of £1bln for a new shaft system, required to reach depths of four kilometres and greater. Investment time frames in excess of 15 years must be considered, with all the consequent risk factors.
The South African Power Utility, Eskom, proposes to raise its electricity tariffs by 35% per year for the next three years. Mining at depth is extremely energy intensive so this alone could delay the race for greater depth for several years and will sterilise more of South Africa’s existing ore reserves.
But, there is a gold price at which all these factors can be overcome and investment justified. So, from the point of view of future generations, it may not all be over for the South African gold mining industry.
Working in a gold mine
South African gold mines present one of the most dangerous working environments outside the military sphere. An examination of the causes of gold mining related deaths shows that 40% of all fatalities are due to rockbursts/rockfalls and 54% of these occur on the stope panel. This implies that using any manned extraction technique at depth is hazardous – this is a real challenge for deep level mining engineers.
Therefore, the prospects for South Africa’s gold mines can be categorised onto two strategies – shallow mines and tertiary declines.
Relatively shallow gold mines (above 1,500m) where ramp/decline access enables use of trackless equipment and more modern mining methods (and less electrical energy) include Gold One’s East Modder mine which came into production in August 2009 and Great Basin Gold’s Burnstone Project.
Brownfield expansions at depth through tertiary declines can be justified as incremental investments. South African examples are AngloGold Ashanti’s Mponeng depth extension and Gold Fields’ Kloof and East Dries Extension Areas.
Mining at depths of five kilometres is technically feasible but probably borderline in economic terms, even at current record gold prices. In any event, mining at these depths is only feasible in South Africa’s Wits Basin due to a relatively low geothermal gradient (nine degrees Celcius/km) and the presence of gold reefs in hard competent country rocks. In the case of the latter this has also been the principle reason why mechanised rock breaking has failed. Explosive rock breakage remains the tool of choice and while it remains so, man will only be able to venture deeper at greater personal risk.