Minesite reports on GATA's expedition to London

Successful GATA Meeting In London Provides Promotional Boost To Wits Gold

By Charles Wyatt
Minesite.com
Thursday, May 7, 2009

http://www.minesite.com/nc/minews/singlenews/article/successful-gata-mee...

It was great timing by Adam Fleming, chairman of Fleming Family & Partners, to have the team from GATA in London simultaneously with Marc Watchorn, chief executive of Wits Gold. Bill Murphy and Chris Powell of GATA -- or the Gold Anti-Trust Action Committee, to give it its full title -- were accompanied by John Embry, the top gold fund manager at Sprott Asset Management.

Everyone with a serious interest in gold in London was there to hear them explain just how governments and banks over a long period have acted in concert to suppress the price of gold. Gold is seen as the "canary in the cage" that warns when inflation or interest rates are getting dangerous. Politicians and bankers prefer to tie up the beak of the canary so that it cannot sing, and this they do by selling gold and hiding the evidence.

No one knows how much gold is currently held by the U.S. Treasury or the International Monetary Fund. Small wonder then that there was a very muted response from the IMF when Gordon Brown suggested at the G20 fiasco that it should sell gold to raise money for less-developed countries hit by the current financial crisis.

Bill Murphy told the audience that last month GATA filed a new set of Freedom of Information Act (FOIA) requests with the U.S. Treasury and Federal Reserve to seek information on the U.S. government's gold swap activities. The first attempt to dislodge this information was filed in December 2007, with dismal results. After carefully analyzing the loopholes used by the Treasury and Federal Reserve to avoid disclosing the requested information, these revised FOIA requests include detailed instructions to overcome the government's obstacles.

The most overt suppression of the price of gold was Brown's sale of the U.K.'s gold assets, no doubt carried out at the behest of our American friends. It took place as a series of auctions, announced in 1999 and completed in 2002, and was one of the least commercial transactions the world has seen, as the price was advertised well in advance. The result was that the price of gold was kept below $300 per ounce over the whole of this period, doing untold damage to countries in Africa, which Brown is now asking the IMF to help by selling gold yet again.

The fact that the IMF may have only pledges rather than gold is now ratcheting up the tension, as China has announced that it has nearly doubled its holding of gold reserves. Where China goes, other countries in the Middle and Far East will follow, and all will demand physical delivery of the gold. When that moment comes there is only one way for the price of gold to go, and that is up.

All of which brings us to Wits Gold, another company where Adam Fleming is chairman. He managed to bring its name into the GATA question-and-answer session on more than one occasion as Wits Gold represents exceptional leverage to gold. Its current share price is 52.10 South African rand, which is equivalent to US$5.80, yet each share is supported by 5.4 ounces of gold in the ground, which at the current price of gold is worth $4,860.

At this point a health warning has to be given that gold in the ground is worth nothing if it cannot be recovered. But one former highly leveraged unexpiring call on a huge precious metal resource, this time silver, is Silver Standard, which has now got traction on its share price since bringing the Pirquitas mine in Argentina into production. Silver Standard's shares have rallied from a low of C$4 last November to a current price of C$23.70.

The whole 149.8 million ounce gold resource owned by Wits Gold covers assets in the Potchefstroom, Klerksdorp, and Southern Free State goldfields, all of which are on the prolific Witwatersrand Basin. The focus is now on the last of these, as the mines are shallower and the gold easier to access. Shallower is a slightly ambiguous term when compared to mines elsewhere in the world, as the De Bron orebody lies between 500 metres and 1,100 metres, while Bloemhoek is at a depth of between 1,300 metres and 2,500 metres, which is average for this goldfield. Bloemhoek is one of the top 10 undeveloped gold resources in the world. It is adjacent to Gold Fields' operating Beatrix Mine and has similar geological characteristics. The Beatrix Mine produced 543,000 ounces of gold in 2007 at a total cash cost of $374 per ounce.

Inferred resources are now being promoted to the indicated category at both mines and the last estimate for De Bron puts it at 23.2 million tonnes grading 5.2 grammes per tonne, to give 3.85 million ounces of gold. This is an increase of 41 percent, and when this is allied to the fact that some of these resources have been identified at depths of between 500 metres and 1,200 metres the possibility of a profitable mining operation comes nearer. A scoping study has been carried out on Bloemhoek that confirmed that it could be mined economically under current conditions.

Marc Watchorn points out that the two orebodies are separated only by a fault, so it may be possible to mine them as one by optimising parts of each. Anyway, pre-feasibility studies are now in progress on both and the one on Bloemhoek is due later this month, with De Bron following in June. Marc's intention is to get the resources of each up to a minimum of 5 million ounces, and production is very much to the fore. Production would of course change the rating significantly as Wits Gold will no longer simply be a deep, out-of-the-money option on gold.

Wits Gold remains a gamble on the gold price but this is steadily changing as resources are upgraded and the pre-feasibility studies are completed.

In addition to gold West Wits also has uranium at the Beisa North and South projects, from which an initial resource estimate is due shortly. Marc Watchorn is expecting something approximate to the Beisa mine, which was operated by Gold Fields and is now closed. This would mean an additional 50 million pounds of uranium for West Wits as well as 2 million ounces of gold. A lot of important information will become available in the coming weeks and we will then take another look at this company.

It was bad luck on Aram Shishmanian, the new chief executive of the World Gold Council, that the reception the World Gold Council gave at the Horse Guards Museum to introduce him to London coincided with the GATA meeting at Fleming Family and Partners. He would have met more of the movers and shakers if he had gone to Suffolk Street himself, as few of them could tear themselves away to walk the few hundred yards to the museum. He seems to be a very sensible man intending to bring some new facets to his job and without the self-importance of some of his predecessors. We intend to carry an interview with him in the near future.

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