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Wits Gold completes positive pre-feasibility study on the De Bron-Merriespruit (“DBM”) Project, Southern Free State Goldfield

June 13, 2012

Witwatersrand Consolidated Gold Resources Limited
(Incorporated in the Republic of South Africa)
Register Number 2002/031365/06
JSE Code: WGR
ISIN: ZAE000079703
TSX Code: WGR
CUSIP Number: S98297104

(‘Wits Gold’ or ‘the Company’)

JOHANNESBURG, June 13, 2012 /CNW/ -

Highlights of the positive pre-feasibility study

        --  Shallow underground mine design comprising a twin shaft system
            to 660 metres
        --  Indicated Resource of 26.7Mt at 5.8g/t Au (4.99 Moz),
            containing Reserves of 23.5Mt at 4.05g/t Au (3.1 Moz)
        --  Average annual production of 200 000oz of gold over an 18 year
            life of mine
        --  Production cash costs US$628/oz
        --  First gold production 47 months after shaft sinking commences
        --  Peak initial capital required of ZAR2.37 billion (US$296
            million at ZAR8/US$)
        --  At ZAR400 000/kg Au (US$1 555/oz & ZAR8/US$) pre-tax NPV (5%)
            ZAR7.3 billion (US$913 million), IRR 28.0%
        --  Semi-mechanised option increases IRR to 31.2% (at the above
            prices) and pre-tax NPV (5%) to ZAR10.3 billion (US$1.3
            billion)
        --  Additional shallow Inferred Resources of 5.97Mt at 5.7g/t Au
            (1.1 Moz) readily mineable from current mine design - drilling
            to be fast tracked prior to definitive feasibility study

Wits Gold is pleased to announce the completion of a positive
pre-feasibility study (“PFS”) on its De Bron – Merriespruit (“DBM”)
Project, situated south of the mined out Merriespruit Gold Mine, six
kilometres south of the town of Virginia in the southern Free State
goldfield, South Africa. The study has illustrated that mining at DBM
is both technically and economically viable. Wits Gold owns 100% of the
Prospecting Rights to the DBM Project. The PFS was completed under the
guidelines of the South African Code for Reporting of Mineral Resources
and Mineral Reserves (“SAMREC Code”) as well as the Canadian National
Instrument 43-101, and was undertaken by the independent consultants,
Jim Pooley and Jon Hudson (“the Qualified/Competent Persons”), from
Turgis Mining Consultants (“Turgis”). These independent
Qualified/Competent Persons have approved the technical contents of
this news release. A National Instrument 43-101 compliant technical
report is being finalised and will be filed on SEDAR within 45 days of
this news release.

The DBM deposit contains an estimated Indicated Mineral Resource of
41.8Mt at an average grade of 5.5g/t gold (7.5Moz). This Resource was
estimated at a cut-off gold value of 300cm.g/t for the Beatrix,
Kalkoenkrans, B and Leader Reefs where a three-dimensional geological
model illustrated that these conglomerate reefs occur at depths between
480 and 1 350 metres below surface. This Mineral Resource Estimate was
previously disclosed in the National Instrument 43-101 technical report
entitled “Witwatersrand Consolidated Gold Resources Limited: Mineral
Properties in the DBM Project, South Africa” dated February, 2012. This
technical report is available at www.sedar.com and on the Company’s website. The Mineral Resource Estimate was
prepared by George Gilchrist, who is a full time employee of Snowden
Mining Industry Consultants (“Snowden”) and independent of Wits Gold.
Mr Gilchrist is a Qualified Person as defined by National Instrument
43-101. Mr Gilchrist is a registered Professional Natural Scientist
(“Pr.Sci.Nat”) with the South African Council for Natural Scientific
Professionals (SACNASP) and has more than six years of experience in
gold exploration and mineral resource estimation.

The PFS was intentionally based on that portion of the Resource which is
generally less than 1 000 metres below surface and which contains an
Indicated Mineral Resource of 26.7Mt at 5.8g/t gold (4.99Moz). Applying
the geological model, the PFS considered a number of alternative
primary access configurations, mine designs and production profiles.
The results from these production schedules were subsequently input
into a series of financial models in order to compare the potential
returns from each of these options. Based on these results, two options
have been selected for further investigation prior to the commencement
of a feasibility study.

The first option (“Option 1″) is based on standard conventional breast
mining practices in the Witwatersrand Basin, while the second option
(“Option 2″) investigates a semi-mechanised variation of the down-dip
mining methodology currently practised in the platinum mining industry
of the Bushveld Complex. For both options it is envisaged that a twin
shaft system will be sunk to 660m with top production level commencing
on 560m, from where a twin decline system will provide access to the
deeper parts of the ore body.  For both options the off-reef
infrastructure has been developed using trackless mechanised equipment
to facilitate a rapid production build up with conventional on reef
development in order to minimise dilution. A system of off- reef
trackless footwall haulages are developed on strike below the ore
body.  For Option 1, cross-cuts to reef will be spaced at 180 metres
with on-reef raises and conventional breast stoping completing the
layout.

Option 2 differs from Option 1 in that the on-reef development and
mining is done on dip as opposed to on strike. The mining method for
Option 2 involves closely spaced pre-developed on reef raises (spaced
30m apart) which improves orebody understanding and allows for
selective mining and improved gold extraction. The mine design for
Option 2 is flexible and amenable to alternating between conventional
and long hole stoping. The advantage of the long hole stoping method is
that, where applicable, it allows for the mining of a narrower channel
which will have the effect of an increased head grade. Wits Gold
considers that Option 2 therefore has the potential for improved safety
through a better understanding of the orebody, and a potential
reduction in the number of workers on the rock face. The hybrid mining
methodology, alternating between conventional and long hole mining,
warrants further investigation prior to the feasibility study.

The Company, together with Turgis, recognise that the long hole
variation to the dip mining technique for Option 2 is as yet not an
established gold mining practice for the Witwatersrand Reefs and it has
therefore not been used for the conversion of Indicated Resources to
Probable Reserves. Instead, the conversion of Indicated Mineral
Resources to Probable Mineral Reserves results from the application of
modifying factors using the conventional mining method in Option 1.

The following tabulation summarises the planning process followed to
progress from the Indicated Resource used in the PFS mine design to the
Probable Reserve. Note that the Probable Reserve is included in the
Indicated Mineral Resource.

     ____________________________________________________
    |                             | |    | Au |Tonnes|   |
    |                             | | Mt |g/t |  Au  |Moz|
    |_____________________________|_|____|____|______|___|
    |Indicated Mineral Resource*  | |26.7|5.81|155.2 |5.0|
    |_____________________________|_|____|____|______|___|
    |Minus no-design blocks       | |5.3 |5.04| 26.8 |0.9|
    |_____________________________|_|____|____|______|___|
    |Mineable Resource            | |21.4|6.01|128.4 |4.1|
    |_____________________________|_|____|____|______|___|
    |Minus design losses          | |2.7 |6.01| 16.4 |0.5|
    |_____________________________|_|____|____|______|___|
    |Minus mining losses          | |1.1 |6.01|  6.4 |0.2|
    |_____________________________|_|____|____|______|___|
    |Mineable Resource less losses| |17.6|6.01|105.6 |3.4|
    |_____________________________|_|____|____|______|___|
    |Stoping dilution             | |4.1 |  0 |   0  | 0 |
    |_____________________________|_|____|____|______|___|
    |Gulley footwall dilution     | |1.5 |  0 |   0  | 0 |
    |_____________________________|_|____|____|______|___|
    |Reef development dilution    | |0.3 |  0 |   0  | 0 |
    |_____________________________|_|____|____|______|___|
    |Diluted Mineable Resource    | |23.5|4.50|105.6 |3.4|
    |_____________________________|_|____|____|______|___|
    |Mine Call Factor**           | |    |    | 10.6 |0.3|
    |_____________________________|_|____|____|______|___|
    |Probable Reserve             | |23.5|4.05| 95.0 |3.1|
    |_____________________________|_|____|____|______|___|

*The Indicated Mineral Resource included 4% geological losses

**Mine Call Factor planned at 90%

This Reserve calculation is based on an underground mine layout for DBM
that will require a total life of mine capital expenditure of ZAR5.4
billion (approximately US$680.4 million) including ZAR144.6million
(US$18.1 million) for Stay-in Business (SIB) capital. However, peak
initial funding will be considerably lower at ZAR2.4 billion (US$ 295.8
million). It is estimated that the operating cost will be R629/tonne
(US$78.6/tonne), whilst first reef production could be achieved 47
months after the commencement of shaft sinking.  Mineral Resources that
are not Mineral Reserves do not have demonstrated economic viability.

The ore will be delivered to an on-site carbon-in-leach gold recovery
plant that will recover 96% of contained gold delivered to the plant.
Including a five-year ramp-up period, the mine is expected to operate
for 18 years with an average annual production in excess of 200 000oz
of gold and cash costs estimated at US$628/oz.

A number of financial alternatives have been estimated for PFS Options 1
and 2. The NPV and IRR are pre-tax and after 5% royalty. Based on
different gold price scenarios the results of this exercise are as
follows:

     ___________________________________________________________________
    |           |Gold price|        |        |        |        |        |
    |           |  per kg  |R300 000|R350 000|R400 000|R450 000|R500 000|
    |___________|__________|________|________|________|________|________|
    |Option 1   |IRR       |15.3%   |22.2%   |28.0%   |33.1%   |37.6%   |
    |___________|__________|________|________|________|________|________|
    |           |NPV (5%)  |R2 553m |R4 903m |R7 275m |R9 651m |R12 030m|
    |___________|__________|________|________|________|________|________|
    |Option 2   |IRR       |19.4%   |25.6%   |30.9%   |35.5%   |39.7%   |
    |___________|__________|________|________|________|________|________|
    |           |NPV (5%)  |R4 602m |R7 356m |R10 145m|R12 942m|R15 739m|
    |___________|__________|________|________|________|________|________|

At a gold price of R400 000/kg (US$1 555/oz at R8.00 per US$) and a
state royalty of 5% on revenue, Option 1 has an IRR of 28.0% and an NPV
(5%) of R7.3 billion (US$909 million), while Option 2 has a potential
IRR of 30.9% and an NPV (5%) of R10.2 billion (US$1.3 billion). The
financial results for Option 2 are at this stage only considered to be
indicative of the potential as further analysis needs to be done on the
down-dip mining method. Based on the improved IRR values as well as the
potential safety benefits, it is the intention of the Company to
thoroughly research the viability of the down-dip mining method during
the feasibility study stage.   

A sensitivity analysis of the major input variables as shown below
indicates that the financial model for DBM is most sensitive to gold
price and grade.

     ________________________________________________
    |Parameter       |Base - 20%|Base Case|Base + 20%|
    |________________|__________|_________|__________|
    |                |          |         |          |
    |________________|__________|_________|__________|
    |Gold Price      |          |         |          |
    |________________|__________|_________|__________|
    |Pre-tax NPV (5%)|  R3 487m | R7 275m | R11 078m |
    |________________|__________|_________|__________|
    |Pre-tax IRR     |   18.2%  |   28.0% |   35.9%  |
    |________________|__________|_________|__________|
    |                |          |         |          |
    |________________|__________|_________|__________|
    |Opex            |          |         |          |
    |________________|__________|_________|__________|
    |Pre-tax NPV (5%)|  R8 825m | R7 275m |  R5 735m |
    |________________|__________|_________|__________|
    |Pre-tax IRR     |   31.1%  |   28.0% |   24.6%  |
    |________________|__________|_________|__________|
    |                |          |         |          |
    |________________|__________|_________|__________|
    |Capex           |          |         |          |
    |________________|__________|_________|__________|
    |Pre-tax NPV (5%)|  R8 091m | R7 275m |  R6 459m |
    |________________|__________|_________|__________|
    |Pre-tax IRR     |   34.3%  |   28.0% |   23.2%  |
    |________________|__________|_________|__________|
    |                |          |         |          |
    |________________|__________|_________|__________|
    |Gold grade      |          |         |          |
    |________________|__________|_________|__________|
    |Pre-tax NPV (5%)|  R3 487m | R7 275m | R11 078m |
    |________________|__________|_________|__________|
    |Pre-tax IRR     |   18.2%  |   28.0% |   35.9%  |
    |________________|__________|_________|__________|

NATIONAL INSTRUMENT 43-101 STATEMENT

The conversion of Indicated Resources to Probable Reserves was made on 8(th) June 2012 based on the Indicated Resources quoted in the February 2012
NI 43-101 technical report by Snowden Mining Industry Consultants Inc.
(“Snowden”). The Indicated Resource declared by Snowden considered a
geological loss of 4% to account for minor faulting and
sedimentological factors as per the Snowden February 2012 report.
Furthermore it was also recognised that certain portions of the reefs
would for geotechnical reasons not be mined due to the small vertical
separation between them.

The modifying factors used for the conversion of Indicated Mineral
Resources to Probable Mineral Reserves include waste dilution of 28%
and planned ore extraction losses of 18%. This includes dilution from
stoping, in-stope gullies and on-reef development and allowances for
geotechnical constraints, a minimum mining width of 90 centimetres,
minor geological losses (4%) and a Mine Call Factor of 90%. This
process resulted in the definition of an estimated Probable Mineral
Reserve of 23.5Mt at a plant head grade of 4.05g/t gold, containing
3.1Moz of gold. No Inferred Mineral Resources were included in the
conversion of Resources to Reserves.

ABOUT WITS GOLD

Wits Gold holds 14 new order Prospecting Rights over 1 195km(2) in the southern Free State, Potchefstroom and Klerksdorp goldfields.
The Company is currently focused on fast-tracking two advanced
projects, DBM and Bloemhoek, located next to each other in the southern
Free State goldfield and adjacent to the Beatrix gold mine operated by
Gold Fields, and the Joel gold mine operated by Harmony. On 22 February
2012 the Department of Mineral Resources accepted the Company’s
application for a Mining Right for gold, silver and uranium over its
advanced Prospecting Rights areas in the southern Free State goldfield,
which include the DBM, Bloemhoek, Robijn and Hakkies Project areas. The
granting of the Mining Right is expected over the next 12 months, once
the Company complies with requirements in terms of the Minerals Act,
such as obligations in terms of feasibility studies, environmental
impact assessment as well as Social and Labour Plan commitments. Once
granted, a Mining Right is valid for a period of 30 years and renewable
for a further period as required.

Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd

Johannesburg
13 June 2012

FORWARD LOOKING STATEMENTS

Certain statements in this news release may constitute forward-looking
information within the meaning of securities laws.  In some cases,
forward-looking information can be identified by use of terms such as
“may”, “will”, “should”, “expect”, “believe”, “plan”, “scheduled”,
“intend”, “estimate”, “forecast”, “predict”, “potential”, “continue”,
“likely”, “anticipate” or other similar expressions concerning matters
that are not historical facts.  Forward-looking information may relate
to management’s future outlook and anticipated events or results, and
may include statements or information regarding the future plans or
prospects of the Company.  Without limitation, statements about the
development of the mine at the DBM Project, the required capital
expenditures, the time required for the mine at the DBM Project to
enter production, the length of time the mine at the DBM Project will
operate at full production, the annual production of gold at the DBM
Mine and other related statements are forward-looking information.

Forward-looking information involves known and unknown risks,
uncertainties and other important factors that could cause the actual
results, performance or achievements of the Company to be materially
different from the future results, performance or achievements
expressed or implied by such forward looking information.  Such risks,
uncertainties and other important factors include among others:
economic, business and political conditions in South Africa; decreases
in the market price of gold; hazards associated with underground and
surface gold mining; the ability to attract and retain qualified
personnel; labour disruptions; changes in laws and government
regulations, particularly environmental regulations and mineral rights
legislation including risks relating to the acquisition of the
necessary licences and permits; changes in exchange rates; currency
devaluations and inflation and other macro-economic factors; risk of
changes in capital and operating costs, financing, capitalization and
liquidity risks, including the risk that the financing required to fund
all currently planned exploration and related activities may not be
available on satisfactory terms, or at all; the ability to maximize the
value of any economic resources.  These forward-looking statements
speak only as of the date of this document.

You should not place undue importance on forward-looking information and
should not rely upon this information as of any other date.  The
Company undertakes no obligation to update publicly or release any
revisions to these forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the
occurrence of unanticipated events except where required by applicable
laws.

 

SOURCE Wits Gold


Source: PR Newswire