Africa

Africa is a major gold producer, producing up to 30% of global production. South Africa was the leading gold producer for many decades until the Chinese recently took over. The industry is relatively well developed here, mining costs are high and opportunities rare for new ventures.

Other areas however, especially Western Africa, offer many opportunities for the discovery and development of new mines. Tanzania and Mali are rapidly becoming Africa's newest gold producers with several mines being commissioned or in the final feasibility stages while Ghana is also a major global gold producer.

Gold mine production centers on underground and open pit operations in Achaean age greenstone belts in Ghana, Tanzania, Burkina Faso, the Ivory Coast and Zimbabwe. Exploration efforts centered on West as well as East Africa are focused on surface-weathered gold-bearing lateritic and saprolitic rock, which is very suitable for relatively economical surface mining methods.

Virgin Gold, through its joint ventures with local mining companies, has considerable exposure in this part of the world where mining costs are relatively very low. In some places here, gold can still be produced at a cost of less than USD200/oz, whereas the average global production cost for the past few years has been in the range of USD400/oz and above.

Virgin Gold is also currently involved with local mining companies to explore a number of possible mining sites in the African continent with the option for development and production in a few years time. In the African continent, it is vital that we demonstrate our corporate responsibility leadership, especially with regards to environmental issues and developing the community where we plan to operate.

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South America

South America has a strong, active and prosperous gold mining industry which is internationally recognized. Gold mining culture here pre-dates European colonization and the Incas and Mayas have been mining gold since time immemorial.

Several major international resource companies are active across the continent especially in Brazil, Chile, Peru and Argentina with major mining operations and excellent mining support infrastructure. However, gold mining opportunities remain plentiful in Peru, Venezuela, Colombia, Guyana, Suriname and even some remote areas of the upper Amazon region and higher plateaus of the Andes mountain range.

Some countries are politically unstable while in some places environmental and human rights issues are of major concern. The lack of transparent government policy is also a hindrance to significant investment in this part of the world.

Though opportunities abound, Virgin Gold has been cautious as always. Exploration costs are sky high and the success rate is declining. These days it costs an average of $50 to find each ounce of gold, against $7.50 in today's money half a century ago.

To increase its footprint and production capacity in South America, Virgin Gold is employing a strategy of cooperation and joint ventures with local mine operators through its offshore set ups.

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Gold Mining

Owning a gold mine, although potentially very profitable, may also be a source of ruin for many corporations. 95% of gold discoveries worldwide are not economically viable. It takes somewhere between 8 – 13 years to bring a gold mine from scratch into production, though this time frame can be halved in certain cases. Regardless of the amount of money that has had to be spent and the resources involved, many ventures have had to be scrapped at some stage due to unsolvable problems.

• Stage 1: Exploration
  
  Duration
  
  • 3-5 years
  Objective
  
  • Prospecting to discover and confirm mineral reserves
  Process
  
  • Conduct geological survey/geochemical sampling to locate and delineate ore deposits
  • Conduct core drilling to determine the ore grade and geologic characteristics
  • Begin collection of environmental and community baseline information
• Stage 2: Development
  
  Duration
  
  • 3-5 years
  Objective
  
  • Design and receive approval for mine construction and operation
  Process
  
  • Complete engineering design of the optimal mining method (open-pit or underground) and mineral recovery process
  • Complete project feasibility study
  • Obtain necessary construction and operating approvals
  • Obtain land and water rights
• Stage 3: Construction
  
  Duration
  
  • 2-3 years
  Objective
  
  • Construct mining facilities in accordance with approvals, requirements and standards
  Process
  
  • Establish a skilled construction team to execute the development plan
  • Construct mine and processing facilities and associated infrastructure, such as roads, power and water lines, and employee facilities
• Stage 4: Mining
  
  10-35 years is the average lifespan for a gold mine.
• Stage 5: Closure/Reclamation
  
  Gold mining can be politically risky, for many reasons. Gold mines cannot be moved and are very capital intensive, making them very tempting targets for abuse by governments or organized labor. Even though some world regions are considered riskier than others due to different property-rights traditions and current geopolitical events, ultimately every gold mine on earth bears some level of political risk. While gold mines in Africa can be outright confiscated by malicious Marxist governments and rebel militias, those in the West can be shut down just as easily by liberal and pro-environmentalist politicians.
  
  Though these unfortunate events are very rare, they are one of the key reasons why it is so vital for Virgin Gold to diversify its investments into different quality gold mines in different global regions.
  
  There is no reason to regret the fact that Virgin Gold has yet to own a gold mine outright, even after a decade in this business. It is rather a testimonial of how prudent this corporation is in its decision making and toward fulfilling its responsibility to its shareholders.
  
  There is a saying that, "a gold mine is just a hole in the ground surrounded by liars". Operating a gold mine incurs considerable costs and more often than not, gold mines with “probable reserves” turn out to be not as lucrative as portrayed. The acquisition of gold mines with “proven reserves” has reached a record high; reflecting the record price of bullion gold. If gold price were to drift into a correctional phase, such investment in a gold mine at a peak price would equate to a major loss for many years down the road. Many current profitable gold producers acquired and developed their mines when gold prices were at record lows many years ago.
  
  In fact, Virgin Gold is involved in a few gold ventures in both South America and Africa through its onshore investment vehicles. Our subsidiaries also jointly own rights to perform exploration and development work in both continents. We are sure that at the appropriate time and with the right opportunity, Virgin Gold will have outright ownership in some of the better gold mines worldwide.

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