At Blyvooruitzicht, a 77-year-old gold mine southwest of Johannesburg, almost everything had been stolen except gold-bearing ore in the looting after the operation was closed in 2013.
Now, New York University graduates Bastiat Viljoen, 31, and his brother Dane, who was an intern at Goldman Sachs Group Inc., want to revive the ailing mine, which they say may contain 9 million ounces of gold, worth almost $11 billion at current prices.
They are partly financed by South African mining entrepreneur Peter Skeat.
With their backgrounds, the Viljoens and their partners would look more at home in Silicon Valley than South Africa’s rust belt of aging gold mines, some of the deepest and most dangerous in the world.
The challenge at Blyvooruitzicht, which means happy prospect in Afrikaans, is formidable: to rebuild a mine and win over a restive local community, who described the area as a war zone when it was overrun by thieves and illegal miners after falling into liquidation in 2013, Johannesburg’s Sunday Times newspaper reported in 2014.
“We’re trying to bring a start-up mentality to an industry that’s been around for thousands of years,” said Dane Viljoen, 28, in an interview at the mine’s head office under broken light bulbs and surrounded by mine maps from the 1950s.
“We’ve been gifted this reset button. It’s a massive opportunity.”
While the partners have big ambitions, they plan to start small.
They want to rebuild Blyvooruitzicht’s processing plant and begin mining a single waste dump in 2017.
Waste material, or tailings, from decades of mining is deposited in giant mounds that still contain a small amount of gold, which can now be accessed with better technology.
Reviving the mine will be difficult, said Louis Venter, a retired gold-mining analyst who used to follow companies that operated Blyvooruitzicht, including DRDGold Ltd. and Village Main Reef Ltd., at Anglorand Securities Ltd. in Johannesburg
“I don’t like making sweeping statements but Blyvoor is beyond repair,” Venter said by phone.
“That infrastructure is completely destroyed.
One would assume that when private investors spend money on an asset like that they see some value somewhere, but I don’t know what that will be.”
The dump to be mined contains about 400,000 ounces of gold at a grade of 0.33 gram (0.01 ounce) a ton, similar to that being mined by DRDGold, which also processes such deposits, albeit on a bigger scale.
To get mining up and running will cost 150 million rand ($10 million) to 200 million rand, according to Richard Floyd, a business partner of the Viljoens.
The investment into Randlord Consolidated Mines (Pty) Ltd. in part comes from Peter Skeat, who helped pioneer modern, surface gold mining in South Africa and has run companies including Afrikander Lease Ltd., Mintails Ltd. and Galaxy Gold Mining Ltd.
The 6,000 residents living on the mine, a legacy of the operation’s heyday when it owned a town, clinics and a golf course, are hoping Randlord get it right.
When the operation went into liquidation in 2013, 1,700 workers lost their jobs and the mine fell into ruin with the surrounding area beset by crime.
“We had murders, we had a mass rape, it was a real mess,” said Pule Molefe, 37, a former mineworker who lives in the town, also named Blyvooruitzicht.
“The municipality came in and cut off our water supply.
They wanted to cut electricity also.”
At current gold prices, which averaged about 600,000 rand a kilogram in the first quarter, Randlord estimates it can make profit margins of about 40 percent.
The cash generated will be used to reopen Blyvooruitzicht’s underground mine, which is about 3 kilometers (1.9 miles) deep and contains 9 million ounces of gold resources, a figure that could rise to 40 million with further exploration, according to Karel Potgieter, one of the brothers’ partners.
“We didn’t make the investment in the shaft just to think about what we’re going to do,” said Potgieter, 33.
“Our intentions are absolutely to go underground.” Gold fell 0.9 percent to $1,220.33 an ounce at 2:31 p.m. in Johannesburg Wednesday.
A key reason why previous operators such as DRDGold and Village Main Reef couldn’t make Blyvooruitzicht profitable was because they had to pump water from mined-out areas to access the gold.
After the operation went into liquidation, AngloGold Ashanti Ltd., the biggest gold company based in Johannesburg, took on the pumping costs to save its nearby mines from flooding.
“We’re young but we want to build a legacy, a good legacy,” said Dane Viljoen, who named Randlord after the term given to entrepreneurs such as Barney Barnato, who was among those who controlled South Africa’s mining industry in the 19th century.
“We want to be the guys that build libraries, put money into universities.”
After production started in 1942, profits from the Blyvooruitzicht mine flowed through the mining village and the town of Carletonville, four miles away. Within a decade, Blyvooruitzicht was said to be the most profitable gold mine to date, according to the 1968 book Golden Age, chronicling South Africa’s mining industry.
Dividends of 100 percent or more were paid out for five straight years, the book said.
The operation is situated in the Witwatersrand Basin in central South Africa, a geological deposit billions of years old that’s produced a third of all the world’s gold.
Mariette Liefferink, who runs non-governmental organization Federation for a Sustainable Environment, says Randlord may struggle if they don’t reinvest profits in the local community and fix the environmental damage the mine has caused in the past.
“We hope they’ll do what they say they’re going to do,” said Molefe.
“But we want to see action and jobs. Many people came to us with big promises but we’ve been let down many times.”