Corporate profile

Corporate profile and history of the operations

On 9 October 2006 Pamodzi Resources (Pty) Limited (“Pamodzi Resources”), Middelvlei Gold Investments (Pty) Limited (“MGI”), Bema Gold South Africa (Pty) Limited (“Bema SA”) and Bema Gold Corporation (“BGC”) entered into the merger agreement whereby Impafa Resources (Pty) Limited was vended into Bema SA in return for shares in Bema SA. Further to the merger, Pamodzi Resources subscribed for shares in Bema SA for R75 million. On 31 October 2006 Bema SA changed its name to Pamodzi Gold Limited and was converted to a public company. The merger aimed to create a 50,17% HDSA owned junior gold miner which was listed on the main board of the JSE on 11 December 2006.

Subsequent to the Pamodzi Gold listing and management takeover, Impafa Resources changed its name to Pamodzi Gold West Rand (Pty) Limited (“PGWR”) and Petrex (Pty) Limited, which includes all the East Rand operations, changed its name to Pamodzi Gold East Rand (Pty) Limited (“PGER”).

Combining the asset base of the two companies gives Pamodzi Gold the critical mass it needs with an initial production from current operations of about 325kg per month (125 000 oz per annum) for the first year and just above 400kg per month (150 000 oz per annum) thereafter. This gives the newly formed HDSA company the opportunity to incorporate other assets that may become available as a result of the enactment of the MPRDA.

It is envisaged that Pamodzi Gold will be the vehicle used to consolidate the South African junior gold mining sector. The Company believes it is well positioned to generate significant deal flow after the listing based on, inter alia, the combination of its HDSA owned status, its access to capital and the quality of its management team.

Pamodzi Investments Holdings (Pty) Limited (“PIH”) is a BEE investment house whose founders and shareholders are renowned, predominantly black businesspeople. PIH acquired an interest of 50,5% in Pamodzi Resources in December 2002. PIH is considering increasing this percentage shareholding to about 70%. Pamodzi Resources owns 50,0% plus one share in MGI, a Joint Venture with Superior Mining SA (Pty) Limited.

Pamodzi Gold currently has gold mining operations on the East and West Rand of the Gauteng Province in South Africa.

The West Rand operations consist of PGWR’s Middelvlei opencast mine situated 55km south-west of Johannesburg, currently extracting the Black Reef ore body. The MVR and VCR will be mined at a later stage. The operation currently has an expected eight year life of mine.

PGWR applied for conversion of its old order mining rights as required under the MPRDA on 2 May 2005 and has been granted a new order prospecting right for gold on approximately 633 ha of the Middelvlei farm. Currently PGWR has agreements for toll milling with either Goldfields Limited or Harmony Gold Mines Limited and is currently treating ore through the Harmony Plant. However plans are progressing to develop or acquire on-mine processing capacity.

The East Rand operations consist of three underground operations, namely: Grootvlei Proprietary Mines Limited (“Grootvlei”), Consolidated Modderfontein Mines Limited (“Cons Modder”) and Nigel Gold Mining Company (Pty) Limited (“Nigel”) situated on the East Rand, some 40km east of Johannesburg. All three operations hold old order mining rights under the MPRDA and conversion to new order rights is subject to compliance with regulatory issues. Pamodzi Gold is in the process of compiling the requirements to apply for the conversion. The application is expected to be lodged early in 2008.

These operations combined currently have an expected nine year life of mine.

History of the East Rand Operations

The East Rand Goldfield has been one of the major gold producers of the Witwatersrand basin in the past and can be summarised as follows:

Gold production commenced in 1888, when the Nigel Gold Mine came into operation, followed by Van Ryn Estates in 1892. Mining was mainly concentrated on the Main Reef and in the first eighty years of mining some 28 mines were in operation. The main period of production and development was during the 1940s and early 1950s. During the production history of the East Rand there were times of prosperity and of depression. The difficult years were those after World War 1 and included the Miners Strike in 1922, the Great Depression, the low gold price of £4.10 per ounce in the latter part of the 1920s culminating in the abandonment of the gold standard by South Africa at the end of 1932, with an increase in price of 66% to £7.10 per ounce. Thereafter there was a period of prosperity with the mines expanding their operations with the mining of secondary reefs such as the Kimberley Reef from 1931 onwards. The uranium boom in the late 1940s impacted positively on the East Rand in that the Kimberley Reef (UK9A or May Reef) is a significant uranium host. Uranium oxide was extracted on the Vogelstruisbult and Daggafontein Mines.

The fortunes of the area began to decline because of the increasing costs and a fixed gold price of $35 (£12.10) per ounce, so that in the late 1950s and the early 1960s the closure of mines and the abandonment of mines took place. In 1955 there were 24 operating mines and 90 shafts but the fixed gold price, reduction of Main (Nigel) Reef ore resources and increasing working costs of the late 1950s and 1960s caused many of the mines to close down. The abolition of a fixed gold price in 1978 and the devaluation of the Rand thereafter, came too late to save many of the mines. In the late 1980s abandoned claim areas were re-pegged and some of the old workings reopened and revamped. Mines changed hands, new mining companies appeared and there was a resurgence of mining activity. In the 1990s flooding of the deeper Main Reef resulted in the major tonnage contributor shifting to the relatively shallow Kimberley Reef and Black Reef in the northern parts of the basin. The above description of events has resulted in a trend of growth, peaking in the 1950s and then declining in the early 1970s. The area was again rejuvenated in the 1980s through the amalgamation of different interconnecting operations. In an investigation conducted by the Department of Mineral and Energy Affairs during the mid eighties, it was conservatively estimated that exploitable ore resources at the time in the East Rand amounted to 92 million tonnes at an average in situ grade of 3,74g/t. Renewed interest in the mine lease boundaries through amalgamation changed in 1986. Apart from Gencor, which was the title holder of areas such as
Grootvlei, Marievale, Turnbridge and a portion of Modder “B”, Anglo American Corporation and Goldfields of South Africa had control over large portions of the area. Golden Dumps operated Cons Modder and Springs Daggafontein.

To the south the largest portion was under the control of Gold Fields Mining Corporation Limited, which managed Vlakfontein, Vogelstruisbult, and Gold Fields Mining and Development Company. Smaller companies such as Southgo (Nigel) and Rhombus Mining Limited (Sub Nigel) were also active in the area.

On 9 June 1997 and 1 July 1997, Grootvlei and Cons Modder respectively became wholly owned subsidiaries of Harmony Gold Mining Company Limited (“Harmony”). Petra Mining Limited (“Petmin”), owning only Nigel, acquired these properties from Harmony on 15 December 1998.

In October 2002, Chimera Mines and Minerals acquired Petrex, the holding company of Grootvlei, Cons Modder and Nigel, from Petmin. Chimera was, in turn, acquired by BGC in February 2003. In December 2006 Pamodzi Gold acquired Petrex through a merger agreement with BGC.

History of the West Rand Operations

Trial mining and milling of a bulk Black Reef sample commenced during October 2002. A box cut was excavated to expose and mine ~ 6 000 tonnes of Black Reef ore which required the removal of some 46 000 bcms of overburden down to a depth of about 30 metres.

MGI commenced overburden removal on the Middelvlei Mine on 8 February 2006, three weeks earlier than originally scheduled.

Mining operations will be initially focused on the Black Reef Reserve, producing at a rate of 15 000 tonnes per month of mine ore, which will yield about 16 000 ounces of gold for the first year.

MGI has re-modelled the Black Reef by clearly delineating the gold reef channels. Pit optimisations have been run utilising the same design and global financial parameters which defined the previously declared mineral reserves. Major operational milestones include:

• Mining start up – February 2006;
• First ore production – June 2006;
• Steady state ore production from February 2007; and
• Expected 15 000 oz of annualised gold production from the third quarter in 2007.