23rd Jun 2008 07:00
Oxus Gold plc announces Positive Bankable Feasibility Study for Amantaytau Goldfields Underground Sulphide Project in Uzbekistan
London: June 23, 2008
Oxus Gold plc (ticker AIM: OXS.L), the Uzbekistan gold and silver producer, today announces the results of a Bankable Feasibility Study (BFS) compiled by Wardell Armstrong International on its Underground Sulphide Project at its 50% owned Amantaytau Goldfields Joint Venture (AGF).
Highlights
Development of a 1.2mtpa underground gold mine and process plant based on the current reserves at the Severny and Centralny ore deposits is technically and commercially feasible
The Project will exploit a reserve of 1.74Moz within a resource of 2.99Moz, over an initial 7 year life at the Sulphide Project, producing up to 270,000 oz gold per annum
Significant upside potential for extended life and increased reserves as the deposit is open-ended at depth with indications of occurrence of high grade mineralisation
Further geotechnical work is planned prior to underground development in order to investigate the use of lower cost mining methods than the currently planned cut and fill stoping
Total costs are an average of US$ 402 per oz gold produced over the initial 7 year life of mine, including operating taxes, royalties and management fees: the Project is in the midrange on the cost curve of gold producers and is regarded as very robust with potential for further improvement
Ungeared after tax NPV for the Project is US$ 329 million at 7% discount rate per annum, the IRR is 50% and the payback is 24 months from start of production, anticipated in Q3 2009
The Project is an extension and expansion of the existing and ongoing oxide production of approximately 70,000 oz gold equivalent per annum and therefore benefits from the existing infrastructure, existing skilled labour force and management's experience of operating in the area
The Royal Bank of Scotland plc (RBS) has been appointed as lead arranger for a limited recourse senior debt facility. Oxus anticipates 100% debt funding for the Project, thereby eliminating shareholder dilution: RBS has received the BFS and is reviewing it as part of its due diligence ahead of loan documentation
Speaking today, Chief Executive Officer Mr Richard Wilkins said:
"In light of these robust financial indicators, Amantaytau Goldfields is proceeding with the Project implementation including the commencement of purchasing long-lead items, and start-up of initial site works.
Commissioning of the plant is expected by Q3 2009 with a production level of 750,000tpa, increasing to 1.2mtpa by mid 2010. 200,000oz of gold will be produced in 2010 and 270,000oz in 2011.
Since receiving Cabinet of Ministers approval to proceed with the Project last December I am delighted with the progress that we have subsequently made including the completion of this Bankable Feasibility Study. With first sulphide production forecast for Q3 2009, Oxus is poised to quadruple its production over the next 3 years and transform itself from a junior mining company into a mid-tier producer."
Project Description
The Project is located at the existing AGF mine site in the Navoi District of Uzbekistan, some 30 km south east of the town of Zarafshan and 25 km south west of the very large Muruntau gold mine.
The BFS is based only on the current sulphide reserves of the Severny and Centralny deposits and has not taken into account possible future production from the Inferred resource portion of the deposits nor any potential future resources at depth. An exploration programme is planned for these potential targets to increase the resources and then convert them into reserves.
The Project will be an underground mining operation accessed via 2 parallel declines, with the portals located in the northernmost location at the base of the existing Centralny Pit No 1 where the oxide ore has been mined out.
The mine design mainly utilises cut and fill mining methods with limited sub-level open stoping. The cut and fill mining method results in high physical extraction ratios and minimal dilution but is relatively expensive. Post BFS geotechnical work will be undertaken prior to underground development with a view to improving the economics further and reducing the production cost per ounce.
Production of sulphide ore will replace the Centralny open pit oxide ore which is virtually exhausted. Production from oxide ore will continue at the Vysokovoltnoye and Asaukak heap leach plants at a rate of 70,000 oz gold equivalent per annum.
The ore will be processed using bio-oxidation technology provided by Gold Fields, South Africa. The existing carbon in pulp (CIP) plant will be modified to accept the sulphide ore. The existing milling, reagent handling, elution, electro-winning and smelting sections will be retained and upgraded while the leach feed thickener will be converted to accept flotation tails. The float concentrate will be bio-digested to break down the sulphide minerals, thickened and cyanide leached in a carbon in leach (CIL) section. The plant will be constructed in two phases. Phase 1 will consist of a single flotation bank and two bio-oxidation modules designed to treat 750,000tpa of ore with the first module being commissioned by Q3 2009. Phase 2 will increase the plant capacity to 1.2mtpa and will be commissioned in mid 2010. Overall plant recovery of 88% has been used in the BFS based on 96% float and 92% CIL recovery.
Key Results of the Feasibility Study
Mineral Resources
This BFS recognises the JORC classified Measured and Indicated resource base for the Amantaytau Severny and Centralny sulphides to total 13.5 million tonnes at 6.89g/t containing 93.06 tonnes of gold (2.99 million ounces)
Upside potential
Based on the wealth of data available from Soviet times and validated by Lonhro and Oxus, Oxus is confident that there is significant potential to increase the resource base substantially. Neither Centralny nor Severny has been closed off at depth and considerable potential exists for the delineation of mineralisation below existing development levels. A single deep drill hole at Amantaytau Severny intersected mineralisation at 870m below surface comprising a drilled width of 8m* at 51.6g/t (*estimated true width based on drill section is 1.73m).
Initial Mining Reserves
Based on the above resource, JORC classified Proven and Probable reserves have been estimated for stoping blocks within a 3.5g/t cut-off at Severny and a 2.0g/t cut-off at Centralny to be 8.94 million tonnes at 6.99g/t containing 62.5 tonnes of gold (2.01 million ounces).
The total reserve in this BFS for production scheduling is 7.16 million tonnes at 7.55g/t containing 54.0 tonnes of gold (1.74 million ounces).
Capital Costs
The initial capital funding requirements are summarised below:
|
US$ Million |
|
|
Mine |
26.50 |
|
Process Plant |
60.30 |
|
Infrastructure |
8.80 |
|
Indirect |
21.60 |
|
Pre-production opex |
40.20 |
|
Contingency |
10.40 |
|
Total Capital Cost |
167.80 |
A further US$ 48.7m of sustaining capital over the life of the Project will be funded from the Project cash flows.
Operating costs
Operating costs per tonne of ore mined as from Q1 2010 are summarised below:
US$/t
|
Mining [Life of Mine] |
40.70 |
|
Process Plant |
18.20 |
|
G&A |
7.50 |
|
Total Direct Opex |
66.40 |
|
Taxes & Royalties |
16.60 |
|
(excludes profits tax) Oxus Management fee |
3.30 |
|
TOTAL |
86.30 |
Operating costs per ounce of gold produced are summarised below:
US$/oz
|
Direct Costs |
310.00 |
|
Taxes & Royalties |
77.00 |
|
Oxus Management Fee |
15.00 |
|
TOTAL |
402.00 |
Revenue
The BFS is based on the COMEX forward gold price curve as supplied by Standard Bank London Ltd, utilising US$ 905 per oz in 2009, rising to US$ 1,063 per oz in 2016.
The following table represents the NPV of the Project at different discount rates per annum:
NPV = $543.99 million at 0% per annum
NPV = $379.85 million at 5% per annum
NPV = $329.45 million at 7% per annum
NPV = $266.11 million at 10% per annum
Project Funding
Oxus intends that the Project will be funded 100% by debt finance. RBS has been appointed as lead arranger for a limited recourse senior debt facility. Expressions of interest have been received by RBS from a number of resource funding institutions regarding the provision of finance for the Project.
Project Implementation
The Board of Directors of Oxus Gold plc has approved the development of this Project. An initial Project schedule and budget have been established to enable long-lead items and site work to commence prior to the drawdown of the main finance package referred to above. Development of the Project is an extension of the existing fully permitted operation, and will be subject to additional Uzbek Government permits and approvals specific for underground construction and mining. Drawdown of finance will be subject to these approvals together with normal banking conditions precedent.
Both the construction of the processing plant and the establishment of the underground mining and initial stoping will be undertaken by internationally reputable contractors with proven track records. Tenders are currently being processed and potential contractors chosen for these contracts.
For further information, please contact:
Oxus Gold plc
John Donald Tel: +44 (0)20 7907 2000
Jonathan Kipps
Richard Wilkins
Canaccord Adams Limited
Mike Jones Tel: +44 (0)20 7050 6500
Conduit PR.
Jane Stacey/ Ed Portman Tel: +44 (0)20 7429 6606
+ 44(0)792 292 3306
Competent Persons: The resources and reserves stated in this RNS Announcement have been compiled or Approved by the following Competent Persons: Philip S Newall, BSc, ARSM, PhD, CEng, FIMM Wardell Armstrong International Ltd Wheal Jane, Baldhu, Truro, Cornwall, TR3 6EH Tel: +44 1872 560738 Fax: +44 1872 561079 Web: //www.wardell-armstrong.com
Mr. Newall is Senior Consulting Geologist and Director with WAI and has practiced his profession as a mine and exploration geologist for over twenty years for both base and precious metals. Gordon Wylie BSc (Hons) Geology, MAusIMM, FGSSA Gordon Wylie is a consultant and non-executive Director of Oxus Gold plc. Gordon has over 31 years experience in the mining and exploration industry. From 1998 to 2005 Gordon was in charge of AngloGold and subsequently, AngloGold Ashanti's global exploration programme and was appointed Executive Officer in early 2004. William J Charter, BSc, CGeol, FGS, CEng, MIMM Bill Charter has over 29 years experience in mining and exploration industry. Having gained experience with Anglo American Corporation (in Fiji and South Africa), he then worked in Central Asia and other locations worldwide. Bill started work with the Oxus Group in 1996.
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