Last checked at 14 Oct 2010 11:17
Kryso Resources plc
("Kryso" or the "Company")
Pakrut Bankable Feasibility Study Results
Kryso Resources plc (AIM: KYS), the mineral exploration and development company with gold and nickel-copper projects in Tajikistan, is pleased to announce the results of the bankable feasibility study ("BFS") completed for the Company's 100% owned Pakrut gold project by the Beijing General Research Institute of Mining & Metallurgy ("BGRIMM").
The estimates prepared by BGRIMM for the BFS are not compliant with a standard recognised by the London Stock Exchange. Kryso has appointed Snowden Mining Industry Consultants Pty Ltd ("Snowden") to calculate JORC Code compliant Ore Reserve estimates for the Pakrut gold deposit, which will be published as soon as possible. To the extent that Snowden's JORC Code calculation differs from the estimates currently used by BGRIMM, further adjustment to the assumptions made in the BFS (summarised below) may be necessary which could effect the economic prospects of the project.
Highlights :
Mine life 14 years with average gold production of 82,000 ounces per annum over the first 4 years Life-of-mine operating costs US$377/oz At a US$897/oz gold price the project would have: NPV (10%) of US$121 million IRR of 40% Payback period of 3.0 years At a US$1,250/oz gold price the project would have: NPV (10%) of US$227 million IRR of 58% Payback period of 2.7 years Figures are before tax and allowance for anticipated debt financing Total capital required for development approx. US$108 million Optimisation of project prior to construction expected to result in improved economics.Mining
The BFS is based on the development of Pakrut as an underground mine using sub level open stoping with cemented hydraulic fill as the primary mining method. It is proposed the ore body will be accessed by a decline starting at 2265 metres above sea level and running down to the 1810 metre level. Additionally it is proposed a raise will run up from the 2300 metre level to enable mining up to surface at approximately 2400 metres above sea level. The report envisages a modern fleet of diesel powered mining equipment will be deployed; that mining will be at the rate of 2,000 tonnes per day and approximately 9.8 million tonnes will be mined over the life of the project.
Processing
It is envisaged that three recovery processes will be used in the plant; gravity recovery, flotation, and cyanide leaching of both gravity and flotation concentrates and that a dore bar containing both gold and silver will be produced on site at Pakrut and transported to a smelter for refining. The anticipated overall metallurgical recovery of gold from ore fed to the plant is 85.6%. The plant would have a capacity of 2,000 tonnes per day with crushing, grinding, gravity, flotation, leaching and smelting circuits.
Production Schedule
As set out above, in preparing the BFS BGRIMM have used estimates that are not compliant with a standard recognised by the London Stock Exchange. Kryso has appointed Snowden to calculate Ore Reserve estimates for the Pakrut gold deposit that are compliant with the JORC Code as soon as possible.
Earlier resource estimates, announced to the market on 28 June 2010, are JORC Code compliant. These formed the basis of the estimates prepared by BGRIMM and will form the basis of the further work to be undertaken by Snowden and Kryso in preparing the Ore Reserve estimates.
To the extent that Snowden's JORC Code calculation differs from the estimates currently used by BGRIMM, further adjustments to the assumptions made in the BFS may be necessary which could effect the economic prospects of the project as summarised in this announcement.
The BFS currently anticipates a 14-year mine life commencing in the second half of 2012, with total production over the life of the mine estimated to be 857,000 ounces of gold and 123,000 ounces of silver. Average annual gold production over the first four years of mine life is projected to be 82,000 ounces per annum.
Pakrut Project Financial Projections
The following figures are subject to adjustment on receipt of the Ore Reserve estimates from Snowdon's, calculated before tax and do not take account of the anticipated debt financing of the Pakrut project.
Based on BGRIMM's assumptions and a life-of-mine average gold price of US$897/oz:
The potential revenue generated by the project before tax would be US$235million The net present value ("NPV") of the project at a 10% discount rate would be US$121 million The project's internal rate of return ("IRR") would be 40% The project's capital payback period would be 3.0 yearsThe gold price of US$897/oz has been derived by using a consensus of forecasts for the next four years sourced from Bloomberg, and US$850/oz for the years thereafter.
Based on BGRIMM's assumptions and a life-of-mine average gold price of US$1,250/oz:
The potential revenue to be generated over the life of the project, before tax, would be US$505million The net present value ("NPV") of the project at a 10% discount rate would be US$227 million The project's internal rate of return ("IRR") would be 58% The project's capital payback period would be 2.7 yearsThe life-of-mine average operating costs of the project are estimated at US$377/oz. A royalty of 6% of gross revenue payable to the Tajik government has been included in the operating costs of the project. The current corporate tax rate in Tajikistan is 25%.
The report estimates the total capital investment required to bring the Pakrut project into production to be US$108 million including a 6% EPCM (engineering, procurement and construction management) provision and a 15% contingency provision. The total capital investment figure includes the costs of plant construction; underground mine development; mining and ancillary equipment; infrastructure including electricity supply, river diversion, water diversion dam and tailings dam; offices, workshops and accommodation buildings on site; working capital; and owner's costs until the start of production.
Further optimisation of the project prior to construction is expected to result in improved project economics.
Current Drilling
Drilling is continuing at Pakrut, including infill drilling intended to enable the Inferred resources of the Pakrut deposit, set out in the announcement of 28 June 2010, to be converted to the higher Measured and Indicated categories. Drilling has commenced at Eastern Pakrut with the objective of defining new resources at this location. Drilling results will be reported as soon as they are available.
Trevor Davenport, Non-Executive Chairman of Kryso, comments:
"The results of the BFS show Pakrut to be very exciting, with further refinements to the project to be made where appropriate before the commencement of construction.
Our number one objective now is to secure a complete financing package for mine construction at Pakrut and to bring the project into commercial production at the earliest opportunity."
Dr. Trevor Davenport (B.Sc, M.Sc, Ph.D, MIMM, C.Eng), Non-Executive Chairman of Kryso Resources plc has, reviewed the information contained in the announcement, and consents to its inclusion in the form and context in which it appears.
Enquires:
Dr Trevor Davenport/Craig Brown, Kryso Resources plcTel: +44 (0)20 7371 0600
Katy Mitchell, WH Ireland LimitedTel: +44 (0)16 1832 2174
Christian Dennis/Jeremy King, Optiva Securities Limited (formerly Orbis Equity Partners Limited)Tel: +44 (0)20 3137 1902
Ben Knowles/Bob Huxford/Leah Kramer, Walbrook PRTel: +44 (0)20 7933 8780
For further information, please visit the Company's website www.kryso.com
About the Pakrut Gold Project
The Pakrut gold project, of which Kryso has 100% ownership, is situated in Tajikistan approximately 112km northeast of the capital city Dushanbe. Pakrut has total JORC Code-compliant Mineral Resources of 3,024,000 oz Au (assuming a cut-off grade of 0.0g/t Au) and is located within the Tien Shan gold belt, which extends from Uzbekistan into Tajikistan, Kyrgyzstan and western China, and which hosts a number of multi-million ounce gold deposits.
Drilling at Pakrut has previously returned numerous exciting intersections, including the following results released in April 2010:
- Ore Zone 1: 25.5m at 7.5 g/t, 42.4m at 5.4 g/t and 12.0m at 6.4 g/t Au- Ore Zone 3: 9.0m at 7.5 g/t and 13.5m at 7.5 g/t Au (with 4.5m at 20.1 g/t)
About Tajikistan
Tajikistan is a secular republic located in Central Asia. The country is a member of the Commonwealth of Independent States (CIS) and the Shanghai Cooperation Organisation. Tajikistan hosts numerous operating precious metal mines as well as the largest aluminium smelter in Central Asia. Kryso's management team has extensive experience in the mining industry in Tajikistan.
Current Financing
On 27 July 2010 Kryso entered into a conditional subscription agreement with China Nonferrous Metals Int'l Mining Co. Ltd. ("CNMIM") for the placing (the "Placing") of 73,269,539 new ordinary shares of the Company to CNMIM at a price of 15p per share to raise approximately GBP10.99 million before expenses. CNMIM is also to receive one warrant per Placing Share at 21p per share.
A condition of the Placing is that CNMIM use its best endeavours to procure an offer of debt financing for not less than 70% of the funding required to bring the Pakrut gold project into production.
Copyright Business Wire 2010