20 May 2009 09:39
Oxus Gold plc
Amantaytau Update
Oxus Gold plc ("Oxus" or the "Company")(ticker AIM:OXS.L), the owner of a 50% interest in Amantaytau Goldfields AO ("AGF"), an Uzbekistan gold and silver producer, today announces the results of a Stage 1 Amendment to the June 2008 Bankable Feasibility Study ("BFS"), as updated in November 2008, compiled by Wardell Armstrong International Ltd ("WAI") on AGF's Underground Sulphide Project in Uzbekistan ("Project").
This Amendment was initiated as a consequence of the economic climate which has resulted in a delay in raising the capital required to develop the underground sulphide mine at AGF. It is a revision of the original BFS which requires an initial lower capital cost start-up and also includes retreatment of some of AGF's sulphide tailings arising from the previous trial processing of transitional and sulphide ore through the carbon in pulp ("CIP") plant during AGF's open pit oxide ore mining operation. This study envisages an initial 450,000 tonnes per annum ("tpa") operation at an initial capital cost of approximately $74 million.
Highlights
Development of a 450,000 tpa underground gold mine and process plant based on mining a portion of the current reserves at the Severny and Centralny ore deposits (initially supplemented by some sulphide tailings) is technically and commercially feasible
The Project will exploit a reserve of 911,000 ounces of gold within a Measured and Indicated Mineral Resource of 1,872,000 ounces of gold over a life of 12 years and, at full production, will produce 100,000 ounces of gold per annum (the Measured and Indicated Mineral Resource in the November 2008 BFS was 2,992,000 ounces of gold)
Significant upside potential exists for increased production, extended life and increased reserves. The Project mines 44.8% of the known reserves: the balance of the remaining reserves can be exploited via the currently planned access development at a relatively low capital cost. Also the deposit is open-ended at depth with indications of occurrence of high-grade mineralisation
Total costs are estimated at an average $377 per ounce of gold produced over the scheduled 12 years life, including operating taxes and royalties. The Project is in the mid-range on the cost curve of gold producers and is regarded as very robust with potential for further cost reductions
Ungeared NPV for the Project is $103.7 million at a 7% discount rate per annum, the IRR is 34.8% and the payback is 30 months from the start of production, anticipated by the end of Q1 2011, assuming an award of a mining development contract by November 2009 and the securing of project finance
The Project establishes a new underground mining profit centre in addition to the existing and on-going open pit oxide production of approximately 55,000 ounces of gold equivalent per annum and therefore benefits from the existing infrastructure, existing skilled labour force and management's experience of operating in the area
Oxus has been holding discussions with a number of potential sources of financing, including a major Chinese contracting and financing group in respect of both the June 2008 BFS (as amended) and this Amendment.
Speaking today, Chairman Mr Richard Shead said:
"In the light of the current economic climate and the resultant delay in the development of the underground project, Oxus took a decision to revise the original Bankable Feasibility Study to enable the Company to construct the first phase of the mine at a substantially reduced capital cost of approximately $74 million. It is currently the Company's intention to enter into a mining contract with Shaft Sinkers (Pty) Limited by November 2009. Commissioning of the plant is expected in Q1 2011 with an initial production level of 450,000 tpa producing approximately 100,000 ounces of gold per annum. Significant potential exists to expand the Project, given that this Amendment to the original Study only addresses 45% of the known reserves. We remain confident that we will be successful in securing finance for the first phase of this project."
Project description
The Project is located at the existing AGF mine site in the Navoi District of Uzbekistan, some 30km south east of the town of Zarafshan and 25km south west of the very large Murantau gold mine.
This Amendment is based only on a portion of the current sulphide reserves of the Severny and Centralny deposits (initially supplemented by 213,000 tonnes of sulphide tailings) and has not taken into account the balance of these reserves nor any possible future production from the Inferred resource portion of the deposits nor any potential future deposits at depth. An exploration programme is planned for these potential targets to increase the resources and then convert them into reserves.
The Project will largely be an underground mining operation accessed via a single decline only (previously 2 declines were required), with the existing No. 10 Shaft being utilised for ventilation and as a second route of egress. The mine design is planned around transverse bench and fill, longitudinal retreat stoping and a reduced amount of cut and fill compared to the original BFS. Access development scheduling and costing was done by Shaft Sinkers (Pty) Limited and the mine planning was again done by WAI. The planned maximum production level reaches 450,000 tpa in 2013: this can be increased after this date to approximately 600,000 tpa still using a single decline by increasing the access (capital) development. This Amendment does not address this build-up which will be the subject of a future study.
The ore will be processed using bio-oxidation technology provided by GoldFields, South Africa. The existing 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 initially to treat 450,000 tpa using only one of the existing mills and a single bio-oxidation module. Overall recoveries remain the same, being 88% for Severny ore and 78% for Centralny ore, except for the tailings where a recovery of 56% has been used.
Key Results of the Feasibility Study
Mineral Resources
This Stage I Amendment to the BFS considers initial exploitation of Severny Zones 8, 10, 11 and 12 down to a depth of 280m (+80m above sea level), Centralny Zone 8 down to a depth of 132m (+228 m above sea level) together with sulphidic tailings retreatment. The contained gold in the scheduled plant feed is 970,220 ounces and the recovered gold is 841,100 ounces. Only 44.8% of the reserve is to be exploited with the remaining reserve being available for future mining.
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 substantially increase the resource base. 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 51.6 grammes per tonne ("g/t") (*estimated true width based on drill section is 1.73m).
Initial Mining Reserves
The total reserve in this Stage 1 Amendment for production scheduling is 4.4 million tonnes at an average grade of 6.86 g/t containing 30.18 tonnes of gold (970,220 ounces in total).
Capital Costs
The initial capital funding requirements are summarised below:
| $ Million | |
| Mine | 25.8 |
| Process Plant | 36.2 |
| Infrastructure | 6.8 |
| Working Capital | 5.0 |
| Total | 73.8 |
A further $55.5 million of sustaining capital over the life of the Project will be funded from the Project cash flows.
The mine capital costs were supplied by Shaft Sinkers (Pty) Limited and the process plant capital costs supplied by AGF and GBM Minerals Engineering Consultants Limited using suppliers' quotations.
Operating costs
Operating costs per tonne of ore mined over the Life of Mine are summarised below:
| $/t | |
| Mining | 32.6 |
| Process Plant | 22.8 |
| G&A | 12.5 |
| Total Direct Opex | 67.9 |
| Taxes & Royalties | 19.6 |
| (excludes profits tax) | |
| TOTAL | 87.5 |
Operating costs per ounce of gold produced are $377, including operating taxes and royalties.
The mining operating costs were supplied by Shaft Sinkers (Pty) Limited.
Revenue
The BFS is based on a flat gold price of $850 per ounce (with no inflation on costs)
The following table represents the NPV of the Project at different discount rates per annum:
NPV = $197.2 million at 0% per annum
NPV = $124.5 million at 5% per annum
NPV = $103.7 million at 7% per annum
NPV = $78.6 million at 10% per annum
The project IRR is 34.8%
These economics take no account of any plans to expand production and to mine the remaining Proven and Probable reserves as utilised in the November 2008 updated BFS. At a discount rate of 7% per annum it is estimated that these reserves would add a further $205 million to the NPV. Given that the main access development will already have been completed, it is also anticipated that these additional reserves will be mined at a substantially lower capital cost than that envisaged in the November 2008 updated BFS.
Project Funding
Oxus intends that the Project will be funded 100% by debt finance. The Royal Bank of Scotland was mandated to arrange the finance for the original BFS project. As a result of the current economic and financial conditions, this financing has been delayed and Oxus has entered into discussion with other potential sources of finance, including a major Chinese contracting and finance group.
Project Implementation
The Board of Directors of Oxus has approved the development of this Project either by this phased approach or as per the original BFS. 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. Shaft Sinkers (Pty) Limited has been chosen as the preferred contractor for the underground mining: the contractor for the construction of the processing plant has not yet been chosen as this decision may depend on the source of financing.
For further information, please contact:
Oxus Gold plc Tel: +44 (0)20 7907 2000Richard SheadRichard Wilkins
John Donald
Fairfax I.S. PLC
Ewan Leggat Tel: + 44(0)20 7598 5368
Conduit PR.
Ed Portman Tel: + 44 (0)20 7429 6607
Fiona Hyland + 44 (0)773 336 3501
Competent Persons: The resources and reserves stated in this RNS Announcement have been compiled or approved by the following Competent Persons: Phil 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
Dr. Newall is a Consulting Geologist and Director with WAI and has practiced his profession as a mine and exploration geologist for over twenty five years.
William J Charter, BSc, CGeol, FGS, CEng, MIMM
Bill Charter has over 30 years experience in both exploration and mining. He started working in Central Asia with the Oxus Group in 1966, and is currently Chief Geologist of Oxus.