AGF Project Approval

6 Dec 2007 13:45

Oxus Gold PLC06 December 2007 OXUS GOLD PLC Formal Approval for AGF Underground Project LONDON: 6th December 2007 - Oxus Gold plc ("Oxus" or the "Company") (OXS.L) ispleased to announce that Amantaytau Goldfields ("AGF"), its 50% owned jointventure company, has received formal approval from the Cabinet of Ministers ofthe Government of Uzbekistan to proceed with the AGF phase 2 undergroundsulphides project ("Phase 2"). Wardell Armstrong International ("WAI") has been commissioned to produce abankable feasibility study based on a new increased tonnage Phase 2 base casescenario developed by AGF. As stated in the Company's annual report,optimisation studies have been carried out which offer significant benefits overthe original design. Instead of building a new stand-alone plant, the existingoxide CIP plant will be modified to accept sulphide ore. Since the plantmodifications are mainly adding additional processing sections, the new plantcan be constructed and commissioned without significantly affecting the existingplant production. Construction will be subject to the normal permitting process. Re-using the existing plant will not only optimise capital but will also reducelead times associated with the procurement of major equipment such as mills andallow AGF to start feeding sulphidic ore to the plant in the second quarter of2009. In addition, since existing plant capacity is higher than that allowed forin the feasibility study, it is planned to increase the sulphide plantthroughput from the original design tonnage of 750,000 tonnes per annum in 2009to 1,200,000 tonnes per annum by 2012 as the underground ore production isexpanded. The base case also anticipates an initial expansion of the existing Centralnyphase 1 oxide open pit ("Phase 1") into the sulphide ore. This bankablefeasibility study is expected to be completed by the end of the first quarter of2008. A feasibility study on the project was completed by WAI in September 2005. Thisoriginal study estimated processing 750,000 tonnes a year to produce 151,000ounces of gold annually over a life of mine of 13 years at a pre-productioncapital cost of US$88 million and a total cash cost, excluding taxes, of US$194/ounce. The new base case is expected to produce approximately 246,000 ounces ofgold annually from the existing JORC compliant Severny Measured and Indicatedunderground Resources over an initial 7 year period. A total of 1.43 millionounces of gold will be produced during this initial period at an estimated totalcash cost, excluding taxes, of US$197/ounce, and US$268/ounce including taxes.Significant exploration potential exists to increase the mine life through afurther increase in reserves, and the mining of the existing Measured andIndicated underground Resource of 458,000 ounces at Centralny. These estimatesare subject to the results of the bankable feasibility study being completed byWAI. First gold production is expected from the Phase 2 project in mid 2009 bydeepening the existing Centralny open pit mine to access the sulphide ores belowthe current level, while the primary underground access for Severny is beingdeveloped. The expanded pit design will incorporate access for the undergrounddeclines from the pit bottom, thereby reducing the length of the declines andallowing them to be developed in more solid ground which will reduce supportcosts. An additional 86,000 ounces of gold is expected to be extracted from theexpanded Centralny pit at a capital cost of US$9.6 million, and a total cashcost including taxes of US$613/ounce. The existing Phase 1 oxides plant will be modified by the addition of flotationand bio-oxidation sections to treat the sulphide ore. Construction can beundertaken without significantly affecting existing production from the oxideplant due to the modular nature of the plant modifications. Underground miningwill be trackless with the ore either being trucked or conveyed to the plant.First gold production from the underground Severny mine is expected in mid 2010.The pre-production capital cost for the underground development and associatedplant modification is estimated at US$139 million. The plan is to treat the remaining Phase 1 lower grade oxide ores through a newone million tonnes a year gold heap leach plant from the last quarter of 2008.This will be constructed at the existing Asaukak mine and will be fed from thelow grade stockpiles already mined. The heap leach plant will be semi-mobile andwill be used in conjunction with the existing one million tonnes a yearVysokovoltnoye gold / silver heap leach plant over the next 20 years in order tomine out all the potential oxide reserves within the AGF licence area. From mid 2010, combined gold production from the Phase 2 underground mine andthe ongoing Phase 1 heap leach open pit mines is expected to exceed 300,000ounces a year. The combined Severny and Centralny sulphide underground ore reserves are 9.71million tonnes at an average grade of 7.71 grammes per tonne (g/t), containing2.41 million ounces of gold. The ore reserve is within a combined measured andindicated resource above a 3.5 g/t cut-off of 10.32 million tonnes at an averagegrade of 9.0 g/t gold containing 2.97 million ounces of gold. There is anadditional inferred resource of 2.05 million tonnes at an average grade of 7.6 g/t, containing a further 0.5 million ounces of gold. The ore bodies are open atdepth and previous drilling at 500 metres below the currently explored ore bodyat Severny encountered 51.6 g/t gold over 8 metres. The resources and reservesare JORC compliant and derived from the original feasibility study completed byWAI. Douglas Sutherland, acting Chairman of Oxus, comments "The Phase 2 undergroundproject is the reason why Oxus invested in AGF. Over 80% of our resources arecontained within this project and there is very significant potential toincrease this further and to continue mining in excess of 300,000 ounces a yearfor well over a decade. We are delighted to have received formal approval fromthe Uzbek Government to proceed, and we shall now focus on bringing together allthe relevant resources in order to bring the project into production as quicklyas possible." Oxus Gold plcRichard Wilkins Tel: +44 (0)20 7907 2000 Canaccord Adams Limited Tel: +44 (0)20 7050 6500Erin Needra/Mike Jones Bankside Consultants Ltd.Keith Irons/Oliver Winters Tel: +44 (0)20 7367 8873 The reserves and resources stated in this announcement are taken from theCompany's annual report and have been reviewed by the following CompetentPerson: P S Newall, BSc, ARSM, PhD, CEng, FIMMMWardell Armstrong International Ltd. This information is provided by RNS The company news service from the London Stock Exchange