Ovacik mine shut down – sale on hold

Vancouver – The recent shut down of Newmont’s (NEM-N) Ovacik gold mine in Turkey has deferred its proposed sale to Frontier Pacific Mining (FRP-V). The decision to halt production at the mine, which has been in operation since 2001, was made on August 19 by the provincial governor.

The move comes on the heels of a court decision ordering the mine closed pending completion of certain additional permitting requirements and an updated environmental impact assessment to the Turkish Ministry of Environment and Forestry, Newmont said.

The Ovacik mine, situated near the town of Ismir in western Turkey employs more than 400 workers. Frontier Pacific has been negotiating the purchase of a 100% interest in the mine with Newmont since June. The company had agreed to buy the mine for US$30 million plus deferred payments of up to US$14 million. Newmont is operating the mine until Frontier pays for the mine.

Newmont believes the halt in production is a temporary measure and expects that its operating permits will be reinstated, although it did not know when.

Gold production from open pit and underground operations at a rate of some 1,500 tonnes per day, produces 170,000 oz. gold per year at cash costs of US$202 per oz.

The Ovacik property hosts open pit proven and probable mineral reserves of 561,000 tonnes grading 13.3 grams gold or 239,000 contained ounces. Inferred mineral resources mineable from underground are pegged at 655,000 tonnes grading 12.5 grams gold or 263,000 contained oz.

When asked about what the closure would mean to Frontier Pacific, Peter Tegart, President and CEO said, “It’s part of the plan that came from the court order to shut the mine down and we’ve agreed to it. We are putting everyone on vacation for a few weeks until we get the full operating permit so nobody will be laid off”.

Mr. Tegart, who anticipates the shut-down could last until late September, said that the mine has only been working on a temporary permit which was based on an EIS that had not been completed. According to Tegart, the EIS is now complete and is under review by the government.