Government privatizes Bakyrchik

The government of Kazakstan has decided to sell its 60% stake in the problem-plagued Bakyrchik mine complex to its joint-venture partner, Bakyrchik Gold of London.

Bakyrchik Gold, which has owned 40% of the joint venture since 1992, plans to sell a 15% stake in the gold mine to Indochina Goldfields (ING-T). The new joint-venture partners will then own 100% of the entire mine complex, including buildings, equipment, technical information and leasehold rights to the mine property.

Indochina Goldfields, which also trades on the Australian Stock Exchange, became Bakyrchik Gold’s largest single shareholder in October when it acquired 26.3% of the company’s shares. The agreement with Bakyrchik will provide Indochina with a combined direct and indirect interest of about 37% in the Bakyrchik gold project and related assets.

The government’s 60% stake is being purchased for US$60 million, payable in four equal installments, plus a bonus of US$5 million. Although the bonus and first installment were paid by Indochina Goldfields at signing, the balance is the responsibility of Bakyrchik Gold.

Based on Soviet-era drilling data collected between 1954 and 1991, the gold resource at the Bakyrchik mine is estimated at 47.3 million tonnes grading 6.94 grams gold, or about 10.5 million contained ounces.

Preliminary drilling by the joint venture, however, suggests that estimate may understate the resource by about 8%.

“[Drilling by] a major South African corporation… could easily indicate 20 million oz. gold,” says Edward Flood, Indochina’s president. Extending downdip could increase that estimate to 40 million oz. or more, he added.

“We believe there’s tremendous potential on this property,” Flood told The Northern Miner. “The Russians spent some $150 million on development. All the power facilities are in place, and a trained work force is at the site. We’ve got a real leg up on some of the green fields projects out there.” Indochina Goldfields’ chairman and largest single shareholder is mining promoter Robert Friedland, who holds about 34% of the company’s shares.

The redox gold recovery process, a conventional flotation circuit followed by nitric acid oxidation, has proven inefficient at Bakyrchik in the past.

According to Flood, the ore is amenable to conventional roasting technology.

“There’s still some confusion in the market place that [Bakyrchik has] some insolvable metallurgical problem, and that’s simply not the case,” he said.

“The ore is very similar to what you see on [Nevada’s] Carlin trend. We get approximately 88% to 90% [recovery] in the roaster. It’s a proven technique that works.”

Indochina Goldfields will provide Bakrychik Gold with a 12-month working capital loan of US$20 million.

The new agreement retains from the 1992 contract between Bakyrchik and the Kazakstani government key tax and commercial benefits. The privatization agreement also provides for the joint venture’s right to export refined gold and dore bullion without a government auction. This provision is among the first of its kind in Kazakstan.

In addition, the partners will have the right to operate the mine until all reserves and resources are exhausted.

Australia’s Minproc Engineers is working on dual feasibility studies on alternative production plans of 250,000 oz. and 100,000 oz. per year. Results are expected by the end of January. Future expansion there could increase production to 750,000 oz. per year.