Nelson eyes suspended gold mine

In its first venture outside the Commonwealth of Independent States, Nelson Gold (NLG-T) is looking to acquire a majority interest in the suspended Kalana gold mine in Mali, West Africa.

Nelson recently signed a letter-of-intent with Ashanti Goldfields (AHD.U-T) to purchase a 70% equity interest in the underground mine and surrounding 387-sq.-km concession. The interest translates into US$10 million, which will be paid through the issuance of shares and warrants, a convertible debenture of US$5 million, and US$2 million in cash. Ashanti will retain a 10% equity interest, with the government holding the remaining 20%.

Under a Soviet assistance program, exploration and development at Kalana began in 1967 and continued until the regime’s collapse in 1991. During that time, a total resource of 1.4 million oz. gold was outlined. In the 1980s, the Soviets developed the deposit by underground methods and constructed a plant with a capacity of 36,000 tonnes per year. From 1985 to 1991, the plant produced more than 81,000 oz. gold. Also, oxide resources potentially amenable to open-pit methods were outlined in the vicinity of the underground workings during the final three years of Soviet control.

In an attempt to resume production, the government of Mali privatized Kalana in February 1995 by selling 80% of its interest to Ashanti (50%) and JCI (30%) of South Africa. Since then, the partners have spent US$7.6 million reviewing and confirming the project’s economic viability. It has also explored for additional oxide mineralization on the surrounding concession.

However, according to Nelson, the projects fell below both majors’ set required minimum production levels.

Nelson is currently conducting a due diligence review and hopes to resume production by the first half of 1998. Closing of the transaction is subject to several factors, including: outcome of the review; completion of a definitive purchase and sale agreement; Nelson’s completion of the project acquisition and development financing of US$12 million; and approval by government and regulatory bodies.

Upon closing of the transaction with Ashanti, Nelson will assume management of the project and control over its development.

Prior to this venture, Nelson’s activities were limited solely to work programs in former Soviet countries. The company also holds a 44% interest in the producing Jilau gold mine and a 100% interest in the under-development Taror copper-gold project in Tajikistan. At the former project, the company recently initiated a US$11.8-Million expansion program to increase annual production to beyond 100,000 oz. from the current 72,000 oz. (T.N.M., April 7/97).