London-based
Nelson manages and holds a 44% interest in Zeravshan Gold Company (ZGC), a Tajikistani company that owns both mines, as well as the Jilau open-pit gold operation, 10 km from Taror. The remaining interest is divided among the Tajikistani government, with 51%, and International Finance Corp. (IFC), with 5%.
In May 1999, Nelson completed a feasibility study of the sulphide portion of the Taror deposit, calling for mined ore to be processed in the existing carbon-in-leach (CIL) plant at Jilau. Similar studies for the remaining oxidized and transition material, plus the separate Chore deposit, 145 km to the east, had not yet been started.
The capital cost of developing the sulphide portion was pegged at US$10 million, a reflection of the extensive development carried out during the Soviet era. Operating costs were estimated at US$239 per oz. A proposal that would have cut capital costs in half and reduced operating costs to US$200 per oz. was considered after gold prices began sinking. However, gold’s continued devaluation proved too much for IFC to justify financing either proposal.
The new study (essentially a continuation of the old one) calls for the development of both deposits at a cost of US$52.4 million, of which US$34.9 million is earmarked for metallurgical facilities, US$14 million for infrastructure and US$3.5 million for a tailings plant. Tailings from Chore would be dumped at the nearby Anzob antimony plant, which is owned by the state.
Based on the revision, each deposit is to be mined at the annual rate of 500,000 tonnes, starting in 2002 and ending in 2015. A final feasibility, now under way, is scheduled for completion in mid-2001.
All ore types would be mined, though new metallurgical studies suggest that the best gold recovery rates can be achieved by floatation, followed by bio-leaching and a final pass through the existing carbon-in-leach plant. The copper solution extracted from the bio-leach circuit would be processed separately into cathode using electrolytic methods.
As part of the new flowsheet, Chore material would be concentrated separately at the Anzob plant prior to being trucked to Jilau. The extent to which the concentrate can be integrated with the Taror concentrate has yet to be determined.
Studies suggest gold recovery rates will top 88% for Chore and 82% for Taror. Copper recovery rates for the latter averaged 75%.
Based on a cutoff grade of 3 grams gold per tonne, Taror’s proven and probable reserves stand at 6.6 million tonnes grading 5 grams gold and 16.57 grams silver per tonne, plus 0.8% copper. This lies in an overall resource of 10.8 million tonnes grading 5.35 grams gold and 16.45 grams silver, plus 0.78% copper.
Mineralization is oxidized to the 1,500-metre level, below which it is associated with primary sulphides. The deposit itself lies between the 1,260- and 1,680-metre adits and would be exploited by drift-and-fill and sub-level caving methods.
Resources at the less-studied Chore deposit top 5.8 million tonnes averaging 4.45 grams gold, all of which is refractory. The deposit dips steeply and averages 6 metres in thickness over a strike length of 2 km, lending itself to open-stoping mining methods using mechanized equipment.
To date, the deposit has been explored by 38,649 metres of underground development from seven adits and 19 raises developed by the Soviets. Nelson plans to complete a 2,400-metre underground drill program and additional metallurgical sampling by year-end.
If all goes as planned, Nelson expects ZGC to produce 1.9 million oz. gold and 73.9 million lbs. copper between 2000 and 2015. This includes about 300,000 oz. of projected production from Jilau in the first four years.
The average combined operating cost over the life of the mines is estimated at US$203.65 per oz. gold-equivalent; the combined operating cost of Taror and Chore is pegged at US$26.85 per tonne.
The net present value, including US$16.6 million in sustaining capital for Jilau, is projected to be US$46.5 million at a 10% discount rate. The internal rate of return is 40.29%. Both figures are based on a gold and copper price from 2002 onwards of US$315 per oz. and US76 per lb., respectively.
As for revenue, the combined projects are expected to generate US$647.7 million at predicted metal prices. However, a US$15-per-oz. swing in gold prices affects that projection by US$28 million.
Ostensibly, financing is to come through a recently proposed takeover by Central Asian Industrial Investments (CAII), a company incorporated in Netherlands Antilles and which is heavily involved in Kazakstan’s oil and gas industry.
Subject to a definitive agreement, the deal calls for CAII to subscribe for 293.5 million shares — more than twice Nelson’s current 125.8 million shares outstanding — at 7.6 per share. This would effectively give CAII a 70% equity stake in Nelson.
As part of the deal, Nelson would issue 150 million warrants exercisable at 37 per share within 18 months of the deal’s closing and up to another 20 million warrants exercisable at 8 per share within 24 months. The latter group offsets outstanding convertible debentures and related interest payments, and cash or properties may be used to satisfy the exercise price of the former group.
Should shareholders and regulators approve the deal, Nelson would change its name to Nelson Resource and restructure its board to reflect the new ownership and its resulting diversification into the oil and gas industry.
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