The purchase price comprises US$147 million in cash and 81.5 million Oxiana shares worth US$58 million. The shares represent a 6% stake in the emerging Aussie miner and will be held in escrow for six months.
The deal is expected to close by late July, subject to financing.
The Golden Grove operation includes the Gossan Hill and Scuddles underground mines, a 1.3- million-tonne-per-year treatment plant, and a surrounding land package. The operation also comes with US$15.5 million in working capital.
At the end of 2004, reserves amounted to 4.8 million tonnes grading 6.9% zinc, 2.1% copper, 0.9% lead, 75 grams silver and 1.3 grams gold per tonne. There is also a resource of 7.9 million tonnes grading 8.4% zinc, 1.9% copper, 1.4% lead, 78 grams silver and 1.5 grams gold.
The mine is expected to last seven years; however, the drilling now under way is designed to convert 70% of the resources to reserves by year-end, which could extend the mine life.
Between January and May 2005, Golden Grove produced 23,133 tonnes zinc, 9,071 tonnes copper, and 10,400 oz. gold. Next year’s output is projected to be 125,000 tonnes zinc, 10,000 tonnes copper, 50,000 oz. gold and 3.1 million oz. silver. Cash costs are pegged at US30 per lb. zinc net of byproduct credits.
Newmont inherited Golden Grove via its takeover of Normandy Mining in 2002. The company expects the sale to result in a non-cash charge of US$25-35 million on its second-quarter earnings.
Oxiana’s only other producing asset is the Sepon gold-copper project in south-central Laos. That project comprises seven gold deposits and one copper deposit in an area measuring 5 sq. km.
In 2004, the operation produced 141,200 oz. gold at a cash cost of US$189 per oz. The project’s copper plant is ramping up to design capacity of 60,000 tonnes of London Metal Exchange grade-A copper cathode per year. Production in 2005 is expected to be 230,000 oz. gold and 30,000 tonnes copper.
Oxiana is also in the midst of a feasibility study at its Prominent Hill copper-gold project in South Australia, where production could conceivably begin as early as 2008. The company also holds several exploration projects in the Philippines, Laos, Thailand and China.
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