INDOCHINA GOLDFIELDS TO PROCEED WITH PROJECT FINANCING TO CONSTRUCT
PHASE I OF BAKYRCHIK GOLD PROJECT IN KAZAKSTAN, FOLLOWING RECEIPT OF
FINAL ENGINEERING REPORT AND PRODUCTION PLAN
SINGAPORE, Nov. 17 /CNW-AsiaNet/ - R. Edward Flood, President, and Robert M. Friedland, Chairman, are pleased to announce the receipt of a final engineering report and production plan for Phase I development of the Bakyrchik Gold Project in Kazakstan. The report concludes that the first phase of the project will produce 125,000 ounces of gold per year.
"With this engineering report in hand, we will now proceed with project financing and initiate the plan's proposed 18-month construction schedule," Mr. Flood said. "We expect the first gold pour at Bakyrchik in the second half of 1999."
This report, prepared by Kvaerner Metals Davy, of Toronto, advances the work completed in the Definitive Feasibility Study prepared by Minproc Engineers of Perth, Australia, in November, 1996, and establishes engineering and operating criteria upon which the project will be constructed.
The production plan is based an the following operating assumptions:
- Maximum use will be made of present infrastructure, facilities and
equipment.
- 512,500 tonnes of ore a year will be mined from the existing
underground operation.
- A 150,000-tonne portion of the ore will be reduced to 37,500 tonnes of
concentrate using the existing flotation circuit.
- The concentrate will be combined with the remaining 362,500 tonnes of
ore.
- The combined ore stream will be processed through a two-stage fluid-
bed roaster, followed by processing with a conventional cyanide
leaching circuit.
The result will be the production of between 120,000 and 130,000 ounces of gold a year, at competitive costs, for fifteen years.
The Kvaerner report estimates that the project will have cash operating costs below US$200 an ounce for the first five years and average US$214 an ounce for the 15-year term of the report. This cash cost, when coupled with an estimated capital cost of approximately US$100 million, generates an internal rate of return of 18.5%, at a gold price of US$362.50 an ounce.
"This is not a green fields mining project," Mr. Flood said. "The Bakyrchik gold mine has extensive infrastructure and underground development in place. It also has an existing workforce that, in the past 12 months, mined 150,000 tonnes of ore which is currently stockpiled, awaiting completion of the production facilities.
"The Kvaerner report demonstrates that the project is technically and economically sound, even in today's poor gold markets. Indochina Goldfields' management anticipated the recent drop in gold bullion prices and purchased put options to establish a minimum floor price of $362.50 an ounce on one million ounces of production. By utilizing put options as our hedge instrument, the company has retained the opportunity to sell future production from the mine at higher prices when the gold markets recover."
The Kvaerner report, after evaluating various commercial metallurgical alternatives to process the refractory ores at Bakyrchik, concluded that circulating fluid-bed roasting will provide optimum recoveries. Extensive metallurgical test work completed by Lurgi Metallurgie, of Frankfurt, has indicated that recoveries of approximately 90% are achievable with this technology.
"The goal of this report was to bring the mine into significant commercial production utilizing as much of the existing infrastructure, facilities and equipment as possible. We believe that this capital-conscious planning is demanded by the current market conditions." Mr. Flood said. "Going forward, the mine is capable of multiple expansions that eventually could bring production levels as high as 600,000 ounces of gold a year. This production rate would begin to optimize the large, defined resource at the mine, which is currently estimated at more than 13 million ounces."
Kvaerner based its report on a measured, indicated and inferred resource of 7.45 million ounces within the definitive feasibility study (DFS) area as calculated by Minproc Engineers. Within this mineralized envelope, a proven and probable reserve of nine million tonnes grading 7.90 g/t has been calculated, using a mining cut-off grade of 4.48 g/t to yield 2.01 million ounces of recovered gold.
The key parameters for the Phase I Production at the Bakyrchik Gold Project are:
Total drill-indicated resource 13 million ounces of gold
Measured and indicated resource
((at) 3.0 g/t cut-off) 10.74 million tonnes (at) 7.88 g/t
Mineable reserves
((at) 4.5 g/t cut-off) 9.01 million tonnes (at) 7.89 g/t
Production rate:
Mining 512,500 tonnes/year
Project term At least 15 years
Gold recovery 88.2%
Annual average gold production 125,000 ounces
Preliminary economic indicators
Gold price US$ 362.50
Total cash operating cost per tonne US$ 48.54
Average cash cost/ounce
- years 1-5 US$ 198.00
Average cash cost/ounce
- project life US$ 214.00
Initial capital cost US$ 99,980,000.00
Deferred capital US$ 19,700.000.00
Internal rate of return 18.5%
Payback period 4.5 years
Indochina Goldfields currently holds a direct 80% ownership interest in the Bakyrchik gold mine through a recently restructured joint venture partnership with BKG Resources PLC, formerly Bakyrchik Gold PLC. Indochina Goldfields is also the mine operator. The company continues to hold a 27.9% equity interest in BKG Resources, which constitutes an additional six percent indirect interest in the Bakyrchik mine.
Indochina Goldfields also has the first phase of a low-cost, SX-EW copper mine under construction in Myanmar that will be in production, at a rate of 25,000 tonnes copper cathode a year, by the second half of 1998. Other assets include gold and copper properties and other interests in Indonesia, Myanmar, South Korea, Vietnam and Fiji.
Indochina Goldfields Ltd. shares trade on the Toronto Stock Exchange and the Australian Stock Exchange under the symbol ING. Information about Indochina Goldfields and its projects is available on the company's Web site, http://www.goldfields.com.
FOR FURTHER INFORMATION: R. Edward Flood, President, North America,
(604) 688-5755.