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INTERVIEWS |
 Sweden’s Auriant Mining, which mines gold in Russia, has recently reached an agreement to purchase 70% in Kara-Beldyr deposit in the Tuva Republic from its joint venture partner Centerra Gold, thus gaining full control over the deposit. The deal is unique for Russia and very significant for the company, according to Auriant CEO Denis Alexandrov.
“It is a very important step for us. It is the first acquisition and first confirmation of our growth strategy and Auriant's position as a consolidator on the market. The structure of the deal implies no cash, which is new for Russia, and I have not heard about such deals earlier, but it is common for the Western market. The important thing is that Centerra believes in us – that we will build the mine and launch production”, Alexandrov said in an interview with PRIME.
In the beginning, the Kara-Beldyr fully belonged to Auriant, but the company did not have enough funds to hold exploration operations. The company reached an agreement with Centerra Gold and created a joint venture on the terms that Centerra will obtain a stake in the project in exchange for funding. As a result, the company accumulated 70% in the project within the 4-year period.
“Currently, we have completed exploration and came closer to the reserve calculation. By the end of the year, we plan to submit documents to the State Reserves Committee. Everything is ready and we are holding consultations with the committee. Under our expectations, it will be a project with 20 tonnes of gold”, Alexandrov also said adding that it is not big for Centerra and they do not want to build it.
“We have offered to buy back their stake in the project for future royalty. At the current moment we pay no cash, neither shares, but will pay about 3.5% from the future revenue within the entire life of mine. And that is all”, he added.
Since 2011, total investment of both companies in the project amount to approximately $11 million. As of 2012, Kara-Beldyr contained 15.55 tonnes of JORC. Auriant plans to hold open-pit mining at the deposit and build a gold mill with an extraction rate of over 90%.
“We have not made the feasibility study yet, but the mill will roughly process from 600,000 tonnes to 1 million tonnes of ore annually grading about 3 grams of gold per tonne. The reserves of around 6 million tonnes will allow exploiting the deposit for 10-15 years with an annual gold production rate of 1.2-1.25 tonnes of gold, depending on the mill”, Alexandrov said adding that the 1 million tonnes per annum mill may cost $100 million, while the company’s own funds will account for 20%. The company plans to attract project financing.
“We have calculated that the pay-back period is very-short and again it will depend on the processing volumes. We plan to repay the loan in three years if the mill processes 600,000 tonnes of ore annually. We also expect low cash cost – about $700 per ounce. In the first quarter of 2015, we plan to confirm the reserves of the deposit and at the same time we will search for a contractor for the project’s feasibility study. I think that we will complete it in 2015 and begin construction in 2016. I hope that there will be no force-major circumstances and we will launch production in 2019”, Alexandrov said.
Auriant is the sole lode gold producer in the Tuva Republic. Kara-Beldyr will become the company’s second project. The first project is Tardan, which is a part of large Tardan ore cluster.
“We also have other lode gold objects at the Tardan, such as Barsuchy, where we had drilled 3,500 meters and confirmed the reserves of 2.5 tonnes grading 5.4 grams of gold per tonne. All the necessary documentation for the Barsuchy will be ready in the first half of 2015. In the second half of the year, we plan to reconstruct the road and from 2016, we plan to start mining operations. High grade ore will be transported for gravitation to the Tardan plant, while low grade ore and tailings will be put on heap-leach pads”, Alexandrov said.
The company also has Barsuchy-2 and Barsuchy-3 fields, where it had already held geophysics. Barsuchy is one of the satellites of the Tardan. Auriant have also targeted a study for this year at other such satellites, such as Pravoberezhny and Baisyut.
“We have also completed geophysical research there and Pravoberezhny looks even more interesting than the Barsuchy in geochemical view. That is why we expect Pravoberezhny and Baisyut to provide good reserves in future – about 5-6 tonnes of gold and high grades. Drilling is scheduled for 2015. We plan to drill about 5,000 meters, while the spending will total about $3 million on each field in 2015. Our target is to increase the Tardan cluster reserves by 5-6 tonnes by 2018”, he said.
In October, Auriant initiated a temporary cessation of mining, crushing and stacking operations at the Solkokon field in order to save costs during the winter months. The irrigation of the heaps will continue throughout the winter period.
“Solkokon is loss-making. It has two big problems, namely outdated equipment and decreasing grades. The conveyors are always breaking and we are repairing them, so the winter period is also a possibility for the repairs. As for grades, the ore from Bogomolovskoye deposit is losing quality. The upper layer had higher grades, but now the extraction rate is falling despite the ore is still oxidized. Thus, we need to take more ore, crush harder, but we cannot crush more with our equipment. That is why we are suspending Solkokon for this winter and will decide on its future in spring. There are several options for its future – we may continue operating it in the same manner and take additional ore from the Kozlovskoye deposit. It has high grades and oxidized ore that we had not touched yet, while operating the Bogomolovsky deposit (with 7.2 tonnes of gold reserves). Under the second option, we may stop the project, hold exploration operations and invest in construction of a mill, depending on the results”, Alexandrov said adding that the exploration will need $9-10 million, but as a result the company will obtain a quality deposit with around 30 tonnes of gold reserves.
As for placer gold fields, the company is not operating them itself. “The Borzya placer gold field in the Zabaikalsky Region. Contractors are operating it. Last year we obtained 377 kilograms, while the plan stood at 300 kilograms. This year it is about 300 kilograms, and again about the plan of 250 kilograms. A think that the season was good. Principally, we refused from operating alluvial fields and put it for outsourcing and plan to operate in such a manner in future”, Alexandrov said.
As for new acquisitions, Alexandrov said that the company is looking at new fields, existing companies and had already examined 25 assets for acquisition or merger, but not looking at greenfields.
“Unfortunately, we cannot offer money to a partner – only our competence, competent board of directors, and liquidity. The shares will be liquid, because we are a public company, and we may offer attracting funds from a foreign investor. I may say that we are still in negotiations on two or three objects. All assets we are looking are in Russia” he said adding that the market is good for a merger and all understand that it is easier to survive together.
As for the current gold price, Alexandrov said that it would be better if the price higher. Forecasted cash cost at Tardan at full capacity is $850 per ounce, so the price of about $1,200 per ounce satisfies the company.
“The cash cost that we are expecting to receive this year is about $1,100 per ounce, and it will decrease next year to $1,100-850 per ounce. Unfortunately, the current price leaves no place for investment and that is the only problem. The budget is seriously optimized. We are surviving of course, but it is not the full-fledged life, we cannot allow a number of things, including exploration, which is the major thing for junior mining companies”.
End
11.11.2014 20:16
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