Cameco eyes Boroo as Gatsuurt partner

Cameco Gold a subsidiary of Saskatchewan-based Cameco (CCO-T), the world’s largest uranium producer, has acquired a majority interest in OFEX-listed African Gold Resources (AGR).

Cameco is interested in Perth, Australia-based AGR’s 95% stake in the Boroo gold deposit about 35 km away from Cameco’s Gatsuurt gold exploration property near the Mongolian capital city of Ulaanbaatar.

Under the deal, Cameco will invest US$12 million and contribute a 60% interest, worth an estimated US$4.8 million, in the Gatsuurt property to acquire a 52% interest in AGR. Cameco has also committed to boost its stake in AGR by providing another US$3 million for exploration around Boroo and Gatsuurt. Cameco will also be responsible for up to US$3 million in project cost overruns.

The deal also provides Cameco the right to further boost its interest in AGR by contributing more of the Gatsuurt property.

A 1999 feasibility study by AGR and Resolute Ltd., which itself had plans to merge with AGR, at Boroo was reviewed in 2001 and reported probable reserves of 9.4 million tonnes averaging 3.76 grams gold per tonne. SRK Consulting confirmed the reserves under Australian Joint Ore Reserves Committee guidelines. The reserves calculation employed an assumed average delivered gold price of US$290 per oz. over the mine’s six-year lifespan.

Cameco Gold will oversee AGR’s construction and operation of the Boroo open pit mine and mill, which is pegged at an annual throughput rate of 1.75 million tonnes, up from 1.32 million tonnes per year originally envisaged by the bankable feasibility study. Production, expected to ramp up in 2003, will average 150,000 oz. annually at a total cash cost below US$200 per oz. Capital costs to production start-up are estimated at US$40 million. The project will enjoy stable tax and gold export regimes already negotiated with the Mongolian government through to 2013.

Macquarie and Standard Banks have rushed in with a US$33-million limited recourse loan facility, which along with the US$12 million from Cameco, should be enough to carry the project through to production start-up.

Cameco Gold’s president Len Homeniuk said, “This investment provides us with the opportunity to leverage our gold exploration activities and business experience in central Asia.”

He added, “Mine construction at Boroo can begin this spring and the project is expected to contribute to Cameco’s cash flow and earnings by 2003. Also, the Boroo mill facility will be available to process ore reserves which may be found on the Gatsuurt property.”

Cameco’s main gold asset is its one-third interest in the high-altitude Kumtor mine in Kyrgyzstan. The Kyrgyz government owns the remaining two-thirds of Kumtor.

For 2001 gold production at Kumtor was 12% greater than the previous year owing to higher ore grade, which averaged 5.14 grams gold, up from 4.65 grams in 2000. Recovery rates edged up to 83% from 82%. Kumtor’s cash cost per ounce slid US$142 per oz. from US$153.

At the end of 2001, Kumtor’s hedge book covered about 1.06 million oz., Cameco’s shares was a third, at an average of US$300 to US$303 per oz.

Britain’s OFEX is an over-the-counter trading system created and operated by brokerage house JP Jenkins and its affiliates Newstrack and Ofexmedia.