MK Gold plans Jerooy mine

Construction is expected to begin this year on MK Gold’s (NASDAQ) Jerooy gold project in the former Soviet republic of Kyrgyzstan.

A feasibility study, approved by the company’s Kyrgyz partner, outlines a carbon-in-pulp operation which will produce an average of 150,000 oz. gold per year for nine years. Cash operating costs are estimated at US$140-150 per oz.

The mine will include both open-pit and underground operations. Open-pit proven and probable reserves are estimated at 2.5 million tons grading 0.11 oz. gold per ton, while proven and probable underground reserves are projected at 4.3 million tons grading 0.30 oz.

The underground operation will employ bulk-mining techniques and since the deposit is situated in the side of a mountain, all entries will be via adit. The capital cost is estimated at US$133 million, of which US$35 million will be provided by MK Gold with the balance financed through a non-recourse loan. The Overseas Private Investment Corp. will lend up to US$87 million as well as provide political risk insurance for up to US$158 million. Additional financing is expected to come from the European Bank for Reconstruction and Development.

MK Gold is to receive 65% of the after-tax project cash flow until its equity investment is recovered, with the remaining 35% split between betweem MK and its Kyrgyz partner.

MK Gold will receive a management fee of 3% of operating costs. In addition, all income taxes, local taxes, fees, royalties and assessments will be paid out of the Kyrgyz partner’s share of cash flow.