Bakyrchik turns to Friedland for cash

Rather than issue more shares, and thereby dilute shareholder equity, management at London-based Bakyrchik Gold has sought a partner for the continued development of the Bakyrchik deposit in Kazakhstan. The investor group is headed by Robert Friedland, co-chairman of Diamond Fields Resources (TSE).

Recovery problems at the project had cut into Bakyrchik’s cash flow, and the new partnership is expected to provide enough funding to solve its metallurgical woes. The investor group, made up of Friedland, Indonesian businessman Johannes Kotjo, and associates Bambang Trihatmodjo and Tan Sri Azmi Wan Hamzah, will subscribe for just over 6 million shares, representing a 19% interest in the company. The total investment is L11.4 million.

An initial subscription, settled in October 1995, was for 1.3 million shares at L1.50. A general meeting of shareholders in early December 1995 approved a further placement of 4.8 million shares at L2 plus warrants to buy another 4.8 million at L2 to L2.20. If all the warrants are exercised (which would result in an additional L10 million for Bakyrchik Gold), the investor group will have a 29.9% interest.

Friedland and Kotjo have been named co-chairmen, and former RTZ executive Gordon Toll has joined the board. Bakyrchik directors David Hooker, Andrew Buxton and Peter Hambro have stepped down.

The involvement of Friedland and Kotjo has resulted in some investor interest: investment advisor George Soros, through the Quantum Emerging Growth Partners Fund, has now bought a 4% interest in Bakyrchik.

The Bakyrchik deposit was developed jointly by Minproc Resources of Australia and Chilewich International of the U.S., in partnership with the Kazakh government. Bakyrchik Gold was formed by the two Western companies in 1995, and is now earning a 40% interest from the Kazakh state enterprise, Altynalmas.

The mine has proven and probable reserves of 22 million tonnes grading 8.5 grams gold per tonne, or 6 million contained ounces. The resource stands at 35 million tonnes containing 8.9 million oz. gold, but Bakyrchik recently reported that the property, as a whole, “may contain as much as 15 million oz. gold in situ.” The gold is held in pyrite and arsenopyrite, which occur in silicified shear zones in sedimentary rocks.

The Bakyrchik mill uses conventional flotation, followed by nitric-acid oxidation (Minproc’s Redox process) and cyanidation. Flotation had originally recovered about 53% of the gold in the ore, which effectively capped final recovery at that figure; this had been brought to 61% by September 1995, and continues to improve.

Though metallurgical difficulties have centred on poor gold recovery from flotation, all the processes are being examined. “We have gone back to a clean sheet of paper,” says Gordon Toll, Bakyrchik’s new technical director. The Redox plant, while metallurgically sound, had experienced maintenance problems, and the process may be replaced by low-temperature, nitric-acid oxidation.

A short-term solution has been to sign a contract with the Balkhash copper smelter to recover gold from carbon-rich material that has not responded to cyanide leaching.

The company expects it will raise recoveries to acceptable levels in the next six months, during which time a bankable feasibility study will be conducted. Says Toll: “We’re confident we’ll get good recoveries at an economic cost.” The current goal is to bring annual production to 30,000 oz., but the company now has enough cash to expand to 85,000 oz. per year and cover its fixed costs.