Higher metal prices lead to robust economics at Varvarinskoye

Vancouver – A bankable feasibility study has outlined robust economics on European Minerals’ (EPM-T) 86%-owned Varvarinskoye gold and copper project in northern Kazakhstan. The study by South African-based Metallurgical Design Management with input from Arizona-based Mintec on reserves, resources, mining costs and mine design, is based on a re-examination of a 1998 feasibility study by Bateman.

The Varvarinskoye property comprises 300 sq. km near the village of Varvarinka, 130 km southwest of Kustanai in northern Kazakhstan. Three types of mineralization occur on the property including: stratiform massive to disseminated sulphide ore; vein-disseminated sulphide ores and stockworks; and supergene oxide ores, gossans.

The project’s economics at US$375 per oz gold and US$1.00 per lb. copper include a base case net present value (NPV) of US$301 million with an internal rate of return (IRR)of 35% and 26 months payback.

At US$400 gold and US$1.10 copper, the NPV is US$371 with an IRR of 41% and 22 months payback.Capital costs for the project have been reduced to US$94 million from US$123 million in March 2004. The process plant and mine infrastructure are estimated to cost US$80 million with US$14 million for pre-strip and stockpiling.

Operating costs are US$108 per oz. of gold in the first six years and US$170 per oz gold over the 15-year life of the mine. Including capital costs the total operating cost would be US$219 per oz.

Earlier this year Mintec had revised the base case for the project up to US$237.5 million (NPV) and an IRR of 25% at US$350 per oz. gold and 80 cent copper.

The company is planning to begin construction in the second quarter of 2005 if financing can be arranged, and plans to develop Varvarinskoye by conventional open pit mining using hydraulic shovels and dump trucks. The rate of mining would be 4.2 million tonnes of ore per year and 17.8 million tonnes of waste at a stripping ratio of 4.2:1.

The proven and probable mineral reserves based on a gold price of US$375 per oz. and US$1.00/lb.were increased to 2.345 million oz. of gold and 269 million pounds of copper. CIL ore comprises 45.3 million tonnes grading 1.06 grams gold and 0.06% copper for 1.54 million oz. while the float ore comprises 15 million tonnes grading 1.66 grams gold and 0.81% copper for 800,000 oz. gold and 269 million lbs. copper.

These mineral reserves are contained within diluted measured and indicated resources of 117.6 million tonnes that contain 3.8 million oz. gold and 431 million lbs. copper.