A feasibility study indicates the Varvarinskoye gold-copper project in northern Kazakhstan can be mined profitably. The open-pit prospect is 86%-owned by
The study was carried out by South African-based Metallurgical Design Management, with contributions from Arizona-based Mintec. A previous study was performed by Bateman in 1998.
The 300-sq.-km property is near the village of Varvarinka, 130 km southwest of Kustanai (population: 200,000). Roads and electricity are in place, though power would have to be upgraded. The area has a history of large-scale mining.
Mineralization consists of stratiform deposits of massive-disseminated sulphide ore, vein-disseminated sulphide ores and stockworks, as well as supergene oxide ores and gossans. Mining would entail a series of pits.
The feasibility indicates a net present value (NPV) of US$301 million at metal prices of US$375 per oz. gold and US$1 per lb. copper, with an internal rate of return (IRR) of 35% and a payback period of 26 months.
At US$400-per-oz. gold and US$1.10-per-lb. copper, the NPV increases to US$371 with an IRR of 41% and a payback period of 22 months. (Earlier this year, Mintec had revised the projected NPV to US$237.5 million and the IRR to 25% at prices of US$350 per oz. and 80 per lb.)
Projected capital costs have been reduced to US$94 million, from US$123 million in March 2004.
Bioleaching was previously being considered, but European Minerals now intends to use carbon-in-leach (CIL) and copper flotation, says company President Bert Kennedy.
The stripping ratio is around 4-to-1, compared with 3-to-1 previously, which means more low-grade material will be stockpiled and run through the plant.
The process plant and mine infrastructure are estimated to cost US$80 million; with US$14 million for prestripping and stockpiling.
The operating cost would be US$108 per oz. gold in the first six years and US$170 per oz. gold over the 15-year life of the mine, including copper credits. Including capital costs, the life-of-mine operating cost rises to US$219 per oz.
Varvarinskoye has proven and probable reserves of 2.3 million oz. gold and 269 million lbs. copper, based on a gold price of US$375 per oz. and a copper price of US$1 per lb. CIL ore comprises 45.3 million tonnes grading 1.06 grams gold and 0.06% copper, equivalent to 1.5 million oz. gold. The float ore comprises 15 million tonnes grading 1.66 grams gold and 0.81% copper, or 800,000 oz. gold and 269 million lbs. copper.
The reserve estimates are based on results from 168,570 metres or drilling, or 1,058 holes.
European Minerals is pursuing debt-financing through a bank, which would involve hedging at a gold price upwards of US$450 per oz. The company is also arranging limited equity financing.
Kennedy says construction should begin in the second quarter of 2005.
Open-pit mining will entail conventional hydraulic shovels and dump trucks. The yearly mining rate is pegged at 4.2 million tonnes of ore and 17.8 million tonnes of waste.
Gold recovery from CIL would be 87%; gold recovery from concentrate and flotation and tailings would be 76%; and copper recovery from flotation would be 84%.
In its first decade, Varvarinskoye is expected to produce about 145,000 oz. gold and 18.4 million lbs. copper per year.
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