Indochina Goldfields set to develop first phase of Bakyrchik

The final engineering report and production plan for the US$100-million Bakyrchik gold project in Kazakstan has paved the way for Indochina Goldfields (ING-T) to embark on first-phase construction of the mine and mill.

The report, prepared by Kvaerner Metals Davy, concludes that the first phase will produce 125,000 oz. gold per year. The following operating assumptions have been made:

* Maximum use will be made of present infrastructure, facilities and equipment.

* On an annual basis, 512,500 tonnes of ore will be mined from the existing underground operation.

* A 150,000-tonne portion of the ore will be reduced to 37,500 tonnes of concentrate using the existing flotation circuit.

* The concentrate will be combined with the remaining 362,500 tonnes of ore.

* The combined ore stream will be processed through a 2-stage fluid-bed roaster, followed by processing with a conventional cyanide leaching circuit.

Construction will last 18 months, and the first gold pour at Bakyrchik is expected to take place in the second half of 1999.

The engineering report estimates cash operating costs will fall below US$200 per oz. gold for the first five years and average US$214 per oz. over 15 years. This cash cost, when coupled with an estimated capital cost of approximately US$100 million, generates an internal rate of return of 18.5% at a gold price of US$362.50 per oz.

The Soviet government began its mining operations at Bakyrchik in 1956, since which time 3.8 million tonnes have been mined at a grade of 7.3 grams from eight major open pits and an underground mine.

“The Kvaerner report demonstrates that the project is technically and economically sound, even in today’s poor gold markets,” says IG Chairman Edward Flood. He notes that Indochina Goldfields management anticipated the recent drop in gold bullion prices and purchased put options to establish a minimum floor price of US$362.50 per oz. gold on 1 million oz. of production.

“By utilizing put options as our hedge instrument, the company has retained the opportunity to sell future production from the mine at higher prices when the gold markets recover.”

The Kvaerner report evaluates various commercial metallurgical alternatives to processing the refractory ores at Bakyrchik, and concludes that circulating fluid-bed roasting would provide optimum recoveries. Extensive metallurgical test work completed by Lurgi Metallurgie of Frankfurt, Germany, has indicated that recoveries of approximately 90% are achievable with this technology.

IG believes the mine to be amenable to multiple expansions that eventually could bring annual production levels as high as 600,000 oz.

Kvaerner based its report on a measured, indicated and inferred resource of 7.4 million oz. within the definitive feasibility study (DFS) area as calculated by Minproc Engineers. Within this mineralized envelope, a proven and probable reserve of 9 million tonnes grading 7.9 grams gold per tonne has been calculated, using a cutoff grade of 4.48 grams gold per tonne.

IG currently holds a direct 80% interest in the Bakyrchik gold mine through a recently restructured joint-venture partnership with BKG Resources (formerly Bakyrchik Gold). The company continues to hold a 27.9% equity interest in BKG Resources, which constitutes an additional 6% indirect interest in the Bakyrchik mine, and IG is also the mine operator.