Nelson Gold reports startup woes

Most mines experience teething pains during startup, and Nelson Gold’s (NLG-T) Zeravshan project in Tajikistan is no exception.

The company operates, and has a 49% interest in, a mining and milling complex in the Zeravshan Valley, which also includes a 3,000-sq.-km exploration area.

In the first quarter, during commissioning of the carbon-in-leach facility, mechanical problems hampered gold production. As a result, gold production for the year is forecast to be only 47,000 oz. The company says these problems are being addressed and that full production from the first phase of mining will start in July, at an annualized rate of 72,000 oz. gold.

In the meantime, excess ore from the Jilau open-pit is being stockpiled at the mill site.

Nelson Gold is still negotiating final arrangements with the country’s government for gold refining, sales, royalties and taxation.

In the first quarter, the company suffered a net loss of US$730,000 on revenue of US$105,000. Capital and development costs totalled US$8.9 million, with additional financing of about US$8.5 million raised through a private placement.

Capital and development costs, combined with planned exploration expenditures, are expected to total US$14 million in 1996.

The second phase of the operation will involve a 5-million-tonne-per-year heap-leach operation, to be expanded at a later date. After reviewing results of an independent feasibility study for phase two, the company says more work will be required to advance the Jilau heap-leach project to bankable feasibility status.

Although this additional work is expected to delay the production decision for nine months, Nelson Gold believes construction could begin in the second half of 1998, pending financing.

A prefeasibility study is in hand for the third phase of the operation, which focuses on the Taror deposit. Taror is reported to host 3 million oz. of contained gold in a measured and indicated resource of 18.5 million tonnes grading 4.38 grams per tonne, plus an inferred resource of 3.8 million tons of 3.91 grams.

Although the former Soviet government viewed Taror as an underground prospect, it is now viewed as minable by open-pit methods. The study also examined two alternatives for metallurgical processing.

Exploration work continues in the Zeravshan area, and an updated geological resource was calculated for the Jilau deposit, based on the latest drill results. The deposit is now estimated to host measured and indicated reserves of 49.7 million tonnes grading 1.28 grams, or 2.04 million oz. gold. An additional 57 million tonnes grading 0.86 gram is classified as an inferred resource, which expands the total contained resource to 3.62 million oz.

Nelson plans more drilling at Jilau, and at the Olympic deposit to the north.

The summer program will also test two targets at the Shing Magiyan mineralized belt, 25 km south of the Zeravshan mill and mine complex.

In neighboring Kyrgyzstan, the company holds two joint-venture projects that will be drill-tested this year.