Nelson prepares to resuscitate Kalana

A feasibility study by Nelson Gold (NLG-T) calls for a 2-stage development program at the Kalana gold project in Mali, in preparation for a return to production.

Ashanti Goldfields (AHD.U-T) holds an 80% interest in the former producer, with the government of Mali holding the remainder. Nelson recently purchased from Ashanti a 70% equity interest in the mine and in the 387-sq.-km concession that surrounds it.

Under a Soviet assistance program, exploration and development at Kalana began in 1967 and continued until the regime’s collapse in 1991. During that time, a total resource of 1.4 million ounces of gold was outlined.

In the 1980s, the Soviets developed the deposit by underground methods and constructed a plant with a capacity of 36,000 tonnes per year, which, from 1985 till 1991, produced more than 81,000 oz. gold. Also, oxide resources, potentially amenable to open-pit methods, were outlined in the vicinity of the underground workings during the final three years of Soviet control.

According to Nelson, the first stage of development would involve the deepening of two existing vertical shafts, development of additional stoping areas, improvement of hoisting arrangements and upgrading of the existing plant to treat 200,000 tonnes per year. The second stage would encompass an expansion of the underground and open-pit operations, as well as development of a heap-leach facility.

The capital cost of completing both stages is pegged at US$19.4 million, funding of which would be split between Nelson and Ashanti on a 87.5%-12.5% basis, respectively. Once in production, the cash operating cost is expected to reach US$200 per oz.

Proven and probable reserves were recently recalculated, and now stand at 1.4 million tonnes grading 9 grams gold per tonne. These are contained within an overall resource of 6.5 million tonnes grading 6.14 grams gold, equivalent to 1.3 million contained ounces.

The 3-party agreement deal requires that Nelson raise US$12 million. Toward that end, the company is arranging a $13-Million loan from the Standard Bank of London; it has also entered into a 100,000-Oz. gold-hedging program.

Nelson will manage the development program and act as mine operator. Ashanti and the government will maintain 10% and 20% non-participating interests, respectively.

In related news, the International Finance Corp. (IFC) has purchased from Nelson a 5% interest in Tajikistani-based Zeravshan Gold Co. (ZGC). The transaction involved payment to Nelson of US$6.4 million plus a commitment to fund, on a pro rata basis, an additional US$1 million.

As a result of the transaction, Nelson’s interest in ZGC has been reduced to 44% from 49%. The remaining 51% is held by the Tajikistani government.

ZGC owns and operates the Jilau gold mine, where, earlier this year, Nelson initiated a US$11.8-Million expansion program. The program is aimed at boosting the operation’s gold production to beyond 100,000 oz. in 1998 from its current capacity of 72,000 oz.