Placer walks away from Kazakh gold project

The collapse of an agreement that would have seen a restructuring of the ownership of the Vasilkovskoye gold project in northern Kazakhstan has resulted in Placer Dome’s (TSE) withdrawal from the joint venture.

In April, 1995, Placer, through its 55%-owned subsidiary Placer Kazakhstan (PKL), reached an agreement with the government of Kazakhstan to joint-venture the Vasilkovskoye project on a 50-50 basis, subject to due diligence and the signing of a formal agreement. As part of the initial agreement, Placer was required to make a down payment to the tune of US$35 million.

After completing a due diligence review of the project, Placer sought to sell its 55% interest in PKL to Princess Resources (VSE) in a deal that would result in Placer’s receiving a 38.4% fully diluted interest in Princess.

In June it was announced that Princess had reached an agreement to purchase for US$70 million all the shares of Consolidated Mines of Kazakhstan, a private firm made up of European investors, and owner of the remaining 45% interest in PKL.

The closing of both transactions would have given Princess a 50% ownership of the Vasilkovskoye project.

Hugh Leggatt, a spokesman for Placer, says that because Consolidated Mines could not meet certain conditions of the restructured agreement, the deal was terminated.

Geological resources at Vasilkovskoye are believed to total 138 million tonnes grading 3.03 grams gold per tonne at a 1.5-gram cutoff. Placer had envisioned an open-pit operation with carbon-in-leach gold recovery.

Leggatt explained that while the due diligence on Vasilkovskoye confirmed the upside potential of the project, Placer felt that by having only an indirect 27.5% interest in the property, it was better to concentrate its resources on developing projects in which it has a higher ownership. Projects mentioned included Las Cristinas in Venezuela, Musselwhite in northwestern Ontario and Pipeline in Nevada.

While future development of the Vasilkovskoye gold project is uncertain, Placer believes its relationship with the government of Kazakhstan remains unaffected, and the company will continue to maintain an exploration presence in the country.

Placer expects to reclaim its US$35-million down payment within nine months, as set out in the initial terms of the joint venture.