NEWS RELEASE:Kazakstan Goldfields Corp KGFC
Shares issued 34883134
1997-07-24 close $0.18
Friday Jul 25 1997
Mr Thomas Griffis reports
The company's inability to significantly advance the privatization process for its mines under management due in part to a recent reorganization of the government of Kazakstan's administrative structure, together with high smelting costs, frequent power shortages and the inability of a local smelter to process more than 25% of
the company's concentrate, have compelled Kazakstan Goldfields to temporarily suspend operations at its Bestobe mine in Northern Kazakstan.
The company had previously suspended operations at two other mines in January, Aksu and Jolimbet, because of high processing costs at the then government managed smelter.
KGFC, through its 75% ownership of the Gold Pool joint venture manages and operates JSC Kazakaltyn. Under the terms of a management contract, KGFC finances the operations and retains the revenues from gold production at the three mines. As well, KGFC has the right to purchase the state-owned enterprise from the government of Kazakstan.
On April 4, 1997, KGFC advised the State Property Committee of the republic of Kazakstan that it intended to exercise its purchase option for JSC Kazakaltyn.
Since taking over management of the mines, Kazakstan Goldfields has invested in excess of $18 million towards mine upgrades and equipment modernization in attempt to make operations at the three mines economically viable. Further capital investment is contingent upon KGFC concluding its purchase of JSC Kazakaltyn under the terms of the management contract.
As previously announced, pre-production concentrates belonging to the company and valued at US$2.2 million are tied up at the Balkhash smelter in Kazakstan which has recently been taken over by new management. Although the company has a contract with the smelter, the ransition to new management has prevented KGFC from capitalizing on this asset.
In what the company believes to be a reaction to its decision to temporarily suspend operations at Bestobe, the Department of Management of State Property and Assets of Kazakstan advised the company of its intention to unilaterally terminate the company's management contract. However, the managementcontract provides KGFC the right to suspend uneconomic operations. The company has advised the government that it is in full compliance with the terms of the contract and it expects to continue with its obligations and exercising its rights as defined in the contract.
To surmount high processing costs, the company has developed plans for an on-site carbon-in-leach system which make the three operations economically viable. The CIL plant will allow the company to produce a dore gold bar on site therefore replacing dependence on the smelter. The business plan the company has presented to the government contemplates that the CIL plant will be built upon successful completion of the privatization process which depends on acquisition
terms acceptable to the company within its rights under the management contract.
Financing for this facility has already been partially arranged with Gerald Metals, Inc of Stamford, Connecticut. Gerald Metals has agreed to provide a US$12 million loan facility subject to the completion of an accompanying equity financing component. This equity financing component may involve an alliance with a financially strong partner.
Since January of this year, KGFC has shipped in excess of 10,000 ounces of gold with an approximate value of US$3.2 million to Johnson Matthey in London, England. In addition there is approximately US$3.5 million in gold inventory at the mines and at the Balkhash smelter.
Current underground gold reserves in the proven and probable categories at the three mines exceed 8.5 million tonnes containing 1.58 million ounces of gold. Total underground reserves in the possible category are 5.1 million tonnes containing 1.88 million ounces of gold. As well, the company holds licences on three million
acres of exploration property in Northern Kazakstan.
(c) Copyright 1997 Canjex Publishing Ltd. canada-stockwatch.com
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