Operations
The origin of the business dates back to 1929 with the discovery of the Aksu gold deposit in northern Kazakhstan, followed by Bestobe and Zholymbet a few years later. All three are located within 100km of the established mining centre of Stepnogorsk and benefit from a number of distinct cost advantages including an excellent local road and rail network, good power infrastructure and competitive labour and electricity costs.
These operations were partially closed for from mid-2004 to mid-2005 to prepare for the phased upgrading and modernisation of its mining treatment facilities. Since September 2005, KazakhGold has commissioned large open pits at Aksu and Bestobe and built new carbon-in-pulp (CIP) treatment facilities at Aksu and Zholymbet. Heap leaching has also been introduced at Aksu and Bestobe. In mid-2006, heap leaching of open pit ore began at Kaskabulak in eastern Kazakhstan, one of the eight properties acquired in 2005.
As these new facilities have been commissioned there has been a phased increase in gold production, with 52,691oz produced in the final quarter of 2005 at an average cash cost of US$210/oz, and 95,160oz in the first half of 2006 at US$180/oz. At the end of 2005, ore was being sourced from underground and open pit in approximately equal amounts, but the latter component is set to increase from 2006. The economies of scale that will accompany the increase in ore production are expected to result in further reductions in unit cash costs.
Aksu Mine
The Aksu mine, which includes the nearby Quartzite Hills deposits, comprises open pit and underground mining operations, as well as low-grade surface dumps and accumulated tailings. Reserves and resources (Soviet classification) total 5.8m oz and 15m oz respectively, with around one-third (2m oz) of the reserves contained in the high-grade Vera zone.
Prior to mid-2005, Aksu was a wholly-underground operation whose ore was processed by flotation. Since then, open pit mining has commenced and a new 1m tpa CIP plant and 500,000tpa heap leach facility have been commissioned. The original flotation plant has been upgraded and treats up to 200,000tpa of refractory ores to produce flotation concentrates.
The present focus is to build up open pit mining operations to support the Group's production expansion plans. Longer-term, mining of the Vera zone is expected to begin in 2008. This zone has significant potential even though only partly drilled and explored. Because it extends to surface a large-scale open pit operation could be developed on the upper section of this zone in the future.
Aksu is also the location of the geological unit that handles all of the Group's domestic exploration.
Bestobe Mine
Comprises open pit and underground operations, low-grade surface dumps and tailings accumulations and has reserves and resources of 3m oz and 10.2m oz respectively. Over 380 gold-bearing quartz veins have been identified at Bestobe, of which around 285 are considered suitable for mining. Prior to mid-2005, only underground mining and flotation were undertaken.
Unlike the Aksu and Zholymbet deposits, a significant proportion of the mineralisation at Bestobe is coarse, free gold that can be recovered by gravity methods. The original processing plant now produces both gravity and flotation concentrates.
A new 1m tpa heap leach facility was commissioned in August 2005 and now treats a mix of tailings and open pit oxide ore. The 250,000tpa flotation plant will continue to process ore from the Dalnaya zone which is more amenable to this treatment method.
Expansion of open pit mining is a priority in 2006 to support the Group's plans to increase gold production plans. However, the planned 2.5m tpa CIP plant due to be commissioned in the first quarter of 2007 has been deferred to allow for the greater economies of scale that will be achieved under the accelerated investment plan.
Zholymbet Mine
At present, Zholymbet is an underground operation that also has low-grade dumps and accumulated tailings on surface. Reserves and resources total 4.4m oz and 8.2m oz respectively, and the deposit includes a silicified zone, up to 80m wide and extending 2.5km along strike, which contains the Group's highest grade reserves at 21g/t gold.
The original processing plant was designed to treat sulphide ores using gravity and flotation. As part of the Group's modernisation programme, the flotation sections were removed and the plant was modified to treat tailings. A newly installed 500,000tpa CIP plant was commissioned in August 2005 but the planned new 1m tpa heap leach facility, originally scheduled to become operational in late 2006 has been deferred as part of the plan to focus on CIP treatment.
Open pit production is scheduled to commence in the second half of 2006 and, in order to handle this additional ore, the capacity of the CIP plant will be expanded.
Acquisitions
Three further gold mines were acquired in July 2005. These are located near the city of Semipalatinsk where the Group has established a base to manage its operations in eastern Kazakhstan. The properties – Azkhal, Boldykol & Zhanan and Vasilevskyi - are largely unexplored and have no current production.
A further five new exploration licences were awarded in December 2005. Southern Karaultube and Kyzylsorskoe are both located in the Akmola region of Northern Kazakhstan, near the Group's existing mining operations. They can both be explored and developed efficiently by KazakhGold and were historically part of Kazakhaltyn, with the results of earlier exploration work from the 1980s still available.
Pridorojnoe and Kaskabulak are in Eastern Kazakhstan, close to the three deposits acquired in July 2005, and Kaskabulak commenced heap leaching of open pit ore in mid-2006. The Akshatau MMC deposit is located in the Karaganda region of central Kazakhstan.
Late in 2006, KazakhGold formed a joint venture with AIM-listed Oxus Gold to successfully bid US$6.99m for a gold project in Romania that had been placed into liquidation in April 2005. It is estimated that the project can be brought back into production in 6-12 months at a cost of US$5.25m and will generate a strong revenue stream and a healthy operating profit from the treatment of gold-bearing tailings and stockpiled pyrite resources.
Further developments from this link with Oxus Gold occurred in early 2007 with an agreement in principle for KazakhGold to acquire from Oxus the remaining 50p.c. of the Romanian JV (Romaltyn Ltd), together with certain exploration assets in Turkey and the entire issued capital of Norox Mining Company, the Oxus subsidiary which has a 66.7p.c. interest in the Jerooy gold project in Kyrgyzstan. KazakhGold will issue 3.5m shares to Oxus as payment for these assets.
The company also agreed in principle to pay Oxus up to a further US$80m cash, in instalments, if KazakhGold is awarded the licence to develop Jerooy into a producing mine.
These agreements were accompanied by changes to the KazakhGold board structure and a strengthening of its management team.