It’s been an active year for Frontier Mining (LON:FML). At the alpha of 2010, the aggregation was a baby gold ambassador in Kazakhstan, with a bisected absorption in a ample nut porphyry which was at the time ability ability acceptance and infill drilling.
Now, 18 months on, the aggregation is still a baby gold ambassador in Kazakhstan, but is now the 100 percent buyer of the Benkala copper-molybdenum porphyry – amid the six better nut assets in the country – and is anticipating aboriginal nut assembly afore the end of this year.
Frontier is additionally in the action of accepting an added ability 10km to the south of the basic Benkala deposit, accepted as Benkala South.
With a Soviet-established C2 ability of 175 actor tonnes at a brand of 0.34-4 percent copper, Benkala South adds cogent added abeyant to the absolute Benkala JORC-compliant ability of 362 actor tonnes allocation from 0.4 percent (sulphides) to 0.62 percent (oxides).
The alteration to 100 percent buying of Benkala was assuredly accomplished in April of this year, back the Kazakhstan government issued its accord to the accretion by Frontier of the 50 percent absorption of their collective adventure accomplice Coville Intercorp in US Megatech BVI, the buyer of KazCopper LLP.
KazCopper, in its turn, is the 100 percent buyer of the Benkala licence. Frontier additionally acquired Coville’s 100 percent absorption in the Maminksaya Gold Project, a 1 actor ounce Russian-classified ability in the southern Ural region.
Consideration for this accretion took the anatomy of 873,210,000 Frontier shares, which were issued aftermost year, but anchored by a mortgage over the US Megatech shares until final achievement in April and in accession are accountable to a 12 ages lock in period.
The aboriginal assembly ambition at Benkala – which lies in the Urals Copper/Gold ore belt, aing to the Russian bound – is the oxide “cap” to the basic orebody, which is predominantly sulphides.
This weathered, aing to apparent ore, some 30 metres thick, has grades of up to 0.62 percent copper, and represents beneath than 10 percent of the absolute authentic resource, but is accessible to abundance via accessible pit methods, and about bargain to action application SX/EW technology (solvent-extraction/electro-winning).
The independent nut in the oxide ore is about 185,000t compared with the primary sulphide orebody which contains a added 1.38Mt of metal – both with abeyant for gold and molybdenum credits.
Wardell Armstrong International’s Competent Person’s Report, issued aftermost year, estimated the oxide breadth of the Benkala activity to accept a NPV of $190 million, based on 0.5 percent adulterated nut grade, 63 percent accretion and 185,000 bags of independent metal at a 6,000 USD per tonne nut price.
A contempo pit optimisation abstraction estimates a 7 year abundance life, with assembly ramping up from admission to 18,000-20,000 tonnes of nut by the third year. Should the anew acquired activity at Benkala South appear up to expectations, there is additionally a achievability of advance added to 30,000 tpa by 2015 to board oxide ores from that antecedent and access the activity of the action facility.
Site stripping began during 2010, and the absolute armpit has been austere bottomward to the akin of the orebody. Stockpiling of ore accessible for crushing and processing began in the bounce and it’s advancing that crushing will alpha in October, followed by leaching and assembly of nut cathode afore the end of the year.
Output initially will be in the arena of 8,000 tpa, but amplification of the SX/EW bulb from its antecedent 10,000 tpa accommodation will added than bifold the achievement by 2013.
Estimated capex to accompany Benkala’s oxide orebody into assembly has been in the arena of $51 million, funded, appropriately far, afterwards recourse to mining activity accounts or the disinterestedness markets.
Funding has appear from a array of sources, including the Zere Group (now accepted as New Technology), an article in which administrator and CEO Erlan Sagadiev has an interest, Sokol, a aggregation endemic by the two aboriginal founders of the company, Tom Sinclair and Brian Savage, and best afresh by a 4-year nut offtake acceding with Red Kite Abundance Accounts Trust which brought a added $10 actor into Frontier’s treasury.
The aggregation has additionally issued $5 actor of 1-year convertible bonds, taken advantage of bounded coffer lending and has adjourned a SEDA with YA Global for a added $5 million, adjoin which it has, as yet, fabricated no drawdown.
The aftereffect of this is a cogent debt burden, and until recently, Frontier faced the anticipation of added borrowing to complete architecture at Benkala.
But in July the aggregation appear a actual appropriate asset auction – the Maminskoye Gold Activity was acquired for $37.45 actor in banknote by Stanhigh Limited of Cyprus.
The account for the auction was presented appropriately by Sagadiev: “Although we accept been aflame about the abeyant at Maminskoye, its abeyant has not at all been reflected in Frontier’s allotment amount and the development of Maminskoye would accept been an continued and big-ticket accomplishment alfresco of our home region. Importantly, the auction provides Frontier with all the basic appropriate to barrage the Benkala SX-EW project.”
Further amount of about $15 actor will be appropriate during 2012 and 2013 to backpack out the amplification of the processing bulb at Benkala, but the bankable achievability abstraction for the absolute activity – which includes the sulphide orebody – is now about complete, and with this in hand, Frontier will be able-bodied able to defended activity finance, decidedly accustomed the ample advance the aggregation has already fabricated from its own resources.
In addition, the aggregation will by again be earning revenues from both gold and nut production.
Once the bulb advancement has been achieved, Benkala will be bearing some 18,000 tonnes of about authentic LME brand nut cathode per annum, breeding acquirement – at a continued appellation nut amount of $3 per lb – of $120 million. House agent XCAP forecasts chargeless banknote breeze from operations of about $60 actor pa, acquiescent a accumulation afterwards tax of about $50 actor by 2013.
Meanwhile, what of gold? In 2009, Frontier was mining its Naimanjal gold project, anchored in their additional key Kazakhstan licence area.
But as a clearer account steadily emerged of its added analysis assets on the Naimanjal licence, the aggregation absitively to cease operations at Naimanjal itself, area low grades and attenuated veins were proving difficult to abundance at a accumulation and about-face both focus and assets to Koskuduk, a a apparent oxide gold anticipation with sulphide abeyant at added levels.
Once Koskuduk became the gold focus, Frontier confused fast. By aboriginal 2010, its Naimanjal agile and accessories had been re-located, and architecture of ability supply, assembly bulb and bleed pads had commenced, forth with the abatement of dissipate from the ore bodies.
A aboveboard accessible pit/heap-leach operation, Koskuduk caked its aboriginal gold in mid July 2010, and by September had produced over 2,000 ounces, en avenue to achievement for the year of 4,180 ounces of gold and 11,300 ounces of silver.
This was beneath ambition due to ability delays, which inhibited mining and crushing activities on site, but the aggregation are assured that they can advance decidedly for 2011. Koskuduk commenced 2011 operations in April, afterward the winter shutdown, and achievement of up to 6,000 ounces additional argent is expected.
Already a gold producer, and about to become a assisting nut producer, Frontier seems aces of broker interest. However, forth with abounding of its peers, the allotment amount charcoal depressed, and has steadily descended from a aerial of about 8p in January to the accepted akin of 3p.
In a contempo interview, Erlan Sagadiev was asked why he anticipation this had happened. His acknowledgment was that the accuser should conceivably ask investors why they were affairs the banal for bisected what they paid for it “…when annihilation has changed?” He went on to accompaniment that “AIM has actual little to do with fundamentals.”
In the accepted altitude on the AIM market, area burning ample assets are adopted to abiding continued appellation basic appreciation, it is account acquainted his comment.
Because if Frontier can accommodated both its own and its brokers’ expectations, and bear steadily growing post-tax anniversary balance from Benkala, culminating in $50 actor in two year’s time, again today’s bazaar cap of aloof $92 actor will attending a little silly. And with 85 percent of the banal durably in the easily of entities accompanying to administration – accomplished and present – should investors achieve their absorption in Frontier the banal could access cogent aberration value.
Market: AIMEpic: FMLSector: MiningWebsite: www.frontiermining.com
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