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UZBEKISTAN
Uzbekistan, the heart of the Silk Road |
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 OXUS RESOURCES CORPORATION
Gold and base metals in Central Asia
Mr. Roger W. Turner,
President & CEO jj72@dial.pipex.com
Mr. Richard V.L. Wilkins,
Executive Vice President & Director
rvlw.oxus@btinternet.com |
Contacts:
Griffin House, West Street
Woking, Surrey GU21 1BS - UK
Tel: 44(0) 1483 714411
Fax: 44(0) 1483 714014
Email: oxus@oxus.demon.co.uk |
Oxus Resources Corporation Uzbekistan
18 Maryam Yokubova Street
Tashkent 700031 - Uzbekistan
Tel: +998-711 206864
Fax: +998-711 206564
Email: oxustas@online.ru |
Oxus Resources is a private mining, exploration
and development company with advanced gold and base
metal assets in Uzbekistan and Kyrgyzstan.
Oxus plans to list on the Alternative Investment Market (AIM) before the end of year 2000 with US$30m concurrent financing.
Oxus Resources is a private mining company whose key assets are production ready gold and advanced exploration base metal properties based in republics of Uzbekistan and Kyrgyzstan. Concurrent with the next major financing of US$30m the company will list on the Alternative Investment Market (AIM). Since formation, company has successfully raised around US$33m and currently has 45.8m ordinary shares outstanding (68.7m fully diluted). In a pre-IPO issue three million shares are being issued at $1.10/share, after which the implied market capitalization of the company will be US$50m. The company has no long-term debt and $0.8m in cash, as at July 31st 2000.
There are four key projects under the company's management.
| Project Name Ownership |
Location |
Status |
Products |
| Amantaytau-Oxide 50% |
Uzbekistan |
Production ready |
Au, Ag |
| Amantaytau-U/G 50% |
Uzbekistan |
Advanced Feasibility |
Au |
| Khandiza 50% |
Uzbekistan |
Feasibility study |
Zn, Cu, Pb, Ag |
| Jerooy 67% |
Kyrgyzstan |
Feasibility study |
Au |
Oxus' key shareholder are Normandy, with 27% and Lonmin with 7.5%. Management, employees and non-executive directors own just over 20%. Other shareholders include Equitable Life and CIBC World Markets.
The management team is highly experienced in the region and is headed up by Roger Turner, President and CEO.
| AMANTAYTAU GOLDFIELDS - KEY PROJECT IN THE PORTFOLIO |
Amantaytau Goldfields (AGF) is a 50/50 joint venture with the government, through Goskomgeology (40%) and Navoi Mining and Metallurgical Combinat (40%), and is situated in Kizilkum Desert, in the Navoi district, some 30km from the town of Zarafshan.
Zarafshan supports the very large Muruntau gold mining complex, the world's largest open pit gold mine, and Newmont's heap leach operation, with a combined annual production of 2Moz. Both Amantaytau and Muruntau lie in the Tien Shan Gold Belt which also hosts Cameco's (CCO-CN: C$18.35) 600koz per year Kumtor operation in Kyrgyzstan. We understand that Teck Corp (TEK.b-CN: C$9.00) has recently taken an interest in the Ajibugut deposit which lies due west 20km from Vysokovoltnoye, which makes up part of AGF.
Oxus bought Lonrho's original 43%, for $4.3m, in 1999 and recently increased its holding to 50%. Lonrho spent US$23m from 1994 to 1997. The company also inherited an extensive exploration database, compiled in the Soviet era. This includes 810km of drilling and 51km of underground exploration development. Although the samples are no longer available the many records are intact and are being collated by the company.
The company's approach differs materially from that undertaken by Lonmin in that the focus has been on the surface oxide deposits of Centralny, Uzunbulak and Vysokovoltnoye. Uzunbulak and Vysokovoltnoye were not part of Lonmin's original holding and were essentially swapped for the Daugistau deposit with the government, which was the focus of Lonmin's effort and now the focus of the government effort. It was recognized that the oxide deposits could be brought into production quickly and at a low capital cost. Further, Oxus completed 11km of drilling, in order to bring indicated reserves into the mineable reserves category, and 300 leach tests. Results from the leach tests indicate very favorable leach kinetics with 80% recovery achieved in 30 days.
The oxide reserves will be mined in a series of
straightforward open pits, over 10 years at 1Mtpa
with an estimated life of mine stripping ratio of
around 4.4. Oxide ore will be placed on leach pads
in five lifts, after agglomeration. Gold ore will
be refined at the nearby Navoi Mining and Metallurgical
Combinat, which has full accreditation for good
delivery from London Bullion Market Association
for 99.99% (four nines) pure gold. The same plant
processes and refines Muruntau run of mine ore,
and Oxus has been offered very favorable
refining terms. Pre-production is expected to start
in early 2001, pending finance, with first gold
late in 2001. Annual gold production in the first
four years of the project will average 127,000oz.
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Capital requirements are estimated to be $40m and the company already has fixed quotes from Caterpillar, Terex and Svedala for the supply of equipment. The project will enjoy a five-year tax holiday, as from the start of production, and thereafter be subject to a 16% tax rate, as the project falls under the National Foreign Investment Program. Using US$285/oz long-term gold price and an after tax real discount rate of 10%, we value 100% of phase 1 of Amantaytau at US27.1m with payback in less than 2 years.
As the government's portion is carried, Oxus receives all cash flow until payback and thereafter cash flow is equally shared. The company also receives a management fee, equal to 5% of operating costs for the life of the project, and interest, assumed at 7%, on the finance raised until payback. Taking into consideration these adjustments and using a 10% after tax real discount rate, we value Oxus' 50% of the oxide project at $14.7m.
| KHANDIZA - HIGH GRADE POLYMETALLICS |
Khandiza is a high grade polymetallic (lead, copper, zinc, silver) deposit located in the Surkhandarya province 470km, by road, south east of Samarkand. The project is shared on a 50/50 basis with the government through Goskomgeology. Oxus is currently negotiating for 100% of the concession through a buy-in. The project has been brought to a point where a full feasibility study can be conducted and completed quickly.
The Khandiza deposit is a volcanic massive sulfide (VMS) and is hosted on the southwestern limb of a syncline in a series of sedimentary volcanics. Mineable reserves are in the form of massive, brecciated and disseminated sulfides (stockwork), making the run-of-time highly amenable to dense media separation, which will improve milling costs and significantly reduce tailings disposal requirements, as the overflow will be used as fill underground. Highly prospective exploration potential exists on the northeastern limb of the syncline where the known deposit could be mirrored.
As with Amantaytau, Oxus has inherited an exploration database conducted over several years by Soviets, including 77km of drilling and 23km of exploration development. The underground workings provide the base for the current exploration program.
Capital requirements are estimated at US$160m. We estimate payback within less than three years. As with Amantaytau, Oxus will act as operator and "banker" for which it will receive management fees equivalent to 5% of costs (excluding TC/RC's) and interest on the financing drawn down which, we estimate, will be charged at 7%. The company will also receive all cash flow from the project until payback. Using a 13% real after tax discount rate and the following commodity prices, Zn: US$0.55/lb, Cu: US$0.85/lb, Pb: US$0.25/lb, Ag: US$5.00/oz and Au: US$285.00/oz, we value 100% of Khandiza at US$60.6m. Taking into account current ownership, management fees and finance interest we estimate the value to Oxus is US$31.2m.
see map
 JEROOY - SWING PRODUCER IN THE PORTFOLIO |
Through the wholly owned subsidiary, Norox, Oxus holds 66.7% interest in Jerooy, a gold project in northwest Kyrgyzstan, which is the second largest in the country after Cameco's Kumtor. In its present form, the project has three aspects: open pit, underground and low grade and is scoped at 1.4Mt annually to produce around 250.000oz for the first five years of the project.
Capital costs are currently estimated to be around $130m. We assume that gold production will start in 2004. However, the reserves at Jerooy are currently under review and preliminary work indicates that a significant improvement in the reserve position could be achieved. Coupled with re-scoping which would effectively lower throughput and capital requirements, the economics of the project could be improved materially. If this is the case, then the project could be brought forward. Jerooy is ready for full feasibility study that could be completed in less than six months, and if upgraded then the project would be re-prioritized.
As reserves and scooping stands and using a US$285/oz. gold price and a 14% real after tax discount rate we value Oxus's 67% of Jerooy at US$12.3m.
| EARNINGS AND CASH FLOW-QUICK TURNAROUND |
According to our analysis Oxus will record its first positive earnings and cash flow from operations in 2002, assuming a gold price of US$285.00/oz. In terms of converting a new project into positive earnings and cash flow, 18 months represents a very quick turn around and reflects the quality of the Amantaytau project. We estimate that earnings per share and cash flow per share (before changes in non-cash working capital) will be around US$0.05 and US$0.10 respectively.
Our analysis of the three projects in Oxus indicates that between 20% to 30% of cash flow to the company is fixed by way of management fees and finance fees. This reduces the company's exposure to the key commodity prices, namely, gold and zinc and differentiates Oxus from other mining companies. We believe that this situation is unique and one that is generally associated with a holding company, which Oxus clearly is not. The fixed cash flow element of the company also goes some way to ameliorating the perceived country and political risk which, without doubt, will be foremost in potential investors mind. We believe Oxus represents a mining play with less volatility associated with traditional mining investments. |
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© World INvestment NEws, 2001.
This is the electronic edition of the special country report on Uzbekistan published in Forbes Global Magazine.
August 6th, 2001 Issue.
Developed by AgeniaE.Tv |
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