Manas Resources receives boost at Shambesai with higher gold recoveries achievable

Manas Resources (ASX: MSR) has a string of milestones to deliver in the short term for the Shambesai Gold Project, and in some additional positive news for the company is the identification of improved gold processing parameters.

The first milestone for Manas is a resource update to be completed this month, with a Feasibility Study on track for delivery in the December 2011 quarter.

Stephen Ross, managing director, commented “The rapid development of the project along with significant reductions in capital and operating costs positions the company to take full advantage of the expected increase in ore volumes, following the release of an updated resource estimate.”

The November 2010 Scoping Study for Shambesai currently contemplates mining 180,000 ounces of primarily high‐grade oxide material over five years from a total Mineral Resource of 645,000 ounces for a cash flow of US$118 million at a US$1,000 gold price (EBITDA).

Ross continued, “With a resource increase expected from the 2010/2011 drilling program, plus higher recoveries and lower costs, which will result in additional ore becoming economic particularly at the current higher gold prices, we look forward to far exceeding the previous economic estimates in the upcoming pit optimisation and Feasibility Study for the Shambesai Gold Project.”

Importantly for the potential efficiency of the project, the company said that bulk metallurgical test work has indicated higher gold recoveries are achievable

Negotiations and ongoing discussions are underway and progressing with EPCM companies, contractors and the Kyrgyz Ministry of Natural Resources.

Exploration at the project continues at pace, with three rigs operating at Obdilla, two rigs at Ulugtau and two rigs are being mobilised to Tashbulak.


Gold recoveries

Recent vat leach and heap leach test‐work at an independent laboratory in the Kyrgyz Republic under Manas Resources’ supervision has demonstrated significantly improved gold processing parameters, including higher gold recoveries, quicker leach times and lower cyanide consumption.

A bulk sample of high‐grade ore greater than 8.0g/t gold was taken from zones which will be mined first at Shambesai, and was then tested in columns under conditions designed to replicate the Vat Leach process for extracting gold from the Shambesai oxide ore.

The results indicate recoveries of more than 85% can be achieved in rapid leach cycles of less than 36 hours, with very low cyanide consumption of 0.2 to 0.3 kg/t for minus 12mm crushed and agglomerated ore in vats at high solution circulation rates.

The outcome is that the test work results confirm the suitability of the process route selected for the project, providing a very low capital and operating cost ore treatment route.


Current resource

Manas is currently working on a resource update for Shambesai which is expected to significantly increase the current resource of 645,000 gold ounces.

In total, the company has a resource of 1,130,000 gold ounces at the Shambesai and Obdilla prospects, which are located just seven kilometres apart.

The new resource will then be incorporated in an updated pit optimisation, using updated costs and gold price from the Feasibility Study work.

The study is progressing on schedule and Manas is also continuing discussions with the Kyrgyz Ministry of Natural Resources for the timely approval of the TEO Study (Russian interpretation for Technological and Economic Justification Study) and subsequent awarding of a mining licence.


Compelling valuation economics

The key valuation parameters of Shambesai provide a compelling story.

With a project internal rate of return of 201%, on a gold price of US$1000 per ounce, well below the current spot of around US$1900 indicates the potential profitability and return on funds invested in the project for Manas.

Annual gold production at Shambesai is forecast at 35,000 ounces for the first three years, for an average of 30,000 ounces over six years, with a payback period of just nine months.

The average operating cost is US$180 for the first three years, with the initial capital cost to production just $16.3 million.

Some major investors have significant holdings in Manas, with Macquarie Bank (ASX: MQG) and Lion Group holding 15 million shares each, with Macquarie increasing its stake earlier in the year.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/19502/manas-resources-receives-boost-at-shambesai-with-higher-gold-recoveries-achievable-19502.html