VANCOUVER — Business partners Ian Slater and Robert Bell have had their sights set on potential mining plays in Kazakhstan since the country declared independence from the Soviet Union in the early 1990s. Roughly twenty years later, it looks like that vision is a lot closer to becoming a reality with Slater Mining (SLM-V) and its newly-acquired West Khazret gold property on the Urals tectonic belt in northwestern Kazakhstan.
Slater and Bell have had success in another emerging mining jurisdiction using a similar business model under the banner of Red Eagle Mining (RD-V) and its Santa Rosa gold project in Colombia. According to Slater, it has always been the plan to branch out into Kazakhstan, but project scouting proved to be a timely exercise.
“We wanted to buy a real quality project,” Slater explains during an interview at his Vancouver offices. “Meanwhile, we had been establishing Red Eagle in Colombia, but it took much longer to find our asset in Kazakhstan. We were really focused on something with the right sort of metallurgy and that multi-million ounce potential. It is a jurisdiction with great geological potential and a rich mining history.”
Slater says there are roughly thirty mining operations in the region, and that West Khazret actually flew under the company’s radar during initial property scouting. It was Slater’s senior geological team that flagged the project during an expedition, and discovered that a private party had already punched roughly 130 drill holes on a target at shallow depths. Though West Khazret did not come with a resource estimate — unlike some of Slater’s other prospects — it was the grades and shallow-oxide gold mineralization that really drew the company to the project.
“It really met all of our criteria,” Slater says, pointing out that early-stage metallurgical tests on trench material yielded recoveries between 77% and 93%. “It had simple metallurgy where we could heap-leach the oxides and the sulphides are non-refractory, which can be a concern in some parts of the country. I think it definitely has that multi-million ounce potential, maybe even just in the oxide material.”
The company then set out to lock down the property via a mutual acquaintance in the United Kingdom and ended up with a 320-sq.km land package on the Russian border with a strong database of geological data. Under terms of the option agreement Slater Mining can acquire a 100% interest in West Khazret by paying US$2.5 million in 2012 and another US$3.5 million in 2015.
The next major obstacle was bureaucratic in nature and involved a Kazakhstani regulation that allowed the government a first right of refusal on any natural resource acquisition in the country. Basically, the government could have opted to swoop in and acquire West Khazret under the same contractual terms as Slater Mining.
“How it works in Kazakhstan — and this is one reason we like it so much — is that there are barriers to entry,” Slater says, explaining where the problems in Colombia can often be social and environmental, difficulties in Kazakhstan stem more from bureaucracies. “But Bob and I have both been there for so long we know how it works ... so that gives us an early-mover advantage. We've actually received notice that the government is waiving that right so we're good to go on that front.”
Bell is a mining engineer with roughly twenty years of experience in the country, and had previous success permitting and developing the Mizak heap-leach gold mine, which is currently operated by London-based Kazakhmys (KAZ-L).
West Khazret’s most advanced deposit is the Atygai prospect located on the western portion of the property. The target will form the basis of Slater’s early-stage exploration efforts as the company moves quickly to establish a mineable oxide gold resource.
Atygai’s mineralization compromises quartz veins located in granites and Carboniferous shales, with thickness varying from 0.3 metre to 10 metres and averaging over 10 grams gold per tonne. Lower grade halos of veinlets and disseminated mineralization have also been identified outside the higher-grade veins.
A weathering profile has been established to a depth of 70 metres and is compromised of kaolintic saprolite. Historic drill results within the oxide mineralization include: 8.9 metres averaging 2.43 grams gold per tonne from roughly 40 metres depth; 15 metres grading 1.44 grams gold from 45 metres depth; and 25 metres carrying 0.65 gram gold from 30 metres depth.
“It's a big land package. I mean the work to date has been really focused on this one gold deposit, but there are other potential targets on the property and other potential types of deposits as well,” Slater says, explaining the company will start by confirming historic results via its own drilling and working towards a maiden resource. “We already have that blue sky in the sulphides, though we'll be looking at the oxides to start, and then we'll do a lot of surface sampling on the property to try and identify an exploration pipeline.”
Slater says he will follow a similar financing model to Red Eagle, which includes raising enough capital upfront to expedite the project through feasibility and permitting. He speculates he will need about US$20 million to get through that stage and plans on raising it through a limited number of private equity partners.
“So the share price is more of a negotiation between the two parties then it is a function of the market at this stage. We're looking at getting the financing locked down in the first quarter, and we'd like to get the drills turning shortly after that,” he concludes.
West Khazret is located 80km southwest of the mining town of Zhetygara in Kostanai Oblast. The site features all-season road access and a 220-kilovolt power line crosses the property. Slater estimates he could develop a 5-million-tonnes-per-annum heap-leach operation for roughly US$75 million.
“What we've done is set up our camp, and we have around six geologists starting up surface work ... we're completing geochemistry over the entire land package and getting the drill pads setup,” Slater comments, explaining that now that the government waiver issue has been resolved the company is ready to start drilling pending a financing.
Slater Mining has 28 million shares outstanding and has traded within a 52-week range of 12¢ and 53¢. The company closed at 27.5¢ at the time of writing and maintained a $7.9 million market capitalization. Shares jumped from 12¢ to 27.5¢ in two days of trading following the filing of the West Khazret technical report.
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