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TABLE OF CONTENTS Dec 3 - 9, 2012 Volume 98 Number 42 - 0 comments

Slater's patience rewarded in Kazakhstan's goldfields

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By: Matthew Keevil
VANCOUVER 2012-12-03

Business partners Ian Slater and Robert Bell first set their sights on Kazakhstan mineral potential not long after the country declared independence from the Soviet Union in the early 1990s. Two decades later, their vision of developing a signicant asset in the country is finally becoming a reality, in the form of Slater Mining (SLM-V) and its newly acquired West Khazret gold property in the Ural tectonic belt of northwestern Kazakhstan.

Slater and Bell have already had success in another challenging mining jurisdiction with Red Eagle Mining (RD-V) and its Santa Rosa gold project in Colombia. But. according to Slater, it had always been the plan to branch out into Kazakhstan.

“We wanted to buy a real, quality project,” Slater explains during an interview at his Vancouver office. “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’s a jurisdiction with great geological potential and a rich mining history.”

Slater says there are roughly 30 mining operations in the region, and that West Khazret had flown under the company’s radar at first. It was Slater’s senior geological team that flagged the project during an expedition, and discovered that a private party had already drilled 130 holes on a target at shallow depths.

West Khazret did not come with a resource estimate like some of Slater’s other prospects, but Slater says that “it really met all of our criteria,” and points 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 set out to lock down the property through a mutual acquaintance in the U.K., and ended up with a land package spanning 320 sq. km 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 involved a Kazakhstani regulation that allowed the government a first right of refusal on any natural resource acquisition in the country. 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, adding that while 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 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 20 years of experience in the country who previously permitted and developed the Mizak heap-leach gold mine, which is operated by London-based Kazakhmys (KAZ-L).

West Khazret’s most advanced deposit is the Atygai prospect on the western portion of the property. The target will form the basis of Slater’s early stage exploration efforts, as the company moves to establish a mineable gold oxide 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 70-metre depth, and is comprised of kaolinitic saprolite. Historic drill results within the oxide mineralization include 8.9 metres averaging 2.43 grams gold per tonne from 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 . . . 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 would start by confirming historic results from 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 to identify an exploration pipeline,” he says.

Slater would 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 would need 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 than 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 80 km southwest of the mining town of Zhetygara in Kostanai Oblast. The site features all-season road access, and a 220-kilovolt power line that crosses the property. Slater estimates he could develop a 5-million-tonne-per-year heap-leach operation for 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 set-up,” Slater says, adding that with the governmental waiver issue resolved, the company can 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 press time and maintained a $7.9-million market capitalization. Shares jumped from 12¢ to 27.5¢ in two days of trading following the West Khazret technical report.

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A trench at the Atygai prospect on Slater Mining's West Khazret gold project in Kazakhstan. Source: Slater Mining
A trench at the Atygai prospect on Slater Mining's West...
Slater Mining CEO Ian Slater.
Slater Mining CEO Ian Slater.
Slater Mining vice-president of projects Robert Bell examines a sample at the West Khazret gold property in northwestern Kazakhstan. Source: Slater Mining
Slater Mining vice-president of projects Robert Bell ex...

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