European Minerals dumps besieged mine contractor

Vancouver As the list of disgruntled customers of MDM Ferroman grows, so does the number of disrupted and partially constructed mine projects scattered across the globe. European Minerals (EPM-T, EUM-L), the latest mining company to terminate its contract with the South African firm, is now scrambling to complete construction of its Varvarinskoye copper-gold mine project in northern Kazakhstan.

European Minerals had awarded a lump-sum turnkey contract to MDM Ferroman for an open-pit mine with capital costs of US$125 million. About US$49 million has been spent to date at the project, which was slated to pour its first gold by year-end, 2006. The contract contained various undertakings, including a Performance Security obligation that was to be delivered within a specific timeframe. Deadlines came and went, forcing European Minerals to terminate the contract.

The company has since retained Senet Engineering, a South African firm, to review the project and its design and cost parameters. Once this review is in hand, the company will determine the best option to complete construction, which may delay the scheduled completion date.

Production at Varvarinskoye is expected to average 145,000 oz. gold and 18.4 million lbs. copper annually over the first 10 years of a 15-year mine life. Cash costs are projected to average US$130 per oz. gold, after copper credits.

Several other mining companies have recently terminated contracts with MDM Ferroman, including Randgold Resources (GOLD-Q) at its Loulo gold mine in Mali, and Nevsun Resources (NSU-T, NSU-X) at its Tabakoto mine, also in Mali.


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