Petropavlovsk sells gold field in Chita Region to Australia's Meridian for $40 mln
MOSCOW. Feb 18 (Interfax) - Britain's Petropavlovsk Plc has signed a preliminary agreement with Australia's Meridian Mineral Ltd for the sale of 75% in CJSC ZRK Omchak (based in the Chita Region) for $40 million, Meridian said in a statement.
Meridian said that the period of exclusivity, during which the company should carry out due diligence for Omchak, lasts until May 11.
This transaction does not include Omchak's assets and its Russian production subsidiaries. These assets will be transferred to Petropavlovsk.
Petropavlovsk consolidated 90% in ZRK in July 2010 by purchasing 32.5% from Susumanzoloto and 7.5% from the asset's manager, OJSC ZRK Shkolnoye.
ZRK Omchak is the former joint venture of Petropavlovsk and OJSC Susumanzoloto.
One of binding terms of the agreement between Meridian and Petropavlovsk is the necessity of one side purchasing the remaining 10% in Omchak from the third party. It was earlier reported that shareholders in Shkolnoye approved in February 2010 the sale of 14% in Omchak to Cyprus-based Gesport Holdings Ltd. At the same time, reports circulated that Petropavlovsk might sell a stake in ZRK to Gesport. Russia's Federal Antimonopoly Service (FAS) authorized Gesport to consolidate up to 80% in the gold production enterprise. The offshore's beneficiary has yet to be identified.
ZRK Omchak's main asset is the Verkhnee-Aliinskoye gold ore field in the Baleisky district of the Chita Region. The field was discovered in 1980. Initial surveys and resource tallies were held in 1985-1986. According to Meridian, the field's preliminary gold reserves were put at 700,000-1.1 million ounces with gold ore concentration at 6.5-10 grams per tonne. According to a current feasibility study, an underground mine could be developed at the field, which would be in operation for around 12 years if the production rate comes to 7.7 grams of gold per tonne and 12.9 grams of silver per tonne, thereby bringing annual output to 265,000 tonnes. The company will likely utilize gravitational extraction technology for production.
Payments for the start of production are estimated at $76 million. Meridian and Petropavlovsk will likely finance these operations at a ratio of 75:25. If the deal is successful, Meridian hopes to commence development in 18 months. Total costs for this period of the project are put at $122 million.
In addition, the company holds licenses for exploration projects such as the Kulinskoye ore field, the Bukhtinskaya section, the Buryusinsky ore hub and Kauchak.
The Australian company is currently looking at various options for raising capital in order to acquire the asset and finance its operations, the statement said.
Meridian Minerals Ltd specializes in the exploration and development of various recoverable resources. The company owns the Lennard Shelf zinc and lead field in Western Australia. The company's shares are traded on the Australian Stock Exchange.
The Petropavlovsk Alliance (until 2009 - Peter Hambro Mining) develops gold ore fields in Russia's Far East. The company's production for 2010 came to 506,800 (15.8 tonnes) in precious metals, including 52,300 ounces from its stake in Omchak. Petropavlovsk's shares are traded on the London Stock Exchange (LSE).