AFTER completing a scoping study for the Taldybulak Gold-Copper Project in the Kyrgyz Republic Tengri Resources has decided not to proceed with development of the project. The decision also encompasses the nearby Andash project.
The study, which was concluded against the backdrop of lower metal prices and a subdued outlook, was undertaken to ascertain the economic feasibility of a two-phased development at Taldybulak.
The first phase was targeting a high-grade gold-copper zone at modest capital cost prior to a large-scale bulk tonnage mining and processing operation, with potential for the Andash project resource, 27km away, to function as a satellite mine feeding Taldybulak’s central plant.
The scoping study shows that both projects, under all studied development scenarios, do not meet the company’s investment criteria. In particular, the company had hoped that the study would demonstrate that Taldybulak and Andash could deliver an internal rate of return in excess of 25% and production costs in the lowest quartile of the global cost curve.
It showed up-front capital costs of approximately US$320 million that delivered annual production of an average of approximately 70,000 ounces of gold and 7750 tonnes of contained copper over a 28-year mine life. Key assumptions used in the study included US$1200 per ounce of gold and US$5500 per tonne of copper. The results demonstrated a negative net present value and an internal rate of return below the company’s cost of capital.
Whilst Tengri believes that Taldybulak and Andash host large resources with significant upside exploration potential, the Board has decided not to proceed with the development in the current commodity price environment. This decision would be impacted in the future by higher copper and gold prices, the discovery of higher grade zones near to the existing resources or a combination of both.
As a result, Tengri has begun a strategic review and will not apply for development licences over either project but intends to maintain its exploration licences in the near term while it considers what options may be available. To preserve shareholder capital during the review, the Board has suspended all material operational activities in the Kyrgyz Republic.
Given the general weakness in global resource prices, the company believes opportunities may exist outside its existing areas of operation, which require lower start-up costs and a faster route to production and cash flow than the company’s current asset base. Accordingly, it is devoting additional resources to the search for such assets.