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Kryso Resources

  • BY: Andrew Hore |
  • POSTED: 02/03/2008 |

Kryso Resources believes it is on course to commence production at its Pakrut gold deposit in 2009-10.

Kryso is exploring for gold and base metals in Tajikistan. Its main project is at Pakrut in the south of a region known for gold. It has a gold resource of more than 1m ounces of gold, of which 900,000 ounces is in measured and indicated categories. The pre-feasibility study was positive.

The start up cost is expected to be $65m and an average cash cost of production of $291/ounce is envisaged. Initial production is likely to be opencast so its cost will be nearer to $200/ounce. Annual production would be 100,000 ounces of gold. The current resource base would last six years but further exploration will add to the resource.

Kryso estimates that the Pakrut project has a net present value - based on a 10% discount rate - of $115m (£58m). At 15p, Kryso is valued at £11.9m.

Tajikistan is a central Asian country that used to be part of the USSR. It is bordered by Uzbekistan, Kyrgyzstan, China and Afghanistan and has been stable since its civil war ended in 1997. Kryso’s management has more than three decades of experience in the country. Chief executive Vassilios Carellas previously worked for a TSX-listed company. His experience taught him that government joint ventures don’t work and that is why Kryso owns 100% of its projects. He says it takes a while to get an initial exploration licence but it is then easier to get a mining licence.

Kryso also owns 100% of the Hukas nickel-copper project in central Tajikistan. The Russians discovered the mineralisation and more recent trench samples have been positive. A drilling programme will start in the second quarter of 2008.

The share price has been held back by selling by RAB Capital. It has sold 9m shares over three years and hasn’t any more shares left. TSX, JSE and American Stock Exchange-listed Great Basin Gold owns 15% of Kryso, which was bought for 10p a share. It also owns 5m warrants exerciseable at 15p a share.

Kryso has net cash of £1m and it will probably need to raise more cash in the short-term. Longer-term, it will need up to £10m to contribute to capital cost. Kryso is already talking to banks interested in providing project finance.

The strategy is to continue drilling at Pakrut and complete the bankable feasibility study. It will then take around one year to get to production, which will probably happen in 2009-10.

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