Frontier Mining has agreed to sell its subsidiary FML Kazakhstan LLP, owner of the Naimanjal licence area, for US$30 million to Union Transnationale Miniere SA (UTM), subject to regulatory approvals in the Republic of Kazakhstan.
The AIM-listed company intends to solely focus of stabilizing operations at its flagship Benkala copper mine and developing the South Benkala resource.
The Naimanjal licence area is about 200km west of Semey in North East Kazakhstan, with four commercial discoveries covering 529sqkm, including Baitemir, Yubileiny and Beschoku.
The application for the approval of the transaction has also been submitted to the Ministry of Industry and New Technology of Kazakhstan. The Ministry has the right of first refusal over the asset, where should it decide to purchase the asset, it would have to match the existing deal value.
All proceeds from the sale are expected to be used for repayment of maturing debt of Frontier and financing capital expenditures for the ramp-up of copper production at Benkala to maximum levels.
Frontier’s chairman and chief executive Yerlan Aliyev says, “Given the market environment and position of our current financing counter parties, sale of assets was identified as the best method by which to finance capital expenditures at Benkala and pay back existing debts.
“The proceeds of this transaction will allow us to optimize copper cathode production at the Benkala SX-EW plant, paving the way towards increased production in the near future.”
Frontier’s management confirms that 1702 tonnes of copper cathode was produced in the 12 month period to December 31, 2013, in line with guidance communicated in September 2013.
This production was achieved against a backdrop of continual improvement of the various processes to increase production rates, reduce production costs and improve efficiency across the site. In particular, operations were continuous throughout winter despite temperatures dropping to a low of -36 degrees.
Frontier says the focus for the remainder of the first half of 2014 is on continuing to improve the production rate and to remove remaining operational bottle necks. Partial leaching with forced aeration trials has commenced on Pad 4, with encouraging initial copper content results to date.
By the end of the current financial year, the company’s ambition is to have Pads 4, 5 and 6 completely stacked to six metres and to begin leaching, which should ensure significantly higher production levels throughout the winter of 2014 and beyond.