Frontier Mining (LON:FML) is set to expand output from the Benkala copper mine in Kazakhstan, with a deal to acquire a nearby 175 million tonne deposit.
It has agreed a deal with a company called PromSnab2030 LLP to buy the subsurface use contract for the South Benkala mining deposit - which is 10 kilometres from the Benkala mine and plant - for US$2.5 million.
The company said that it has acquired the significant asset at a highly competitive price. It will pay just 20 percent upfront with the rest due once due diligence and government approval is complete.
It will subsequently decide whether to use the new deposit to increase production rates from 20,000 to 30,000 tonnes per year or to increase the Benkala mine’s life span from 7 to 11 years.
"We are extremely excited to have had the opportunity to acquire the South Benkala deposit,” chief executive Erlan Sagadiev said.
“The synergies with our existing Benkala deposit are obvious and the company will now consider seriously whether, with no substantial additional cost, it should extend the SX-EW plant's life or increase capacity.
"Either way, this acquisition marks a very significant step for the company and will allow us to move forward."
South Benkala has an estimated 175.12 million tonne ore reserve – estimated to Soviet C2 standards, back in 1979 – containing copper, molybdenum and silver.
There is a snag, however, as access to 40-50 percent of Benkala South’s primary deposits (sulphide) are restricted by a railway line that crosses the property. Frontier said that it will need to relocate the railway line, at an estimated cost of US$12 million, to access all parts of the Benkala South deposit.
All the secondary (oxide) ore is largely accessible, Frontier said.