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Share in Charaat Gold (LON:CGH) rose almost 3% after it outlined plans to increase production from its proposed mine in the Kyrgyz Republic that will significantly enhance the economics of the project.
Updating on the progress of its definitive feasibility study, the AIM-listed mine developer told investors it expects to build the operation in two stages, ultimately producing 250,000 ounces of the precious metal a year.
Using the previous blue-print, the firm expected to mine 200,000 ounces at a cash cost below US$600 an ounce.
Charaat will kick off with a very simple to build heap leach facility that will process 120,000 ounces, before constructing a facility to take the sulphide ore.
The plan commends itself on a number of levels, the company said, not least the lower upfront capital costs of starting with the heap leach option.
The layout of the project is to be revised to improve efficiency, reduce possible environmental impact and eliminate access issues, the firm added.
And at the same time there will be a small amount of additional “to support the implementation strategy and secure more geotechnical information”, Chaarat revealed.
All of this means the DFS is likely to be published in early 2015, rather than late 2014 as first proposed.
Chief executive Dekel Golan said: "The board has listened to our key stakeholders and taken note of market conditions to adapt the company's strategy accordingly.
“We believe that now is not the time to commit cash flow to small scale production and that fast-tracking a definitive feasibility study, together with a continued focus on the development of infrastructure, is the optimal route to deliver the value of the Chaarat deposit.
“This will also further strengthen our hand in the negotiation of strategic alliances.”
At 11.20am, the shares were changing hands for 9.95p, for a rise of 2.6%. This values the company at £25mln.
The measured and indicated resource for the Chaarat project is 3.59mln ounces, at a grade of 3.3 grammes a tonne (g/t) and the deposit consists of three parallel mineralised zones: the Contact Zone, the Main Zone (together the Kiziltash Zone) and the Tulkubash Zone.
The measured and indicated resource of the Tulkubash zone, which is more oxidized and set to be mined by the open pit method, stands at 639,171 ounces at 1.98g/t.
Chaarat said on Wednesday a preliminary design of the Tulkubash pit has indicated the economic benefits of processing not only the material grading above a 1 g/t cut-off but also the lower-grade material situated inside the pit envelope.
This early plan shows reserves included in the initial pit will be about 17mln tonnes of ore at a grade of 0.93 g/t, or 523,000 ounces of heap leachable reserves.
A low strip ratio of around two-to-one, with a reduction in the mining costs of diesel and labour, will increase the returns generated from a heap leach operation, the company said.
So the heap leach operation is being designed to process 5mln tonnes a year to unearth the 120,000 ounces of gold.
Chaarat believes this will require a further 4-5,000 metres of drilling “to support a sustainable standalone heap leach operation”.