Could it be that Kazakhstan contains the next Kalgoorlie?
That’s the proposition that East Star Resources Plc (LSE:EST) will be offering up to investors when it re-lists on the main board of the London stock exchange next Monday.
The company has just completed the acquisition of privately-held gold exploration vehicle Discovery Ventures Kazakhstan, which boasts a huge landholding inside Kazakhstan.
“The more we looked at it, the more we realised it was Western Australia fifty years ago,” says East Star’s incoming chief executive Alex Walker, who was also a founder of Discovery Ventures Kazakhstan.
He’s just moved his whole family to Almaty, the biggest city in Kazakhstan, so he’s not messing about when he makes these big claims.
“Kazakhstan has unbelievable potential,” he says.
“We think it’s like walking into Kalgoorlie and being able to peg as much as you like.”
Anyone familiar with the gold mining scene in Western Australia will be salivating at the mere thought of that, given the plethora of multi-million ounce deposits that have been discovered there.
So what’s the catch?
If there is one, it’s hard to pin down.
Kazakhstan is midway through its emergence as a major player on the global mining scene. Much of its wealth comes from oil, which is generally bigger, badder and more powerful than mining as a sector, and so the immediate post-Soviet economic effort focussed there.
At the same time though, some big and some not so big names from mining have been able to go into the country and make it work. Among their number are Glencore and Fortescue at the top-end and, further down the pecking order, at least for now, former Glencore sparring-partner Mick Davis, whose investment company Vision Blue has just taken a major stake in Ferro-Alloy Resources.
The real step change came three years ago, however. That was when Kazakhstan updated its mining code to a recognisable Western-based model.
“It’s similar to the first-come, first-served rights you get in Western Australia,” says Walker. “You can peg a licence in ten days.”
That change did, to some extent, generate a renewed interest in exploration in Kazakhstan, with companies like Discovery Ventures Kazakhstan able to pick up serious ground. But less than a year into the new mining regime, covid hit, and everything juddered to a halt.
Now that the world is attempting, with mixed results, to grind its way back up to some form of normality, Kazakhstan is beginning to come back on to peoples’ radar.
So much so, in fact, that when East Star Resources put together the fundraising to correspond with Monday’s re-listing, it was heavily over-subscribed.
Initially, the thought had been to go for £2mln, but in the end East Star was still oversubscribed at just over £3.1mln, which will really enable it to hit the ground running when trading resumes on Monday.
And, because it was already up and running as Discovery Ventures Kazakhstan, the work is already in progress.
Walker expects to have news about exploration and drilling within weeks or of the debut. But the real newsflow is only just beginning.
With the £3.1mln East Star will start to ratchet up the pace of exploration across its four major licences in Kazakhstan. Two of these are located on the Chu-Ili orogenic belt, and two on the Rudny Altai belt, to the east.
At this stage it seems likely that the most value-add in the short-term will come from work on the two Chu-Ili licences, Apmintas and Dalny, drilling on both of which will get underway in the first half of this year.
All-in, Walker plans to spend around £1mln in the ground in calendar 2022, and to keep the drill rigs turning for as much of that time as he possibly can.
Exactly how prospective Apmintas and Dalny really are is hard to say. But certainly there are plenty of signposts that point towards an optimistic assessment.
For a start, there are old artisanal mines all over the place.
Then there’s the Soviet era work, which posited a resource of over 900,000 ounces in the P1 and P2 categories – not a concrete number, perhaps, but the Russians aren’t amateurs when it comes to mining and exploration either.
One historic grab sample from Apmintas showed a gold grade of well over 4,000 grams per tonne, with a second showing a grade of over 1,000 grams.
And more recently, towards the end of last year, Discovery Ventures Kazakhstan conducted its own reverse circulation campaign, the results of which comprise the newsflow that’s due within the next few weeks.
Much to ponder, there, and on Dalny too, where reverse circulation and diamond drilling are planned for the second quarter of this year, and where there are countless Soviet-era anomalies that have never been drilled.
Magnetic work has been done on both Apmintas and Dalny, and once the results of that are in, East Star will really begin to zero in on where it wants to drill and how the programmes will look.
Local state-owned mining champion Tau-Ken Samruk is a joint venture partner, with 20%, and will start contributing once East Star has spent US$6.8mln. That threshold might not get hit this year. But don’t bank on it taking too much longer, because East Star is wasting no time. It senses a big opportunity and suspects it won’t be too long before a number of other global mining companies join the party.