SP Angel concludes on Georgian Mining “The signing of the MOU allows the joint venture to continue on a 50:50 basis following the meeting of Georgian’s commitments. This is great news for the Georgian Mining team and shareholders. Mining of the gold oxides should start shortly following some confirmatory work with cash flows expected to follow soon after. Given the minimal expenditure incurred since the start of joint venture negotiations Georgian should still retain a useful cash balance. We continue to recommend Georgian Mining as a Strong Buy based on our view that the Kvemo Bolnisi copper resource could prove to be world class in time.”
- Georgian Mining, has at long last, agreed terms to start development of the Kvemo Bolnisi project in Georgia.
- Moreover, Georgian’s jv partner is extremely keen to accelerate cash flow generation from the gold oxides with mining expected to start relatively quickly.
- Further detail is expected to be released on this in the short term as the Georgian team finalise details for the start of mining.
- Management are still in Georgia after lengthy and exhaustive negotiations with the owners and management of the Madneuli gold mine. Their effort and persistence appears to have won through and we hope investors are appreciative of the time, effort and dedication beyond the normal call of duty which has been applied. The team are now focussed on pushing the program forward to start mining as soon as is practically possible.
- The good news is that Georgian ‘GEO’ and it’s jv partner Caucasian Mining Group ‘CMG’ will now jointly fund development of the joint venture subsidiary Georgian Copper and Gold ‘GCG’ on a 50:50 basis. Georgian has solely funded the joint venture to date, meeting its $6m commitment to earn its 50% interest in the joint venture and the Kvemo Bolnisi mining project.
- New work program: the new work program starts with some further drilling and metallurgical test work before the joint venture starts stripping ore off Kvemo Bolnisi Gold Zone 2. The drilling and met test work is to help better schedule the heap leach processing of the gold ore to optimise recovery rates and cash flow generation.
- Mining will involve the very simple stripping of gold oxide ore off the top of the Kvemo Bolnisi project for processing using the Madneuli mine heap leach infrastructure.
- Low cost environment: Georgia is a low cost environment from a mining perspective with availability of contractors.
- We reckon that mining of the gold oxides should incur minimal cost. The heap leach pads can be seen from the Kvemo Bolnisi mine and the use of local contractors will hopefully require no up-front cost. Some work may be required on the road from Kvemo Bolnisi to the heap leach pads but there should be little else in the way of expenses before mining and processing starts.
- Mining will focus on the weathered layer of relatively soft oxide material appears to host economic gold grades which will be simply processed at one of the Madneuli heap leach sites.
- Gold recoveries should run at >90% as seen in initial test work and the topography and layout of the mine should see a near zero strip ratio and low crushing costs as the rock is highly fractured, broken and weathered with
- Our inspection of the gold heap leach operation at Madneuli confirm the functionality of the mine’s gold heap leach operations though the copper flotation plant could use some refurbishment.
- Drilling costs in Georgia run at around US$100 per meter all in, excluding assays. This is very low by industry standards.
- Cash: We reported Georgian had $5m in the treasury back in October. Since then the company has had minimal expenditure while it negotiated with its joint venture partner as ongoing exploration has been done at minimal cost.
- World class asset: we view the underlying Kvemo Bolnisi copper project as a world class copper mining asset. Georgian management are also describing the asset as world class though there is still much work to be done and to be discovered on the property. Drilling shows the deposit to remain open in all directions with drill holes down to just 200m suggesting that there are further copper, gold resources to be delineated both laterally and at depth.
- The Kvemo Bolnisi resource appears to be ahead of its 3-5mt target and shows a substantial tonnage of brecciated and broken rock with assays confirming relatively good copper grades of copper.
- High-grade copper in chalcocite mineralisation: the team still need to test and define the high-grade copper in chalcocite mineralisation seen in drilling. The mineralisation runs at >40% copper in places and is an unusually exciting discovery from an economic perspective. The extent of this will be better defined in drilling going forward.
- Exploration: While the jv partners are keen to focus on the mining of the gold oxide ores at surface Georgian Mining are also keen to progress with the broader exploration program. The team have already discovered a second potential new mining target and there is significant potential for further discovery within the jv license area.
- The company has also agreed to continue to do further regional exploration on the massive 860km license on the Tethyan Belt which hosts a number of copper mines along its structure.
*SP Angel acts as Nomad and Broker to Georgian Mining.
*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
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