Update on the Ereen Licence S

RNS Number : 5524X

Central Asia Metals PLC

08 December 2010

 



8 December 2010

CENTRAL ASIA METALS PLC

("Central Asia Metals" "CAML" or the "Company")

Update on the Ereen Licence Status in Mongolia

Central Asia Metals (AIM:CAML), a mining exploration and development company focused on base and precious metals in Central Asia, would like to provide an update on the status of its Ereen licence located in Mongolia.

On 17 November 2010 the Government of Mongolia published a list of 254 mineral licences in the country that they intend to revoke on satisfaction of certain events, the most relevant of which is a compensation payment to the owners.  This list is pursuant to the Water and Forest Law passed in July 2009 by the Mongolian Parliament, whereby they enacted legislation that would prohibit mineral exploration and mining in water basins and forest areas, and provided for the revoking of licences already issued in such areas.  The legislation allows for the termination of such a licence only after the government has paid compensation. This payment will be based on previous work, fees and taxes incurred by the owner.

All the 254 licences included in the recent list relate solely to 'placer' gold occurrences which are commonly defined as 'alluvial deposits containing heavy minerals such as gold'.

CAML has, within its portfolio of mineral properties in Mongolia, three areas of mineral interest, including Handgait, Alag Bayan and Ereen.  The Ereen gold deposit comprises five (5) mining licences; three (3) of which have been included in the list of 254 licences, referenced above.  The licences listed include MV-15617, MV-15618 and MV-15619 which were transferred to mining licences in June 2010 with a 30 year term. Two smaller mining licences, 2616A and 4265A, have not been included in the list and it is estimated that these contain approximately 50% of the known mineral resource. The remaining 50% lies predominantly within licences MV-15618 and MV-15619 from which the Company has been left with 19.4 hectares and 22.3 hectares of ground area respectively.  These areas correspond very closely to the plan area of resource within the listed licence areas for revocation.  CAML is actively pursuing clarification from the government authorities that the areas not included in the potential cancellation are indeed intended for continued ownership with CAML.

CAML owns 85% of the Mongolian entity Zuun Mod UUL LLC which holds the rights to the Ereen mining licences.  Ereen comprises a hardrock gold occurrence with a JORC compliant resource of 19.9 million tonnes at a gold grade of 1.2 gram per tonne for 773koz of contained gold at a 0.5 gram per tonne cut off, as defined by Wardell Armstrong International in the Competent Persons Report (CPR) in the CAML IPO admission document of 30 September 2010.  As the Ereen deposit is mostly of hardrock origin and not considered to be 'placer', the Company has lodged official letters with the relevant authorities disputing the inclusion of the three Ereen licences in this recently published list. In the CPR the Company had indicated that only $0.2-$0.8 million would be spent during 2011 on exploration and evaluation expenditure at Ereen and CAML will continue to comply with its mining licence obligations.

CAML is aware that this new law has caused some concern amongst the mining community in Mongolia which was evidenced last week when a number of alluvial mining companies voiced their concern, stating that a number of the assets included in the list of 254 have been used to secure loans with local banks and that many thousands of workers may be laid off causing extensive social hardship.

CAML will continue to keep all stakeholders informed of any further developments in relation to the Ereen licences and ongoing discussions with the relevant government authorities in Mongolia.

The Chief Executive Officer of CAML, Nick Clarke, commented;

"The key focus for CAML in the coming year remains the construction of our 10,000 ton per annum copper production plant at Kounrad.  We are obviously disappointed with the inclusion of our Ereen licences in the list of revoked licences. However we feel confident that the government has left CAML with sufficient area to encompass our known resource thus securing our title. In so doing the government is showing some understanding of the needs of mining companies and demonstrates the progressive nature it has shown to mining in the recent past. We also understand the states desire to protect its natural environment which is very much a part of the attraction of Mongolia but it has to balance this against responsible inward investment into the mining sector. 

We remain confident in the lasting security of our Ereen asset and this is evidenced by our continuing work on a locally based feasibility study and other environmental obligations."

Enquiries:

Central Asia Metals Nick Clarke, CEO Nigel Robinson, CFO	[phone]
KPMG Corporate Finance Nominated Adviser Susan Walker	[phone]
Mirabaud Securities LLP Broker Peter Krens	[phone]
Pelham Bell Pottinger Charles Vivian Klara Kaczmarek	[phone] / [phone]

Overview of Central Asia Metals

Central Asia Metals Plc currently has interests in a number of copper, gold and molybdenum mining exploration and development assets in Kazakhstan and Mongolia.

In Kazakhstan, the Company has advanced plans for the construction of a plant at the former Kounrad copper mine that will have the capacity to deliver 10,000 tonnes per annum of near term, low-cost copper production. CAML plans to construct the plant with a joint venture with a local Kazakh government entity, Saryarka. Kounrad was formerly an open-pit copper mine that was operated between 1936 and 2005.  The site around the mine contains a number of dumps of waste material from the mine from which copper can be extracted through an in-situ leaching process followed by Solvent Extraction - Electro-Winning (''SX-EW'').  Initial construction ground-works for the commercial SX-EW plant have already been started and production at the plant is expected to commence in the fourth quarter of 2011.

Central Asia Metals also has exploration opportunities in the region.  One of these is Alag Bayan, an early stage exploration project in Mongolia, where the Company is focused on outlining a potentially significant copper/gold porphyry target.  This asset is situated close to the Oyu Tolgoi copper mine being developed by Rio Tinto and Ivanhoe Mines.  In addition Central Asia Metals plans to develop further its molybdenum exploration project, Handgait, and its gold exploration project, Ereen, both located in Mongolia.

The Company has an experienced management team that has a proven track record of developing and commercialising mining opportunities in Central Asia.  Central Asia Metals plans to use this experience to look at additional opportunities in the region and is already in early stage discussions in respect of a new exploration and development opportunity.

Further details about Central Asia Metals can be found on the Company's website: 
www.centralasiametals.com

 

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