LONDON: The Board of Caspian Sunrise announced conditional acquisition of significant manganese and gold assets for an initial consideration of $25 million and a maximum consideration of $45 million.
For several years the Board has been evaluating opportunities in the minerals sector, which are both attractive in their own right and would also lessen the Group’s reliance on the Kazakh oil & gas market, which in recent years has been heavily impacted by Russian sanctions.
In comparison to the Group’s oil & gas operations, the Board believes the mineral projects they are targeting typically require a lower level of initial investment; are faster to become cashflow positive; are expected to have fewer regulatory delays; are less affected by the impact of Russian sanctions; and where the end customers for the minerals produced typically pay international prices.
The Group has conditionally acquired 100% of the shares of Kazikhan Limited (“Kazikhan”), a company registered in Kazakhstan’s Astana International Financial Center, which holds the shares of a group of companies, which in turn hold licences to explore for minerals being principally manganese and gold, but also silver, copper and molybdenum (the “Acquisition”).
Kazikhan’s subsidiary GRK Borly LLP (“Borly”) has a licence to explore for and produce manganese with state confirmed probable reserves of approximately 8 million tonnes under the new Kazakh Resource Code (KAZRC), a CRIRSCO-style code.
Kazikhan’s subsidiary Zhambas PV (“Zhambas”) has a licence to explore for gold and copper with existing state confirmed C2 gold reserves of 700 kg under the former Soviet classification system.
It should be noted that none of the above reserves figures have been prepared to a JORC standard.
The shares in Kazikhan are currently owned by Kuat Oraziman and Aibek Oraziman, who are members of the Oraziman Family Concert Party, which collectively currently own 50.52% of the shares in Caspian Sunrise. Accordingly, the Acquisition is a related party transaction under the AIM Rules.
Manganese
One of the Kazikhan Group’s principal assets is the licence to explore for and produce manganese at the Borly location in the Karaganda province of central Kazakhstan.
History and background
Manganese was first identified at Borly in 1996, when while digging agricultural irrigation channels manganese deposits were identified by chance.
Licences to drill were obtained in 2018. In 2023 the assets were acquired by members of the Oraziman family, who then funded completion of the outstanding work programme obligations under the appraisal licence to develop the asset to the point of approximately 8 million tonnes of probable reserves and to pave the way for a full production licence, which was issued in 2024.
The principal use of manganese is for steel production, which accounts for more than 80% of total demand. Further uses include aluminium alloys, batteries, fertilizers and animal feeds. Manganese is often sold in the form of concentrated ore, which is then further refined to be used as mentioned.
Operations
Mining at Borly is open pit with the manganese source rock typically found at depths between 5 and 120 meters. Once excavated the raw earth is crushed and then cleaned with water and mechanical agitation to remove clays. This cleaned material is further processed by gravitational separation into a concentrated form. The resulting ore concentrate is then sold to traders or directly to end users.
The existing operations currently produce approximately 1,000 tonnes of ore per month, at grades of approximately 33%, and sell for approximately $120 per dry metric tonne unit (DMTU), generating monthly income of approximately $120,000.
As part of plans to further increase production under its ownership the Group intends to install new washing and crushing lines, following which production volumes are expected to increase to up to 20,000 tonnes per month with the grades increasing to approximately 36%.
These actions are expected to require a $4.5 million investment and are expected to take 18 months to complete. Once acquired it is planned to fund the investment by utilising pre-payments for the manganese to be produced from industry and financing partners. To avoid delays however, while the required Kazakh regulatory consents are obtained, Caspian Sunrise has agreed to provide a $1 million loan secured on the Borly asset with the funds to be used as the initial payment for the new washing and crushing line equipment (“Equipment Loan”). In the event the Acquisition does not complete the Equipment Loan, which has been guaranteed by Kuat Oraziman and Aibek Oraziman, would be repayable by the Kazikhan vendors.