Sunkar Resources – Chilisai Project Update

Sunkar Resources – Chilisai Project Update

Sunkar Resources plc (SKR) is pleased to announce an update of operations and developments at its wholly owned Chilisai phosphorite project in NW Kazakhstan.

Highlights

• Mining operations on the Chilisai field being sustained at consistent levels
• Beneficiation plant commissioned and consistently producing 17% P2O5 grade phosphate rock concentrate
• 2008 subsoil contract obligations met
• Wardell Armstrong International contracted to complete JORC resources estimate
• Contractors being appointed to carry out continuous pilot-plant phosphoric acid production tests
• Cash position of US$29.5 million

Mine Establishment, Ore Extraction and Beneficiation
Establishment of the mining facilities and operations have been progressing since the first deliveries of equipment in July 2008, just one month after IPO. A base camp capable of accommodating up to 50 shift workers has been commissioned with all services in place by the beginning of September 2008. There are currently 121 operational staff employed. Permanent maintenance and fuelling facilities are expected to be operable within 3 months.

Early mining operations commenced in September 2008. Due to the shallow ore body, the mining operations do not require complicated methods and are very much straight forward. Ore is extracted at a rate of 350 tonnes per hour which is broadly in line with management’s early mining expectations. This has been achieved in operating conditions varying from 15°C during September and minus 25°C during January.  As at 31 January 2009, a total of 256,000 Tonnes of ore have been extracted.

Upon introduction of the mobile beneficiation plant in November 2008 and further adjustments and optimisation, a steady production rate of 50 t/hr of concentrate was achieved in January 2009. The P2O5 content of the concentrate has been independently confirmed and is consistently between 16 and 18 per cent. – as was forecast in the competent persons report in the Company’s AIM admission document.
Dry beneficiation (crushing and screening) as envisaged at Admission has been successful and management have decided to proceed with an extension of beneficiation plant capacity to match the rate of ore extraction.
The Company has also met all current obligations under its subsoil use contract including the extraction of 200,000 tonnes of ore and investment of no less than US$20 million.

Capital Resources

The Company has a cash balance of US$29.5 million as at 24 February 2009.  In the current financial climate, the directors are continually reviewing development efforts and strategies to ensure value is achieved from finite cash resources – particularly in relation to capital expenditure. In the short term more emphasis is being placed on seeking and evaluating potential sales opportunities for the concentrate produced. The significant part of capital expenditure is being deferred until such sales have been achieved.
The acquisition of the remaining 10 per cent. of the participation rights of its Kazakh subsidiary, as announced in December 2008, has been completed and as such, the Company owns 100 per cent. of Temir Service LLP who holds subsoil rights for the Chilisai deposit. 

Project Development
The short term strategy has been set at commencement of sales of the concentrate produced in order to achieve first cash flow and to offset early mining costs. As a result of ongoing investigation and evaluation of sales opportunities, three potential markets are being actively pursued:
• Direct application rock sales to domestic agriculture;
• Rock sales to regional phosphoric acid plants; and
• Toll manufacturing of local specification MAP fertilizers, called “ammophos”, which has a certain market niche in FSU countries.

For the purpose of sales, the concentrate produced on mine has to be ground to flour to meet ex-Soviet Standard for phosphate flour. In order not to rush the installation of milling facility on site and preserve associated capital expenditure, the Company is in negotiations with potential contractors to outsource grinding until sustained sales are achieved.

Ore samples have been shipped and analysed by potential customers. Discussions regarding the product specification, consistency and volume of supply are ongoing with several parties.

The groundwork for the Bankable Feasibility Study (BFS) has commenced. Wardell Armstrong International (WAI) has been contracted to prepare a JORC resources estimate. WAI conducted an initial site visit in November 2008 and have reviewed the extensive Soviet data on the deposit.  Digitising of the 5,000+ Soviet drill holes database is currently taking place in order to create the ore body model so confirmation drilling program can commence.  In addition, contractors for continuous pilot plant testing of concentrate to phosphoric acid conversion are being appointed.  It is currently envisaged that the first results of the BFS economic model will be available by end of 2009 and that financial engineering will commence in Q4 2009 – Q1 2010.

Commenting today, Serikjan Utegen, CEO of Sunkar, said:
“I am glad to see the progress we made to date on the Chilisai phosphorite mine. Our mining crew is also proud that we have achieved this during most challenging months of the year. The crew have worked extremely hard to start up the mine and make it a high standards operation. Due to the current developments in the World financial markets the management is continually modifying short term strategy in terms of cash conservation and commencement of first rock sales. We are focussed on accomplishing the goals we set ourselves at IPO.”

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