China NonFerrous Gold [LON:CNG], the AIM-listed, exploration and mining company has been prospecting for precious metals in Central Asia for over a 20-years. Registered in the Cayman Islands, the exploration company also has offices in Beijing, China and London. The main focus of the company’s operations is Tajikistan where its is developing the Pakrut Gold Project, which lies within the southern portion of the Tien Shan Fold Belt, a belt of folded rocks that extends from near the Aral Sea in Uzbekistan through the northern part of Tajikistan into China and then into Mongolia.
CNG was initially granted an exploration licence for Pakrut in 2004 allowing it to prospect over 6,300Ha. The area included the Pakrut and Eastern Pakrut gold deposits as well as deposits and mineral occurrences at Rufigar, Sulfidnoye and Surmyanoye.
A large number of significant mesothermal gold deposits can be found in the Tien Shan Fold Belt, the world’s second biggest gold belt. The Pakrut area is included in this province, as well as in the rare-metal-polymetallic Zeravshan-Hissar belt of mineral deposits and the Kugiturinscky gold belt of low-sulphide gold-quartz mineralization.
The company subsequently secured a full mining licence for the Pakrut Gold Project from the Government of Tajikistan in 2012 which CNG believes has reserves of 4.7 million ounces (moz) of gold at a grade of 0.5g/tonne. The company has completed a Bankable Feasibility Study for the project, completed by the Beijing General Research Institute of Mining & Metallurgy.
CNG is an old hand in Tajikistan and was the first foreign entity to acquire a 100% ownership mining licence in the republic. CNG has a 20-year licence for Pakrut, and the company states that exploration is well underway on the ground.
The Chinese miner believes once in production the Paktrul Gold Mine will have a life-of-mine (LOM) of 19-years. The mine will take a year-and-a-half to build and cost just over USD175m to build Phase One and then another USD46.5m to extend into Phase Two, with all-in-sustaining costs of USD32m for the LOM, which will be paid for from operations.
According to CNG the value of the Pakrut operation would be in excess of USD260m, with an IRR of 26.3% and payback period of less than three-and-a-half years from commissioning.
Promise to be fulfilled
China Nonferrous Gold falls into that category of junior miners that have promise but remain to be fulfilled. Although exploration is underway there is a long (silk) road ahead of CNG. Financing this early stage of the project is – as with all junior miners – a costly business.
CNG had to secure short-term finance of USD65m earlier this week from CNMC Trade Company to pay off another loan from the Bank of Shanghai, and the clock is ticking on the new loan that it needs to repay or refi within six months. The Tajik prospector is paying US LIBOR+5% monthly for the bridge and has total debt of USD316m.
Financing will be tough for CNG to find. The ace it has in its pocket is that it has a kindly uncle waiting in the wings, the China Nonferrous Metals International Mining Co., which holds 38% of CNG’s issued share capital. China Nonferrous Metals International Mining Co. is a state-owned entity which itself has mines in Zambia, Mongolia and Thailand, and a project in Laos and is an investor in copper, aluminium, zinc, nickel, tantalum, niobium, and beryllium. It also undoubtedly has deep pockets, so bearing that in mind, may well become a strategic investor in the project financing of the Pakrut Gold Mine, if not the principal (and only) investor.
CNG is, like many junior miners, a speculative investor. It has its chips all-in on Pakrut, with a hope that it might find a few more gold deposits in the area. However, like many junior miners, the company isn’t making revenues and is a bit of a ‘hit and hope.’
Bridgewise rates CNG as ‘Underperform’. The analyst said: “China Nonferrous Gold’s financial reports for Q2 showed some underwhelming results. Specifically, their growth and value factors indicate an execution challenge when it comes to generating exciting and consistent growth. These results indicate a weak growth potential for China Nonferrous Gold’s stock’s price moving forward. As such, China Nonferrous Gold received an overall score of 54 and an ‘Underperform’ recommendation.”
China Nonferrous Gold closed trading on 14th June at 1.7p and has offered a -39.8% year-to-date return, and a -69.7% one-year return with its shares ranging from 1.2p to 6.4p over a 52-week period. The company has a market capitalisation of GBP6.5m.
Source: The Arm Chairtrader