Karchiga Copper Deposit – “Excellent Progress” in Advancing the Definitive Feasibility Study

Orsu’s Karchiga copper project is located within the Rudny Altai Volcanic Massive Sulphide (VMS) belt in the country of Kazakhstan, ranked among the top four VMS belts of the world. VMS zones are major sources for copper, gold, silver, zinc, lead.

Earlier studies on the project indicated that there is a potential here for a 29 Million pounds of copper per annum in an open pit mine scenario that could produce copper at US$1.13/lb over 10 years. A NI 43-101 report stated that the total copper resource was 437 million pounds grading 1.81% copper and using a 0.3% cutoff.

The scoping study which came out late last spring estimated that the net revenue would be US $765 million with an IRR of 40.5% based on a copper price of $3.

Orsu has now completed their 2010 drilling campaign which resulted in 6,952 meters of core over 72 drill holes. 40 of these holes were infill drill holes which will provide for a resource update that they hope to have completed in January 2011. Geotechnical and hydrological drilling was also done which engineers will use to help design the open pit and to monitor water for environmental purposes.

I have mentioned before that since Karchiga is located next to the Chinese border, it opens up the possibility of off-taking ore to Chinese smelters and potentially Chinese financing. That’s still a possibility however Orsu has sent a sample of typical ore from Karchiga to KazZinc, a Kazakh subsidiary of Glencore International AG. The ore will be processed at their new copper smelter which is 220 km away and is due to be fully operational in 2012. The preliminary test results show that the ore is very compatible with the smelter requirements and recoveries of up to 93% were achieved.

On the financing front, the Managing Director of Endeavour Financial, David John Rhodes has joined Orsu as a Non-Executive director. Mr. Rhodes has arranged, structured and advised on over $4.5 billion of resource related projects and he will likely guide Orsu in acquiring the money they will need to start mine construction.

The next catalyst will be the completion of a Definitive Feasibility Study which is expected to be done by Q1 of 2011 at which time an environmental study is expected to be completed. Based on the outcome of the DFS, a decision to start construction and to look at financing options would begin in Q1 - Q2 of 2011. The management is openly stating their goal is to start construction before the end of 2011. Optimistically production would start by mid-2013.

Taldybulak-Talas Project

Orsu’s second most important project is the 40% owned Taldybulak-Talas gold-copper-molybdenum project in Kyrgyzstan. The company announced the details of a scoping study in November which featured these highlights:

• Average annual production of more than 240,000 oz gold, 26,000 t copper and 900 t molybdenum;
• US$516 million initial CAPEX;
• US$815 million pre-tax NPV7.5;
• 24.7% pre-tax IRR (using US$1,150/oz Au, US$3.00/lb Cu, US$15/lb Mo);
• 17 years Life of Mine
• 6 Years Payback from start of construction

It should be noted that only indicated and inferred mineral resources were used in the Scoping Study which calculated a total resource of 254 M tons of ore. Mineral Reserves, which are more precise resources based on closer spaced drill holes, have never been estimated.

The Scoping Study is a preliminary estimate of the technical and economic viability of project and is a necessary step prior to a full feasibility study. The study did show though that there is a high Initial Rate of Return for the project which is expected from a porphyry type deposit of this nature.

For a more precise evaluation of this deposit, infill drilling must be done to move the ore into a reserve category. To that end, after the winter a 5,000 meter program will start which should upgrade the value of the deposit.

Blue chip mining giant Gold Fields Ltd of South Africa is the operator of the Taldybulak-Talas Project.