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Russia: Gold Firm Revives Former Soviet Mines

Washington, 23 May 1997 (RFE/RL) - A huge gold mining operation in the West African nation of Mali, started by the Soviet Union but abandoned when the USSR broke up, is about to be tackled by a company already successfully running an old Soviet gold mine in Tajikistan and exploring others in the Kyrgyz Republic.

Starting in 1967, the Soviet Union poured untold millions of dollars into the Kalana project in southwest Mali, exploring a concession covering 387 square kilometers, developing an underground mine with two shafts, and building a gold processing plant capable of handling 36,000 tons of ore per year.

In addition, open pit mines to get at other minerals were started. From 1967 to 1991 the mine produced over 81,600 ounces of gold and Soviet geologists estimated the area contains a potential of 1.4 million ounces of gold.

But in 1991, as the USSR was disintegrating, Soviet technical and financial support was withdrawn and Kalana closed. In early 1995, in an effort to get it restarted, the Mali government privatized the project and a joint venture of two major African gold producing companies poured $7.6 million into it before deciding it wasn't right for them.

London-based Nelson Gold Corporation, which prides itself on its ability to successfully build and operate gold mines in remote and difficult locations in the former Soviet Union, has now stepped in and agreed in principle to acquire 70 percent of the Kalana gold mine and concession for $10 million.

If the deal is finalized, Nelson says it would hope to begin production in Mali in the first half of 1998.

The company says it will draw heavily from its experience in the Zeravshan Gold company joint venture in the Zeravshan valley region of Tajikistan. The company expects to produce 72,000 ounces of gold from the Jilau and Taror gold deposits there this year and has already launched an $11 million expansion of mining, milling and processing facilities to double its capacity next year.

Nelson had to overcome a long string of difficulties in getting the Zeravshan project started and making it pay, including a two-month shutdown in a dispute with the Tajik government over the company's ability to export both refined and partially refined gold.

But that experience in former Soviet mining is what made the Kalana project so appealing to Nelson, says Vice President Andrew King.

"We arrived on the site and found tons and tons of Russian geological data, which scares off most people, but we've already been through that loop, so we look at it with relish," he says.

He told our economics correspondent in a telephone interview that the moth-balled plant in Mali is filled with the same equipment Nelson uses in Tajikistan.

"We have the Russian link, the Russian data, Russian equipment, we know where to get the spare parts, and we're comfortable with using Russian geological data," he says.

On top of that, says King, Nelson had two officials who previously ran similar type gold mines in South Africa -- technically difficult because the gold, while very high grade, is found underground in non-continuous veins.

"Most people would not have taken it up for the technical difficulty alone," he says.

The expansion into West Africa provides a geogrphic diversification for Nelson, King says, but the company still believes Central Asia is the place to be in the future.

Nelson is moving ahead with two other joint venture exploration projects in Kyrgyzstan, where early estimates put the potential at 13.6 million ounces of gold. The Zeravshan facility in Tajikistan has an estimated total gold resource of 5.9 million ounces.

King says his company has just opened an office in Almaty to explore gold mining opportunities in Kazakhstan as well. The biggest problem there, he says, is that many Kazakh officials want to be paid "up front" for allowing western mining companies to begin exploring.

"We're prepared to spend money in the ground, but we're not prepared to make some guy very rich just to get in," says King.

Nelson's purchase of the nearly three-quarters share of the old Soviet mining operation in Mali will require a complete business and financial check -- known as due dilegence -- of the Kalana joint venture company, the arrangement of financing, and Mali government approval, before it can be finalized.