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Manas Resources Receives Key Approval For The Shambesai Gold Project

Manas Resources (ASX: MSR) has achieved a major milestone for the Shambesai Gold Project in the Kyrgyz Republic, Central Asia, after receiving TEO Study approval.

The TEO Study is the Russian interpretation for Justification of Technical and Economic Conditions, and is a key authorisation required for the commencement of detailed design, permitting, construction and gold production at the project.

Importantly a schedule is now in place for construction to commence in 2013, to be followed by gold production which is forecast for early 2014. Permitting continues with social and environmental studies being conducted for a number of months.

Another plus for Manas advancing the project is that new Kyrgyz Republic legislation recently enacted to simplify the permitting process for mine development.

Stephen Ross, managing director, commented from the capital of Kyrgyz Republic, Bishkek: "I am extremely pleased with the support Manas has received from the Government of the Kyrgyz Republic in regard to this key approval and its desire to see gold production from Shambesai as soon as possible."

Highlighting the power of Shambesai, the project has a projected net cash flow of US$208 million after capital expenditure of US$37 million from production of 245,000 ounces of gold at an average grade of 2.8g/t - over an initial 4 and a half year mine life (US$1,500 per ounce gold price).

Where the project really impresses is with the average life‐of‐mine cash costs (C1 costs) of just US$411 per ounce, placing the company in the lowest quartile of producers globally.

Manas is currently considering some debt financing options.

Worth noting as well are the recent successful Leachwell™ analysis on additional sulphide material highlights the potential to increase reserves and production rates beyond the Shambesai Mineral Inventory in the Definitive Feasibility Study.

Shambesai receives Government support

Adding further to the support from the Kyrgyz Republic Government, Shambesai has been included in the "Medium Term Social and Economic Development Program from 2013 to 2015" resolution with production scheduled for inclusion in the State budget in 2014.

Another plus for Manas and the minerals sector as a whole in the country, the resident of the Kyrgyz Republic has signed new reforms for governance of the minerals sector with the stated intention of strengthening the relationship between the mining sector and
government.

Benefits from this move will increase security, stability and clarity in mining legislation and harmonizing the associated regulations for the mining industry. These include amendments to the "Law on Subsoil Use" and the associated "Land Code" and "Tax Code".

TEO Study Approval

The approval was received from the Mineral Reserves Commission acting on behalf of the State Agency for Geology and Mineral Resources (SAGMR), the controlling authority on mining issues for the Government of the Kyrgyz Republic.

Manas is now entitled to apply for and receive a production license for the Shambesai Gold Project and commence the License Agreement process with SAGMR.

Ross added, "The Mineral Reserves Commission of the Kyrgyz Republic and SAGMR are incredibly supportive of the quick development of the Shambesai Gold Project and we look forward to delivering a low‐cost, high‐margin gold operation to the Kyrgyz Republic."

After the grant of the production license, a two‐stage License Agreement process begins. License Agreement 1 requires the preparation and assessment of the detailed mine and process design.

This includes the Environmental and Social Impact Assessment (ESIA); as well as the issuing of the mining allotment (land allotment) and all the relevant operational and commercial permits based on the various sections of the approved detailed design and ESIA.

License Agreement 2 commences upon completion of all of the requirements and commitments from License Agreement 1 and will provide State authorization to proceed with construction and ultimately production from the Shambesai Gold Project.

Comment and Analysis

Manas is well funded with over A$10.5 million in cash at the end of the June 2012 quarter, yet the company has a market cap. of just $34 million - providing an E/V of around $24 million.

Now add to the mix gold production forecast in around 18 months at Shambesai at an average cash costs for the life-of-mine of US$411 per ounce of gold, and considering the capital costs to first production and gold pour are estimated to be US$32.6 million - the payback of this capital is estimated to be within the first 10 months of operation.

A key outcome of the Definitive Feasibility Study is the confirmation that Shambesai will be a technically simple, low‐cost vat leach and heap leach operation, with the project initially designed to process the oxide ore only.

Where the major upside comes from is that as part of the Definitive Feasibility Study, and due to the positive results from extensive metallurgical testwork.

This identified that Leachwell™ analysis can be used to differentiate refractory and non‐refractory ore during mining, and the process design now incorporates treatment of both refractory and non‐refractory sulphide ore that falls within the original oxide optimised pit design.

Therefore the amount of gold produced at the project has the potential to increase, and with drilling set to resume - any further discovery success could lead to an expanded production mine life at the project.

Not to be forgotten - Shambesai could be just the start. The company's extensive landholding in the Kyrgyz Republic includes 54 prospects with only six drilled to date for a resource base of 1.25 million ounces of gold.

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