August 6, 2008

Basel in Talks to Mine Tuva Metals Deposit With China’s Longxing

MOSCOW. Aug 6 (Interfax) - Oleg Deripaska's Basic Element (BasEl) held negotiations with OOO Lunsin (LLC Longxing), a subsidiary of China's Zijin Mining Group and Heilongjiang Longxing International Resource Development Group, on the joint development of the Kyzyl- Tashtyg zinc and lead deposit the internal Russian republic of Tuva, BasEl deputy general director Andrei Plugar told Interfax.

The deposit, the rights to which are owned by Lunsin, has estimated reserves of 1.2 million tonnes of zinc and 0.6 million tonnes of lead. The deposit, located in a remote area 120 km from the city of Kyzyl, has been explored and prepared for development.

Plugar said "the negotiations are at a preliminary stage and will be continued soon."

The Chinese company is interested in a partnership with Basel because the Russian company will build a combined heat-and-power plant near the deposit under a Tuva government resolution signed in May.

The plant, with projected capacity of 240-360 MW, will be fuelled by coal from the Kaa-Khem open-pit mine, in which Basel intends to become a strategic investor.

BasEl is also planning other projects in Tuva, Plugar said. The company is in talks with the regional government to build a hotel in Kyzyl and to participate in the management of the regional capital's airport.

The Kyzyl-Tashtyg polymetallic ore field contains overall B+C1+C2 resources of 12.9 million tonnes, including C2 copper ore - 2 million tonnes and C1 pyrite ore - 6.2 million tonnes. The Kyzyl- Tashtyg field is located in Todjin district of Tuva, 120 km northeast of Kyzyl. The main minerals are zinc, lead, copper, barium and sulfur, with incidental reserves of gold, silver, cadmium and selenium.

The Longxing Group won the license to the field at a tender in April 2006, paying 742.5 million rubles, or way above the starting price, which was 270 million rubles. It completed designs for a mine and concentrating plant in December 2007. The tender rules stated that the mine must be brought on stream in five years.

The Tuva government said on Tuesday that the Chinese company had now started to build the mining complex. It said the plans had passed state appraisal on May 29. Design capacity of 1 million tonnes of ore per year should be reached in 2012. More than 20 million rubles have been invested in the mine since the start of this year. The metal produced, particularly zinc, will be exported to China.

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