Silvercorp Metals acquires 70% interest in the Tulkubash/Kyzyltash Gold Projects, Kyrgyzstan
Silvercorp Metals Inc. [TSX: SVM] reported that it has signed a Share Purchase Agreement with Chaarat Gold Holdings Limited and a Cooperation Agreement with the National Investment Agency under the President of the Kyrgyz Republic (the NIA). Under these agreements, the company will acquire a 70% interest in Chaarat ZAAV CJSC (ZAAV), which holds a 100% interest in the mining license (~7 km2) hosting the fully-permitted Tulkubash/Kyzyltash gold projects as well as surrounding exploration licenses (27.42 km2) hosting the Karator and Ishakuld gold zones located in the Tian Shan area of the Kyrgyz Republic for cash consideration of US$162 million.
Additionally, the company, through its wholly-owned subsidiaries, entered into a Share Purchase and Shareholders Agreement with Kyrgyzaltyn (a wholly-owned subsidiary of the Kyrgyz Republic). This agreement states that upon completion of the acquisition of ZAAV, it will be converted into a joint venture company (JVC) between Silvercorp and Kyrgyzaltyn. Silvercorp will hold a 70% interest and be the operator of the JVC and Kyrgyzaltyn will hold a 30% free-carried interest.
As part of the Cooperation Agreement, NIA will receive $70 million cash in two staged payments: payment of $60 million upon the Kyrgyz Government issuing a waiver of its statutory pre-emptive right on the projects and an extension of the validity period of the JVC’s mining license from June 25, 2032 to June 25, 2062, and $10 million cash payment after certain other milestones are achieved. Per the Share Purchase Agreement, Chaarat will receive a $92 million cash payment from Silvercorp conditional upon receipt of the Kyrgyz Government waiver. Now that the Kyrgyz Government has issued a Waiver for its pre-emptive right, Silvercorp will proceed to make the payment to Chaarat for closing.
The JVC envisages a two-phase development plan for the Tulkubash/Kyzyltash gold projects per the Cooperation Agreement and the Shareholders Agreement.
Phase 1 Development of Tulkubash (2026-2028): Silvercorp will commit to invest US$150 million for construction of a 4 million tonnes of ore per year open-pit mine/heap leach operation for the oxidized gold ore from the Tulkubash field using the Bankable Feasibility Studies completed by Tetra Tech (Joint Ore Reserves Committee (JORC) Code standard) in 2018, expertized and localized for Kyrgyzstan by Ken Too (Bishkek) in 2020, and further improved (JORC Code standard) in 2021 by a South African firm, LogiProc with support from Ausenco’s Canadian branch.
Once in production in 2027-2028, the Tulkubash field is expected to produce approximately 110,000 oz of gold annually for 3-4 years. Additionally, if the Karator exploration license is converted into a mining license in 2026, the open pit/heap leach operation could be extended for at least two years.
Phase 2 Development of Kyzyltash (2028-2031): approximately US$400 million in investment to develop the Kyzyltash sulfide deposit into a 3 to 4 million tonnes per year open pit/underground mine, plus flotation, bacterial oxidization (BIOX) and carbon-in-leach (CIL), based on a 2016 pre-feasibility study (Non NI-43-101 standard) by China’s NERIN design institute. Once in production, the Kyzyltash sulfide deposit could produce approximately 190,000 to 230,000 oz of gold annually for over 18 years, starting from 2031.
Dr. Rui Feng, Silvercorp Chair and CEO said: “We are pleased to develop these Projects, the largest undeveloped gold deposits in the West Tien Shan gold belt. All interests are aligned for us to bring the Projects into production. With our 20 years of mining expertise and financial strength, we are confident Silvercorp and Chaarat’s well-established local team can work with our Kyrgyz partner to advance ahead on the Projects and unlock value for all stakeholders and shareholders.”
Silvercorp will use its cash and short-term investments currently on hand to make the payment for the acquisition and the remaining cash on hand after the acquisition, as well as cash flow from our current operations and financing capacity, will be sufficient to advance the Tulkubash/Kyzyltash projects through the Phase 1 Development.
The Tulkubash/Kyzyltash Gold Projects are located approximately 490 km by road southwest of Bishkek. The first 360 km from Bishkek to the mine site is on paved roads, followed by ~130 km of graded gravel road to the site.
Antimony-gold mineralization was identified by Soviet era geologists in the early 1970s. The exploration license was acquired by Apex Asia, which then formed a Joint venture with Newmont in 1997. Newmont completed an IP survey and drilled seven holes and made a discovery. Newmont left Kyrgyzstan in 2000. The Project License was acquired by Chaarat in 2002.
Since 2002, Chaarat has spent $174 million on the Projects: $77 million on drilling, $40 million on operating expenses, $36 million on studies by independent consultants, and $22 million on construction of a road, camp, and other facilities. Chaarat was a London AIM-listed public exploration and development company until fall of 2024.
A total of 188,000 metres of drilling has been performed on the Tulkubash/Kyzyltash Gold Projects, including 80,500 metres on the Kyzyltash sulfide zone up to 2013, and 107,500 metres on Tulkubash up to 2023. Since 2014, all the exploration drilling work and most engineering study work by outside consultants has been focused on defining mineral reserves/resources and creating a development plan for the oxidized gold ore from Tulkubash.
At Karator, 14 drill holes drilled in 2021 and 2023 discovered extensive oxidized gold material near surface and in 2025, approximately 9,000 metres of in-fill and step out diamond drilling was completed, which could form a resource base to convert the exploration license to a mining license. Assay results for 2025 drill holes are pending.
A series of resource and reserve estimates were completed at different times for Tulkubash, Kyzyltash and Karator: SRK Consulting (South Africa), 2009 for Kyzyltash resource estimation, an indicated resource of 1.47 million oz gold at 4.15 g/t, plus an inferred resource of 1.663 million oz gold at 4.21 g/t using a 2 g/t cut-off gold grade.
Wardell Armstrong International (UK), 2012 for Kyzyltash, an indicated resource of 2.54 million oz gold at 4.3 g/t plus an inferred resource of 1.754 million oz gold at 3.95 g/t, and for Tulkubash, measured and indicated resource of 0.21 million oz gold at 2.9 g/t and an inferred resource of 0.29 million oz gold at 2.99 g/t.
GeoSystem International (Florida), 2014 resource estimate (JORC Code Standard) for Tulkubash and Kyzyltash as follows. Tulkubash: measured and indicated resource of 0.856 million oz gold at 1.36 g/t, and an inferred resource of 0.1 million oz gold at 1.37 g/t, at a 0.5 g/t cut-off grade.
Kyzyltash: measured and indicated resource of 6.016 million oz gold at 2.57 g/t and 18.7 million oz silver at 8 g/t, and an inferred resource of 1.185 million oz gold at 2.47 g/t for and 3.22 million oz silver at 6.7 g/t, using a 1 g/t cut-off grade.
Combining Tulkubash and Kyzyltash, total measured and indicated resource of 6.0 million oz gold at 2.56 g/t and 18.7 million oz silver at 6.3 g/t, and an inferred resource of 1.264 million oz gold at 2.49 g/t and 4.1 million oz silver at 5.9 g/t, using a 1 g/t cut-off gold grade.
Tetra Tech (UK), 2018 Bankable feasibility study (JORC Code standard), Tulkubash: measured and indicated resource of 1.414 million oz gold at 1.13 g/t, and an inferred resource of 0.091 million oz gold at 0.62 g/t. Proven and probable reserve was 0.468 million oz gold at 0.91 g/t, using a 0.3 g/t cut-off gold grade.
LogiProc (South Africa), 2021 Bankable feasibility study (JORC Code standard), Tulkubash: measured and indicated resource of 0.789 million oz gold at 0.86 g/t, and an inferred resource of 0.388 million oz at 0.56 g/t. Probable reserve of 0.571 million oz gold at 0.85 g/t using 0.21 g/t cut-off grade for open pit and heap leaching operation.
Dimitar Dimitrov estimated in 2024 (JORC Code standard) that Karator contains measured and indicated resource of 0.077 million oz gold at 0.96 g/t, plus inferred resource of 0.130 million oz at 0.97 g/t of oxidized materials at 0.21 g/t cut-off grade.
The company has also prepared an internal mineral resource estimate in accordance with NI 43-101 standards for both Tulkubash and Kyzyltash, the result for Tulkubash, the company’s estimate is comparable to above historical estimates. For Kyzyltash, Silvercorp’s result is similar to the estimates by GeoSystem in grades but less in resources.
Extensive metallurgical studies were also completed on the Tulkubash/Kyzyltash Gold Projects. The Heap Leaching process flow sheet is well tested and confirmed as a viable processing option for Tulkubash oxide material, with gold recovery of 74 to 76%.
Several metallurgical studies addressing Kyzyltash refractory gold mineralization were conducted.
Based on these studies, the most economically-effective and highest recovery flowsheet would be flotation of sulfide, then processing the sulfide concentrate using BIOX, and followed by CIL to produce gold doré with a total gold recovery rate of 82 to 88%.
China NERIN Co. Ltd issued two reports for the development of Tulkubash and Kyzyltash, the “Nerin Chinese FS Report October 2015” and the “Nerin Chinese FS Report Exec Summary and Optimisation May 2016”, which are the equivalent of Preliminary Economic Assessment plus level studies. The NERIN reports contemplated constructing Tulkubash and Kyzyltash simultaneously as standalone projects at an estimated capital cost of over $500 million and annual gold production over 200,000 oz.
The Tulkubash oxidized ore would be mined via an open pit, with gold being recovered using a heap leaching operation with a gold recovery rate of 75% and a production rate of approximately 3 million tonnes of ore per year during the first 3.5 years.
The Kyzyltash sulphide deposit would be mined by the open pit and underground mining methods, with gold being recovered through flotation, BIOX and CIL leaching plants with a total gold recovery rate of 77.4% at 3 to 4 million tonnes of ore per year for a further 14.5 years, starting from the 4th year in production, leading to a total mine life of 18 years to recover approximately 3.6 million oz of gold.
Since 2014, all the exploration drilling work and most engineering study work by outside consultants have been focused on defining mineral reserves/resources and development of a plan for the oxidized gold ore from the Tulkubash field.
The 2018 Bankable Feasibility study by Tetra Tech (UK) on Tulkubash was prepared based on the JORC Code. According to the study, the Tulkubash oxidized ores would be mined by open pit mining method at 13,500 tonnes/day or 4.0-4.8 million tonnes/year.
Gold will be recovered using heap leach with absorption, desorption, and refining (ADR) operation. Gold recovery rate is 75% to produce approximately 110,000 oz of gold per year for 3.75 years. The estimated initial capital cost was $122 million, total life of mine operating cost of $16.32/tonne, total strip ratio of 4.1 for 16 million tonnes of reserve, based on a $1,300/oz gold price.
The 2021 Bankable Feasibility study for Tulkubash by LogiProc (South Africa) with support from Ausenco’s Canadian branch on heap leach design was prepared based on the JORC Code. The mine plan calls for 4.92 million tonnes of ore per year with a life of mine average strip ratio of 2.59.
Gold will be recovered using heap leach with an absorption, desorption, and refining (ADR) operation. Gold recovery rate is 73.6% to produce approximately 100,000 oz of gold per year for 4+ years. The estimated initial capital cost was $115 million, total life-of-mine operating cost of $13.6/tonne, total strip ratio of 2.6 for 20 million tonnes of reserve, based on a $1800 per oz gold price.
Local adaptation and legalization is required in Kyrgyzstan for foreign or externally developed designs and technical documentation to comply with national standards before they can be implemented. “Local adaptation” relates to the work performed by local Qualified Persons. “Legalisation” refers to the approval provided by the Kyrgyz Government. In this process the Government issues “expertise approvals” or “Expertization” once they are satisfied with the adaptation work submitted for their review.
So far, the detailed designs for the heap leach, open pit mine and waste dump, and related environmental work related to the 2018 Tetra Tech Bankable Feasibility study have completed Local Adaptation and Expertization. However, the detailed designs for the 2021 LogiProc study, such as the heap leach design by Ausenco, have not completed a Local Adaptation and Expertization.
Upon completion of the acquisition, the company will engage the independent engineering firm to update the 2021 feasibility study report in accordance with NI 43-101 on the Tulkubash Open Pit/Heap Leach Operation, pursue Local Adaptation and Expertization of the 2021 LogiProc Bankable Feasibility Study to Kyrgyz National Standards and obtain other necessary permits for construction based on the most recent designs, local team building, and engage experienced mining and construction contractors for the development of the Tulkubash Open Pit/Heap Leach Operation.
Meanwhile, Silvercorp will engage independent engineering firms to work on a preliminary economic assessment study for Kyzyltash and to carry out more definitive drilling in preparation for a feasibility study.