Project Operations Update

   01.07.2011

SUNKAR RESOURCES PLC

("Sunkar" or the "Company")


Project Operations Update


Sunkar Resources plc (AIM:SKR) is pleased to present an update on its ongoing dicussions with potential strategic partners on the Chilisai Phosphate Project and Direct Application Rock ("DAR" or "phosphate flour") sales.

Strategic Partner discussions

The Company is in discussions with several potential strategic partners for the Project in parallel with developing the Feasibility Study for the Chilisai project.

Interested parties are undertaking due diligence, with access to the full Preliminary Feasibility Study Report, and technical and geological information. A number of the parties have already completed site visits. Amongst those parties conducting due diligence, are well established fertilizer market operators as well as non-industry specific parties.

DAR sales

The Company launched its first milling train in December 2010 and the milling and loading complex was completed and commissioned within the first quarter of 2011. Operations are anticipated to ramp up in the second half of the year following the implementation of the revised Kazakhstan government fertilizer subsidy programme. As a result of this delay in the domestic subsidy changes, interest in DAR sales came mostly from Russian buyers, farmers and fertilizer blenders, who after trialing DAR are interested in further orders. The Directors believe that establishing commercial relations with bulk fertilizer trading organizations is of particular importance for the Company at this stage.

The Company has signed several agreements for subsidised commercial sales of DAR with local Kazakhstan agricultural producers. The shipment volumes contracted are in excess of 3,000 tonnes of DAR which is to be delivered during the period of July- August 2011.

Initial market reaction has convinced the Directors that DAR sales will grow during the short to medium term and they expect these to provide considerable cash flow to the Company as it progresses through the next stage of the Chilisai Phosphate Project's development. The growing interest in Chilisai phosphate product underlines the potential of phosphate flour providing a good, relatively low cost source of phosphate for farmers in the region.

Industrial Scale Testing

Since Sunkar initiated DAR production, significant interest has been shown by potential industrial buyers to secure bulk phosphate rock shipments.

The Company announced on 7 April 2011 that it had signed a protocol with the Russian company Meleuzovskie Mineralnye Udobreniya ("MMU") to conduct industrial scale tests in the first half of 2011 at its compound fertiliser plant in Meleuz, Russia. MMU recently notified the Company that capital repairs are required to their phosphoric acid unit to replace failing mechanical equipment and suggest that industrial scale tests are conducted after the completion of renovation. Therefore it is intended to revisit the industrial scale tests agenda in the third quarter of 2011.

The Directors believe that cooperation with MMU may result in an agreement for a long term off-take of a substantial part of the current output at the Chilisai mine.

Feasibility Study

Completion of the Feasibility Study will be pivotal in the development of the Chilisai Phosphate Project so it is of paramount importance to ensure that all aspects of the report are comprehensively prepared, reviewed and coordinated. The majority of the study, in particular the technical aspects, is virtually complete. Currently, verification testing for final technology approvals is being completed.

Agreeing the scope of another essential aspect of the Feasibility Study - the Environmental and Social Impact Assessment ("ESIA") has taken a substantial amount of time due to the various sets of requirements and regulations of the Kazakhstan legal system, the engineering firm's internal standards, Equator Principles, World Bank guidelines and recommendations by the project finance advisor. There are certain obligatory stages of an ESIA, such as public hearings in the area of the future chemical plant, which can only be conducted after the basic design of the chemical plant has been finalised. The completion of the ESIA is anticipated in the third quarter of 2011. Accordingly, the Directors currently anticipate that completion of the Feasibility Study will be towards the end of 3Q 2011.


Serik Utegen, Chief Executive Officer commented - "We are generally very satisfied with the progress made to date. The seriousness of potential partners' approach to due diligence is encouraging and we look forward to seeing a very active second half of this year. The feasibility study for the project must account for all possible aspects of its future construction and operation and requires the sign-off of by a number of parties. We are glad to see the majority of the work has been completed and the study is now in the final stages of completion."

"Following the implementation of the Kazakhstan fertilizer subsidy programme, we have started to receive orders for DAR from Kazakhstan farmers and whilst overall quantities remain modest, the growing interest is encouraging."


For further information please contact:

Sunkar Resources plc

Serikjan Utegen, CEO                            Tel: +44 20 7930 8678
Donald Sinclair, CFO

Ambrian Partners Limited

Anthony Rowland                                 Tel: +44 20 7634 4700
Matt Einhorn

Bankside Consultants

Simon Rothschild                                   Tel: +44 20 7367 8888


Editors Notes


Sunkar Resources plc

Sunkar Resources plc, through a wholly owned subsidiary Temir Service LLP, operates a phosphate rock mine in Aktobe Oblast, North West Kazakhstan. Temir Service LLP holds a Subsoil Use Contract to part of the Chilisai Phosphate Rock Deposit. The contract area is estimated to contain 800 Mt of phosphate ore.

Sunkar's strategy is to build a world class integrated ammoniated phosphate fertilizer plant with low operating costs. Sunkar's low cost base derives from its near surface phosphate rock deposit and access to sulphur from the nearby North Caspian oil and gas fields.


all news