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Concentrations of phosphate at the Chilisai Licence Area are found in a shallow (average overburden in the licence area is 3 metres), thin (approximately 1 metre), flat-lying, practically continuous sedimentary layer occupying most of the licence area of approximately 836 square kilometres. Three distinct lithologies are present in the phosphate bearing zone; from top to bottom, a weakly cemented plate, a nodule zone, and a pebble zone.

In historic reports the P2O5 content averaged 10.1% without much variation vertically or horizontally. According to the Competent Person's Report that is a part of the Admission Document, resources are more than sufficient to support a conceptual 10 million tonnes per year mining and processing operation producing up to 1.76 million tonnes of DAP per year for 56 years.

 




Work Plan 2012


Sunkar’s current work plan is based on three separate processes.

1. Extraction of phosphate bearing ore from the Chilisai deposit in accordance with the subsoil use contract.

2. Pursuing sales of 17% P2O5 crushed dry concentrate (Direct Application Rock).

3. Completion of the Bankable Feasibility Study on the development of the fertiliser manufacturing complex, which would produce high value added end user fertilisers such as diammonium phosphate and/or monoammonium phosphate.

Mining

Early mining operations commenced in September 2008. Ore extraction to date has been undertaken by a surface miner (manufactured by Wirtgen) or by using bulldozers / excavators.

In September 2008, under the Subsoil Use Contract ("SUC"), Sunkar achieved requirement to extract 200,000 tonnes of ore during 2008 and 1,000,000 tonnes of ore in 2009.

In 2010 the Company has successfully revised its work programme commitments under the SUC to develop Chilisai phosphate deposit. The new commitments align mine development with Sunkar's planned construction of world scale, low cost integrated phosphate fertiliser complex. The new extraction requirements can be found in RNS dated 02/03/11.

Mobile beneficiation equipment was introduced in November 2008 to produce dry concentrated rock with a P2O5 content of approximately 17% (up from the approximate 10% contained in the raw ore). By the end of 2011 dry beneficiation plant has produced 236 kt of 17% P2O5 rock. The beneficiation plant capacity is currently being extended, aiming to match the current rate of extraction. The beneficiation process produces mine rejects which equates to approximately 50% of the raw extracted ore. These mine rejects are being used as backfill in the reclamation process.

 

Sales of concentrate (beneficiated rock) and milled rock

To generate early cash flow the Company is pursuing two separate avenues of 17% P2O5 rock sales:

1.Sales of beneficiated rock to neighbouring country fertiliser manufacturing plants. Manufacturing plants then have to mill the beneficiated rock with their own milling facilities to obtain milled rock. Milled rock is used then as a raw material to produce end user fertilisers such as Ammophos.

2. Sales of milled rock to (a) neighbouring country fertiliser manufacturing plants and to (b) local Kazakhstan agricultural producers.

a) Milled rock can be sold to neighbouring country fertiliser manufacturing plants as a final raw material to produce end user fertilisers. In the beginning of the April 2011 the   Company has completed its first commercial shipment of milled rock. The sale was to a Russian farming company (RNS dated 07/04/11). Earlier, in March 2011 the Company has agreed to ship 5 kt of milled rock to Open Joint Stock Company "Meleuzovskie Mineralnye Udobreniya" ("MMU") to test its conversion to phosphoric acid and subsequently production of compound fertilisers on an indutrial scale. Should the results of the test will be successful, the Company and MMU would work on commercial agreement arrangement for the supply of the rock to MMU (RNS dated 22/03/11).

b) Milled rock can be sold to local Kazakhstan agricultural producers to apply it as direct application fertiliser called Direct Application Rock ('DAR"). DAR is a simple and cheap, but effective, type of fertiliser which is within the reach of ordinary agricultural people. Chilisai DAR has all necessary compliance certificates and has been successfully passed applicability tests on KZ grounds in licensed and aknowledged agricultural institutions.

To ensure DAR sales the Company has applied for subsidies programme in 2010. The use of fertilisers produced and sold domestically in Kazakhstan is subsidised by the Government. The Ministry of Industry and New Technologies of KZ has included the Company's wholly owned subsidiary Temir Service LLP ("Temir") in the list of domestic producers of fertilsers, so agricultural producers purchasing Company's DAR will be able to recieve this subsidy. The Prices for our DAR wil be very competitive with those of other fertiliser manufacturers.

According to data provided by the Ministry of Agriculture of KZ the Kazakh market potential comprise up to 500 ktpa of P2O5.

Bankable Feasibility Study (“BFS”)

The BFS is a core task for progressing the overall project and represents a critical path item preceding project finance agreements and subsequent construction of the fertiliser processing facilities. On March 31, 2010 SNC Lavalin was appointed as a BFS contractor for the Chilisai Phosphate Fertiliser Project. SNC Lavalin has completed and issued BFS in February 2013.

Phosphoric Acid Pilot Plant testing

As a precursor to the appointment of the BFS engineering contractor, the dry concentrate was tested in the series of Pilot Plant Tests to confirm the rock’s ability to produce phosphoric acid of a quality suitable for diammonium phosphate and monoammonium phosphate manufacturing. Sunkar has chosen to establish the optimal process for producing the phosphoric acid and to determine the target product list in advance of appointing the BFS contractor. 

Samples of beneficiated rock have been sent to three separate technical contractors; Jacobs Engineering and KEMWorks in Florida, USA and Prayon Technologies, Belgium. Pilot Plant Tests performed by these contractors produced the following results:

• Pilot Plant Tests confirmed that 17% phosphate rock can generate phosphoric acid
• No significant difference in processing costs compared to mass traded rock grade of 32-34%
• Acid post-treatment test by KEMWorks generated internationally accepted grade DAP (18-46-0, 90% water soluble)
• Jacobs Engineering produced internationally accepted grade MAP without any special treatment of phosphoric acid

Technical Advisor


Mr Chris Neser has been appointed as a Technical Advisor to Sunkar to advise on all technical and financial aspects of the project. Mr Neser has over thirty years of experience within the phosphates industry gaining hands-on experience in mining, beneficiation, phosphoric acid and DAP production, fertilizer logistics as well as international phosphate marketing, most recently as a consultant to Agrifos Fertilizers Inc. Between February 2007 and July 2008 he was Deputy CEO Operations, for Jordan Phosphate Mines. From 2004 to 2007 he was Business Director in charge of completing the feasibility study on the Saudi Arabian Mining Company's Al Jalamid Phosphate Project.


JORC Resources Estimate


As part of the competent persons report (CPR) contained in the AIM Admission Document, Behre Dolbear estimated the JORC resources by aligning historical data compiled under the Soviet Classification System.
In 2008 Sunkar contracted Wardell Armstrong International (WAI) to produce a JORC compliant resource estimate for the Chilisai project. In January 2010 WAI prepared JORC compliant mineral resource estimate covering some 40% of Company's Chilisai licence area with the following highlights:

• The JORC resource estimate covers 40% of the Sunkar licence area. This is the area closest to the proposed fertiliser plant site
• The area contains more than sufficient resource to meet the first 20 years of planned ore extraction at a rate of 10 million tonnes per annum
• 293 million tonnes in the JORC Measured and Indicated categories with a grade of 10.6% P2O5 at a 5% cut-off grade for a total of 31 million tonnes contained P2O5
• Total resource including Inferred ore is 475.4 million tonnes with a grade of 10.6% for a total of 50 million tonnes contained P2O5
• Observations from trial pits and long trenches, which bound 400m x 400m mining panels, confirm the phosphate rock in the Licence Area forms a layer that is fairly uniform in terms of thickness and properties but varies in terms of its structure (occurrence of top plate, nodule and pebble zones within the ore body)


BFS Contractor SNC-Lavalin


SNC-Lavalin (TSX: SNC), one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure and in the provision of operations and maintenance services. SNC-Lavalin has a workforce of over 21,940 employees worldwide and generated total sales of €4.05 billion and €4.20 billion in 2009 and 2010, respectively. SNC-Lavalin's web site: www.snclavalin.com