The Kalana concession covers an area of some 387.4 sq. km. in South West Mali and includes in the Northern parts of the concession the Kalana Mine covering a surface area of 2 sq. km. The concession permit was transferred to AGL on 30 December 2003 and confers the right to exploit and explore for precious and base minerals for a period of 30 years and renewable thereafter so as to be co-terminous with the life of any mine on the concession area, which is unusually favourable in Mali . It is believed that the permit in respect of the concession area is one of two on these terms.
The concession and in particular the Kalana mine was thoroughly explored in the period 1962-1982 by two Malian National companies, SONAREM and SOGEMORK, as part of a Soviet Technical Assistance Program to Mali. A production decision was taken in 1982 to develop the Kalana mine as a small underground mine using a process flow sheet based on crushing, milling and gravity concentration. Production commenced in 1985 and over the following six years until 1991 a total of 270,000 t were treated at an average head grade of 12.9 g.t to product 2,534 kg of gold. With the break up of the former Soviet Union in 1991 Soviet personnel as well as technical and financial resources were withdrawn and the Kalana mine was placed on care and maintenance. The Kalana concession was held by AGL under permit no. 03147/PM/RM dated April 7, 2003 (“the permit”). In accordance with the Foundation Agreement concluded with the Government of Mali the permit was transferred to a Malian company, SOMIKA SA, a 80% subsidiary of AGL.
The permit was originally granted to SOGEMORK in 1984 and after the dissolution of SOGEMORK in February 1992 following the Soviet withdrawal the permit reverted to the State.
In 1994 the Malian Government embarked on a privatisation program with the assistance of the World Bank. As part of that program the Malian Government launched an international call for tenders for the Kalana concession. The invitation to tender stipulated that the main aims were inter-alia the re-starting of the existing gold mining operation at the Kalana mine and the exploration for further resources in the Kalana concession.
In February 1995 a joint venture of Ashanti Gold Fields Co. Ltd. (“ Ashanti ”) and Johannesburg Consolidated Investments Ltd. (“JCI”) was awarded the tender and therefore the right to acquire an 80% interest in the Kalana concession with the Government of Mali holding a 20% carried interest. Ashanti was to be the operator of the Kalana concession. JCI withdrew from its joint venture with Ashanti in 1996 and in 1997 Ashanti mandated Rothschild Natural Resources LLC ( Washington DC ) to seek a suitable mining company to develop, operate and acquire a majority interest in the Kalana concession.
In May 1997 Nelson Gold Corporation Ltd. (“NLG”) reached agreement with Ashanti subject to approval inter-alia of the Malian Government. Pursuant to that agreement and in anticipation of the fulfilment of the conditions NLG conducted a feasibility study on the Kalana mine under the leadership of its Chief Executive Officer Mr. Roy Meade.
On 15 April 1999 the Minister of Mines of the Republic of Mali notified Ashanti that the Government had terminated its rights pursuant to the provisions of Clauses 7.6 and 12.2 of the Foundation Agreement entered into between the Republic of Mali and the joint venture consisting of Ashanti and JCI dated 20 June 1995 . The basis of the cancellation was essentially that the joint venture had failed to meet its contractual commitment to put the Kalana mine into production within the prescribed three-year term.
In July 1999 and again in August 2001 the Malian government again issued international tenders. NLG tendered in the 1999 tender and was the second most successful tenderer. The successful tenderer was a relatively unknown Algerian company which did not meet its initial financial commitments as a result of which its right as the successful tenderer were cancelled. Following NLG’s acquisition of significant hydrocarbon assets in the second half of 2000 Elliott Advisors acting on behalf of Avnel acquired NLG’s intellectual property to the Kalana concession consisting of the various feasibility studies undertaken by NLG under Mr. Meade’s leadership.
AGL tendered in the October 2001 international invitation to tender. It ranked highest in its technical bid but was the second highest financial bidder and accordingly was not awarded the tender. When the successful tenderer failed to meet its commitments the Malian Government offered AGL the right to acquire the Kalana concession as the second most successful tenderer and the tender was formally awarded to AGL on 23 December 2002 .
The necessary legal agreements were concluded in the early part of 2003 and the permit in respect of the Kalana concession awarded to AGL on 7 April 2003 . On 23 July 2003 SOMIKA SA was incorporated as an 80% subsidiary of AGL with the Government of Mali holding a free carried 20% interest.
The Kalana mine was re-commissioned in December 2003 and the first production of dore commenced in March 2004.
Exploration of the Kalana concession commenced in February 2004.
Source document: Kalana Mine and Conseccion - Executive Summary - August 2004
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