Monday 09 May, 2011

Asset Acquisition: South Benkala

Frontier has signed a Sale and Purchase agreement to acquire the Subsurface Use Contract for South Benkala from PromSnab2030 LLP for US$2.5 million, which management believe to be a substantial deposit and a highly competitive price.

Purchased with an initial 20% down payment, the remainder is payable subject to due diligence and the Republic of Kazakhstan declining to use its pre-emptive right to acquire; the Company believes the same conclusion will be reached as taken regarding its existing Benkala application.

The deposit is located approximately 10 kilometres south of the Company’s existing Benkala license area. Whilst the Oxide (Secondary) ore is largely accessible the deposit is crossed by a railway line that restricts access to approximately 40-50% of the Sulphide (Primary) deposits. In order to access all deposits this railway line will need to be relocated between approximately four to seven years from commencement of mining operations at an estimated cost of approximately $12 million.

The Company will now consider two options: to either extend the life of the SX-EW plant at Benkala from 7 to 11 years, or to increase the production capacity of the Benkala plant from 20,000 to 30,000 tonnes per year.

Erlan Sagadiev, CEO of Frontier Mining, commented:

“We are extremely excited to have had the opportunity to acquire the South Benkala deposit. The synergies with our existing Benkala deposit are obvious and the Company will now consider seriously whether, with no substantial additional cost, it should extend the SX-EW plant’s life or increase capacity. Either way, this acquisition marks a very significant step for the Company and will allow us to move forward”.