KBL Mining Limited Secures Chinese Backing for Mineral Hill Mine

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Researched by Industrial Info Resources Australia (Perth, Australia)--One of Australia's newest copper producers, KBL Mining Limited (ASX:KBL) (Sydney, Australia), announced earlier this week that it has signed a memorandum of framework cooperation with Guangdong Guangxin Mining Resource Group (GMR) (Guangdong, China), which will provide capital for the operation of KBL Limited's Sorby Hills silver project mine in Western Australia, as well as for future expansions.

The memorandum involves the payment of $80 million by GMR, in exchange for a 25% interest in the Mineral Hill mine; all of KBL's 75% share of copper concentrate production at Mineral Hill at a 25% discount to current market prices; and a 15% shareholding in KBL. The Mineral Hill mine has been operational only since late July, with full production reached in August, but the investment by GMR indicates that the company has confidence in the mine's potential. The agreement is not yet finalized, with both companies requiring shareholder approval, as well as Chinese and Australian government approval, before it can take effect. But both companies expect this to be completed by March 2012.

Jim Wall, KBL's chairman, said: "We are delighted that this opportunity, with a company the size of GMR, not only provides us with capital to rapidly expand Mineral Hill, to start developing Sorby Hills in 2012 and to pursue other opportunities, but provides us with a long-term, stable partner for KBL that will assist our expansion from a single-mine company to a medium-sized multi-mine corporation."

The Mineral Hill processing plant is currently operating at its 250,000-tonne-per-year capacity, but KBL has plans to increase the total output from the plant to 400,000 tonnes per year in 2013. This increase will be achieved by installing a new carbon-in-leach circuit and new grinding circuit. With the injection of funds by GMR, it should now be able to proceed quickly.

KBL also will be using the funds to progress its Sorby Hills silver project, which currently is the focus of a pre-feasibility study that is due to be completed in 2012. The Sorby Hills project contains one of the world's largest undeveloped silver-lead deposits, at which KBL hopes to construct an open-pit mine and 500,000-tonne-per-year processing plant to produce about 45,000 tonnes per year of silver lead concentrate by mid-2014.

The market seems to have liked KBL's announcement, with the company's share price quickly jumping from 23 to 27 cents after having slowly declined from its 37-cent high back in April. KBL will be hoping that this injection of funding will speed up the company's growth over the next 12 months in what is a very tough economic climate for smaller miners.

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