Companies: OXS   

Aim-listed gold hopeful Oxus Mining has signed its long-awaited loan agreement with a banking syndicate led by Société Generale, which will provide $31 million (£19.7 million) to develop the Amantaytau gold field in the central Asian republic of Uzbekistan, writes Robert Tyerman.

The finance, which consists of a $26 million term loan and a $5 million cost overrun facility, is being given not to Oxus but Amantaytau Goldfields, in which it holds a 50 per cent stake. Amantaytau Goldfields is the company planning to develop the Amantaytau licence area project, which Oxus says is known to contain 6.6 million oz of gold.

Oxus boss Roger Turner expects to sign its first construction contract for the project tomorrow, and hopes production will start in a year's time. He says Amantaytau should yield 175,000 oz in its first year of production, at a cash cost of only $90 an oz. This compares with a current market price of $317.

The loan carries several conditions. Oxus must provide an extra $15.35 million (£9.8 million) for construction and $1.5 million for cost overruns.

Oxus proposes to fund this with the proceeds of an earlier share placing and a subordinated loan raised under an insurance policy from a German insurer and a 'high-street bank'. The company must hedge half of its expected production to cover operating costs and debt servicing, and arrange political risk insurance.

Another Oxus gold project, Jerooy in Kyrgyzstan, is more problematic. Turner says this more marginal prospect needs a $300 an oz gold price to be economic.

Oxus asked the local government for various tax-breaks to help it along. But the Kyrgyzstan authorities claimed Oxus did not do a feasibility study and had therefore forfeited its licence. Oxus insists the feasibility study was done 18 months ago, and maintains that it still has exclusive rights to Jerooy.

Shares in Oxus, which not so long ago raised £8 million at 30p, later plunged to a 6p low. They now trade at 12.25p.