Frontier Mining (LON:FML) has sold its Maminskoye gold deposit in Russia for US$37.45 million in a “transformational transaction”.
The news triggered a buying spree, driving shares in Frontier up 21.5 percent in early deals in London.
The location of Maminskoye is outside of Frontier’s focus area and the costs required to develop the project were the main reasons behind the decision to sell. The sale will enable Frontier to fully focus on Kazakhstan and give it the funds to launch the solvent extraction/electrowinning (SX-EW) plant at its flagship Benkala project.
“I believe that uncertainty about Frontier's capacity to complete Benkala has weighed on our share price and that this monetization of value will encourage investors to focus on the significant value that Frontier offers to investors,” said chief executive of Frontier Mining Erlan Sagadiev.
The Maminskoye property was acquired by Frontier as part of its acquisition of Coville Intercorp assets in 2010. That deal consolidated Frontier's and Coleville's interests in the Benkala copper deposit in Kazakhstan and included Coville’s wholly owned Maminskoye deposit.
Maminskoye currently has a resource of 27,177 kilograms of gold. Last month, Frontier hired Calder Maloney to design the SX-EW plant at Benkala.
The proposed plant will be developed in two stages. It is intended that Phase 1 will have a production capacity of 25 tonnes per day, equating to 7,000 tonnes per year.
Once the plant has been successfully commissioned, and has been operating and producing at that rate, the Phase 2 development will commence.
Shares in Frontier rallied 0.78 pence (21.5 percent) to 4.38 pence this morning, giving the company a market cap of £81.4 million.