Navan Resources has made a tender offer to the Bulgarian Government to increase its interest in the Chelopech mine to 92 per cent.
Navan is offering to purchase 75 per cent of the shares of Chelopech EAD, the state company which holds 32 per cent of BIMAK AD, the joint venture company which operates the Chelopech mine.
Navan already owns 68 per cent of the Chelopech mine and is expected to pay between £5 or £6 million, subject to negotiations, for the shares in Chelopech EAD.
The remaining 25 per cent of the shares in Chelopech EAD will be retained by the Bulgarian government and be available for Chelopech's employees and management to acquire. Navan may have an opportunity to bid for this additional shareholding at a later date.
Navan is confident it will win the tender to acquire the Government's interest "as it is the most logical candidate".
If it acquires a 92 per cent interest in the mine it will clear the way for Navan to proceed with the further development of the mine by accessing "higher grade ores at lower levels".
Navan and Homestake Mining of California have been working recently on an expansion programme for the mine. Under this programme Homestake had the right to earn 51 per cent of Navan's interest in the Chelopech operation.
This proposed investment was part of an earlier plan to increase the processing capacity of the mine to approximately double the current output. However, Navan has decided that with falling gold and copper prices that level of expansion is "not currently warranted".
Instead, the European Bank for Reconstruction and Development will invest up to $30 million to complete the modernisation plan. Homestake has decided that the project is no longer large enough to justify its direct participation and its previous arrangement with Navan has been cancelled.
However, it has agreed to advance loans up to £1.5 million, to be used at Chelopech, which subject to Navan shareholder approval, may be converted into ordinary Navan shares. This would mean Homestake taking an almost 15 per cent stake in Navan.
The newly expanded mining operation will have a 25-year life and will involve the selective mining and processing of 800,000 tonnes of ore a year, compared 700,500 tonnes at the current Chelpech operation.
