TORONTO (miningweekly.com) – TSX-listed Khan Resources plans to sit down with Mongolian authorities “at the earliest possible date” to start hammering out an investment agreement for the firm's $333-million Dornod uranium project, president and CEO Martin Quick said on Wednesday.

In the meantime, the company is in talks with potential strategic partners, in the hopes that having a larger entity in its corner will bolster its negotiating position.

In December, Khan signed a letter of intent on cooperation with Japan's Marubeni Corporation, and the firm is in talks with another two potential partners, Quick said. He declined to provide any further details.

“But we want to get those discussions finalised quickly, because we feel that with a large partner by our side that will have a lot more sway with the government.”

The company announced on Wednesday it has completed a definitive feasibility study confirming the economic robustness of the mine, which is expected to cost some $333-million and will produce an average of three-million pounds a year over 15 years.

The Mongolian government has made it clear that it wants to get investment agreements for the large Oyu Tolgoi copper/gold and Tavan Tolgoi coal projects out of the way before it starts talks with other companies, Quick said.

However, the country's Parliament will be considering the draft agreement for Rio Tinto and Ivanhoe Mines' Oyu Tolgoi mine this week after it was endorsed by the Cabinet, and stakeholders are optimistic that the document will be approved.

“And then we hope to be able to sit down with the government and map out a timetable for the investment agreement,” Quick said.

Khan will also need to establish which authority it will be talking to, as it is unclear whether responsibility for uranium mining will fall under the Mongolian Nuclear Energy Commission or the new Minerals and Energy Ministry.

“But, I am hoping that by the summer we will be able to be in a position to sit down with the government and start negotiations."

Once an investment agreement is in place, the company believes it can start up production within three years.

Assuming the negotiations with the government run smoothly, detailed engineering work on the mine and processing plant will be completed during the last quarter of this year.

Khan owns 58% of the main properties of the Dornod project, and the balance is held in equal parts by the Mongolian and Russian governments.

Shares in the company jumped 25,81% on Wednesday, to C$0,39 apiece by 15:32 in Toronto.

DORNOD

The bankable feasibility study for the project envisages a 3 500-t/d operation, which would produce an average of three-million pounds of uranium a year over 15 years, at a cost of $23,22/lb.

The study was based on an NI 43-101 compliant indicated mineral resource of 25,3-million tons, at an average grade of 0,116% uranium for 64,3-million pounds of uranium and an inferred mineral resource of 2,2-million tons at an average grade of 0,050% uranium, for 2,4-million pounds.

The number 2 and 7 openpit deposits at Dornod contain ten-million tons in reserves, at an average grade of 0,133%, for 52,9-million pounds of uranium oxide, out of the 64,3-million pounds of indicated resources.

The Dornod uranium deposit was initially discovered and developed by Russia, and began producing the nuclear fuel in 1988, but the mine stopped operations in 1995, after uranium demand fell off and funds for the operation dried up.

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