Russia’s Vneshtorg Bank will provide backing to Armada Gold (AAU-T) in the form of a gold sales commission agreement, paving the way for development of the Baley gold project in southeastern Siberia.
The agreement, under which the bank will act as Armada’s agent, is expected to place the project on the fast track toward construction.
An independent feasibility study in late 1997 concluded that the project can be mined at a profit.
An open-pit mine is envisaged for the Taseevskoe deposit, which is estimated to contain more than 5 million oz. gold. The mine is projected to produce an average of 220,000 oz. gold per year for an initial period of 10 years at an average cash operating cost of US$166 per oz. gold. The payback period would be 4.2 years with a US$350-per-oz. gold price, and 2.9 years if the price climbs to US$375.
Higher-grade ore would be mined in the first two years of the operation.
Output is projected at 267,000 oz. gold at a cash operating cost of US$140 per oz. in the first year and 324,000 oz. at US$120 in the second.
The study, conducted by Kvaerner Metals Davy, is based on an open-pit mine with a stripping ratio of 7.2 to 1. The expected milling rate is 1.75 million tonnes per year, and the grade in the first 10 years should average 4.5 grams.
The mine plan calls for 10.7 million tonnes of low-grade (1.14 grams gold) ore to be stockpiled over the first 10 years and subsequently processed.
The project is estimated to contain proven reserves of 9.2 million tonnes grading 5.21 grams gold and probable reserves of 19 million tonnes grading 2.26 grams. The estimates are based on a cutoff grade of 0.88 gram.
Recently, Kvaerner Metals undertook a supplementary study (to be completed by June) that will recommend a strategy for development of the Taseevskoe deposit. The study will consider the feasibility of exploiting a small, high-grade area by open-pit before further commercial exploitation is undertaken. Ore from the small pit, at a projected head grade of 7.1 grams gold, would be processed at a rate of 500,000 tonnes per year.
The capital cost of starting up the small pit is estimated at US$30 million, and the operating cost is pegged at US$144 per oz. gold.
“The study will target the rich upper level of the Taseevskoe I zone, with ore accessible from the existing Russian pit,” says Armada President Derek Fisher. He adds that use of the existing Russian crushing and grinding circuit is being considered in order to reduce capital costs and speed up construction.
“The other major change being considered is the elimination of pressure oxidation from the processing circuit, resulting in a significant capital saving but lower gold recovery,” Fisher says. “But the effect of the latter will be offset by increased head grade.”
An expansion of the Russian pit is expected to result in a resource of 3.1 million tonnes grading 7.1 grams gold. The milling proposal calls for crushing, grinding, flotation and cyanidation. Gold recovery is anticipated at 75-80%, such that the operation would yield 85,000-90,000 oz. gold per year.
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