Siberia is not the easiest place to build and operate a mine, but Toronto-based High River Gold (HRG-T) is seeking to become a major player in that region’s gold industry.
A partner in the Russian company Buryatzoloto, High River intends to boost gold production at that company’s operations in southern Siberia, near Lake Baikal.
The Russian-Canadian partnership has retained Kvaerner Metals to conduct a feasibility study, the objective being to increase gold production to 200,000 oz. per year from the current rate of 85,000 oz. Kvaerner has plenty of experience in Russia, having recently completed construction of the Kubaka gold project in the Magadan region, in the eastern part of the country.
The joint venture previously mined at a cutoff grade of only 1 gram; recently, however, the government granted approval for a cutoff of 2.5 grams, which is more in tune with Western standards. The higher cutoff is expected to increase the mining grade, as well as reduce dilution and operating costs.
Late last year, Buryatzoloto completed a US$25-million financing, with the European Bank for Reconstruction and Development (ERDB) as lead underwriter.
Proceeds from the financing are being used to upgrade mining equipment and build a carbon-in-pulp (CIP) processing plant.
The CIP plant, which is expected to be operational by mid-1998, will reduce operating costs by eliminating the need for costly concentrate transport and smelting.
Most Russian mines built before the collapse of the former Soviet Union produced concentrates which were shipped to central processing facilities, thereby reducing the economics of most mines. The practice reflected Moscow’s efforts to keep the gold mining industry under central control.
While the Russians are still fiercely protective of their natural resources, the benefits of introducing Western practices is winning converts. Many were won over by High River’s activities in Siberia.
The Toronto-based junior is the largest shareholder of Buryatzoloto, with a 24.6% interest. The company holds two seats on the board and chairs a 5-member advisory committee.
The EBRD is the second-largest shareholder of Buryatzoloto and is, therefore, a strong political and financial ally of the project.
To date, High River has invested US$6.5 million in the project, which consists of two underground gold mines — Zun-Holba and Irokinda.
Those mines, which have been in production for seven years, turned out 77,000 oz. of the yellow metal last year. That rate is expected to increase to 85,000 oz. this year, and higher still once the expansion program is completed.