Baley gold project feasibility study completed
Armada Gold Corp AAU
Shares issued 79,252,868 Oct 28 close $0.50
Wed 29 Oct 97 News Release
Mr Derek Fisher reports
A newly-completed independent feasibility study has concluded that the
first phase of the Taseevskoe portion of Armada's Baley gold project in
southeastern Russia is capable of producing an average of 220,000 ounces of
gold a year for an initial period of 10 years.
Kvaerner Metals Davy of Toronto, which conducted the feasibility study,
estimates that the cash operating cost will average US$166 an ounce.
Kvaerner found that the project is technically and economically feasible to
develop. A particularly favourable aspect of the project is that
higher-grade ore is to be produced in the first two years of operation.
Production in the first year is estimated to be 267,000 ounces and in the
second 324,000 ounces. The operating cost would be US$140 an ounce in the
first year and US$120 an ounce in the second year.
The company confident that it has identified a viable, economically sound
project with a rate of return that will support financing for the
development. Discussions have commenced with various institutions that have
shown interest in providing equity and debt financing for the project, and
the company has retained Levesque Beaubien Geoffrion to advise it on
maximizing shareholder value.
Armada Gold, through its Russian-subsidiary, Balgold Limited, has an 85%
interest in the Baley gold project in the Chita region of Siberia.
Kvaerner based its study on an open-pit mine with a stripping ratio of 7.2
to 1, with the ore to feed a processing plant rated at 1.75 million tonnes
of ore per year. The first 10 years of mining will provide ore to the plant
at an average grade of 4.5 grams of gold a tonne. The mine plan will result
in an additional 10.7 million tonnes of low-grade ore being stockpiled in
the first 10 years, which will be available for subsequent processing.
Armada Gold believes that the pit shell also may capture additional ore, as
it is likely that a portion of the inferred resource will report as ore
during mining. The Kvaerner study did not attempt to take this into
account. Armada Gold is also investigating the possibility of augmenting
the Taseevskoe mill feed with higher-grade ore from the satellite ore
bodies at Baley that are held by Balgold.
Kvaerner's work has demonstrated that processing of the Taseevskoe ore will
result in 87% gold recovery using conventional gold processing technology
of crushing, grinding and making a concentrate by flotation. The
concentrate will be pressure-oxidized and the gold in the oxidized
concentrate and in the flotation tailings recovered in a carbon-in-leach
circuit. The Kvaerner study includes a detailed plan for development of the
project which estimates that the first gold can be poured within 28 months
of the decision to proceed.
The key parameters of the first phase development of Armada Gold's Baley
gold project are:
Mineable Reserves (.88 g/t cut-off)
Proven 9,200,000 t at 5.21 g/t Au
Probable 19,000,000 t at 2.26 g/t Au
Stripping ratio 7.2:1
Plant throughput 1,750,000 t per year
Plant cut-off grade 2.0 g/t
Gold recovery 87%
Average annual
gold production 220,000 ounces
Mine life 10 years
Low-grade stockpile
(at end of
10 years) 10.7 million t at 1.14 g/t
Preliminary Economic Indicators (Pre-Tax)
Cash operating cost per tonne US$20.94
Cash operating cost per ounce US$166
Total cost per ounce US$243.00
Capital cost - mill US$122.4 million
Mining fleet US$34.1 million
Pre-strip US$12.5 million
Net present value
Dis- US$350 US$375
counted oz oz
rate
(over 10 yr
mine life) 0% 220.1 275.1
5% 117.2 156.1
10% 55.1 83.6
Payback period 4.2 yr 2.9 yr
IRR (after tax
leveraged US$375) 24.0%
Armada has concluded a tax protocol with the Chita region administration
and is currently finalizing appropriate contracts with Russian banks and
authorities to enable its gold production to be marketed in Russia and
abroad.
Armada also has a 49% interest in the Erdmin joint venture in Mongolia,
which is producing at the rate of 11 tonnes of copper cathode a day from a
demonstration plant and is studying the feasibility of an expansion to 60
tonnes a day.
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