Armada’s ship ready to sail

.SCHITA, Russia

To the casual observer, the Siberian landscape may appear bleak and barren, without much to offer. But this view is not shared by Armada Gold (ASE), which believes that the land package it controls here has enough bounty to make the company a major gold producer.

Armada, through its wholly owned subsidiary Trans Pacific Resources, has interests in two companies dedicated to exploring, developing and mining large gold deposits in the historic Baley gold district, 300 km southeast of Chita in southeastern Russia.

The Northern Miner recently visited the district as preparations were being made to start a bankable feasibility study on the Taseevskoe gold deposit, one of several past-producing operations previously operated by Baleyzoloto, a state-owned mining company.

Armada holds a 56% interest in the Russian joint-stock company, Balgold Limited, with Baleyzoloto owning the remaining share. Armada can further increase its share in Balgold to 66% by making option payments to Baleyzoloto totalling US$4 million by March 31, 1996.

Armada says it has the distinction of being the only western company to hold a controlling interest in a Russian company owning gold-mining licenses directly. As a result, Armada has control of the Taseevskoe, Sredney-Golgotay and Verchny-Aliinskoe licenses comprising 1,300 hectares, and containing two past-producing, underground gold mines. The Taseevskoe license, which includes the past producing Taseevskoe mine, has been the focus of Armada’s efforts. This project is a priority, based on studies that indicated the Taseevskoe I and III deposits have remaining underground geological resources and reserves totalling 7.7 million oz.

Armada also owns a 49% interest in Baltails, another Russian joint-stock company that controls two tailings dams with significant gold reserves and resources. Baltails owns the ZIF 1 and ZIF 2 tailings dams, which contain about 1.1 million oz. of gold derived from more than 70 years of gold mining in the region.

This past August, Armada was presented with a positive preliminary feasibility study. According to this study, the Taseevskoe I and III deposits, which comprise Armada’s Taseevo deposit, have diluted geological ore reserves of 65.2 million tonnes averaging 3.3 grams gold per tonne, at a cut-off grade of 0.7 grams per tonne.

The study proposed that ore remaining in the Taseevskoe I and III be mined from a 1.2-km-long by 1.5-km-wide open pit, reaching an ultimate depth of 340 metres. This pit, the study concludes, contains a diluted minable reserve of 55 million tonnes averaging 3.41 grams gold, which translates into more than 6.9 million oz. gold.

The study states that the open-pit mine could operate for 11 years. The deposit would be mined at a rate of 15,000 tonnes per day, or 5 million tonnes per year, to yield 470,000 oz. gold per year at an average operating cost of US$147 per oz.

In addition, the tailings deposits, which contain 1.1 million oz., could also be processed to increase the operating mine life by two years.

“We think we have one of the world’s largest gold deposits, (that) ranks in the top 5% of those in the world,” says Derek Fisher, Armada’s president.

Gold mineralization in the Baley mining camp is located along the margins of the northeast-southwest trending Baley graben. The graben basement, composed of Paleozoic granites, lies 650 metres below surface and is filled with a 30-to-100-metre- thick upper Jurassic-aged conglomerate, on top of which lie lower Cretaceous-aged sandstone and conglomerate units varying from 20 to 100 metres thick.

The margins that define the graben have acted as channel ways, allowing mineralized epithermal solutions to percolate through the sediments forming extensive chalcedonic veins and alteration halos. Alteration typically consists of silicification, carbonatization, argillization, secondary adularia and 1-3% sulphides. Sulphides are most commonly pyrite, chalcopyrite, sphalerite and arsenopyrite. The gold is said to be 25% refractory, resulting from its fine-grained nature and its association with arsenopyrite.

The Taseevskoe I and III deposits are two sub-parallel vein systems with alteration halos, spaced roughly 500 metres apart.

The Taseevskoe I is a near-vertical system comprised of 10 veins that form a 20-centimetre- to-10-metre-wide braided assemblage with a strike length of 1 km. The Taseevskoe III is a more complex assemblage that appears to have been affected by post-ore tectonic movement. The deposit is up to 200 metres wide, with a strike length of about 1 km. Both zones appear to narrow at depth, and this is believed to be related to the higher competency of the deeper conglomerates, compared with the shallower sandstone.

Armada is in the process of confirming the results of the preliminary feasibility study by initiating a $3-million bankable feasibility. An independent engineering consultant will complete bulk sampling, metallurgical testing, confirmation drilling and other tests as part of the study. Armada hopes to have a positive bankable feasibility study delivered by June of 1996.

For Armada, the results of the preliminary feasibility study have been the culmination of an intensive effort that began three years ago. With the collapse of the Soviet Union and the lessening of restrictions on foreign investment, Armada pursued an opportunity to examine many of Russia’s known gold deposits.

Like many explorers who had come before, Armada was drawn to the Chita region by the tales of rich alluvial gold deposits. Unlike Canada, more than 75% of Russia’s gold production has come from alluvial gold production. While touring the region, Armada’s management was shown the expansive tailings deposits near the town of Baley. Unfortunately for Baley, Baleyzoloto ran into financial problems around the time the operation was being converted to an open-pit mine. Increasing debt, lower productivity and poorly maintained equipment forced Baleyzoloto to close the mine in 1992. Between 1920 and 1992, the Taseevskoe and Baleyskoe mines had produced in excess of 17 million oz.

Given the sizable tailings deposits, Armada reviewed its options and shifted its focus from searching for alluvial deposits to reprocessing tailings. The company believes that by bringing modern technology and additional capital to Baley, the potential will increase to recover sizable quantities of gold. “Russia was crying for capital to pay off debt and to upgrade outdated technology from the 1950s,” Fisher explains, adding that this window of opportunity ultimately led to the creation of Armada’s first company, Baltails.

Armada completed 28 drill holes in the ZIF 1 dam and six holes in ZIF 2 to define resources of 12.5 million tonnes averaging 1.1 gram gold per tonne in ZIF 1, and 31.3 million tonnes averaging 0.7 grams gold per tonne in ZIF 2.

While interested in the potential of the tailings, Armada was told of mineralization that remained underground in the Taseevskoe deposits. This held even greater promise for the company. By bringing into the picture “new” western geological concepts and a fresh approach, Armada saw potential for the remaining mineralization in the underground mine to be developed into a large-tonnage, low-grade gold deposit.

Fisher sums up Armada’s philosophy by saying: “Concepts such as epithermal deposits were not known here and we thought the Taseevskoe deposits were a prime example of a classic epithermal system. Previously, it had been mined as a lode vein deposit. Along with the remaining quartz vein material, we thought there was ore in the alteration halos.”

Fisher speculates that there may be ore in most of the ground between the Taseevskoe I and III deposits. “This, however, has not been confirmed, and we will complete exploration drilling to test this,” he adds.

Armada has spent two years digitizing relevant geological information provided by Baleyzoloto. The data were gleaned from more than 600 drill hole logs, 400 underground mine plans, and 20,000 channel samples taken when the mine was operating. This information was then incor
porated into the preliminary feasibility study.

On the exploration front, Armada believes that the Baley camp still holds much promise. Balgold also holds licenses to two other nearby deposits with total resources of more than 844,000 oz. The Sredney-Golgotay has reserves and resources of 653,000 tonnes averaging 15.5 grams per tonne, while the Verkhne-Aliinsko holds probable reserves of 1.4 million tonnes averaging 11.4 grams and possible reserves of 1.4 million tonnes averaging 11 grams.

“We think we could find an additional 5 million oz. in our licenses,” Fisher says, adding that this estimate does not include the remaining extent of the Baley graben. This feature is expressed as the Onda river valley, which is more than 60 km long.