First Dynasty sells Armenian gold

Singapore-based First Dynasty Mines (FDM-T) has exported its first shipment of gold dorefrom the Ararat tailings project in western Armenia.

A total of 312 oz. gold was sent to a refinery in the United Kingdom and then sold to U.S.-based Gerald Metals. Future shipments are expected to occur bi-weekly and total 1,000 oz. each.

Proceeds from the gold sales will initially go toward paying down First Dynasty’s US$12-million capital investment in the project. Thereafter, earnings will be divided equally between First Dynasty and the government so long as recovery rates stay above 50%. If not, First Dynasty’s share of the profits will rise on a pro rata basis, up to a maximum of 67%.

Ararat hosts 12 million tonnes of low-grade tailings left over from when it served as a central processing facility during the Soviet era. A newly constructed carbon-in-leach plant, built over the past year by First Dynasty, will treat 1.5 million tonnes of the tailings in each of the next eight years, yielding a total of 200,00 oz. gold at an average cost of US$220 per oz.

Meanwhile, feasibility studies are winding down at the nearby, past-producing Zod and Megradzor mines. Prefeasibility studies completed earlier this year pegged Zod’s resources at 10.7 million tonnes grading 6.01 grams gold per tonne, whereas Megradzor is estimated to contain resources of 815,000 tonnes grading 12.25 grams gold (T.N.M., Jan. 12-18/98).

First Dynasty can earn a 50% interest in each of the Zod and Megradzor mines. The remaining interests are held, on a carried basis, by the government.

First Dynasty’s accomplishments in Armenia come on the heels of poor financial results. The company lost US$14.7 million in 1997, though this is considerably better than the previous year’s loss of US$33.1 million.

The company also reports that the sale of its 80% interest in Genindo EPS, which operates the producing Sembakung Oilfield project in Indonesia, will likely be delayed due to the political unrest in that country. First Dynasty had hoped to complete the deal by late June. The sale is expected to generate US$30 million in cash, which will be used to fund the non-debt portion of the cash required to redevelop the Zod and Meghradzor mines.

In order to meet short-term requirements, First Dynasty has borrowed US$4.5 million from Robert Friedland’s Ivanhoe Capital Finance — in addition to the US$5 million it already owes that company. Both loans are convertible into shares at 40 cents per share. Ivanhoe has agreed to convert the earlier loan to shares, though shareholders have yet to approve the transaction.

A portion of the proceeds from the new loan was used to clear half of an existing US$6-million short-term loan facility with Gerald Metals. The maturity date of the remaining US$3 million, along with the new loan with Ivanhoe, is Aug. 31 or on the date that the company completes the sale of Genindo, which ever comes first.