Dundee to test open-pit potential at Armenian mine

Dundee Precious Metals (DPM-T, DPMLF-O) claims that the Shahumyan polymetallic deposit at its producing Kapan mine, in Armenia, shows potential for an open-pit mine, and now the company is setting out to prove it.

Kapan, which consists of Shahumyan and a copper deposit called Centralni, produced 1.6 million lbs. copper, 9,300 oz. gold and 5.7 million lbs. zinc in 2007.

This year, Dundee plans to spend more than $20 million to drill 13,600 metres in two phases to put together a National Instrument 43-101-compliant resource estimate.

The company is just about ready to go. Dundee bought three diamond drills and three reverse-circulation drills last year with a plan to start drilling then, but it’s still awaiting delivery of three of the drills, thus deferring most of the major exploration to 2008.

In addition to calculating a resource, Dundee wants to find locations for several small pits that could supplement underground production and keep the Kapan mill running at its capacity of 1.2 million tonnes per year.

Dundee will first test a 600- metre-long zone of mineralization in the Vein 5 area with a starter-pit drilling program.

The company has already begun drilling for the purpose of metallurgical testing and is currently building an assay facility, which will be managed independently by SGS. Until then, assays are being sent to an SGS lab in Perth, Australia.

Highlights from the metallurgical samples included 48 metres grading 0.15 gram gold per tonne, 7 grams silver and 0.07 parts per million (ppm) copper and 5.5 metres grading 0.44 gram gold, 27 grams silver and 0.06 ppm copper.

The company also reported two Vein 5 resource definition drill holes, which returned a 3-metre intersection grading 2.01 grams gold per tonne, 19 grams silver and 0.03 ppm copper and 89 metres of 1.42 grams gold, 66 grams silver and 0.11 ppm copper.

Although Kapan has seen at least 280,000 metres of diamond drilling, 33,000 metres of drive channel sampling and 32,000 metres of face sampling over the past six decades, no core samples were saved, nor have any reference samples survived.

But before buying its 95% interest in the property, Dundee says it tested 750 kg worth of 30-kg samples from the accessible parts of the Shahumyan mine, and used the data as an in-house reference.

An Armenian-compliant reserve estimate for the Shahumyan underground mine stands at 12 million tonnes grading 0.5% copper, 2 grams gold per tonne, 37 grams silver and 2.2% zinc.

In other news, Dundee is one step closer to realizing its plan to expand its Chelopech copper-gold mine in Bulgaria with a recently signed agreement in principle with the Bulgarian government. Under the deal, Dundee will pay a higher royalty than under a previous agreement that had been set to expire in 2010. The new royalty will be calculated on a sliding scale of 2-8% at a profitability ratio between 10% and 60%.

Dundee will also provide a full environmental reclamation bond for Chelopech.

Dundee and the Bulgarian government have signed another agreement in principle to partner at a new, US$155-million metals processing facility to be built at the project. The new smelter will employ 150 people, and Bulgaria’s Silver Fund will own 25% of the facility.

Approval of the agreements is still required by the country’s council of ministers, after which the environmental impact assessment for the project can be finalized.

The company earned $15.4 million in 2007, down from net earnings of $69.7 million in 2006; the decline was due primarily to upgrades and refurbishing of the company’s mining and processing facilities, molybdenum exploration in Serbia and advancement of the Black River gold project in Nunavut.