AngloGold cements new Russian alliance (October 30, 2006)

AngloGold Ashanti (AU-N, AGD-L, ANANO-J) has concluded a deal with Russian gold producer Polymetal for a strategic alliance in gold exploration in the Russian Federation, which has left one London-listed junior to go it alone and given another a fatter wallet for its own use.

Under the agreement, Polymetal and AngloGold divide Russia into three parts; in seven specified areas of eastern Russia (Sverdlovsk, Khabarovsk, Magadan, Chukotka, Koryakia, Kamchatka and Irkutsk) each company will have a free hand to work on any project; everywhere else east of the Ural Mountains the two companies will operate exclusively through their alliance; and west of the Urals the alliance will have a right of first refusal on any project one of the partners enters into with a third party.

Polymetal brings two gold projects to the table, the Aprelkovsko-Peshkovski project in the Chita region and the Anenskoye project in the Krasnoyarsk region. AngloGold will contribute two projects it has just bought from London-listed Trans-Siberian Gold (TSG-L).

Trans Siberian is selling Anglo the Veduga and Bogunay projects in the Krasnoyarsk region. Veduga, currently at the prefeasibility stage, has a measured and indicated resource of 11.8 million tonnes grading 5.4 grams gold per tonne and an inferred resource of 4.9 million tonnes grading 4.8 grams. Bogunay, an old producing mine, has a 1940s-era resource estimate of around 1 million tonnes at 8.5 grams gold per tonne.

Trans Siberian gets US$40 million for the two projects, which it plans to use to develop the Asacha mine in the Kamchatka region. Asacha, which has 694,000 tonnes grading 23.3 grams gold and 45.4 grams silver per tonne in the measured and indicated category, is slated to produce 100,000 oz. gold and 180,000 oz. silver annually once it is in production. Feasibility work there continues to examine open-pit and ramp-access underground development.

Anglo will also fund a US$900,000 geophysical program at Verduga and Bogunay, which Trans Siberian had previously committed to do, and has extended a technical co-operation agreement (under which AngloGold boffins Glen Koropchuk and Solly van der Wath are seconded to Trans Siberian) to the end of 2009.

The new arrangement with Polymetal jilts Eurasia Mining (EUA-L), whose strategic agreement with AngloGold in the Chita and Buryatia regions will be dropped to conform to the new alliance. Eurasia, however, got US$1 million in exploration work on its properties out of the alliance.