Armada Gold boosts stake in Russian project

The Chita region of southeastern Russia continues to captivate Armada Gold (AAU.A-T).

The company has completed a series of transactions that will increase to 85% from 66% its controlling equity in the large Baley gold project. It will also purchase a separate, but nearby, 440,000-oz. alluvial gold deposit in the town of Baley.

The total value of the transactions is estimated at US$12.6 million, including US$1.2 million in cash and 6.4 million Armada shares. According to Armada, the acquisition cost equates to US$4.25 per oz. gold.

“The developments are significant because Armada will increase its gold reserves by 30% at an excellent price, and the extra measure of control will improve our ability to finance and develop the project,” says John Hopkins, who shares Armada’s chairmanship with Robert Friedland.

Situated in a historic gold district, 300 km southeast of Chita, the Baley deposit is owned by Balgold, a Russian joint-stock company. All interest in Balgold not held by Armada is held by Baleyzoloto, a Russian firm.

The current drill program at Baley is nearing completion. Recent highlights include: 20 metres of 7.3 grams gold per tonne; 9 metres of 20 grams; and 42 metres of 3 grams. Samples were taken from 22 holes, which were drilled at various angles to test widths of the gold-bearing veins at depths amenable to open-pit mining. Complete assay results are expected in September.

Armada’s bankable feasibility study for the deposit is expected to be complete by early 1997. The study is based on plans to produce more than 450,000 oz. gold annually from a 15,000-tonne-per-day, open-pit mining and milling complex. Processing would entail flotation, pressure oxidation and carbon-in-leach.

A prefeasibility study estimates that gold production from an open-pit mine on the Taseevskoe deposits at Baley would average 470,000 oz. per year for 11 years. The cash operating cost is projected at US$147 per oz.

According to this study, the Taseevskoe I and III deposits have combined reserves of 65.2 million tonnes averaging 3.3 grams gold per tonne, at a cutoff grade of 0.7 gram.