EXPLORATION ’95 — Homestake options Russian project

During the course of a corporate life that spans more than a century, Homestake Mining (NYSE) has transformed itself into one of the world’s largest gold producers by building on the cornerstone of its namesake mine in South Dakota.

Today, the company is looking much farther afield for growth opportunities, and among those prospects is a Russian gold deposit containing about 2 million oz.

In late February, Homestake announced it had purchased an option which allows it to conduct economic and technical evaluations of the Pokrovskoye gold deposit in the Amur district of far-eastern Russia, near the Chinese border. Homestake bought this option from Zoloto Mining, ownership of which is divided among Tokur Zoloto (a public company listed on the Moscow Stock Exchange), London-based Peter Hambro PLC and several other investors. Zoloto Mining is earning a 75% interest in the operating company that has been licensed from Tokur Zoloto and the Russian government to develop the deposit.

Once evaluation is completed, Homestake will have the right to acquire 5% of Zoloto Mining for US$1 million. The major will then work with an international engineering firm to complete a feasibility study which will determine the best way to produce gold from the deposit. Based on current information, Homestake believes the deposit has the potential for low-cost production using methods employed at its other operations.

Few details about the deposit have been released, although it is believed to be heap-leachable and minable by open-pit techniques.

Homestake also has the right to increase its share holding in Zoloto Mining to 67% upon payment of an additional US$15 million, thereby earning a 50% direct interest in the deposit and the right to direct operations. Homestake produced 1.7 million oz. gold last year at a cash operating cost of US$254 per oz. from mines in the U.S., Canada and Australia.