First Dynasty buys into Armenian projects

Singapore-based First Dynasty Mines (FDM-T) and New York-based Global Gold have inked a deal that will see the former earn up to a half interest in three advance-staged gold projects in Armenia.

First Dynasty will earn its interest through a progressive takeover of Global Gold’s subsidiary, Global Gold Armenia, which is currently in a 50-50 joint venture with the Armenian government to develop the Ararat tailings recovery project and conduct feasibility studies on the refurbishment of the Zod and Meghradzor mines. The takeover will occur by way of staged investments in these projects, up to a total of US$24.5 million, and through the issuance of 4 million First Dynasty warrants to Global Gold.

The agreement, which has yet to be approved by regulators, also gives First Dynasty immediate control over all projects.

At Ararat, which is near the western border with Iran and Turkey, the company plans to invest US$12 million in the construction of a carbon-in-leach (CIL) plant capable of processing 1.5 million tonnes per year. The plant will recover gold from the 12 million tonnes of tailings grading 1.1 grams gold per tonne which have accumulated there since 1976, when the former Soviet government designated Ararat as the central processing site for all gold mines operating in Caucasia. The plant is expected to begin operations late this year, and, depending on metallurgical performances, First Dynasty’s interest will fall between 50% and 67%. Previous metallurgical tests on bulk samples taken last year by Global Gold indicate that a gold recovery rate of 50% is achievable. Thus, at full capacity, the plant is expected to yield about 24,000 oz. gold per year.

At Zod and Meghradzor, First Dynasty will study the feasibility of constructing conventional CIL processing plants at both sites, as well as replacing old Soviet mining equipment with a modern fleet and employing modern mining techniques. The former mine is estimated to host proven resources of 14.3 million tonnes grading 6.7 grams gold, which are contained with a total resource of 24.1 million tonnes grading 6.7 grams gold. An additional 30 million tonnes of uncrushed material grading 1 to 2 grams gold is stockpiled on surface. The latter hosts resources (in all categories) of 1.45 million tonnes grading 14.8 million tonnes.

First Dynasty expects to reach a final agreement with the government on these two projects and others within the next two months. Within four years, the company hopes to have both mines producing at a combined annual rate of 470,000 oz. gold.

The Zod mine entered production in 1976, and, up to its closure in November of last year, produced 7.5 million tonnes grading 5.5 grams. It lies near the western border with Azerbaijan and operated as a combined open-pit and underground mine.

At Meghradzor, in north-Central Armenia, underground mining began in 1986 and was suspended at the same time that Zod shut down. During that time, the mine maintained an annual production rate of 20,000 tonnes.

Both mines were closed primarily as a result of the high costs associated with shipping the ore to the Ararat processing plant.