High River picks up Russian gold producer

Another Canadian company has found a ready market for its financing experience in the former Soviet Union. High River Gold (TSE) acquired 22.9% of Buryatzoloto, a Russian joint stock company with two producing underground gold mines in the Buryat Republic of the Russian Federation.

The republic, also known as Buryatia, was an autonomous region in the Soviet Union, and comprises 350,000 sq. km between Lake Baikal and the Mongolian border.

Buryatzoloto, privatized in 1994, owns the Zun-Holba mine, about 200 km west of the Siberian city of Irkutsk, and the Irokinda mine, about 350 km east of the northern tip of Lake Baikal. The mines, while in remote areas, are both accessible by road.

Buryatzoloto’s placer mines have become exhausted, causing overall production to fall to about 54,000 oz. in 1995 from 94,585 oz. in 1992.

Nevertheless, Zun-Holba’s annual production has improved steadily, to an estimated 35,000 oz. in 1995, and Irokinda, which peaked at 18,160 oz. in 1993, is producing at a 12,000-oz.-per-year pace. Both mines have been profitable since privatization.

Reserves on the two leases, confirmed by High River’s Canadian consultants, total almost 3.2 million oz. proven and probable, plus possible reserves of just over 5.3 million oz. The deposits also have a combined silver resource (all categories) of 9.6 million oz.

High River picked up most of its interest at a government auction in November 1995. The company is now Buryatzoloto’s largest single shareholder. Management has an 18.2% interest, and because 25% of shares are non-voting, High River and the management control 54.8% of the voting stock. The acquisition cost of US$2.9 million represents a 700,000-oz. share in the Russian company’s proven and probable reserves, at slightly more than US$4 per oz.

Zun-Holba, which has been in production for five years, exploits vertical, nearly conformable veins in tightly folded, Proterozoic, metavolcanic and metasedimentary rocks. It has proven and probable reserves of 7.4 million tonnes grading 10.6 grams gold per tonne, and possible reserves of 22 million tonnes with a grade of 6.2 grams per tonne.

The geologically similar Braun-Holba deposit, not yet in production, is 12 km from Zun-Holba on the same mining lease area. Proven and probable reserves stand at 360,000 tonnes averaging 32.6 grams per tonne, and there are possible reserves of 1.6 million tonnes at an average grade of 12.3 grams per tonne.

Irokinda, mined since 1975, has proven and probable reserves of 330,000 tonnes grading 22.3 grams per tonne and a possible 654,000 tonnes grading 12.3 grams per tonne.

The operation mines silicified shear zones in Archean diorite and granitic gneiss.

The Buryatzoloto mills have recovery rates of around 95%, but the company has been hampered by low mine production, which has stemmed from poor access to modern mine technology.

Buryatzoloto’s management has been seeking capital to modify production, increase mill capacity and add a carbon-in-pulp plant. High River and Buryatzoloto are negotiating for a US$20-million loan to finance the improvements. Buryatzoloto will also be applying for a listing on a stock exchange in a Western country.