Russian estimates fuel Armada Gold’s optimism — New estimate could boost production grades

A new estimate of the gold resource at its Baley gold project in far eastern Russia has enabled Armada Gold (AAU-T) to boost the projected production grade by about 20%.

The new resource for the Taseevskoe deposit at Baley, calculated using three cutoff grades, is:

* 13.8 million tonnes grading 4.76 grams gold per tonne measured, 104.7 million tonnes at 1.05 grams gold indicated and 20.8 million tonnes at 1.53 grams gold inferred, based on a cutoff grade of 0.3 gram gold per tonne; * 13.7 million tonnes at 4.8 grams gold measured, 28.1 million tonnes at 2.4 grams gold indicated and 7.8 million tonnes at 3.14 grams gold inferred, based on a cutoff of 1 gram gold; and

* 11.1 million tonnes at 5.55 grams gold measured, 9.8 million tonnes at 4.34 grams gold indicated and 4 million tonnes at 4.84 grams gold inferred, based on a cutoff of 2 grams gold.

Based on these cutoff grades, the amount of contained gold present is 6.7 million, 5 million and 4 million oz., respectively.

The resource estimate, calculated by Snowden Associates of Perth, conforms to the rigid guidelines of Australian regulations.

“It’s particularly pleasing to have an independent specialist verify that about 85% of the resource at Taseevskoe belongs in the measured and indicated categories,” Armada President Derek Fisher states in a release. “We expect that this resource will be largely converted to proven and probable reserves once the feasibility study is completed.”

Fisher says Snowden has confirmed that much of the measured resource is found at a shallow depth, where it can be readily mined using open-pit methods.

The Snowden report states that the model grades have been validated by Armada and that they show good spatial correlation with the known stoped-out areas.

The licences for the Taseevskoe deposit are held by the Russian company Balgold, in which Armada Gold has an 85% interest.

Preliminary pit designs based on the new resource estimates indicate that Armada should be able to operate the mine for several years with production grades exceeding 4.5 grams per tonne.

“By planning for early, high-grade production, we are able to reduce the scale of the project, which in turn will increase the return, pare the risk and lower the project cost to a level that’s more attractive to Armada shareholders,” Fisher says. “Then, after startup, we will investigate the possibility of expanding the project.”

Snowden is developing mine plans that will be used to produce a minable reserve. This work is expected to be completed by August. Completion of a bankable feasibility study by Kvaerner Metals Davy is expected in October.

The Taseevskoe deposit is the largest of several deposits in the Baley district. Balgold holds three other deposits at Baley, which contain an additional 3 million oz. gold (according to a Russian resource calculation).

In addition, Balgold intends to explore for a fourth deposit.