Study shows potential at Armada’s Baley

An independent feasibility study shows that Armada Gold (AAU-T) is on the road to profitability at its Baley project in southeastern Russia.

Armada, through its Russian subsidiary, has an 85% interest in the Baley gold project, which is situated in the Chita region of Siberia.

The study, which was conducted by Kvaerner Metals Davy, estimates that the Taseevskoe portion of the Baley gold project is capable of producing an average of 220,000 oz. gold per year for an initial period of 10 years at an average cash operating cost of US$166 per oz. gold. The payback period would be 4.2 years with a US$350-per-oz. gold price, and 2.9 years if the gold price climbs to US$375 per oz.

The study concludes that development would be technically and economically feasible. A particularly favorable aspect of the project is that higher-grade ore would be produced in the first two years of operation, notes Armada President Derek Fisher. Production in the first year is projected at 267,000 oz. gold; in the second, at 324,000 oz. The cash operating cost would be US$140 per oz. in the first year and US$120 per oz. in the second.

“We are confident we have identified a viable, economically sound project with a rate of return that will support financing for the development,” Fisher says.

He adds that Armada has begun discussions with various institutions that have shown interest in providing equity and debt financing for the project.

Kvaerner based its study on an open-pit mine with a stripping ratio of 7.2-to-1. The expected milling rate is 1.75 million tonnes per year, and the grade in the first 10 years should average 4.5 grams gold per tonne.

The mine plan will see 10.7 million tonnes of low-grade ore (1.14 grams gold per tonne) stockpiled over the first 10 years and subsequently processed.

Armada is investigating the possibility of augmenting the Taseevskoe mill feed with higher-grade ore from satellite orebodies at Baley.

The Kvaerner study estimates that, by emplying conventional crushing, grinding and flotation, a gold recovery rate of 87% is achievable. The concentrate will be pressure-oxidized, and the gold in the oxidized concentrate and in the flotation tailings will be recovered in a carbon-in-leach circuit.

The study estimates that the first gold can be poured within 28 months of the decision to proceed.

The project is estimated to contain proven reserves of 9.2 million tonnes grading 5.21 grams gold, and probable reserves of 19 million tonnes grading 2.26 grams gold. The estimates are based on a 0.88-gram-per-tonne cutoff.

Armada has concluded a tax protocol with the regional administration of Chita and is currently negotiating contracts with Russian banks and authorities to enable its gold production to be marketed in Russia and abroad.