Star helping to develop large Sukhoi Log deposit

Australia-based Star Mining is hoping to strike it rich in the Irkutsk area of Siberia where gold mining has been a way of life for 148 years.

Star has a 34.9% interest in a Russian company, LenaGold (shortened from Lenzoloto Mining Closed Join Stock Company), whose assets include the potentially large Sukhoi Log hard-rock gold deposit.

Officials of Star, including chief executive officer Michael Bates, along with representatives of LenaGold, hosted a luncheon in Toronto to discuss their plans.

LenaGold operates 18 dredging operations and about 100 individual sluicing operations which yield more than 350,000 oz. annually.

Hard-rock deposits in the Lena gold fields, of which Sukhoi Log is the largest, were identified in the 1960s. According to Bates, the Sukhoi Log deposit, which has an average depth of 165 metres and where sampling to date has returned an average grade of 2.7 grams gold per tonne (at a cutoff grade of 1.5 grams), is estimated to contain more than 50 million oz.

A production startup for the open-pit operation has been targeted for early 1998, at a rate of 2-3 million oz. per year. The first-phase capital cost of placing Sukhoi Log into production is projected at US$400-500 million.

Other deposits in the area belonging to LenaGold are expected to contribute, in total, an amount roughly equal to Sukhoi Log’s output.

Star, which has 458 million shares outstanding, is paying US$250 million for its 34.9% interest in LenaGold. Star’s interest in LenaGold is owned through a wholly owned subsidiary, Star Technology Systems, which first opened an office in Moscow in 1989.

To help in the raising of funds, management intends to list Star outside of Australia, likely in London and New York.

The Irkutsk area is a leading Russian source of coal, oil and gas, gold, semi-precious stones, potassium salt and aluminum, as well as timber. It also boasts major power-generating capabilities.