GLOBAL SEARCH FOR GOLD — KWG augments holdings in Russia

Montreal-based KWG Resources (KWG-T) has acquired a half interest in the Mnogoverchinny (MG) gold mine in far eastern Russia.

Situated in the Khabarovsk region, the mine contains proven and probable resources of 11.8 million tonnes grading 7.4 grams gold per tonne.

The deal will also see KWG acquire an interest in the nearby Khakandja and Yurievsk deposits, which have aggregate probable resources of 10.7 million tonnes grading 7.9 grams gold and possible resources of 848,300 tonnes grading 15 grams gold.

KWG and the vendor, private Russian firm Amour International Gold Mines, will each hold a half interest in the Russian joint-venture company that will own and operate the MG gold mine. The deal will see KWG provide all the financing required to advance the MG mine to production. The company will be entitled to 70% of the cash flow from the mine until any loans it provides the joint venture are repaid.

The mine produced 70,000 oz. gold in 1996, and the new joint venture plans to improve and expand mining and milling operations in order to boost production to 200,000 oz. per year by the end of 1998.

Similarly, KWG will earn its half interest in the Khakandja and Yurievsk projects by financing the development work required to bring the deposits to production at a projected combined rate of 64,000 oz. gold per year. If production reaches 96,000 oz. gold per year, KWG will have the option of increasing its half interest to 70% in consideration of cash and equity payments. KWG will also be entitled to 84% of the net income derived from Khakandja and Yurievsk until it has recuperated all the loan capital and accrued interest advanced for commercial production.

KWG’s other interest in the region is the Ametistovoe open-pit project, which is scheduled to open late this year. Output for 1988 is projected at 140,000 oz. gold.

Meanwhile, KWG has agreed to buy 7.5 million shares of Emerging Africa Gold (EAGI-C), which is held 39% by KWG’s parent company, St. Genevieve Resources (SGV-T). In exchange, KWG will issue 814,583 shares to another St. Genevieve subsidiary, SGV Merchant Bank. This will raise to 23% the combined shareholdings of SGV and SGV Merchant Bank in KWG. The deal will give KWG a 34.5% interest in Emerging Africa.