First Dynasty gets green light in Armenia

Despite the gloomy gold market, First Dynasty Mines (FDM-T) is entering the new year with a bang.

Recently completed independent prefeasibility studies give the “thumbs-up” sign for the redevelopment of the past-producing Zod and Meghradzor gold mines in Armenia.

The studies, which actually represent an interim step toward a bankable feasibility study to be completed by mid-year, conclude that start-up at both mines should take place in two phases, beginning with Meghradzor in the third quarter of this year. Production at the larger Zod mine, which lies in the eastern part of the country, will follow in 1999.

Combined capital costs for both projects are pegged at US$86.1 million, with the bulk of this allocated to Zod. The mine will be fitted with a gravity separation and cyanide-in-leach circuit to process gold on site. During its previous operation from 1976 till late 1996, ore was shipped west to the former Soviet Union’s central gold processing plant for the area, at Ararat.

As in Soviet times, the operation will combine open-pit and underground techniques.

Production is pegged at 136,000 oz. per year, based on gold recovery rates of 70%. Operating costs are expected to average US$177 per oz. gold, however, higher costs in the first year of production give a life-of-mine average of US$182 per oz. The project’s capital cost of US$63.3 million includes working capital, owner’s costs and 15% for any contingency.

Measured and indicated resources at Zod are pegged at 10.7 million tonnes grading 6.01 grams gold per tonne, based on a cutoff grade of 3 grams gold.

Of this, 4 million tonnes grading 5.83 grams gold can be mined at a stripping ratio of 10-to-1. Underground ore blocks, which assume 10% for ore dilution and 20% for mining losses, account for another 4.7 million tonnes and average 5.91 grams gold.

The open-pit reserves were calculated using a cutoff grade of 1.56 grams, whereas a grade of 3 grams was used to outline underground blocks.

First Dynasty notes that a further 13 million tonnes of resources fall into the inferred category.

Unlike Zod, Meghradzor ore will be shipped south by rail to Ararat, where the company is in the final commissioning stage for a

1.5-million-tonne-per-day plant that will process tailings left over from the Soviet era (T.N.M., May 26/97). A portion of the US$22.8-million capital investment needed for Meghradzor will be used to increase the plant’s capacity to accommodate the extra feed.

Mining will be carried out by underground methods at a rate of 125,000 tonnes per year. The expected gold recovery rate of 90% will yield 36,000 oz. gold per year, bringing total annual production at Ararat to 61,000 oz.

Operating costs are expected to fall in the range of US$142 per oz.

The mine contains measured and indicated reserves of 815,000 tonnes grading 12.25 grams gold, based on a cutoff grade of 6 grams gold. The reserve calculations assume 30% for dilution and 20% for mining losses.

First Dynasty has the right to earn 50% interests in both the Zod and Meghradzor mines.