Magadan pumps cash into mining operations — Production can’t keep pace with 1998 output

Regional officials in the prolific gold and silver region of Magadan, in northeastern Russia, have approved the financing of 11 upgrade and construction projects to the tune US$631.6 million.

The news follows reports that the region may not produce as much of the yellow metal this year as in 1998.

At the Matrosov mine, US$224 million will be spent modifying operations and developing the surrounding Natalka goldfield. Mine officials estimate that the investment could translate into production of between 320,000 and 385,000 oz. per year.

The government says it will contribute US$150 million to the cost of building a mine and mill at the Dukat project. A revised feasibility study in December 1998 estimated that facilities at the past producer could be upgraded at US$89 million, plus US$43 million for “sustaining capital” over its life of 15 years. Touted as one of the world’s largest silver deposits, Dukat is a joint venture among Canadian firms Pan American Silver and Western Pinnacle Mining, the Russian company that holds the mining licence, and International Finance Corp.

Small projects will also receive cash infusions. At the Vetrinskoye deposit, US$10 million will be spent building a hydrometallurgical plant to process gold concentrates. About US$30 million will be spent to build a mine for a group of prospectors at the Goltsovskoye silver field, and a similar amount will be distributed to placer gold producers throughout the region. The government will also spend US$7.5 million to build a silver-refining plant at the Kolyma refinery, and US$4.6 million to build a mining explosives factory.

In the first eight months of the year, Magadan-area gold mines produced an average of 76,250 oz. gold per month — below last year’s average of 81,000 oz. per month. Last year’s total production of 970,000 oz. could remain out of reach for Magadan producers, which are on-track to producing only 915,000 oz. for 1999 at current rates.

The region’s largest producers since the beginning of the year have been the Kubaka and Matrosova mines, with a combined total of 354,000 oz.

For the first six months of 1999, the Kubaka mine produced 244,000 oz. gold and 243,000 oz. silver. Overall, 163 hardrock and placer producers are expected to produce 1.14 million oz. in 1999, up over last year’s total of 970,000 oz. mined by 155 companies.

Magadan’s silver industry could get another boost if Serebro Territorri follows through on plans to develop the Lunnoye silver deposit. The company is a division of Geolog, which, with Canadian partner Silver Standard, tried unsuccessfully to develop the deposit. Geolog was reorganized earlier this year and Serebro Territorri spun off in another attempt to build a mine and mill at the deposit.

— With files from Interfax News Agency.