A month-old Russian company that describes itself as a machinery and aircraft builder has succeeded in its US$12-million bid for surface assets at the huge Dukat silver mine in Eastern Russia.
The successful bid has stalled plans by Serebro Dukat, which is 70%-owned by
The Kaskol Group, a tea-importing house and affiliate of an aviation manufacturer, bid successfully for the mill building, a few items of mill equipment and some support buildings. Pan American says it is “surprised” that Kaskol was awarded the bid since the assets have little value without the mining licence. Moreover, the company says it intends to continue developing the mine in accordance with its rights under the mining licence and lease agreement, and that Serebro Dukat may challenge, in court, the awarding of the development licence to Kaskol.
“We have spent a lot of time and money on the Dukat project and have overcome many problems,” says Pan American CEO Ross Beaty. “Kaskol’s action is frustrating, but we believe it will not prevent us from developing Dukat as soon as possible.”
According to the mining licence, Dukat, a former producer, is required to be in production by the end of 2001. In October 1999, Pan American completed the first phase of construction, which included the tailings dam and liner, heating plant and mine services building.
A feasibility study by Kilborn Engineering recommends that Dukat be designed to produce silver concentrates, with total capital costs pegged at US$89 million and the internal rate-of-return, at 22.5%. These estimates are based on a silver price of US$5 per oz. and a gold price of US$300 per oz. (Earlier studies considered producing silver dor, but higher-than-anticipated capital costs of US$212 million rendered such an approach unattractive.)
Pan American has spent US$30 million in its effort to return Dukat to production, including payment of US$5 million for the mining licence. An additional US$75 million is budgeted to finish the project.
Diluted proven and probable minable reserves are estimated at 10.5 million tonnes grading 755 grams silver and 1.54 grams gold per tonne, equivalent to 256 million oz. silver and 522,000 oz. gold. The geological resource, as reported by Russian state agencies, totals 31.4 million tonnes grading 473 grams silver and 0.98 gram gold, equal to 477 million oz. silver and 1 million oz. gold.
Ore is to be processed at the existing mill in Omsukchan at the initial annual rate of 380,000 tonnes, ramping up to full-scale production of 750,000 tonnes within two years. Metal production, in the form of concentrate for export to overseas smelters, is expected to average 15.8 million oz. silver and 30,500 oz. gold per year over a planned 15-year mine life.
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