Mining giant Homestake Mining (NYSE) has reached an agreement whereby it can acquire a sizable chunk of the Chelopech gold-copper mine 75 km east of Sofia, Bulgaria.
The company will buy 6 million newly issued shares (about 10%) of Navan Resources, an Irish company with mineral interests in Europe, for US$24 million. Navan must invest half of the proceeds in the Chelopech operation.
The agreement includes an option for Homestake to buy half of Navan’s wholly owned subsidiary, which currently owns a 68% indirect interest in the Chelopech mine. If exercised, Homestake will invest US$48 million in the Navan subsidiary, which would then invest the funds in the operation.
The Chelopech underground mine contains one of Europe’s largest gold resources. It opened in 1957 and closed in 1990, after producing 700,000 oz. gold, when local Bulgarian smelters could no longer effectively treat the arsenic-bearing concentrates.
Last year, Navan reopened the mine, processing about 500,000 tonnes of ore per year. The gold produced — about 46,000 oz. per year — is sold as concentrates for refining outside Bulgaria. Work is in progress to increase annual capacity by 50% to 750,000 tonnes containing about 72,000 oz. gold, and install an arsenic-removal plant to meet European environmental standards.
Homestake’s option to buy into Navan’s subsidiary will depend on results of a study which is being carried out to investigate the possibility of more than doubling annual capacity to 2 million tonnes. The US$48 million would be used to provide a portion of the funds necessary to sink a new 2,500-ft., high-production shaft and expand the ore treatment facilities. A preliminary estimate of the total cost of the expansion is US$120 million.
Reserves and resources at the Chelopech mine are estimated at 33.6 million tonnes containing 1.1 billion lb. of copper and 4.5 million oz. gold, based on a cutoff grade of 5 grams gold per ton. If the cutoff were lowered to 4 grams per ton (which might be possible, given the expansion plans), the total reserves and resources would increase to 57.6 million tonnes containing 1.5 billion lb. of copper and 6.3 million oz. gold.
In other news, Homestake has exercised its option and paid US$1 million for 5% of Zoloto Mining, which is earning a 75% indirect interest in the Pokrovshoye gold deposit in the Amur region of Eastern Russia. Homestake retains another option for an additional 62% of Zoloto for US$15 million.
If exercised, Homestake would hold a 50% indirect interest in the mine.
A feasibility study, already under way, envisions milling 350,000 tonnes of ore and heap-leaching another 3.6 million tonnes of lower-grade ore. The operation would produce 140,000 oz. gold annually.
Preliminary capital cost estimates for the mine and mill facilities are in the range of US$75-85 million. Production is expected in 1998.
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