ASIAN EXPLORATION — KWG develops gold mine in Russia’s far east — Production at Ametistovoe epithermal system slated for September

Montreal-based KWG Resources (KWG-T) plans to pour its first dore bar this September from its newly acquired Ametistovoe gold mine, now under development in the Kamchatka Peninsula of far eastern Russia.

The mine site lies in the tundra of the Koryak autonomous region, about 120 km northwest of the coastal town of Korf, a year-round Pacific port linked to the site via a winter road.

KWG acquired the mine last winter through the reverse-Takeover of sister company Far East Gold, which has an 80% interest in the Russian company, Koryakiya Mining. Koryakiya holds a licence at Ametistovoe covering 31 sq. km of surface rights and 11 sq. km of mineral rights.

The Ametistovoe deposit is a caldera-Associated, low-sulphide epithermal vein swarm hosted within hydrothermally altered porphyritic diorite of Oligocene age. Within the deposit are 80 known zones of gold mineralization irregularly distributed in an 8-sq.-km area along a series of concentric ring faults associated with the caldera structure. Gold occurs as fine-grained particles measuring from 0.01 to 0.15 mm, often disseminated in quartz, or, more rarely, in sulphides.

The updated resource estimate for Ametistovoe stands at 11.1 million tonnes grading 8.24 grams gold and 37.92 grams silver per tonne. This estimate takes into account more than two decades worth of Soviet-era data, which included 167,000 metres of drilling and 60 km of trenching.

The first phase of operations will consist of open-pit mining to a depth of 80 metres, exploiting the surface reserves of the Chempion and Yagodka zones.

Total open-pit reserves have been pegged at 1.6 million tonnes grading 5.45 grams gold, with a stripping ratio of 5.1-To-1. As the project matures, other zones amenable to open-pit mining will be developed.

During 1997, KWG plans to mill about 250,000 tonnes at Ametistovoe, boosting this rate to 1 million tonnes annually by 1998. The company plans to be milling 2 million tonnes annually by 2001.

Total operating costs are estimated at US$152 per oz. gold for 1997, a figure that is expected to drop to US$119 per oz. gold during 1998. To reach production, capital expenditures in the order of US$18.7 million will be required.

Ore processing will be accomplished by means of vat leaching, with planned recovery rates of 75% for gold and 70% for silver.

Some 120 people will work at the mine, most of whom will be local residents.

KWG predicts the Ametistovoe operations will generate gross revenue of US$15 million in 1997.

The firm plans to conduct more than 50,000 metres of reverse-Circulation drilling at Ametistovoe during the next two years, targetting mineralized areas not included in the current resource estimate.

In 1996, KWG incurred a loss of $3.3 million (or 14 cents per share) on revenue of $865,000, compared with a loss of $5.2 million (30 cents per share) on no revenue in the previous year.

KWG, which is 24%-owned by parent-Company St. Genevieve Resources (SGV-T), is also exploring for gold on properties near Magadan, a Russian coastal city 1,000 km west of Ametistovoe.

KWG intends to produce about 300,000 oz. gold annually by 1998, 75,000 oz. of which will come from Ametistovoe.

The company recently appointed a new president, John Webster, who once served as vice-president of mining for Nelson Gold (NLG-T).