Fortress accepts superior offer from Russian company for Svetloye

Offering US$9.25 million in cash, Russian gold and silver producer JSC Polymetal has trumped an earlier offer by MacRitchie Metals Pte. for a 100% stake in the Svetloye gold project owned by Vancouver-based junior Fortress Minerals (FST-V).

Fortress, a member of the Lundin Group of companies, say it accepts the superior bid and will pay MacRitchie a break fee of US$250,000.

The Svetloye gold deposit in the Russian Far East, has an inferred resource of  20.1 million tonnes grading 2.21 grams gold per tonne for contained gold of 1.43 million oz.

The remote project, in an area of little or no infrastructure, is about 750 km southwest of Magadan, 220 km southwest of Okhotsk, and roughly 80 km from the Pacific Ocean.

Okhotsk is the access port used by Polymetal’s existing Khakanja mine. Currently supplies and personnel are generally transported to Svetloye by regular commercial aircraft from Khabarovsk to Okhotsk (about 1,300 km), then to site either by helicopter or winter road, depending on the time of year.

One option Polymetal is considering is to truck ore from Svetloye to the Khakanja mine for processing. Polymetal’s strategy is to create centralized processing facilities for the treatment of material from different sources.

“Svetloye represents a unique opportunity to broaden our late-stage exploration effort in the region and potentially add several years of mine life for Khakanja,” Vitaly Nesis, Polymetal’s chief executive, stated on the company’s website.

The sale is still subject to the approval of Polymetal’s board of directors. If the deal goes ahead, the transaction is expected to close before the end of August.

With Svetloye comes an 8,460 hectare exploration and mining licence valid until Dec. 31, 2030.

Previous owners Freeport-McMoRan Copper & Gold (FCX-N) explored Svetloye during the 2003 and 2004 field seasons during which time they identified a large zone of epithermal gold mineralization. With 28 drill holes (3,687 metres) and roughly 550 metres of surface trenching, Freeport discovered seven targets within the licence area: Elena, Larissa, Tamara, Tamara North, Gorki, Ludmilla and Amy.

Polymetal owns gold and silver mines in three regions of Russia: the Magadan region, where it operates the Dukat and Lunnoye mines (and the Lunnoye satellite of Arylakh), the Khabarovsk Territory, where it operates the Khakanja mine (together with its satellite Yurievskoye) and the Sverdlovsk region, where it operates the Voro mine. Polymetal also operates Varvarinskoye gold-copper deposit in Kazakhstan.

Last year Polymetal’s gold production grew by 9%, to 311,000 oz. gold, and its silver production expanded by 1% to 17.3 million oz.

This year the company hopes to produce 350,000-370,000 oz. gold and 19 million oz. to 20 million oz. silver. (These numbers do not include any production from the Varvarinskoye mine in Kazakhstan.)

By 2012, Polymetal aims to lift its gold production by more than 100%, to 630,000 oz. gold and its silver production by 50%, to 25.6 million oz.

At presstime in Toronto Fortress Minerals was trading at 14¢ a share, up half a penny or 3.7% on the news. The company has traded in a 52-week range of 11¢-51¢ per share.