First Dynasty joins JV in Armenia

Junior First Dynasty Mines (FDM-T) has entered an agreement with the Armenian government to upgrade two gold mines in the former Soviet republic.

Other participants in the project include New York-based Global Gold (through its Cayman Islands-based subsidiary) and Armgold, Armenia’s state mining company.

The two mines — Zod and Meghradzor — will be upgraded in order to reach a combined production rate of 300,000 oz. per year by 1999.

Reserves at Zod have been calculated as 24.1 million tonnes grading 6.7 grams per tonne whereas those at Meghradzor stand at 1.45 million tonnes grading 14.8 grams.

Zod, which was commissioned in 1976, has a production capacity of 800,000 tonnes per year, but production has been suspended until old equipment can be updated.

Operations have also been suspended at Maghradzor, which has a production capacity of 200,000 tonnes per year.

“Typical of many mines in Russia, it ran out of money,” says Robert Garrison, president of Global Gold. “The Soviet system was inadequate.” The new agreement calls for construction of a tailings processing plant with an annual capacity of 24,000 oz. gold.

Capital costs for the tailings project are estimated at US$10 million, with cash production costs pegged at $180 per oz. Startup is scheduled for September.

The deal allows First Dynasty to acquire an initial 51% in Global Gold’s subsidary in the Cayman Islands by contributing US$10 million to development projects. It can acquire the subsidiary outright by investing US$26.4 million and issuing 4 million shares to Global Gold.