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Kamchatka Prospects


At the end of March, Kamchtka Regions minister for natural resources stated that by 2018, gold output in the region would increase to 18 tonnes, while platinum production to 3 tonnes.

Currently there two companies mining gold in Kamchatka, OAO Zoloto Kamchatki (Aginsky refinery) and the Kamchatka Prospectors Artel. The former produced 2.024 tonnes of gold last year, while the latter produced 123.5 kilograms.

The leader of Kamchatkas gold production is Zoloto Kamchatki, whose shareholders are Renova and Berkley Investments, an investment fund whose interests are represented by the Swiss Investment Partner AG. Last year a merger was being prepared of Renovas gold mining assets in Zoloto Kamchatki and the uranium assets of the South African Harmony Gold, but the deal did not go through.

There are also gold mining projects in various stages of development in Kamchatka carried out by Trans-Siberian Gold and the Siberian Mining Metallurgical Alliance. At the source of both projects was the MIRP Directorate, which now concentrating on projects in the Krasnoyarsk Region.

In 2006 a merger between Trans-Siberian and the Siberian Mining Metallurgical Alliance was considered but never materialized either.

Trans-Siberians largest shareholders are Anglo Gold Ashanti and UFG Asset Management (34.92%). The Alliances largest shareholder is UFG, but the fund is abandoning the project.

In March, Norilsk Nickel joined the list of miners in Kamchatka, having won the auction for the Tymlatskaya area with reserves of gold and silver. But Norilsk Nickel is not interested in precious metals but in copper.

Projects:

Gold: One tonne will be added by the Aginski mining and enrichment combine if it reaches the project capacity of three tonnes a year. In December 2006 the company announced it had reached project capacity, but in 2007 real extraction was only one third of project capacity. In 2008 there is not expected any commissioning of new gold mining projects, but in 2009-2010 extraction should begin at the Ametistovoe and Asachinskoe deposits.

A successful start-up of Ametistovoe (Zoloto Kamchatki) can add at once five tonnes to Kamchatkas annual gold production. The commissioning of the project was delayed by an earthquake at Khailino in 2006, after which design needed to be altered. But now there should be any problems with the start-up as the deposit has been thoroughly prepared for extraction and by 2010 Ametistovoe will come on stream. The capacity of the complex is 600,000 tonnes of ore a year.

Asachinskoe (whose license belongs to Trevozhnoe Zarevo, a subsidiary of Trans-Siberian Gold) is expected to begin production in 2009. Asachinskoes project capacity is three tonnes of gold a year. The company has had problems with financing but preparatory work is proceeding according to plan. Thus by 2010 these three deposits will produce together 11 tonnes of gold.

The remaining seven tonnes will come from projects where exploration and evaluation is still under way but whose reserves have not been confirmed yet. They are Baranyevskoe, Kumroch, Ozernovskoe and Rodnikovskoe.

In the second quarter of 2008 Zoloto Kamchatki intends to complete the evaluation and registration of the first phase of Baranyevskoes reserves. The reserves are expected to amount to 50 tonnes.

Also this year Zoloto Kamchatki plans to complete exploration at Kumroch, whose projected resources are 50-60 tonnes.

Exploration and evaluation is under way at two more deposits, Rodnikovoe and Ozernovskoe. The Ozernovskoe license is held by the Siberia Mining and Metallurgical Alliance. Prognosis resources there are 80 tonnes and the compoany expects to confirm reserves at 50-60 tonnes. Last year the company stopped exploration at the Porozhistoe deposit because prognosis resources were not confirmed.

Apart from Ozernovskoe, the Alliance holds the license for the Karamshinskoe ore area, whose P1+P2 reserves are 18 tonnes of gold and 75 tonnes of silver.

Rodnikovoe is another project of Trans-Siberian. On 2008 the company intends to submit to Rosnedra its reserves. Under JORC reserves are evaluated at seven tonnes of gold and 70 tonnes of silver.

Platinum mining in Kamchatka is done by Koryakgeoldobycha (the same shareholders as with Zoloto Kamchatki). Currently Koryakgeoldobycha operates at placer deposits with the annual output of two tonnes. In 2006 the company began exploration of an underground deposit and it is expected to switch to underground mining as its placer resources are exhausted.

Last year the company took a sample and platinum content in the ore showed at 1.7 grams/ton. Considering that the infrastructure at the deposit is ready, its a very good content. Reserves are expected at 30 tonnes of platinum. There are also slug heaps in the region with the platinum content of 150 milligrams per cubic meter of sand..

The confirmed reserves at Asachinskoe, Ametistovoe and Aginskoe will be sufficient for ten year of extraction at project capacity. Ametistovoe has 50 tonnes, Aginskoe about 30 tonnes, which means it will be exhausted by 2017-2018 if no additional reserves is discovered. This means that without geological exploration and starting of new min ing assets the declared 18 tonnes a year will not be kept for long.

Kamchatnedra has reserves in the region of 200 tonnes and prognosis resources of about 1,000 tonnes.

Three areas have been included in the list of auctions planned for this year, Khim-Kirganiksky ore area (gold resource potential about five tonnes, copper ore 480,000 tonnes in P1 category and 370,000 tonnes in P2), Sukharikovsky ore area and Lazurny area, that latter having been put to auction in 2007.

The Lazurny auction did not take place because only one bid was submitted, from Kamchatka Minerals, a subsidiary of the US Phelps Dodge Corp, which is part of Freeport-McMoRan Copper&Gold Inc. In the auction for Sukharikovsky not one bid was judged as meeting the auctions conditions. The bids were from Severnaya Zolotorudnaya Kompania (Severstal) and a subsidiary of Zoloto Kamchatki.

As of the beginning of this year in Kamchatka, as in the rest of Russia, no new auctions have been held, apart from those prepared and announced in 2007.

One reason is that the Land Code has changed and now permits for the possession of land need to be obtained before the auction is held. Also the fate of government agencies is unclear when the new president and government take office. Until this happens there will be no new auctions.

End

22.04.2008 18:16


WEEKLY REVIEW HIGHLIGHTS
Gold ambitions of Kamchatka
Commerzbank: Palladium steals the show
Norilsk Nickel reduces capital spending, eyes palladium deficit
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