Overview

The Omchak Joint Venture in the Magadan region with Susumanzoloto and Shkolnoye was established in August 2003 following the signing of a joint venture agreement in July 2003.  The Company contributed US$7,400,000 to the joint venture and Susumanzoloto and Shkolnoye contributed their interests in two operating mines, the Berelekh mine and the Shkolnoye mine respectively.

The primary objective of the Omchak Joint Venture was to identify, acquire and develop promising gold deposits in regions of Russia where the Group did not have a presence at the time.  The strong team of people employed by Omchak has vast experience in Russian gold mining, in particular, in underground and alluvial mining. 

Since its incorporation, Omchak has acquired over 10 new assets in four different regions of Russia which it has been actively exploring and developing.  In 2006 Omchak also carried out gold exploration and production in four different regions of Russia: Magadan, Chita, Amur and Republic of Sakha (Yakutia). 

CJSC Susumanzoloto was formed following the privatisation of State operations in 1993-4 and is the legal successor to the Susuman Gold processing plant which was commissioned in 1938.  It is the largest gold mining company in the Magadan region and has its head office in the town of Susuman and a representative office in the region’s capital city, Magadan. 

CJSC Nelkobazoloto was a subsidiary of the Shkolnoye gold mining company which was formed in 1994 for the purpose of acquiring the mineral licence for the Shkolnoye deposit in the Tenkinsky District of the Magadan region.  CJSC Nelkobazoloto was subsequently formed in 1996 as a subsidiary of JSC Shkolnoye for the purpose of bringing the Shkolnoye deposit into operation.  CJSC Nelkobazoloto has its head office in the town of Ust-Omchug as well as a representative office in Magadan city.

CJSC Nelkobazoloto holds the exploration and production licence for the Shkolnoye hard rock gold deposit which it mines by underground methods.  Major development works were completed at the deposit in 2002.   The company also mines the Vetrenskoe hard rock gold deposit under contract with CJSC Susumanzoloto which acquired the licence to the deposit in 2000.  In 2001 CJSC Nelkobazoloto was contracted to develop and operate an open pit and underground mine and a processing plant; ore processing subsequently commenced in August 2002 at the deposit.

CJSC Berelekh was formed in 1999 and holds a number of licences including 4 exploration licences.  Placer gold deposits have been exploited in the Berelekh River valley in the Susmansky district of the Magadan region since 1936.  The company has its head office in Susuman and a representative office in Magadan city. 

In May 2005 the Omchak Joint Venture acquired 50% of OOO Zeyazoloto and 100% of OOO 'Noviye Tekhnologii' which owns five licences for the development of placer gold in the Amur region with evaluated gold reserves and resources of c.100,000oz and development and analysis work suggests that its reserves and resources will increase significantly over the next two years.  

Noviye Tekhnologii’s deposits are near to Pokrovskiy and are thus easily accessible with developed infrastructure and also benefit from their proximity to a supply of earthmoving and processing equipment as well as experienced labour.  During the first half of 2005 'Noviye Tekhnologii' started preparatory works for the commencement of production on the five licence areas.  Mining works commenced in May and included stripping and the preparation of machinery for the washing of gold bearing sands.

The Omchak Joint Venture also acquired the combined exploration and mining licence for the Verkhne-Alliinskiy gold property in the Chita region in May 2005.  The deposit contains gold reserves and resources of 669,000 oz and silver reserves and resources of 890,000 oz.  The Omchak Joint Venture also won the auctions for the Kuliinsky and Bukhtinskiy hard rock deposits also in the Chita region.  In 2005, the Joint Venture also acquired the Uduma deposit in the Republic of Sakha (Yakutia). 

During the first six months of 2006 OOO Zeyazoloto and OOO Noviye Tekhnologii acquired several licences for the right to explore and produce alluvial gold at local deposits.  New licensed areas acquired in this process have confirmed reserves that are expected to yield a planned annual production of alluvial gold in the Amur region of an additional c.10,000oz gold per annum starting in 2007 for some five years.