Pioneer is the Group's most advanced development project. First production is scheduled for the fourth quarter of 2007. The licence for the deposit was issued in 2001 and since then extensive exploration work has been undertaken, including 78.4km of drilling, 17.4km of shallow drilling and 481,700m3 of trenching. 108,000 samples have been processed through the Group's laboratories. Management estimates of 69.6 million tonnes of ore at 1.6g/t in C2 and 15.4 milliion tonnes at 2.1g/t in P1 containing c.3.7 million ounces of gold in aggregate have been established at the central part of the deposit.
In 2006, 166,400m3 of trenching, 30,750m of deep drilling and 5,700m of shallow "mapping" holes were completed in 2006 at Bakhmut, Promezhutochnaya and Yuzhnaya ore zones.
Officials from GKZ (State Committee on Reserves) surveyed works conducted at Pioneer in the summer of 2006, ahead of the submission of documentation to GKZ for reserves and resources approval. The Commission noted the high quality of work carried out by the Group and agreed with the geological interpretation of the deposit's mineralisation and the work programme needed to bring the deposit into production. A broad metallurgical assesment of Pioneer was carried out in 2006; 410 samples were collected for phase analysis and bulk samples of oxide and primary ore were obtained.
At each of the Bakhmut, Promezhutochnaya and Yuzhnaya ore zones, previously predicted high grade ore columns were confirmed by several intersections. The Group has decided not to further delineate the identified high grade areas (with the exception of Andreevskaya) for reserve definition purposes, preferring to finalise the detailed evaluation of this material in the mining plan in due course.
The Andreevskaya ore zone, intersected by drill holes for the first time in 2006 has already been traced for 2km. Andreevskaya consists of a southerly-dipping (62o-75o) outcropping zone of argillisation and quartz stockwork 2.8m to 19.3m thick, with variable gold grades between 0.9g/t and 368.4g/t along the evaluated section. Maximum grades (up to 1,225.0g/t) have been found in the central area of the explored part of the zone and it is possible that they are related to an ore column, predicted in that location.
So far, drill holes and trenching works on 450m show an average grade of 32g/t to a depth of 90m over a 6m width, giving C2 and P1 contained gold of 550,000oz. Significant silver grades are also present, with some samples greater than 1,000g/t.
Pilot scale mining is now continuing for the third year. One of the purposes of this is to confirm the results of geological exploration. Mining of the ore (on 5m benches) is preceded by detailed exploration with continuous channel samples on each bench at 8-10m spacing, and sampling of blast-hole cuttings on a 7m x 7m grid. The results of this work have confirmed the reliability of corresponding exploration estimates.
In the course of exploration at Pioneer, new geological data allowed the deposit model to be viewed in a new light. In 2003, the deposit was considered to take the form of sub-parallel ore-bearing circular structures around a stock of granite-porphyry. Later, it seemed more likely that the deposit structure was related to sinistral fault displacements producing East-West and North-South ore-controlling structures, and rich ore columns at intersections with transverse tectonic structures, some of which are only visible as satellite image lineaments. This enabled the Group to forecast a total of 22 ore columns, eight of which have now been confirmed. Discovery of the rich Andreevskaya ore zone has changed the Group's view about the deposit structure. It seems that both models mentioned above are important, and on this basis the Andreevskaya zone is likely to have a continuation to the South-West, parallel to the Yuzhnaya zone.
In the first half of 2007 efforts were concentrated on preparing the deposit for first production in September. Construction works and equipment deliveries are proceeding according to schedule and the construction of the man camp and main infrastructure has been completed allowing for the transfer of the labour force previously trained at Pokrovskiy to Pioneer operations.
