In 2005 the Omchack Joint Venture produced 79,000 oz predominantly from its two main assets in the Magadan region: Shkolnoye underground mine and Berelekh alluvial deposits. There was an 11% decrease in prodcution in 2005, subsequently the Group's attributable production also decreased by 10% from 57,000 oz to 51,500 oz following a cash dividend receipt in December, which reduced PHM's interest in the Joint Venture from 65% back to 50%. The decrease in gold production was forecast as a result of the transition of mining to the lower horizon at the Shkolnoye deposit, where the ore is less rich, rather than a reduction in ore extraction and processing. The gold grade in saleable ore is now 10-15g/t, whereas 2003-2004 zones with gold grades of over 20g/t were mined.
It is estimated that Berelekh has on-balance (commercial) reserves for open-pit mining for over six years. In addition, each year Berelekh carries out exploration at the same time as extraction, which is expected to lead to a growth in reserves each year of between 38,000 and 48,000 oz. At Shkolnoye reserves and resources are expected to enable production of c.13,000 oz in 2007.
During the first six months of 2006 the Omchak Joint Venture produced c.23,000 oz of gold. PHM's attributable share of production was 11,500 oz. OOO Zeyazoloto and OOO Noviye Teknologii, which were acquired by the Joint Venture in 2005, continued successfully, producing c.1,447 oz of gold. These companies were also involved in the acquisition of local 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 c.10,000 oz of gold starting in 2007 for upwards of five years.
Noviye Tekhnologii’s deposits are near to Pokrovskiy and thus are easily accessible with developed infrastructure with proximity to a supply of earthmoving and processing equipment as well as experienced labour. The development of these projects should benefit both Peter Hambro Mining Plc and the Omchak Joint Venture with a pooling of resources – the original intention of the joint venture from the outset.
Detailed exploration will be required at the Verkhne-Alliinskiy deposit to further delineate the three principal ore zones already defined and to investigate the more than 50 additional mineral anomalies that have been identified within the licence area, on some of which, gold grades of up to 5g/t have been recorded. By the end of 2007 reserves estimation of the deposit should be completed to categories C1 and C2, as well as the relevant information on the hydrogeology and geotechnical conditions and metallurgical properties of the ore.
Geophysical and geochemical exploration work is currently under way at the Bukhtinskiy deposit to investigate previously detected primary dispersion halos and to identify targets for detailed geological exploration, surface trenching and exploration drilling.
At the Kuliinskiy deposit, by the end of 2007 trench and drill hole exploration of the gold-sulphide mineralisation will be completed, resulting in category C2 gold reserves and P1 resources being established.
At the Uduma deposit, in July 2006 pilot-scale alluvial gold extraction at one washing plant was started. By the end of the season 38,300m3 of gold bearing sands had been washed and enriched and 1,170 oz of gold extracted. 100,000 m3 of trenching is planned for 2007 for further conversion of resources into mineable reserves.
