Pokrovskiy Flanks
It is planned to delineate the fanglomerate resource in detail in 2007, and at the same time exploration of the underlying hard-rock ore zones will be continued. Exploration will continue in ore zones discovered elsewhere in the inner flanks. In the "outer flanks" areas, exploration will be continued in all areas. At Velikiye Luzhki drilling is planned in 2007 - a series of vertical holes to intersect the mineralised zone and allow the upgrading of the already established Russian P1 resource to the Russian C2 reserve category. The metallurgical similarity of washed fanglomerate ore to run-of-mine Pokrovskiy ore means that the fanglomerates can be brought into production using the existing Pokrovskiy mill, with its planned expansion of capacity, and no separate new mill for the "flanks" is required in the short to medium term.
Pioneer
Preparations for the early start of full-scale mining are scheduled to continue and the Pioneer heap leach facility is due to start operation in 2007 and the RIP plant in 2008. Detailed exploration of all ore zones is scheduled to continue, with concentration on the evaluation of Andreevskaya and proving extensions of this zone to both East and West. Further drilling of zones predicted by structural model and satellite imagery data is planned.
The Group has developed a highly positive economic mine plan for Pioneer that provides for the construction of a stand alone processing operation at Pioneer so that the high-grade fraction will no longer need to be treated through the mill at Pokrovskiy, some 30km away. The plan includes heap leaching with an eventual processing capacity of 2.9mt of ore per annum and a modularly expanded RIP plant, eventually capable of processing 5.2mt of ore per annum. The modular expansion of the heap leach operation and the RIP plant is expected to be carried out without interruption to production.
Three types of ore have been identified at Pioneer: oxidised, mixed and primary ore. Oxidised and some mixed ores will be treated first, using the RIP plant and Heap Leach, then the remainder of the mixed ore and the primary ore will be treated by floatation and cyanidation. Separate treatment of different types of ore is expected to cut operating costs and allow for higher recovery rates. The mine plan provides for modification of the mill to treat primary ore from 2014 with all equipment being used as a Flotation-Cyanidation plant.
Open pit mining is expected to be carried out with an average strip ratio two times lower than at current operations at Pokrovskiy. The site plan locates the stockpiles between the Promezhutochnaya, Bakhmut and Andreevskaya zones as the dip of all these zones is away from this area. The electricity supply has been commissioned at Pioneer with the power line to Pioneer from Pokrovskiy completed and the 4MW first stage substation operational. Pre-stripping of 392,000m3 has been completed.
Capital costs are expected to be in the order of US$87m for the first phase of the development, processing oxidised and mixed ore, up to 2009. When primary ore treatment starts, it is estimated that an additional US$53m will be spent on plant conversion. Cash costs per tonne of ore processed are expected to be similar to those at Pokrovskiy Rudnik.
