Trans-Siberian deal funds Russia projects

The UK's Trans-Siberian Gold is blazing a trail as one of the first foreign mining companies to operate in the Kamchatka region of Russia. Trans-Siberian is developing the Asacha and Rodnikova gold deposits, just outside the city of Petropavlovsk-Kamchatsky, and plans to have a producing hard rock mine by the end of 2006. The process hasn't gone altogether smoothly, but Trans-Siberian is determined to proceed, unlike Kinross Gold, which departed Kamchatka when faced with environmentalists' roadblocks.

After four years of going it alone, Trans-Siberian sold a 29.9 percent stake for $31.6 million to South Africa-based major AngloGold Ashanti in July 2004. This guaranteed the financing Trans-Siberian needed to build a mine at Asacha. "If AngloGold Ashanti wanted to start from scratch, it would take them two or three years, and they probably wouldn't get to where we are," said Jocelyn Waller, Trans-Siberian's founder and managing director. "So it gives them the entry point and it's a recognition that Russia is on the map for every global player."

Waller acknowledged that a takeover could be in the cards. "It's very unusual for AngloGold Ashanti to take a minority stake, although they have made some statements recently, that this may be the way forward, rather than big-scale mergers," he said in an interview on the company website. "So, to some extent, this is experimental. But I think it is possible, obviously, that if this works and we are successful, that they would be of a mind to consolidate Trans-Siberian Gold into AngloGold Ashanti."

Six-year life could be extended

Trans-Siberian initially plans to produce 100,000 ounces of gold per year at Asacha for a six-year mine life, but there is a strong chance this could be extended, especially if the nearby Rodnikova deposit is also mined. Like Koryakgeoldobycha's Aginskoye gold deposit, Asacha and Rodnikova were extensively explored in the Soviet era, but Trans-Siberian will undertake further exploration there with a view to obtaining open pit mining licenses in addition to the hard rock mining license it currently holds. The grade at Asacha is high, although not quite as high as Aginskoye's: 20 grams per metric ton.

A bankable feasibility study for Asacha was completed in March 2004 and a 140-page environmental assessment of the project was written by UK-based MDS Mining & Environmental Services the following November.

"Hopefully we can give the final green light," Waller told Mining News in a telephone interview.

"We've (been) given an amber light.

In Russia you need permitting to construct the mine, and we got the environmental sign-offs in Moscow a couple of months ago.

We're putting together the final financing arrangements and now we're poised - by the end of September we hope to give the final go-ahead.

We have a very clear-cut plan.

It's a question of the board being satisfied that we have the funding in place."

Road to mine built

Trans-Siberian has already built a 60-kilometer road to the mine and part of the camp has been completed. The mine will be on a caldera, where three to four meters of snow have been known to fall in winter. Although the site is close to the Mutnovsky geothermal power station, the mine will generate its own power because if lines to the power station were constructed, the snow would inevitably cause outages.

"To get the environmental clearance was a lot of work, it took about two years," Waller said. "It's a very pristine part of the world. If you're going to mine there, you really ought to mine in a very responsible way. ... They need mining in Kamchatka. The fishing industry is depressed and there are a lot of ex-military without jobs."

People underestimate the fact that Russia is very regulatory, Waller said. "For everything you do, there's paperwork to be done. I would say it's excessive - that's the legacy of the Soviet system." Companies that hold licenses to develop Russian deposits must do so within a certain time-frame. "It's not a drop-dead situation. Most license-holders, their licenses are not totally in conformity. You have to explain why. For example, we had a delay of six months with our environmental clearance because there was a reorganization of Russian ministries."

Trans-Siberian used a Western design for Asacha, which had to be adapted for the Russian regulations. "It's not an absolutely straightforward project," Waller said. "I think we should have attacked it more aggressively earlier on. We're pioneers in Kamchatka." The company also holds the licenses for the Veduga and Bogunay deposits in Siberia's Krasnoyarsk region. A bankable feasibility study is being undertaken for Veduga.

Waller chose to focus on Russian projects because the country is one of the last frontiers for gold mining, he said. "There has been very little exploitation of the hard rock, technically more difficult mining. There is a good risk-reward ratio. It seemed to be a place to have a go. It's a fairly dynamic environment."