Active Gold Holding PLC
INVESTMENT PROPOSAL
Active Gold Holding PLC
Investment Proposal
Table of Contents
1
EXECUTIVE SUMMARY ........................................................................................................... 4
2
2.1
2.2
2.3
2.4
2.5
HISTORY, SITUATION AND OBJECTIVES................................................................................. 5
HISTORY .................................................................................................................................. 5
THE PRESENT SITUATION ....................................................................................................... 5
MINING RESULTS .................................................................................................................... 6
COMPANY OBJECTIVES ........................................................................................................... 6
INVESTMENT OFFER ............................................................................................................... 7
3
3.1
3.2
3.3
3.4
3.5
3.6
GOLD MARKET ANALYSIS ...................................................................................................... 8
DEMAND AND SUPPLY............................................................................................................ 8
HOW DOES GOLD WORK? ...................................................................................................... 8
RELEVANT FACTORS – PRODUCTION ................................................................................... 11
RELEVANT FACTORS - COMMODITY ..................................................................................... 12
RELEVANT FACTORS – SAFE HARBOR ................................................................................... 13
PREDICTIONS ABOUT THE GOLD MARKET PRICE IN THE FUTURE........................................ 14
4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
GOLD MINING ...................................................................................................................... 16
INTRODUCTION .................................................................................................................... 16
ALLUVIAL GOLD .................................................................................................................... 16
HARD ROCK GOLD ................................................................................................................ 17
GOLD MINING IN RUSSIA...................................................................................................... 19
OVERVIEW – THE REPUBLIC OF ALTAI .................................................................................. 20
THE HISTORY OF GOLD MINING IN THE REPUBLIC OF ALTAI ............................................... 21
CURRENT GOLD MINING IN THE REGION ............................................................................. 21
CLASSIFICATION IN THE WESTERN WORLD .......................................................................... 22
CLASSIFICATION IN RUSSIA................................................................................................... 23
5
5.1
5.2
5.3
5.4
5.5
ACTIVE GOLD DEPOSITS ....................................................................................................... 25
ACTIVE GOLD’S FOUR DEPOSITS ........................................................................................... 25
THE CHUIKA AND MIDDLE KAINACH DEPOSIT ..................................................................... 26
THE ALBAS AND KAURCHAK DEPOSITS ................................................................................ 28
THE BRECCIA DEPOSIT .......................................................................................................... 29
PROSPECT MINES ................................................................................................................. 34
a PRAVOBEREZHNY ............................................................................................................. 34
b MAISKO-LEBEDSKY AREA ................................................................................................. 35
c CHOISKAYA AREA ............................................................................................................. 35
d SYNZAS ............................................................................................................................. 36
e BOLSHAYA RECHKA .......................................................................................................... 36
6
DEVELOPMENT PLAN ........................................................................................................... 37
6.1 TIME SCHEDULE .................................................................................................................... 37
6.2. INVESTMENT DETAILS .......................................................................................................... 38
a ALREADY PURCHASED ..................................................................................................... 38
b EQUIPMENT TO BE PURCHASED ..................................................................................... 40
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Active Gold Holding PLC
7
7.1
Investment Proposal
7.5
PRODUCTION, LOGISTICS AND LOCAL INTEGRATION......................................................... 43
PRODUCTION ........................................................................................................................ 43
a ALLUVIAL MINES .............................................................................................................. 43
b HARD ROCK DEPOSIT ....................................................................................................... 45
LOGISTICS ............................................................................................................................. 46
CONCESSIONS ....................................................................................................................... 48
GOVERNMENTAL SUPPORT AND LOCAL INTEGRATION ....................................................... 50
a National Agency ............................................................................................................... 50
b Social Responsibilities ...................................................................................................... 50
ENVIRONMENT ..................................................................................................................... 50
8
SALES .................................................................................................................................... 51
9
9.1
9.2
9.3
9.4
9.5
9.6
COMPANY ............................................................................................................................ 52
STRUCTURE ........................................................................................................................... 52
ORGANIZATION .................................................................................................................... 52
BOARD OF DIRECTORS .......................................................................................................... 53
MANAGEMENT TEAM GENERAL MANAGEMENT ................................................................. 54
GEOLOGICAL AND TECHNICHAL EXPERTS - SITE MANAGEMENT ......................................... 55
SHAREHOLDERS .................................................................................................................... 57
10
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
FINANCIAL PROJECTIONS..................................................................................................... 58
Revenues .............................................................................................................................. 58
Cost ....................................................................................................................................... 59
Profit and Loss ...................................................................................................................... 60
Balance Sheet (Pro Forma March 31st 2011) ....................................................................... 61
Free Cash Flow...................................................................................................................... 62
Sources & Uses Of Capital .................................................................................................... 63
Investment Metrics .............................................................................................................. 64
Exit multiples ........................................................................................................................ 65
Return Sensitivities ............................................................................................................... 66
7.2
7.3
7.4
11
11.1
11.2
11.3
11.4
RISK MANAGEMENT ............................................................................................................ 67
GOLD PRICE .......................................................................................................................... 67
DIESEL ................................................................................................................................... 67
POLITICAL.............................................................................................................................. 67
OPERATION ........................................................................................................................... 67
a Work force ....................................................................................................................... 67
b Spare part ........................................................................................................................ 67
c Equipment Lead Times .................................................................................................... 68
d Close Circuit Water Supply .............................................................................................. 68
e Vegetation ....................................................................................................................... 68
11.5 RISK & PROBABILITY ESTIMATIONS ...................................................................................... 68
11.6 ENVIRONMENT ..................................................................................................................... 68
12
DISCLAIMER.......................................................................................................................... 70
3
Active Gold Holding PLC
1
Investment Proposal
EXECUTIVE SUMMARY
Active Gold Holding PLC (“Active Gold”) was formed in 2004 and currently holds four gold mining
concessions in the Russian Republic of Altai, Siberia. Active Gold has concluded all the
preliminary research, license negotiations and initial drilling works. Active Gold started with
successful production in summer 2008.
The overall geological reserves and resources of Active Gold exceed 50 tons of gold and 150 tons
of silver with an annual gold production of 1.4 ton. At current gold price levels of approx.
1’450$/ounce and a silver price level of 40$/ounce, this is estimated to result in revenues of
more than US$ 2.5 bn over the lifetime of the investment.
Many trustworthy gold market analysts project the price of gold to rise significantly in the future,
thus potentially further increasing revenue. However, after full development of its hard- rock
mine, the Company will break even at a gold price of about 600$/ounce.
During 2008, Active Gold has successfully achieved actual production of gold on its first alluvial
mining site at an average of 650 to 950 g of raw gold per day. In 2008 63.2 kg have been
produced. 2009 yielded 99.1 kg and 2010 79 kg, i.e. a total of 240 kg until 2010, which has
generated a positive cash flow.
Active Gold has been controlled by a small group of individual shareholders from Russia and
Switzerland ever since its incorporation. They combine investment know-how, local experience
and a good understanding of the political network in Russia. All operations are headed by skilled
professionals with extensive expert knowledge of the geographical region in which the Company
is active.
To expand operations, and to enable work on all four mines in parallel, Active Gold is seeking
US$ 16.2m as debt or equity in a first phase investment placement.
The current focus is on the operation of one additional identified hard-rock mine with geological
reserves of more than 50 tons of gold. For the acquisition of additional mining concessions
(“Phase 2”), no additional money will be required as it can be financed out of operating cashflows.
Active Gold strives to become a leading Russian gold producer which applies Western Standards
of production and management. Once the envisaged production level of approx. 1.4 ton per
annum has been successfully reached, an IPO or trade sale will be targeted within a timeframe
of 3-5 years to provide an exit for the investors. According to the business plan, an Internal Rate
of Return of 28% per annum can be expected. Phase 2 will certainly provide for additional upside potential.
The IRR calculation is based on a gold price of 1’450 $/ounce. An important calculation element
is the exit valuation in 5 years. A conservative EV/EBITDA multiple of 5x has been applied, using
South African mining companies as a proxy for the Company. The world average EV/EBITDA
multiple is however currently above 8x.
Active Gold is proposing a share capital increase of US$ 16.2m which would provide investors in
this placement with 16.8% of its shares (post money). The remaining US$ 4.9m funding
requirement would be financed with equipment debt finance at an interest rate of 11% p.a. We
are proposing this investment to high net worth individuals with the desire to increase exposure
to an attractive gold mining stock. We reserve this opportunity to investors bringing a minimum
amount of US$ 1m.
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Active Gold Holding PLC
Investment Proposal
2
HISTORY, SITUATION AND OBJECTIVES
2.1
HISTORY
7 years ago, in 2004, three entrepreneurs, two Russians and one Swiss decided to leverage a
unique opportunity to start a gold mining operation in Siberia.
One of the Russian partners is a mining engineer with relevant know-how and management
skills. The Swiss investor is fluent in Russian and has over 15 years of business experience in
Russia which goes back to the times of the iron curtain. Together with another Swiss, he
successfully manages a fish processing plant near St. Petersburg and is partner in the first quality
vinery on the Russian Black Sea coast. The other Russian partner, who joined them later, brings
a profound understanding of the political networks to the table.
In 2006 a second Swiss investor joined the team. He is not only the owner and chairman of a
Private Bank in Switzerland but also brings a broad network in the financial industry and
extensive Private Equity experience to the team.
All four investors financed, out of their own funds, the acquisition of the mining concessions,
the drillings to test and prepare the ground, the purchase of equipment and the employment of
professionals for the first mine.
In 2009 an investor from Spain and another Swiss investor became shareholders of the company.
To bring this mining operation from the drawing board to operation has, at times, been quite a
challenge. Considerable effort has gone into finding the right mining professionals, into
obtaining all required mining licenses, and obtaining alignment and support from regional and
federal governmental instances.
By 2008, the company had successfully managed to overcome the start-up difficulties, brought
the first alluvial mine into operation and even obtained a rare gold export license.
Today, through its company Active Gold Holding PLC, St. Petersburg, the Company holds
concessions to exploit three alluvial and one hard rock mine in the Republic of Altai, Siberia,
Russia.
2.2
THE PRESENT SITUATION
The first alluvial mine started its operations in summer 2008 and yielded 63.2 kilograms of gold
within only 5 months of production. In 2009 the production volume increased by 57% totaling
99.1 kilograms. In 2010 79 kg of gold has been produced. The total amount of gold produced
within the period of mining operations since 2008 to 2010 is approximately 240 kg. This relatively
small quantity is due to the fact that the financial means have been concentrated on exploration
of the hard rock mine during the initial phase.
This first mining site is located near the village Chuika, about a 5 hours drive from Barnaul or a 8
hours drive from Novosibirsk, the capital of Siberia. A second alluvial mine is currently in process
of being made operational. All preparatory works have already been finalized. The total
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Active Gold Holding PLC
Investment Proposal
gold reserves and resources under the current concessions and its extensions exceed 50 tons of
gold.
Presently, the gold is being refined in Novosibirsk and sold via Sberbank (Moscow) in the form
of 999.9 quality gold bars at London spot price. Active Gold envisions exporting part of the
production to a Swiss Bank. The required licenses for export of gold bars and nuggets have
already been obtained; based on a contract with a Swiss Private Bank (Bank Frey & Co AG in
Zurich) Active Gold was the first company to export gold nuggets from Russia.
2.3
MINING RESULTS
The first months of actual field operations have produced evidence that the gold content at
Active Gold’s first alluvial site is between 50% and 200% higher than that stated in the geological
data sheets on which the business plan was originally based.
The data used to establish Active Gold’s business plans comes from various sources. Some are
the results of Active Gold’s own drillings during recent times, others come from field tests and
historical documents that were executed and issued by Russian Governmental Institutions in the
1970’s and later.
Based on the first results of Active Gold’s recent gold production it became obvious that the
historical data as found in Russian archives were too conservative. This is partly due to the fact
that the techniques utilized today are far more precise and efficient than those put to use during
the Soviet era; it is also due to the Soviet authorities who have applied a rather conservative
methodology and made their calculations accordingly.
In 2009 and 2010 extensive drillings have been conducted. 54 drill holes and more than 8000
meters of drillings have been conducted to comply with the 43-101 requirements of the Toronto
Stock Exchange to confirm the assumed reserves. Alone in the area of 300 x 400 m more than
2.5 tons of gold have been confirmed. Further drillings will be executed in the course of 2011.
2.4
COMPANY OBJECTIVES
Active Gold strives to become a leading Russian Gold Producer applying Western Standards for
production and management. It will utilize modern technologies to achieve highest efficiency
while preserving the environment and protecting its workforce.
The objective of Active Gold is to exploit all four mines in parallel, acquire new alluvial
concessions once the current alluvial mines are depleted and, if possible, to acquire the
concession for another hard-rock mine.
Active Gold has already been offered one hard-rock mine with more than 40 tons of gold
reserves and a second one with another 30 tons of gold reserves. Active Gold believes that
obtaining the opportunity to acquire additional mining concessions would not be a difficult task
– certainly not after having established itself as a trustworthy counter party with actual and
successful production in place.
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Active Gold Holding PLC
Investment Proposal
As explained in more detail in the financial section, Active Gold only needs “bridge financing” as
it will be cash-flow positive from the beginning. This additional capital helps to operate all mines
in parallel within a shorter period of time.
Initially, an amount of US$ 21.1m is sought to purchase equipment and hire the necessary
employees to operate mines 2, 3 and 4. In Phase 2, a second hard-rock mine together with the
necessary mining equipment will then be acquired.
In 3-5 years Active Gold intends to obtain a listing at an appropriate exchange (IPO) or to sell
the business to a large international mining company.
2.5
INVESTMENT OFFER
Active Gold is proposing a share capital increase of US$ 16.2m which would provide investors in
this placement with 16.8% of its shares (post money). We are proposing this investment mainly
to high net worth individuals with the desire to increase exposure to an attractive gold mining
stock. This opportunity is reserved to investors bringing a minimum amount of US$ 1m.
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Active Gold Holding PLC
Investment Proposal
3
GOLD MARKET ANALYSIS
3.1
DEMAND AND SUPPLY
Gold mine production increased significantly over the 1980s and 1990s from less than 1’300 t in
1980 to over 2’500 t by 1998. The increase has been fuelled by incremented production from
the majority of gold producing nations, offsetting decreasing production from South Africa.
From an industry perspective, gold is predominantly driven by global jewelry demand. The 2006
consumption was 3’400 t, 1’100 t more than the mine supply. The difference was made up of
scrap supply (1’100 t) and official sector sales (300 t), offset by producer de-hedging (400 t).
Gold touched an all-time high of $1496/oz in April 2011. Today, China is the world's largest gold
producer followed by Australia, USA and South Africa and Russia.
Gold price development 1975 -2011
1600
1400
1200
1000
800
600
Spot Price
400
3.2
01.04.2011
01.04.2008
01.04.2005
01.04.2002
01.04.1999
01.04.1996
01.04.1993
01.04.1990
01.04.1987
01.04.1984
01.04.1981
01.04.1978
01.04.1975
200
HOW DOES GOLD WORK?
According to UBS Investment Research (March 10, 2009), gold is almost unique in a commodity
context. It is unique (and from an investor perspective often maligned) because over the past
several decades there has been no clear societal need for the metal. It could be (and often is)
argued that while other commodities are required to directly support the inner workings and
advancement of human civilization, gold is not. Gold’s primary applications have, throughout
history, been consigned to two primary (and often interlinked) uses: as a medium of exchange
or currency, and for jewelry.
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Active Gold Holding PLC
Investment Proposal
Is gold money?
In our view, gold can best be characterized as being “mostly” money. This is not a perverse way
of saying that it both is and is not money; we would instead describe gold as having the most
important characteristics of money without having the explicit authority to be money. Gold’s
role as a form of money is largely a function of its physical and geological properties; the more
important of these are described below:
– Scarcity: Gold is reasonably scarce, so there is not likely to be a loss of confidence
from supply growth; and mine-supply growth over time is reasonably predictable.
– Utility: Gold is divisible, indestructible and transportable; furthermore, it can be
stored indefinitely, all of which makes it unique as a convenient agent of exchange.
– Acceptability: Gold has been a widely accepted and used form of currency for much of
human history.
Given gold’s financial links, the usual supply/demand dynamic often does not apply for the metal.
Gold prices generally respond quite peripherally and temporarily to the waxing/waning of
jewelry demand, or oscillations in mine output or central bank selling. If selling or buying surges,
then of course prices will respond; however, this is usually short-lived. The evidence does
suggest, that gold meaningfully responds as a financial instrument that competes with other
stores of value, i.e. other currencies and other asset classes.
Over time, gold trades like another form of money
As such, over the past several decades, with confidence in paper money having fluctuated (the
US dollar in particular, as this is still the default global reserve currency), the performance of
gold has responded largely as a response to changing inflationary and deflationary expectations.
Gold and deflation
UBS believes that gold, given the contention that it acts as a currency, will usually outperform
other assets in this type of environment. Gold acts as an effective hedge against deflation. The
chart below illustrates the performance of silver from 1925, highlighting the 1927-34
deflationary period, a period of out-performance of silver versus other important asset classes.
In this instance, we use silver as a proxy for gold given the price controls and restrictions on gold
from 1933.
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Active Gold Holding PLC
Investment Proposal
Silver (proxy for gold) performance relative to other assets (from 1900)
Source: UBS estimates
Gold and inflation
Inflation also erodes the value of key asset classes, particularly of equities and debt, given that
it generally coincides with greater volatility of inflation, which leads to greater uncertainty and
increased risk perceptions. But before making further comments on how gold performs in
periods of inflation, it is necessary to clarify that we also believe that one needs to consider the
source of inflation, as this may have a bearing as to how gold could perform.
For example, inflation during the 1970-80s was due to a combination of two things: (1)
stimulative monetary policy during the 1960s; and (2) a spike in oil prices which occurred as a
consequence of supply restraint. These two factors led to a strong performance in commodities
as an asset class and a mixed performance by gold versus some of the other commodities.
It is also possible, in our view, for inflation to emerge in another manner, and one which may be
more applicable to the current financial environment; that is the potential for currency
debasement as governments spend vast quantities of money, and potentially start the printing
presses to produce more currency and avoid deflation. In such environment, we would argue
that prices rise as a direct consequence of growing availability of money (the velocity of money
being key factor). Given the non-fiat characteristics of gold, we would expect that in this macro
environment gold could perform in-line with inflation. In summary, gold can well act as a hedge
against inflation, particularly if the source of that inflation is a loose monetary policy.
The chart below illustrates the performance of gold from 1975, highlighting the 1972-83
inflationary periods, and the period of inconsistent performance of gold versus other important
asset classes. We would note that there was some distortion in the gold market from 1975 to
1980, as the US Treasury and IMF had selling programs during this time.
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Active Gold Holding PLC
Investment Proposal
Gold performance relative to other assets (from 1975)
Source: UBS estimates
3.3
RELEVANT FACTORS – PRODUCTION
The main relevant factors influencing the price of gold is the production capacity, the current
need for gold as a commodity, and the use of gold as a safe harbor.
Production has a lesser impact on price of gold than on the price of other commodities. Annual
production has now leveled off at approx. 2500 t per annum.
Gold Production 1980-2014 (World Gold Mine Production)
$ 1,400
2,500
$1,200$
1,000$
1,500
800
$ 600
1,000
GOLD SPOT $ US/OZ US/OZ
Tonnes of Production
2,000
$ 400
500
$200
ource 0GFMS,
Company
and CIBC
World
Markets
Inc. Asia
Africa
Northreports
America Europe
Europe
Lattin
America
Oceania 
Other Countr ies
G old
The total volume of gold ever mined in history is estimated at some 155’000t which compares
to an annual production of approx. 2.500 tons. The average grade of the mined ore is also
declining globally. The higher average mines have been depleted and the market has been forced
to turn to mines that deliver a lower grade of ore, which means that the gold exploration
expenditures have risen sharply in recent years.
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Active Gold Holding PLC
Investment Proposal
Global Average Mine Grades Q1 2005 – 2008
1,7
Global Average Yield (g/t)
1,6
1,5
1,4
1,3
1,2
1,1
1,0
Source: Bloomberg and CIBC World Markets Inc.
3.4
RELEVANT FACTORS - COMMODITY
Gold is subject to hoarding and dishoarding based on financial investors’ sentiment. This, rather
than industrial applications or even jewelers demand, is the key determinant of the gold price.
Gold price fluctuations are not really a function of supply and demand fundamentals.
Demand Drivers:
Above Ground, world gold holdings are concentrated on jewelry
Gold supply failed to grow
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Active Gold Holding PLC
3.5
Investment Proposal
RELEVANT FACTORS – SAFE HARBOR
The price of gold has surged in the past seven years fuelled by political and economic
uncertainty, rising oil prices and the decline of US investors investing in gold as soon as the
economic climate is worsening - at times viewed as a "recession hedge". As the confidence in
the financial market's ability to preserve economic value is being shaken, for example by a
weakening US Dollar and rising oil prices, gold is, again, gaining credibility among investors as
the ultimate “store of value”.
The increasing role of gold as the currency of last resort can be seen in the increasing correlation
between gold prices and measures of financial distress from the credit-default swap (CDS)
markets. Specifically, the recent divergence between gold prices and the fair value currency
basket is largely explained by the rising CDS spreads of financials and sovereigns (see illustration
1). Augmenting the fair value currency basket with these measures of financial and sovereign
risk suggests that gold is priced consistently with increased sovereign default risks (illustration
2).
(Illustration 1)
(Illustration 2)
Source: COMEX, CME and GS Global ECS Research.
Source: COMEX, CME and GS Global ECS Research.
lt is also important to emphasize that the recent strong demand for gold has not been irrational
but rather in line with the probabilities of financial and sovereign default. Specifically, the strong
rise in gold ETF demand is a reflection of default risks as measured by the financial and sovereign
CDS spreads (illustration 3). Such strong demand for investment reasons is likely more than
offsetting the declines in gold demand for jewelry use.
(Illustration 3)
Financial + Sovereign CDS
Indes
Gold ETF Holdings
(left axis; min oz)
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Active Gold Holding PLC
3.6
Investment Proposal
PREDICTIONS ABOUT THE GOLD MARKET PRICE IN THE FUTURE
Although it is notoriously difficult to make firm predictions about future geopolitical events, it is
clear that stocks and gold work in opposition to each other. Certain analysts make the prediction
that the gold price will even reach 4,000 US$ in the not too distant future.
Forecast of selected financial institutions (gold price in 2011 in USD per 1 ounce)
Institution
Low
High
Credit Suisse
1100
1600
UBS
980
1550
Goldmann Sachs*
960
1690
*source Wall Street Journal
Gold is not at extreme values compared to house prices
Gold is not overvalued compared to US equities
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Active Gold Holding PLC
Investment Proposal
Inflation Adjusted gold price still below the past peak
Production costs justify the rise in the gold price
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Active Gold Holding PLC
4
GOLD MINING
4.1
INTRODUCTION
Investment Proposal
Alluvial or “placer” gold comes from eroded hard-rock sources. Rivers and glaciers flowing over
gravels have washed and sorted them, concentrating the heavy metal gold in specific layers. This
often makes placer gold deposits much richer than their hard-rock sources.
While "hard rock” gold is usually mined by means of mining hardware, using explosives and
"cyanidation", alluvial gold can be mined by the process of digging it up and washing with special
equipment. Therefore, alluvial deposits usually have a lower mining and exploration costs than
hard-rock deposits.
4.2
ALLUVIAL GOLD
Typical locations for alluvial deposits are on the inside bends of rivers and creeks, in natural
hollows, at the base of a waterfall, within sand dunes, beach profiles or in gravel beds.
Alluvial “placers” are formed by the deposition of dense particles at sites where water velocity
remains below that which is required to transport them further.
To form a placer deposit, the particles sought after must show a marked density contrast with
the surrounding material, which is transported away from the trap site. Only if the deposit is
winnowed in this way can the minerals be concentrated to economic levels.
All methods of placer deposit mining use gravity as the basic sorting force. The mining process
uses a drum which is composed of a slightly-inclined rotating metal tube (the “scrubber section”)
with a screen at its discharge end. Lifter bars, sometimes in the form of bolted-in angle irons, are
attached to the interior of the scrubber section. The mineral containing sand that passes through
the screen is then further concentrated in smaller devices such as sluices and jigs. The larger
pieces of sand that do not pass through the screen are carried to a dump by gravity flow over a
discharging chute.
The sand is then further concentrated in smaller devices. The placer gold is finally obtained,
containing gold and fine mineral granules. It is sent to the refining plant, where the gold is melted
out by using high temperatures.
Gold washing plant, Active Gold Holding Plc,
Chuika mine
Gold-bearing sand being moved to the crushing facility,
Chuika mine
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Active Gold Holding PLC
Placer gold on a shaking table,
Chuika mine
4.3
Investment Proposal
Native nugget of 456.2 grammes,
Chuika mine
HARD ROCK GOLD
“Hard-rock” gold differs from “placer” gold in its occurrence. It usually occurs in fissures and
fraction zones, where it has been deposited in quartz veins, which are not destroyed by nature
and which form pillar massifs. Very often the ores also contain other precious metals like silver
and copper.
Gold can be deposited near the earth's surface (epithermal gold) and at greater depths
(mesothermal gold). Heavy equipment and thus higher investments are normally required for
hard-rock deposit mining.
The first stage of the ore mining is usually the blasting of the rock massif. Then, the ore is
crushed. After crushing, the gold (and any other metals that are found) can be recovered in two
different ways.
The first recovery method is called “cyanidation”. It involves using chemicals to separate the gold
from its contaminants. In this process, the ground ore is placed in a tank containing a weak
solution of cyanide. Zinc is added to the tank, causing a chemical reaction of which the end result
is the precipitation (separation) of the gold from its ore. The gold precipitate is then separated
from the cyanide solution in a filter press.
The second approach is mechanical extraction through gravitation and flotation. The
combination of water and mechanical action frees the valuable minerals from the ore.
Depending on what recovery scheme is chosen, the plant (crusher, mill, and centrifugal
concentrator and flotation cell) and metallurgical department (pumps, adsorbing devices) have
to be constructed at the location of the deposit.
Hard-rock deposits are much larger than alluvial ones and, accordingly, also have longer mine
lives which justifies the more extensive and costly mining and exploration.
The main product is the concentrate containing the gold. This concentrate is being sent to the
refining plant where it is cleaned and shaped into bullions by using high temperature to melt
the gold.
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Active Gold Holding PLC
Investment Proposal
Ore breccia from the Breccia site
Visible gold in core, quartz-hematite veinlet,
Breccia site
Visible disseminated gold,
core sample from the Breccia site
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Active Gold Holding PLC
4.4
Investment Proposal
GOLD MINING IN RUSSIA
In the last few years, Russia took the 5th place in the world gold mining rankings. The world
leaders in gold-mining are China, The Republic of South Africa and Australia. In 2010 Russia
produced 175.2 tons, i.e. 1.7% less than in 2009.
Gold is mined in 23 regions of the Russian Federation. Krasnoyarsky Krai is the leader in goldmining among the Russian regions. In each one of the regions, situated in the Eastern part of
the country, more than 10 tons of gold are mined per annum. The total volume of mining in
these regions is approximately 80% of the entire production in Russia.
Gold mining in the main gold-mining regions (in tons)
Federal Subjects
Krasnoyarsk Krai
Chukotka Autonomous Okrug
Amur Oblast
Sakha (Yakutia) Republic
Irkutsk Oblast
Magadan Oblast
Khabarovsk Krai
2010, ton
36,0
25,0
19,8
18,6
16,0
15,4
15,2
2009, ton
33,8
31,2
22,0
18,6
15,0
13,7
14,7
Source: Gold Mining Union of Russia
Gold mining in the Republic of Altai has started only recently and already exceeds a level of 1
ton of gold per annum. It is believed to have a great future potential.
Gold mining in Russia in 2010 (tons)
Polyus Gold
Chukotskaya GGK
43.1
44.1
Severstal
Petropavlovsk
Polymetal
Uzhuralzoloto
3.6
3.9
19.6
6.4
Highland Gold Mining
Vysochaishy
6.7
Susumanzoloto
13.8
18.3
15.7
Other companies
Source: Gold Mining Union of Russia
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Active Gold Holding PLC
Investment Proposal
The leader among Russian gold-mining companies is Polyus Gold Mining Company ZAO.
International mining companies are present in Russian gold mining, with the following
companies invested in the sector: Kinross Gold Corporation (USA), Petropavlovsk Plc (UK),
Highland Gold Mining Ltd (UK), Leviev Group (Israel), Angara Mining Plc (UK), Central Asia Gold
AB (Sweden), High River Gold Mines Ltd (Canada) and Bema Gold Corporation (Canada).
4.5
OVERVIEW – THE REPUBLIC OF ALTAI
The Republic of Altai is a federal subject of Russia and covers 92'600 Km2, which is roughly twice
the size of Switzerland, and has 203'000 inhabitants.
The Republic is situated at the very center of Asia at the junction of Siberian taiga, the steppes
of Kazachstan and the semi-deserts of Mongolia. The most striking geographical aspect of the
Republic of Altai is its mountainous terrain which is rich in mineral resources.
The Republic of Altai is one of the Russian Federation’s many subsidized regions. Federal grants
account for 90% of its budget. The main industrial sectors in the Altai Republic are non-ferrous
metallurgy, food processing and timber.
The name Altay means Golden in Turkic and Mongolic languages, and this area was always
referred to as “Golden Mountains” in the Chinese language.
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Active Gold Holding PLC
4.6
Investment Proposal
THE HISTORY OF GOLD MINING IN THE REPUBLIC OF ALTAI
Gold has been mined in the mountains of Altai since the first half of 3,000 BC, and in modern
history, since the first half of the 18th century (Koluvano – Voskresensky, Demidov plant). The
area is located between two world-unique mining regions – the polymetallic South-West RudnoAltaisky region and the ferrum-and-coal dominated North Kuznetsky region.
Based on the state of gold exploration in the region, and also taking into account the prospecting
experience from Active Gold’s site at the Chuika River, it is clear that, compared to other goldmining regions in Russia, except maybe for the Kemerovo region, the territory is at the initial
stage of exploration both regarding hard-rock and placer gold.
The search and proper assessment of the deep gold placers (8-10 m and deeper), including more
productive buried ones, in these more complex mining and geological conditions, is performed
with the help of modern technical and technological equipment.
Searches for hard-rock gold deposits have been performed mainly for two industrial and genetic
types – vein gold-quartz and scarified gold. Geological surveys on the 1:50 000 scale have been
carried out by all exploration companies in the region, except for those that have specialized in
coal, ferrum and poly-metals. In the 1960s- 1980s, thousands of places with native mineralization
were found in the area but their potential in terms of industrial hard-rock gold reserves has not
yet been fully estimated.
Regular surveys for gold deposits in modern times were started as late as in 2003 by GornoAltaiskaya Ekspeditsiya PLC. Active Gold performed geochemical prospecting on the 1:200 000
scale within the North-Altai gold-bearing belt and obtained very positive results in the
Novofirsovskaya and Kuriinskaya areas during the second year.
4.7
CURRENT GOLD MINING IN THE REGION
30-35% of the hard-rock gold mining in the region is performed by a single enterprise (Rudnik
Vesyoly PLC). This company performs surface and underground mining of ore, which is processed
at a gold recovery plant. Rudnik Vesyoly PLC has doubled its sales volume over the last 15 years
without attraction of external investments.
The peculiarities of the geological structures in the region, and the occurrence of direct and
indirect criteria and features of gold deposits, confirm definite possibilities to identify industrial
gold deposits of all genetic types, including large and very large deposits (like Kupol, Karlin and
Bukurchik). This fact is mentioned by all leading Russian specialists of gold metallogeny, who
have performed research in the region for the last 15 years (Borisenko A.S., 1995-1999 and
Scherbakov U.G., 1997-2004, IG SO RAN [Institute of Geology, Siberian Department, Russian
Academy of Science]; Schepotiev U.M., 2003, CNIGRI [Central Scientific and research Geological
Prospecting Institute of Non-ferrous and Precious Metals]). It has also been confirmed by Altai
Gold’s own drilling for the 43-101 application.
Hence, the identification and exploration of industrial reserves of hard-rock gold in the area is
only a matter of time. A conservative estimate of the region’s total potential made by Active
Gold’s specialists is 2,750 tons of hard-rock gold, including the most prospective metallogenic
taxons:
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Active Gold Holding PLC
Investment Proposal
– North-Altai gold-bearing belt: 2’ 000 tons
– Salair Range: 500 tons.
On February 1, 2006, the Head of the Russian Administration for the Geology of Hard Minerals,
B.K. Mikhailov, named the surveying of the North-Altai gold-bearing belt as one of the eight
major achievements of the Russian Geological Survey during the last 3 years and said it was
going to “totally change all traditional views on the poly-metallic specialization of this region”.
For alluvial placer gold, the situation is somewhat different. In the three constituent territories
of the Federation, only 18% of the resource potential is at the present disposal of subsurface
users. The open acreage includes the placer grading 500-600 mg/m3 and lower. According to
calculations, the use of proper technical means, technologies of extraction and processing of
sands at the present gold price will make the operation of placers with this grade quite profitable.
More than half of the subsurface users that have obtained mining licenses do not produce more
than 20 kg of gold per annum - or do not start operations at all. Since 2008, the managers of
Active Gold Holding PLC were approached seven times with the suggestion to acquire various
rights of subsurface usage.
The main causes of failure of the enterprises in the region are on the one hand the obsolete
equipment, requiring expenditures for their repair and maintenance as well as an insufficient
professional approach. On the other hand, there is also an application of traditional power- and
material intensive technological schemes of overburdening, extraction and processing of sands,
which ignores certain mining and geological peculiarities of deposits which lead to unduly
excessive gold losses.
Finally, the low attention to the mineral base, conditioning instable work, additional costs and
excessive gold losses take place, mostly due to the absence of qualified engineers, technicians
and employees, who can determine and eliminate the above drawbacks.
4.8
CLASSIFICATION IN THE WESTERN WORLD
Australia's Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
("JORC") has been widely adopted by the global mining industry. Other Western World
Standards exist and are broadly comparable to JORC. The JORC classification is based on
geological knowledge and confidence; it uses “Resources” versus “Reserves” as a function of
"availability" vs. "commercial viability".
Measured Resources
Tonnage, density, shape, physical characteristics, grade and mineral content can be estimated
with a high level of accuracy. Supported by extensive drilling and sampling, shape and
characteristics of the ore body can be firmly established.
Indicated Resources
Where the estimates can be provided with a low level of confidence.
Inferred Resources
Where the estimates can only be provided with an even lower level of confidence. They cannot
be converted directly to reserves.
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Active Gold Holding PLC
Investment Proposal
Proven Reserves
Normally the economically mineable part of a Measured Resource.
Probable Reserves
Normally the economically mineable part of an Indicated and in some cases Measured
Resources where there are uncertainties over some of the Modifying Factors.
Resources
(«Availability»)
Increasing
level of
geological
knowledge
and
confidence
Reserves
(«Commercial Viability»)
Measured
Proven
Estimated with high level of
accuracy, supported by extensive
sampling, leading to firm
establishment of characteristics
Normally the economically mineable
part of a Measured Resource
Indicated
Probable
Estimated with a low level of
confidence
The economically minable part of
and Indicated Resource with some
unclear modifying factors
Inferred
Estimated with lowest level of
confidence – need to be upgraded
first to be converted to reserves
Consideration of modifying
factors:
===========
Mining, metallurgical, economic, marketing, legal, environmental, social and
governmental
4.9
CLASSIFICATION IN RUSSIA
In Russia, an alternative system (“GKZ”) is used to classify reserves and resources which is not
directly comparable with Western World Standards.
Mining companies in Russia report reserves and resources to the State Authority (GKZ) under
the Russian code of reporting in a Russian Gold context; the terminology is also not always
applied consistently. What is technically a “resource” is often referred to as a “reserve”. Thus,
the comparison of GKZ reserves and resources with JORC is, at times, an art - and not a science.
C1 Good understanding of the mineralized zone, including geometry, grade continuity, physical
and metallurgical properties.
C2
Preliminary assessment of the mineralized zone's properties. Tonnage, grade, geometry
and grade continuity are not always certain. In general suitable to use in mine plans, but
often requires more drilling to be proven.
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Active Gold Holding PLC
Investment Proposal
P1
Little understanding of the geometry of the mineralized zone exists. Not suitable for use
in mine plans. Market experience suggests that, in practice, 70-80% of P1 resources
normally get converted into a "C" category.
P2
Based on very limited drill hole and/or sampling data. The results are considered to be a
highly unreliable measure of the potential upside of the relevant deposit.
P3 Based purely on geophysical and geochemical data and is a purely speculative and subjective
measure.
Importantly, the standards for P1 Resources can vary considerably. Thus, it is important to
understand which and how much data was used to generate the P1 resource assessment.
Generally, drilling and underground channel sampling is obviously favorable compared to
surface sampling.
«Resources»
Unclassified
Inferred
Indicated
Measured
After Feasibility Study
А+В
Normally after Pre-feasibility Study
С1
Varying confidence
level
P1
No drilling
С2
C1 – Good understanding of mineralized zone properties.
C2 – Preliminary assessment of properties. Can require more drilling.
P1 – Little understanding of properties. 70-80% normally converted «C».
P2 – Based on very limited data. Highly unreliable measure of potential.
P3 – Based purely on geophysical and geochemical data. Speculative and
subjective.
P2 + P3
Increasing level of geological knowledge and confidence
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Active Gold Holding PLC
Investment Proposal
5
ACTIVE GOLD DEPOSITS
5.1
ACTIVE GOLD’S FOUR DEPOSITS
The deposit of alluvial gold in the Turochack region at the Chuika and Middle Kainach rivers are
currently the focus of the activities of Active Gold. In 2011-2012 production at the alluvial
deposits of Kaurchack and Albas is scheduled to be started. The forth and most important mine
– the hard-rock deposit of Breccia - will be prepared during 2011. It is intended to start procution
in 2012 with actual mining operations producing finished products in 2013.
This territory is covered with taiga vegetation and abundant forests and the river valleys are
waterlogged. Logistically, all 4 mines are close to main roads. Tashtagol and Barnaul offer
resources for the workforce, including an airport and all the necessary infrastructure.
Active Gold PLC (Holding). Total expected gold (“Reserves” and “Resources”)
Hard-rock
gold
Total
Total
Breccia
Total
Breccia
126
523
2‘850
3‘373
8‘900
550
200
950
2‘000
2‘950
10‘000
0
0
0
0
5’000
5’000
15‘000
P3
0
0
0
0
40‘000
40‘000
120‘000
Total
400
748
326
1‘473
49‘850
51‘323
153‘900
Category of
reserves
(resources)
Chuika
Albas
Kaurchack
C1+C2
200
198
P1
200
P2
Alluvial Gold
Silver
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Active Gold Holding PLC
5.2
Investment Proposal
THE CHUIKA AND MIDDLE KAINACH DEPOSIT
This locality is characterized by mid mountain relief with sea-level marks of 500-1’200m and a
local difference in elevation of 200-600m. The Chuika River is the left inflow of the Kluk River,
flowing in the Lebed River of the Biya River system. The valley of the Chuika River is of trapezoid
shape with the well-marked flood plain, with depth changes from 200-1’000m. The River depth
is near 1.5m and its width is 10m. The water level depends on the amount of precipitation;
season fluctuations do occur.
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Active Gold Holding PLC
Investment Proposal
Drilling Scheme
To prospect for gold reserves and define gold grades in the placer by the Chuika river, 112
drillholes totaling 1’109 line metres were completed in 2009-2010. Prospecting operations
resulted in the increase of reserves equal to 121 kilograms of gold. After the 2008-2010
production period there is sufficient evidence to increase the total reserves at the Chuika mine
to 196 kilograms.
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Active Gold Holding PLC
5.3
Investment Proposal
THE ALBAS AND KAURCHAK DEPOSITS
The Albas deposit is located by Albas River, which is the left inflow of the Lebed River, located
five kilometers below the mouth of the Kaurchak River. The extent of the valley is 12 km.
Drilling Scheme
To estimate the production sites and gold potential of the deposit along the Shirokyi brook, the
left inflow of the Albas river, 65 drillholes totaling 346 line metres were completed. Total
reserves at the Albas river are 198 kg, including 36 kg in the C1 category.
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Active Gold Holding PLC
Investment Proposal
The Kaurchak deposit is situated in the area of the Small Kaurchak basin. It has a rather complex
geological structure, conditioned by its location at the joint of Gorny Altai, Gornaya Shriya and
Western Sayan.
The main reason for the high perspectives of the area is its location in the Western part of the
North-Altai “gold belt” characterized by high gold productivity. Approximately 16 tons of placer
gold and 18 tons of hard-rock gold have been mined here in the past.
The valley of the Small Kaurchak River has a trapezoid profile, its width varies from 100 to 300
m. Along the river extension, there is an erosive and accumulative socle terrace at the level of
20-30 m, predominantly along the right slope. The terrace bedrock is covered by alluvium, which
is overlaid by eluvial trains of brown loam close to the valley slopes.
In the mouths of the side inflows, there are distinct detrital cones which significantly increase
the thickness of the sediments. The terrace declines from the slope to the brow. The alluvial
placer has a distinct productive stratum, lying at the basement of river sediments. The reserves
are explored both in the flood plain (a flood plain deposit) and terrace (terrace deposit) valley
parts.
5.4
THE BRECCIA DEPOSIT
The Breccia mine is located in the Turochack region of the Altai Republic, some 13 km from the
Artubash settlement. It is well connected by a highway and is close to the Biysk railway station.
As of February 2011, the drilling programme and laboratory work at the Breccia site have been
completed. Rock mechanics of ores and hosting rocks as well as technological properties of ores
are being currently studied. Fifty-two drill holes have been completed totalling 7’682.5 meters.
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Active Gold Holding PLC
Investment Proposal
Twenty trenches totalling 7’178 cubic meters and 150 line meters of pits have been dug, and
laboratory work has been completed in preparation of a 43-101 application.
The central part of the site, which is 300x400m, has been explored by drilling operations. On
some prospecting lines the ore bodies have been traced to the depth of 200-300 m.
The ore bodies are formed by silicified volcanic explosive breccias intersected by veins and
stockworks of quartz veins, disseminated with limonite, pyrite and free gold. Visible free gold
was observed in core from five drill holes. It became clear from the results of the assay tests
that the ore bodies are in the column shape. The gold occurs in pockets. Maximum gold values
range from 78 to 145 g/t. Within the mineralized zone of higher gold grades (0.1-0.9 g/t) six ore
bodies have been delineated at 1 g/t cut-off grade.
The thicknesses of the ore bodies range from 1.0m to 35m. The strike extension is 35 to 134 m.
The ore bodies were traced to a depth of 75-350m. Gold grades in ore vary from 1.0 g/t to 145
g/t; silver grades ranges between 1.0 g/t and 675 g/t. The average grades in the ore bodies are
1.81 to 4.26 g/t of gold and 1.7 to 27.7 g/t of silver.
Micromine geostatistical modelling of the Breccia site has shown the following preliminary
estimate of ore, gold and silver reserves: 1’199’944 tons of ore; 2’849 kilograms of gold grading
2.37 g/t; 8’924 kg of silver grading 7.44 g/t. The major portion of ore and metal reserves (74%)
are hosted by ore body 1.
Ore body 1 extends along the strike for 210m. It has been traced to a depth of 300m. The ore
body has not been delineated to the west and to the depth. The thickness of the ore body ranges
from 2.0m to 35.1m averaging 8.4m. The average gold grade in the ore body is 3.30 g/t and the
silver grade is 22.1 g/t.
The other ore bodies are smaller but similar to ore body 1.
In 2011, it is scheduled to continue geological exploration of the Breccia site and the Churinskaya
gold area. The following scope of work is planned to be carried out: core drilling – 5’000 line
metres; mechanical trenching (excavator and bulldozer) – 20’000m3 and geological traversing –
50km.
In the report on scientific research – the Feasibility Study of the “Provisional Exploratory
Parameters for Estimation of Reserves” at the Hard-rock Gold Breccia site, a method of openpit mining was placed under consideration. The stripping ratio is optimized. At 1 g/t Au cut-off it
varies greatly from 2.7 to 12.6. The average strip ratio is quite high - 7. As practice shows, the
estimated volume of stripping increases 15-20% while mining. The open-pit mining at such
deposits reduces the base ore quality control. Shallow ore bodies occurring at a depth of more
than 30m are characterized by a high ore dilution factor, lower grades and high yield of dradges
if mined by open-pits. Economic calculations of gold production in the report show that the
open-pit mining method is not profitable for this type of deposit. If the open-pit mining method
is used, dumping, blasting operations on the surface, industrial noise of mining machinery and
exhaust fumes of internal combustion engines (ICE) affect negatively the environment of the
ecologically clean area of the Teletskoye Lake.
The business plan considers the possibility of underground production at the deposit. This
method allows effective monitoring of base ore quality and excludes negative factors affecting
the ecological environment. The terrain of the area determines the adit stripping for accessing
the underground ore and the chosen method determines locations for the major openings,
surface constructions and size of the mine site.
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Active Gold Holding PLC
Investment Proposal
Due to high strength of rocks blasting will be carried out and drilling equipment with downhole
hammers is required to be used as its efficiency in strong rocks is very high in comparison with
rock bit drilling.
30m level interval between benches was determined by the following factors: geological –
dimensions (thickness, strike length and depth down the dip), shapes and slope angles of ore
bodies; geotechnical - mining methods, order of production, maintenance conditions of mine
openings, conditions and safety of mining operations, terms of preparation and development of
a level; technical and economic - ore reserves in a level, value and grade of metal in ore; scope,
terms and costs of development and production mining; costs of maintenance of mine workings
– transport, drainage, staff transportation and equipment.
The business-plan provides for a simple method of digging adits in a level at +740; +710, +680,
+650, +620 and +590. Down the dip the level is limited by an airway and an air-out adit and
along the strike - by the boundaries of the mine site. Opposite the adits, there are 30m air
raises which are also used as an emergency exit.
Based on recommendation of IRGIREDMET (2006), gold will be recovered from ores by heap
leaching. A heap leaching system includes the following facilities and devices: crushing facility;
heap leaching facility with drainage and spraying systems; service and emergency capacities
for gold-bearing and barren solutions; pump station; hydrometallurgical department;
storehouses; administrative and household facilities, including bar melting department and
laboratory; processing facility for cyanide solutions; power and heat supply equipment as well
as drinking and technical water supply.
After the major preparation work is completed, the cash cost of one ounce produced at the
Breccia site is expected to be approximately US$515.
Drilling Results
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Active Gold Holding PLC
Investment Proposal
32
Active Gold Holding PLC
Investment Proposal
Au reserves
C2
P1
P2
P3
2’850 kg
2’000 kg
5’000 kg
40’000kg
LOCATION OF ORE BODIES AT THE BRECCIA SITE (3D MODELLING)
Ore body 1 – red
Ore body 2 – violet
Ore body 3 – light blue
Ore bodies 4,5 and 6 – green, gray
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Active Gold Holding PLC
5.5
Investment Proposal
PROSPECT MINES
Several hard-rock mines have been offered to Active Gold to expand its operation during Phase
2.
a
PRAVOBEREZHNY
The site is located in the central part of the Kaurchackskaya paleocaldera formed by a
volcanogenic sedimentary stratum of the Sadrinskaya suite. Gold mineralization is confined to
linear lenticular steeply dipping mineralized zones of metasomatites composed of quartz,
albite, chlorite and sericite which were altered by sulfidization. The depth of estimation is
210m; total length of blocks is 3.7 km.
Gold resources in the P1 category are 25 tons. The average grade of gold is 3.43 g/t and the
average thickness is 4.7 metres. The resources were assayed by the TNIGRI commission (Central
Scientific and Research Exploration Institute of Non-ferrous and Precious Metals, Moscow) Minutes No.5 dated 10.06.2008 г. as well as by GornoAltaisknedra.
34
Active Gold Holding PLC
b
Investment Proposal
MAISKO-LEBEDSKY AREA
A 50 km2 area located in Turochack region at the upstream of the river Lebed hosts a
complex iron copper gold ore mineralization. Besides the iron gold Maisky deposit,
promising iron- copper-molybdenum-gold ores of the Andobinskoye deposit are found
there. Five ore-bearing zones are defined and estimated in the area - Andobinskaya, MaiskoLebedskaya, Magalaksko- Semenovskaya, Perspectivnaya zones and the zone of Talonsky
thrust.
In the Andobinskaya zone, the Andobinskoye deposit hosting complex iron-coppermolybdenum gold-bearing ores was estimated. Thickness of ore bodies is as follows:
iron (magnetite) ores – 20 to 33m; copper and molybdenum ores – 4.0 to 15.0 (up to 50)
m and gold-bearing ores – 2 to 15.0m. Average contents are as follows: 36.6 % of iron,
0.57 % of copper (0.37 to 0.92 %), molybdenum -0.031 % (up to 0.51 %) and gold – 0.6
to 6.2 g/t.
Inferred resources of metals in the Andobinskoye area including the Andobinskoye deposit
are the following:
 C2+P1 categories: gold - 40 tons, iron – 20.5 million tons, copper – 357.4 thousand
tons, molybdenum – 18.8 thousand tons;
 P2 category: iron – 107.1 million tons, copper – 151.7 thousand tonnes
/Platonov, 2004f/.
At the flanks of the Maisky gold hard-rock deposit inferred resources of hard-rock gold in the
P1 category total 2.5 tons grading 8.82 g/t, copper -350 thousand tons grading 0.5%, iron –
25 million tons grading 36%; thickness of gold-bearing ore bodies is 8.7m and copper-iron
ore bodies – 2 to 12m.
Resource potention of the Maisko-Lebedsky area is estimated at 50 tons of hard-rock gold,
0.82 ton of crustal gold and 138 million tons of magnetite ores in the P2 category (Minutes
No. 07- 11/0347-pr of the Ministry of Natural Resources dated 12.08.2003).
c
CHOISKAYA AREA
The Choiskaya area is located in the Turochack region of the Altai Republic 5km north-west
from Verkh-Byika village. It is confined to the south wing and west closure of the Ainskaya
syncline. An unconformable contact of Cambrian terrigenous-carbonate and Ordovician
terrigenous strata with slightly eroded intrusives of the Yugalinsky and Kyzyltashsky
complexes influences the location of the mineralization.
Inferred resources of gold, bismuth and tellurium in the Central part of the area were
estimated in the P2 category /Nikolenko, 2003f/ applying the method of direct calculations
based on the results of previous operations at the Choiskoye deposit. The ore zone in the
Central part is 2’200 metres along the strike and 300 metres down the dip. P2 inferred
resources in the Central part are as follows: 3.8 million tons of ore, 10.6 tons of gold, 2.8
35
Active Gold Holding PLC
Investment Proposal
thousand tons of bismuth and 1 thousand tons of tellurium.
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Active Gold Holding PLC
Investment Proposal
Given the value per length in the Central part of the ore zone (10.6 tons : 2.2 kilometre =
4.8 t/km), P3 inferred resources were estimated in the 800m Western part and 1’600m
Northern part. P3 Inferred resources hosted by the Choiskaya area total 12 tons.
d
SYNZAS
A placer by the Synzas river - the right tributary of the river Kabyrza - is located in the basin
of the river Mrassu, Gornaya Shoria, Kemerovo Oblast. Reserves of placer gold in the C1+ C2
categories are 254 kg at the average grade of 593 mg/m3. Thickness of overburden is 2.6m
and thickness of sands is 0.53m. P1 inferred resources at the river Synzas are 1’500kg.
e
BOLSHAYA RECHKA
A placer is located by the Bolshaya Recka river – the left tributary of the river Mrassu,
Gornaya Shoria, Kemerovo Oblast. Reserves of placer gold in the C1+ C2 categories are 392
kg at the average grade of 650 mg/m3 and thickness of sands of 0.52m. P1 inferred resources
in the basin of the river Bolshaya Rechka are 900 kg.
37
Active Gold Holding PLC
Investment Proposal
6
DEVELOPMENT PLAN
6.1
TIME SCHEDULE
Deposit
Chuika
Albas
Kaurchack
Breccia
New alluvial deposit
New hard-rock deposit
2011
2012
2013
2014
2015
2016
MINING
DRILLING
PREP.
43-101
MINING
MINING
PREP.
MINING
DRILLING
PREP.
43-101
MINING
PREP.
MINING
In 2008, Active Gold Holding started its operations with Chuika mine and during 2009-2010
prepared the sites at Albas, Kaurchak and Breccia. As of spring 2011, Kaurchack will be
operational. In parallel, Breccia will be further prepared so that operation can start in 2012.
As Chuika will be depleted in 2012, preparation work at Albas will start in 2011 with full
operation scheduled for 2012.
In order to make the best use of the already purchased heavy equipment, new alluvial
concessions will be acquired which allow the start of additional mining operations from 2014
onward. At the moment, it is rather easy to obtain such additional licenses at favorable
conditions.
In the course of Phase 1, a concession for a second hard rock mine will be acquired. It is
intended to start the operation of such a mine in 2014.
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Active Gold Holding PLC
6.2.
Investment Proposal
INVESTMENT DETAILS
The following equipment has been already acquired or is planned to be purchased.
a
ALREADY PURCHASED
Equipment and hardware as of 01.01.2011
Items
1
Office equipment
Equipment for land surveying GPS TRIMBLE
Communication and video equipment
Dwelling trailers
Dwelling trailers for staff ( with heating system) - 8 trailers per 8 persons each
Office dwelling trailer ( cwith heating system) for management
2 dwelling trailers (with undercarriage)
Dwelling trailer ( with heating system) for engineers and technicians
Car wash facility
Gas filling station
Banya/sauna
Kitchen-canteen (tent-wooden)
Gold room
House-office-canteen
5 storehouses for inventories
Hangar for hardware storage
4 tanks for fuel and lubricants,10 m3
Bulldozers
Tractor with bulldozing devices B 10 MB 0121-2V4
Tractor with bulldozing and ripper devices B10M.0111-EN
Bulldozer B10M.0111-1E
Bulldozer Т-130
Bulldozer CAT D9R (serial number WDM01162)
Bulldozer CAT D6R
Trucks
2 dump trucks Ural 55571
2 cargo high-sided trucks KIA FRONTIER
Automobile URAL-4320, high-sided
Cars
Land Cruiser 150 Prado 3.0
Toyota Avensis
Mitsubishi Pajero
Special Hardware and Facilities
Autocrane MKT-25.5 t, chassis URAL 4320
Excavator HITACHI ZX330L-3 HCM1V700L0003288
Fuel-servicing truck - 11,5 t, chassis URAL 4320-1912-40
Tanker trailer8602
Automobile GAS66
Automobile UAZ-396254
2 automobiles UAZ-390944
Automobile Kamaz 740u31-240 2300741
Gold-mining complex
Amount, rub
2
1‘ 185’964,00
1’750’000,00
2’191’529,98
5’734’484,99
1’200’000,00
200’000,00
878’500,00
150’000,00
65’984,99
300’000,00
480’000,00
200’000,00
700’000,00
730’000,00
600’000,00
160’000,00
70’000,00
48’400’904.38
2'907’070,00
2'938’000,00
3’350’359,50
300’000,00
15'962’825.92
22’942’649.96
4 ‘405’000.00
3’190’000,00
865’000,00
350’000,00
5’476’627.00
2’526’627.00
950’000.00
2 000 000,00
14’833’200.00
5’250’000,00
5’725’600,00
1’830’000,12
169’000.00
150’000,00
305’300.00
810’300.00
728’000,00
31’494’872.92
39
Active Gold Holding PLC
Investment Proposal
Items
1
Hoist 3 LS 55
Gold-washing plant OZK-70M "Zolotoy Poloz"
Hydro-gold-washing facility PPG-30
Washing complex КОS-1
Portable processing equipment POY-4-3m
Shaking table SKO-1
Sand pump
Concentrator KCP-1000, stainless steel
2 concentrators KCP -1000
3 concentrators KCP-6
Laboratory POY-1
2 Ainlay bowls
8 magnetic starters
Gold washing facility GGM 3
Pump station 8NDV
Drill rig UBR-2M
UPI-120-2 (set) (furnace)
Double-roll crusher DVG 200х125
Jaw crusher ShD10
Rail saw K960 (for channel samples)
Stone-cutting machine Volga-130
Other machines and equipment
3 pump stations
Pump with counter
Generator AIRMAN SDG 400S
Generator AIRMAN SDG 100S
Diesel generator
Diesel generator 30 (DES)
Generator United Power DG 3600 E
Electric motor 110kWх1500 revolution per minute
Aggregate 1D800/56B with electric motor
Separator SWK 2000/40 M
Hammer HM 1801/Makita
Hammer drillHR 5211 c/Makita
Heat gun Sial 28 kW
2 chain saws ECHO CS-680
Total machines and equipment in rouble
Total machines and equipment in dollar
Dollar rate
Amount, rub
2
450’000,00
12'411’338.00
1’000’000,00
2’600’000,00
757’000,00
355’000,00
45’000,00
1’140’000,00
1’ 083’000,00
1’893’000,00
997’500,00
180’000,00
148’000,00
3’827’663.32
1’449’957,00
2’500’000.00
89’680.00
294’019.90
151’217.70
59’697.00
62’800.00
3’691’203,57
550’000,00
39’000,00
2’010’800,00
589’500,00
41’939,56
30’000,00
25’011,00
42’151,41
157’848,60
35’000,00
64’606,00
34’018,00
19’499,00
51’830, 00
120'613’743.84
4’020’458.128
30
40
Active Gold Holding PLC
b
Investment Proposal
EQUIPMENT TO BE PURCHASED
Equipment for the alluvial mines
No.
1
I
Item
2
Washing and processing facility
Hydromechanical screen GGM-3
Pump station
Num
ber
3
2
2
Price, $/unit
4
Amount, $
120’000.00
24’000.00
5
288’000.00
240’000.00
48’000.00
II
1
2
3
4
5
Mining hardware
Scraper ramp with scraper hoist 3LS55S
Excavator CАТ 336 DL ME, Caterpillar
Dump truck CАТ
CAT-D6R Caterpillar
CAT-D9 Caterpillar
1
2
4
1
1
40’246.9
376’000
500’000
418’000
820’000
4’030’246.88
40’246.88
752’000.00
2’000’000.00
418’000.00
820’000
III
1
2
3
4
Power supply equipment
Diesel generator station (DGS)
Distribution substation
Reserve while washing DGS - Honda 5 kW
ADD-4004Π+VG diesel welding set
1
1
1
1
90’000
8’750
3’593.75
5’537.19
107’880.94
90’000.00
8’750.00
3’593.75
5’537.19
IV
1
12
5’312.5
105’625.00
63’750.00
2
3
4
5
Auxiliary equipment
Modular portable camp for 40 people
Portable storehouse for fuel and lubricants (capacity - 50
m3)
Storehouse for inventory, 40t container
UAZ 452
Servicing vehicle for wheeled and tracked machinery
2
2
1
1
3’125
2’656.25
13’125
17’187.5
6’250.00
5’312.50
13’125.00
17’187.50
V
Computers and digital equipment, communications
26’390.63
VI
Life necessities
26’906.25
VII
Exploration and laboratory equipment
38’281.25
Total
Contingency reserve
Total with VAT
Transport expenses
TOTAL
4%
5%
4’623’330.95
184’933.24
4’808’264.19
240’413.21
5’048’677.40
41
Active Gold Holding PLC
Investment Proposal
Equipment for the hard-rock deposit
No.
1
I
1
2
3
4
5
6
7
8
9
10
11
12
II
1
2
3
4
5
III
1
2
3
4
IV
1
2
3
3
4
5
6
7
8
VI
1
1.1.
1.2.
1.3.
1.4.
1.0.
1.0.
1.0.
2
3
Hardware and equipment
2
Mining hardware
Mobile drilling rig, Boomer 104
Hydraulic mobile drilling rig Simba 1254 with hydroperforator
SOR 1838 ME
Load haul dump truck Scooptram ST3,5
Fan, VME-6
Main fan system
Portable electrical air compressor «Airman»-SDV
Shotcrete equipment CB-67B2 (for shafts)
Roof supporting facility «Secoma»-060
Lightning deviceAOSh-4
Batch charging device ZP-12
Grinding machine for drill bits
Wireless communications system
Total
Ore preparation equipment
Jaw crusher SMD110A
Jaw crusher SMD109A
Cone crusher KMD1200T
Haulage conveyor, 600m
Stacker
Total
Power supply equipment
Diesel generator station CAT 3508B TA
Diesel generator station CAT GEP380
Distribution substation
ADD-4004P+VG diesel welding set
Total
Auxiliary equipment
Modular camp
Fuel storehouse, 50 m3 capacity
Storehouse for explosives
Storehouse for inventory, 40t container
UAZ452
Bulldozer CAT D6R
Portable double-detector gas analyzer KOLION-1V-04
Portable station for air control, ALMAZ
Mine rescue equipment
Total
Office furniture and equipment, communications
Computers
Geological department
Land surveying department
Production department
Accounting department
Scanner
Plotter
Printer
Desk
Chair
Number
Price, $/unit
3
4
Amount, $
5
1
705’566.00
705’566.00
1
2
9
1
1
1
1
1
1
1
1
995’372.00
631’056.00
7'042.00
211’268.00
15’845.00
21’127.00
32’211.00
2’641.00
8’803.00
56’338.00
31’690.00
995’372.00
1’262’112.00
63’378.00
211’268.00
15’845.00
21’127.00
32’211.00
2’641.00
8’803.00
56’338.00
31’690.00
3’409’351.00
1
1
1
1
1
176’056.00
123’239.00
352’113.00
528’169.00
528’169.00
176’056.00
123’239.00
352’113.00
528’169.00
528’169.00
1’707’746
2
1
4
1
198’900.00
113’101.00
12’676.00
7'852.00
397’800.00
113’101.00
12’676.00
7'852.00
531’429.00
80
1
6
2
1
1
1
1
1
1'585.00
3’521.00
4’049.00
4’049.00
14’789.00
415’250.00
2’289.00
5’000.00
98’592.00
126’800.00
3’521.00
24’294.00
8’098.00
14’789.00
415’250.00
2’289.00
5’000.00
98’592.00
698’633.00
1
1
1
1
1
1
1
12
36
1’831.00
1’831.00
1’831.00
1’831.00
229.00
2’958.00
1’708.00
106.00
18.00
1’831.00
1’831.00
1’831.00
1’831.00
229.00
2’958.00
1’708.00
1’272.00
648.00
42
Active Gold Holding PLC
No.
1
4
5
6
7
Investment Proposal
Hardware and equipment
VII
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
2
Bookcase
Set for shaft and surface communications
Surface station of satellite communications LinkStar DVG-2004S
Land surveying equipment
Total
Miscellaneous
Fridge
Freezer
Kitchen stove with four burners
Oven
Washing machine (20 kg of linen)
Dishes and cookware
Kitchen table
Dining table
Chair
Wardrobe
Beds
Special clothes
Night stand
Bed set (blanket and pillow)
Bed linen
VIII
Hydrometallurgical department
Number
Price, $/unit
Amount, $
3
15
1
1
1
4
352.00
32’062.00
13’556.00
52’817.00
5
5’280.00
32’062.00
13’556.00
52’817.00
117’854.00
2
1
1
1
1
80
3
5
20
40
80
80
80
87
160
775.00
4’366.00
1’972.00
880.00
7’923.00
113.00
141.00
106.00
18.00
141.00
70.00
528.00
35.00
183.00
16.00
1’550.00
4’366.00
1’972.00
880.00
7’923.00
9’040.00
423.00
530.00
360.00
5’640.00
5’600.00
42’240.00
2’800.00
15’921.00
2’560.00
5’200’000.00
Total
Contingency reserve
Transport expenses
Total with contingency reserve and transport expenses + VAT
11’766’818.00
470’673.00
588’341.00
12’825’832.00
4%
5%
Equipment for logging department
I
Processing equipment
1
Corner rotary disc sawmill PDPU-550
II
Power supply equipment
1
III
1
Diesel electric station, 30 kW
Auxiliary equipment
Modular camp
Total
Contingency reserve
Transport expenses
Total with contingency reserve and transport expenses + VAT
4’770,00
1
4’770,00
4’770,00
16’500,00
1
16’500,00
1
700,00
4%
5%
16’500,00
700,00
700,00
21’970,00
878,80
1’142,44
23’991,24
43
Active Gold Holding PLC
7
Investment Proposal
PRODUCTION, LOGISTICS AND LOCAL
INTEGRATION
7.1
PRODUCTION
a
ALLUVIAL MINES
Currently, the Chuika and Middle Kainach deposits are developed using a surface mining
method. Firstly, overburden is removed by earthmoving machinery. Sands are washed and
processed in a portable gold washing plant GGM-3.
OZK-70 processing equipment will be used at the Albas and Kaurchack mines. It has excellent
characteristics as to recovery of fine gold. It disintegrates sands with high content of clay easily.
It is ideal for defining sand and gold characteristics at the beginning of a production process.
Technological scheme of the GGM-3 gold washing plant
1
3
2
5
4
1 – Water spray
2 – Plate conveyor
3 – Hydraulic screen
4 – Sluice
5 – Oil station
Technical Characteristics of GGM-3 facility
1.
2.
Washing productivity, mid-washable sands (m3/h)
Sieving dimensions of the screen (mm)
3.
4.
5.
6.
Maximal boulder size under irrigator (mm)
Necessary water consumption (m3/h)
Necessary water pressure of irrigator (mmAq)
Engine of the oil station:
- type
- capacity (kW)
- revolutions per minute
Screen size:
7.
70
50x3000
40x3000
30x3000
1200
500-700
20
4А180M4
30
1500
44
Active Gold Holding PLC
8.
9.
10.
Investment Proposal
- length (m)
- width with a switch (m)
- height with the installed irrigator (m)
Sluice dimensions (m)
- length
- width
Oil-station dimensions
- length (mm)
- width (mm)
- height (mm)
Total weight (t)
6,5
3,55
3,0
6,0
1,6
2240
940
1380
21
Gold washing facility GGM-3, Chuika mine
The order of mining operations assumes simultaneous production of no less than two blocks,
which are at the different production stages. These stages make the single technological
complex of works (STCW), which moves up along the river valley, consistently producing gold
reserves of the overlying blocks and making reclamation of the already worked territory of the
underlying ones, see picture below.
The order of mining operations:
– laying out a geological block contour;
– drainage of a polygon; the pump station is placed at the lowest point of the block on
the drain sump board (10х10х6.0=120 m3), then starting from the sump, trenching is
carried out: width – 2m, depth – 4 m, length - along the block perimeter; pumped out
water is discharged to the channel divert;
– an entry trench is developed: depth - 3,5 m, length – block length, along the perimeter
of the block – 30-90 m, width of the trench is 15 m;
– an overburden wall is formed by an excavator from the beginning of a ramp to the
opposite side of the block; space for transport is provided – turnarounds and waiting
areas;
– the first auto dump is formed of top soils at the last geological block not far away from
the river head;
– the first dump is located at the open-pit (polygon) sides;
45
Active Gold Holding PLC
Investment Proposal
– waste rocks of the following blocks are placed on the worked out areas;
– extraction of sands is carried out with the help of an overburden excavator.
Excavating provides advanced stripping and extraction of sands along the bench.
Production at the Albas placer mines is shown as an example.
Scheme of the Albas placer mine production
b
HARD ROCK DEPOSIT
The project provides for application of heap leaching. The process consists of three stages: firstly,
blocked-out ore is stockpiled; secondly, the pile is irrigated by the sodium cyanide solution,
dissolving gold and silver and; finally, gold and silver are recovered from this solution in the
hydrometallurgical department.
Laying of protective film
Preparation of a pile
46
Active Gold Holding PLC
Investment Proposal
Hydrometallurgical department
As an alternative to the technology mentioned above, Active Gold is currently evaluating the
most modern methods to eliminate any adverse environmental effects of the leaching process
(developed in Finland). The technology with the most promising features is called
“Bioheapleaching” and is a process, whereby metals are leached from ore as a result of bacterial
action.
7.2
LOGISTICS
a)
Work process
Since production has been commenced at the Chuika mine a 15 in 15 shift scheme will be
applied. This means that an employee works 15 days and then has a rest for 15 days. Active Gold
produces 24-hours a day – 2 shifts, each lasting 12 hours per day. Depending on the performed
activities, the number of employees at the mine varies from 23 to 33. Two person usually
perform works at one position.
b)
Energy
The producer of qualitative fuel in the Western Siberia region is the Omsk Oil-refining Plant. The
official dealer of the plant is the Sibneft Group. Active Gold has concluded a contract with the
dealer for fuel supply. The purchase period depends on the volume of production. In spring and
autumn, when there are no washing operations, fuel consumption is less than one petrol tanker
per week, equal to approximately 10’000 liters. In summer, consumption requires about 3 petrol
tankers per week.
47
Active Gold Holding PLC
Investment Proposal
For custody of fuel and lubricants in Tashtagol, Active Gold has 2 cisterns of 60 m3 each, and has
2 tanks of 25 l3 at the Chuika mine.
Fuel and lubricants is delivered to the Chuika mine from Tashtagol (180 km) by an URAL-4320
fuel tanker truck. Fuel consumption for each equipment item is controlled on a permanent basis.
As the mines are located too far from industrial and power-supply centers, the company has to
use electric power generated by diesel stations. The costs of electric power connections are high.
Electricity production by diesel stations directly at the mines guarantees the power supply
necessary for the production process. Comparative analysis of the full cost of electric power
shows a significant economic and technical advantage of electricity generated by diesel stations
at site.
c)
Spare parts
The nomenclature of our repair parts and consumables includes approximately 1,000 items; the
average total price of the remaining material and repair parts in the warehouse totals
approximately 1 million ruble. Spare parts for import equipment are delivered by our suppliers,
which are certificated by the producers. Spare parts for the Russian equipment are delivered by
local suppliers from Barnaul, Gorno-Altaisk and Nobokuznetsk. All suppliers have their own
equipped storage bases. The storehouses of Active Gold are located in Tashtagol and at the
Chuika mine itself.
d)
Transportation of Gold
Two times per day, our gold production is collected from special facilities in the processing
equipment. The gold is stored in the safe of the “Gold Room”, a high security room in the camp.
Once a sufficient amount of gold is accumulated (between 10 and 20 kg, depending on
production and financial necessity), a parcel of gold is prepared for sending to the refining plant
in Novosibirsk. The gold is transported by cash-in-transit armoured vehicles. It takes 2-3 days to
deliver the parcel to the Novosibirsk Refining Plant from the moment a special vehicle order for
transportation has been placed. At the refining plant, gold is melted into standard or small bars
of chemically pure gold. The weight of standard bullions varies from 11 to 13.3 kg. The period of
processing at the refining plant is 3-5 days.
After its processing, the gold is sold in accordance with the contracts in place, which are
preliminary registered in GORHAN (Government Institution for Formation of the State Fund of
Precious Metals and Stones) of Russia.
At the moment, Active Gold has already concluded contracts of gold delivery with the following
counterparts:
1.
Sberbank
According to the contract with the Sberbank, two ways of settlements are available:
–
Preliminary settlement – right after acceptance of gold by the refining plant - the Bank
pays in advance 70% of the total sum for the gold delivery. These 70% are given as a
credit with 18% annual interest. The remaining sum is paid after delivery of gold to the
Depository of the Sberbank head office in Moscow.
–
Final settlement – all sums for gold are paid when gold is delivered to the Depository
of the Sberbank head office in Moscow. Metal is transported from Novosibirsk by
48
Active Gold Holding PLC
Investment Proposal
Sberbank within 2-3 days from the date of the bullions’ readiness, confirmed by the
refining plant.
2.
Bank Frey & Co AG, Switzerland
Refined gold is delivered in standard and small bars as well as in nuggets not subject to refining
according to the contract. In this case, Active Gold delivers the product, which is cleared for
export to the customs of Zurich airport, Switzerland. Bank Frey & Co AG shall make a payment
for the sold metal within five (5) working days after the product has been exported from the
custom territory of the Russian Federation via bank transfer to the settlement account of Active
Gold.
Active Gold has already obtained the license for export of gold in the form of either nuggets not
subject to refining or refined gold in standard and small bars. The contract with Bank Frey & Co
AG is in place.
7.3
CONCESSIONS
Current Concessions:
Licence R. Chujka (OOO Aurum),
Serie GOA Nr. 00284, BR, 21.09.2006 in register Nr. 282,
valid until 1.8.2011
Licence R. Albas (OOO Altyn Cur),
Serie GOA Nr. 00226, BR, 1.5.07 in register Nr. 225,
valid until 1.5.2014
Licence R.M. Kaurchak (OOO Altyn Cur),
Serie GOA Nr. 00227, BR, 20.9.2004 in register Nr. 226,
valid until 15.03.2014
Licence Breccia, BREKCAIJA (OOO Altaj Korona),
Serie GOA Nr. 00258, BR, 2.11.2005 in register 256,
valid until 1.12.2014
All 4 Concessions are extendable.
49
Active Gold Holding PLC
Investment Proposal
License for Export of Gold Nuggets, Active Gold Holding Plc, 9th December 2009
License for Export of Gold Bars, Active Gold Holding Plc, 9th December 2009
50
Active Gold Holding PLC
Investment Proposal
7.4
GOVERNMENTAL SUPPORT AND LOCAL INTEGRATION
a
National Agency
A.Y. Nikiforov, CEO of the Federal Subsoil Resources Management Agency, expressed a strong
interest that Active Gold expands its activities and acquires additional licenses. Active Gold does
not only bring needed tax income to the Republic of Altai, but it also helps to create new jobs
and to improve the infrastructure of the region.
b
Social Responsibilities
Active Gold is actively working towards the goal of effectively utilizing its presence as a force for
sustainable social stability, well-being and growth in the region.
The terms stated by the local government in the Company’s license agreements specify a number
of activities related to this goal and the Company has even expanded these activities further
along the lines of contemporary Corporate Social Responsibility.
Since the beginning of 2008, Active Gold has assisted in the construction or renovation of local
official buildings such as several local schools and hospitals.
The Company has also been instrumental in strengthening and upgrading the bridge over the
Chuika river and its access roads, for instance by installing standpipes and distributing new road
filling materials.
Active Gold is a substantial supplier of labor opportunities for the local workforce and the
Company’s taxes make up a significant portion of the annual budget for the local and regional
administrations.
Besides the obvious positive implications for the Company’s brand and reputation, this work also
makes the Company a very valued member in the local community, thus it has never experienced
any undue political pressure or other delays, nor any disruptions of deliveries and supplies.
7.5
ENVIRONMENT
Gold mining does put some temporary stress on the local environment, but Active Gold is fully
committed to make this impact as small and short-lived as possible.
Detailed nature conservation regulations for working with cyanides are provided by the federal
legislation. Here, the main obligation for the company is to make sure that any transfer of
cyanides from the production area into the water and air is eliminated. Active Gold works with
completely closed cycles to avoid any pollution.
Thus, Active Gold is in full compliance with all relevant parts of the Russian Federal legislation.
Any lands that are damaged as a result of the mining activities are first partially reclaimed and
then transferred, in the case of Active Gold, to the State Forestry Fund, which performs further
environmental reconstruction efforts.
51
Active Gold Holding PLC
Investment Proposal
The Federal Zapsiblesproekt Research Institute is responsible for Active Gold’s own land
reclamation projects which include a wide range of technical and partially also biological
reclamation efforts.
As the environmental regulations of the EU in some cases are stricter in this regard than the
ones of the Russian Federation, Active Gold strives to comply also with the EU regulations.
8
SALES
Currently, and as described in 7.2.d), our gold (and silver) has been transported from the site to
a melting company in Novosibirsk. After a cleaning and melting process, which takes some 2-3
days, it is sold to Sberbank at the London spot prize.
The Company has already obtained the licenses for export of gold in the form of bars and
nuggets. The contract with the Swiss bank, Bank Frey & Co AG has been executed. According to
the contract, the cost of delivering gold will be defined on the basis of London gold fixing in
USD/ounce as at the date of product shipment.
52
Active Gold Holding PLC
9
COMPANY
9.1
STRUCTURE
Investment Proposal
Active Gold Holding PLC
(Holding)
St. Petersburg
Expert Centre Ltd.
Altai Republic
Barnaul
Altyn Kour Ltd.
Altai Republic
Altai Crown Ltd.
Altai Republic
Transport Service Ltd.
Kemerov Region
Tashtagol
Artel of Gold Miners Altyn Kour Ltd., Altai Crown Ltd. and Aurum RA Ltd.:
Exploration and Mining for precious metals.
Transport Services Ltd.: Title to all hardware, providing all transport and
logistics
Aurum RA Ltd.
Altai Republic
9.2
Expert Centre Ltd.: Centralized administration for the mining companies. The
company performs the management functions, prepares reports and data
information for the decisions making.
ORGANIZATION
Shareholders
Board of Directors
General Director
Head Finance
Head Legal
Head HR
Chief Geologist
Head of Security
Production Director
Head of
Sites
Chief Engineer of
Ore Dressing
Logistics Director
Mining
Engineer
Supply
Settlement
Support
Department
General
Departm
ent
53
Active Gold Holding PLC
9.3
Investment Proposal
BOARD OF DIRECTORS
Dr. Beat Weber
Chairman
Born in 1950. Higher education: Master in Economics from the
University of St. Gallen and a PhD in Economics from the University of
Vienna. Entrepreneur and founder of various enterprises with over 15
years of business experience in Russia. Active partner of a fish
processing plant and of the first quality vineyard in Russia. International
consulting, management and marketing mandates in Zurich,
Switzerland. Entrepreneurial and consulting experience in South
America.
Vladimir Petrovich Zhukov
Member
Born in 1946. Higher education: Degree in Physics and Mathematics at
the Leningrad Higher Military Command College in 1967. President of
LISUISSE AG, INNOVADATA AG, a licensed gold bullion company based
in Switzerland, since 2001. Former President of Artel Altyn Cur Ltd. and
the Altai Crown gold mining companies. President of Aurum Ltd. in
2006. Current position: Acting CEO of Active Gold Holding PLC.
Alexander Semyonovich Belyakov
Member
Born in 1945. Higher education: Graduated from the Petrozavodsk
Railroad Technical College in 1963, and in 1979 from the Leningrad
Agricultural Institute with a degree in Mechanical Engineering. Elected
as Chief of Administration for the Leningradsky Region in 1991. Official
Secretary to the Deputy Minister of Agriculture and Food of the Russian
Federation until 1997. Deputy of the State Duma of the Federal
Assembly of the Russian Federation and Chairman of the Committee for
the Management of Natural Resources until 2008. Current position:
Deputy Chairman of the Board of Rosselkhozbank.
54
Active Gold Holding PLC
Investment Proposal
Yarugin Victor Olegovich
Assistant General Director
Born in 1956. Higher education: Saint-Petersburg Shipbuilding Institute,
Faculty of Power Machine Building in 1982. Power Engineer and
Workmaster of the Innovation Fund of Development until 1995. Chief
Manager of PTK-Lestransit Ltd. until 2002. Technical Director of Regional
Financial Company – Saint-Petersburg ZAO until 2008. Current position:
Assistant General Director of Active Gold Holding PLC.
Dorovoskih Elena Vladimirovna
Vice-President for Legal Matters
Born in 1976. Higher education: Faculty of Jurisprudence, Tomsky State
University, Legal Officer. Vice-President of Artel Altuna Kour Ltd.until
2007. Current position: Vice-President of the Expert-Centre Ltd.
9.4
MANAGEMENT TEAM GENERAL MANAGEMENT
Vladimir Petrovich Zhukov
CEO
Born in 1946. Higher education: Degree in Physics and Mathematics at
the Leningrad Higher Military Command College in 1967. President of
LISUISSE AG, INNOVADATA AG, a licensed gold bullion company based
in Switzerland, since 2001. Former President of Artel Altyn Cur Ltd. and
the Altai Crown gold mining companies. President of Aurum Ltd. in
2006. Curent position: Acting CEO of Active Gold Holding PLC.
Irina Victorovna Popovkina
CFO (Financial Director)
Born in 1978. Higher education: Degree in Economy from the Altai State
University in 2002 with a specialty in anti-recessionary management.
Career: Financial officer position until 2005 and thereafter Financial
Director of the Joint Stock Company “Barnaul bread-baking complex №
1”.
55
Active Gold Holding PLC
9.5
Investment Proposal
GEOLOGICAL AND TECHNICHAL EXPERTS - SITE MANAGEMENT
The heads of the mining team combine more than 100 years of experiences in the gold mining
industry.
Nikolai Petrovich Bedarev
Chief Geologist
Born in 1951. Higher education: Tomsk Polytechnic Institute, in 1981,
with a specialty in Geological Surveys, Exploration and Prospecting of
Mineral Deposits. In the mining industry since 1977. Current position:
Chief Geologist, head of the group and Chief Geologist of the Holding.
Andrei Germanovich Sandykov
Senior Geologist
Born in 1959. Higher education: Tomsk Polytechnic Institute, in 1985,
with a specialty in Geological Surveys, Exploration and Prospecting of
Mineral Deposits. In the mining industry since 1985. Current position:
Senior Geologist, Altai Crown Gold Mining Company Ltd.
Vladimir Fyodorovich Kuznetsov
Chief Operating Officer
Born in 1954. Higher education: Tomsk Polytechnic Institute, in 1976,
with a specialty in Geological Surveys, Exploration and Prospecting of
Mineral Deposits. In the mining industry since 1976. Current position:
Chief Operating Officer of the Holding.
Maxim Victorovich Shtirtz
Department Head
Born in 1972. Higher education: Krasnoyarsk State Academy of Nonferrious Metals and Gold, 2003, Tashtagol ore mine branch of
EVRAZRUDA. In the mining industry since 1994. Current position:
Department Head, Expert Centre Ltd.
56
Active Gold Holding PLC
Investment Proposal
Ildar Gayazutdinovich Fakhrutdinov
Site Head
Born in 1963. Higher education: Faculty of Geology, Kazan State
University, with a specialty in Engineering Geodesy. In the mining
industry since 1984. Current position: Site Head, Expert-Centre Ltd.
Nikolai Vasilevich Lyoshin
Chief Mechanic
Born in 1963. Higher education: Tomsk Polytechnic Institute, 1989, with
a specialty in Automotion and Robotics applied In Engineering. In the
mining industry since 1989. Current position: Chief Mechanic, Expert
Centre Ltd.
Mikhail Georgievich Myasnikov
Chief Power Engineer
Born in 1966. Higher education: Siberian State Institute, Engineer with
a specialty in Electric Drives and Automatic Machinery of Industrial
Facilities and Technological Complexes. Current position: Chief Power
Engineer, Expert-Centre Ltd.
57
Active Gold Holding PLC
9.6
Investment Proposal
SHAREHOLDERS
Agrofirma
"New
Agricultural
Agrofirma
'New
Agricultural
Technologies"
(RUS)
Technologies'
Ltd Ltd
(RUS)
2.8256%
8.0000%
Vladimir
Zhukov
(RUS)
Vladimir
Zhukov
(RUS)
15.7889%
4.3858%
Beat
(CH) (CH)
Dr.Weber
Beat Weber
Ekaterina
Shevchenko
(RUS)
Ekaterina
Shevchenko
(RUS)
22.0544%
Markus
Frey (CH)
Dr. Markus
A. Frey (CH)
31.7802%
Kurt
Suter
(CH)
Kurt
Suter
(CH)
0.0038%
15.1613%
German de la Cruz Cabeza de
German de la Cruz Cabeza de Vaca
Vaca y Leighton
Leighton (ES)
Dr.Baumgartner
Rico Baumgartner
Rico
(CH)
The current shareholders combine a significant amount of know-how and experience.
One of the Russian partners is an engineer with the know-how and management skills in gold
mining. The other Russian partner brings the political network to the table. The first Swiss
investor has over 15 years of business experience in Russia which goes back to the times of the
iron curtain. He successfully manages a fish farm and a vineyard in Russia. He is fluent in Russian.
The second Swiss investor is not only owner and Chairman of a Swiss Private Bank but also brings
a very broad network in the financial services industry and extensive Private Equity experience
to the table.
Shareholders, who joined the Company in 2009, brought additional advantages to the team.
The investor from Spain is an entrepreneur and Private Equity Investor with a wide experience
of doing business in Europe. The Swiss investor is a technical engineer and top-ranked specialist
in this field.
58
Active Gold Holding PLC
Investment Proposal
10 FINANCIAL PROJECTIONS
10.1
Revenues
The Company expects to produce 200 kg of gold in 2011 corresponding to a turnover of US$
8.0m. When the key Breccia hard-rock mine will enter production, gold production will gradually
increase to 1.41 ton. With the silver mining side-product, the turn-over of Active Gold is
forecasted to reach US$ 69m by 2014.
Amounts in USD thousands unless mentioned otherwise
Production forecasts
Gold (kg) per mine
Total resource
estimate
2011
2012
2013
2014
2015
2016
2017
Chuika / Kainach
196
150
46
-
-
-
-
-
Albas
307
-
130
177
-
-
-
-
Kaurchak
160
50
55
55
-
-
-
-
42'220
-
-
630
910
910
910
910
6'000
-
-
-
500
500
500
500
Breccia
Extension alluvial mining
Total gold production (in kg)
in troy ounces
Expected gold price per kg
200
231
862
1'410
1'410
1'410
1'410
6'430
7'427
27'714
45'333
45'333
45'333
45'333
46.6
46.6
46.6
46.6
46.6
46.6
46.6
per troy ounce
1'450
1'450
1'450
1'450
1'450
1'450
1'450
Revenue gold (USD '000)
9'324
10'769
40'186
65'733
65'733
65'733
65'733
2011
2012
2013
2014
2015
2016
2017
Silver (kg) per mine
Total resource
estimate
Chuika / Kainach
-
-
-
-
-
-
-
-
Albas
-
-
-
-
-
-
-
-
Kaurchak
-
-
-
-
-
-
-
-
-
-
1'947
2'812
2'812
2'812
2'812
2'812
Breccia
Total silver production (in kg)
316'794
-
-
1'947
2'812
2'812
2'812
Expected silver price per kg
1.30
1.30
1.30
1.30
1.30
1.30
1.30
Revenue silver (USD '000)
-
-
2'531
3'655
3'655
3'655
3'655
42'716
69'388
69'388
69'388
69'388
Total revenues
9'324
10'769
59
Active Gold Holding PLC
10.2
Investment Proposal
Cost
The Company has a favorable production cost that will gradually decrease over time due to
economies of scale, notably with the development of the Breccia mine. The 2010 fully loaded
cost per ounce is relatively high as the cost structure is being ramped up for the development
of all 4 mining concessions. Over time, the company plans to produce under US$515 per ounce,
which is a reflection of the quality of the deposits and the advantageous cost of mining in Russia.
Amounts in USD thousands unless mentioned otherwise
Cost structure (before financing)
2011
2012
2013
2014
2015
2016
2017
2018
Salaries (Mining)
142
194
87
68
68
68
68
68
Maintenance: Spare parts and oil
140
130
43
131
131
131
131
131
Energy
197
197
66
81
80
80
80
80
27
39
120
101
101
101
101
101
-
-
8
6
6
6
6
6
122
114
63
39
39
39
39
39
Management fee
47
40
11
7
7
7
7
7
Miscellaneous
11
Non-income taxes
13
Cash costs
Mining supplies & services
Environmental restitution
Administration / office
Mining tax
VAT
87
(155)
11
(167)
87
(371)
7
9
9
9
9
9
58
76
74
73
62
70
92
92
92
92
92
92
(88)
(57)
(57)
(57)
(67)
(57)
27
Uniform social tax
56
76
34
27
27
27
27
Personnel tax
21
25
11
9
9
9
9
9
4
16
9
5
4
2
1
(0)
Total cash cost per ounce produced*
699
559
461
518
516
514
503
512
Depreciation
160
400
143
88
89
90
97
82
Total cost per ounce produced*
859
960
604
606
605
604
600
594
6'430
7'427
27'714
45'333
45'333
45'333
45'333
Ounces
produced
Property tax
Ounces produced
* before financing and income taxes
Note: the negative tax figures represent VAT refunds
60
Active Gold Holding PLC
10.3
Investment Proposal
Profit and Loss
A revenue threshold of US$ 69m will yield substantial net returns, largely due to economies of
scale and reasonable taxation levels.
Amounts in USD thousands unless mentioned otherwise
Profit & Loss
2011
2012
2013
2014
2015
2016
2017
Tota l revenues
9'324
10'769
42'716
69'388
69'388
69'388
69'388
Salaries (Mining)
916
1'443
2'406
3'100
3'100
3'100
3'100
Maintenance: Spare parts and oil
898
964
1'185
5'950
5'950
5'950
5'950
1'269
1'466
1'819
3'666
3'641
3'641
3'641
176
292
3'315
4'580
4'580
4'580
4'580
Cash costs
Energy
Mining supplies & services
Environmental restitution
-
-
208
261
261
261
261
Administration / office
786
849
1'733
1'750
1'750
1'750
1'750
Management fee
300
300
300
300
300
300
300
70
82
190
426
425
425
425
1'616
3'434
3'375
3'311
2'789
2'563
4'163
4'163
4'163
4'163
(2'443)
Miscellaneous
Non-income taxes
Mining tax
VAT
81
559
646
(2'581)
(2'577)
(2'577)
(3'035)
Uniform social tax
358
564
940
1'211
1'211
1'211
1'211
Personnel tax
137
188
313
403
403
403
403
26
118
243
238
175
111
46
Property tax
Transaction fees
(999)
(1'241)
(2'756)
600
-
-
-
-
-
-
Total cash costs
5'097
4'155
12'771
23'467
23'383
23'319
22'797
EBITDA
4'227
6'614
29'945
45'921
46'006
46'069
46'592
Depreciation
1'029
2'972
3'976
4'011
4'047
4'083
4'418
EBIT
3'197
3'642
25'970
41'910
41'959
41'987
42'173
Interest expense (income)
2'446
1'852
929
385
275
110
EBT
752
1'790
25'041
41'525
41'684
41'877
42'173
-
Tax
150
358
5'008
8'305
8'337
8'375
8'435
Net income
602
1'432
20'033
33'220
33'347
33'501
33'738
61
Active Gold Holding PLC
10.4
Investment Proposal
Balance Sheet (Pro Forma March 31st 2011)
Amounts in USD thousands unless mentioned otherwise
Assets
USD '000
Current assets
Cash and equivalents
Inventory
Receivables
Prepaid expenses and advances to suppliers
Other current assets
Total current assets
Liabilities and Equity
USD '000
Current liabilities
351
3'191
Financial debt
Accounts payable
7'576
56
46
Tax provisions
200
2'006
Other liabilities
356
27
Total current liabilities
8'188
5'622
Non-current assets
Equity
Property & equipment
Concessions
2'261
80'280
Additional issue
Retained earnings
80'285
-310
Total non-current assets
82'541
Total equity
79'975
Total assets
88'163
Total liabilities and equity
88'163
Note: exchange rate used 1 USD = 28.4 RUB
The pro forma balance sheet of the Active Gold Holding PLC comprises essentially the value of
the gold concessions. The book value of the concessions is subject to audit by a specialized audit
firm mandated by the Russian government. We have used the pro forma equity per March 31st
2011 as the benchmark for the pre-money valuation of the firm.
62
Active Gold Holding PLC
10.5
Investment Proposal
Free Cash Flow
The Company is forecasted to become rapidly cash-generative after the main development
expenditure has been spent in 2011 and 2012. An annual free cash-flow after financing of more
than US$ 35m is expected as of 2014.
Amounts in USD thousands unless mentioned otherwise
Cash-flow
2011
2012
2013
2014
2015
2016
2017
Operating cash-flow
Net income
+ Depreciation
- Capex
602
1'432
20'033
33'220
33'347
33'501
33'738
1'029
2'972
3'976
4'011
4'047
4'083
4'418
-3'250
-3'048
-14'113
-7'473
-250
-250
-250
+ Changes in Net Working Capital
829
129
2'765
5'165
15
15
-7
Operating cash-flow
-588
-9'580
19'300
42'146
37'159
37'349
34'900
Financing cash-flow
+ / - Equity funding
-
-
-
-
-
-
177
-4'823
-5'823
-1'000
-1'000
-2'000
-
Total financing cash-flow
16'357
-4'823
-5'823
-1'000
-1'000
-2'000
-
Free cash-flow
15'769
-14'404
13'477
41'146
36'159
35'349
34'900
+ / - Debt funding
16'180
63
Active Gold Holding PLC
10.6
Investment Proposal
Sources & Uses Of Capital
The Company aims to raise US$ 16.2m to fund the full development of its concession portfolio,
comprising 16.5m in production equipment and 3m of additional drilling. Furthermore, 1.0m are
required to fund peak working capital requirements and the costs related to the fundraising.
Development of concession portfolio in 2011/2012
Amounts in USD thousands unless mentioned otherwise
Sources
Equipment vendor financing
Capital increase
Uses
5'000
16'180
Investment in plant and equipment
Additional drilling
4'758
Working capital and cash reserve
3'420
Fees (finance, legal, structuring)
Short-term bank loan
-
Company operating cash-flow
-
Shareholder loans
-
Total Sources
21'180
12'403
Total Uses
600
21'180
64
Active Gold Holding PLC
10.7
Investment Proposal
Investment Metrics
Below we outline the forecasted returns to investors in the current share capital increase based
on the business plan, a gold price of US$ 1’450 per ounce and an exit respectively in 2014 or
2016 at a conservative EV/EBITDA multiple of 5x. Based on these assumptions, the investment
would generate IRRs of more than 28% and a multiple on funds invested (money multiple) of
above 3.7x.
For Investors in the capital increase
Amounts in USD thousands unless mentioned otherwise
5 years to exit
Equity investment
30.06.2011
FCF to new shareholders (dividends)
Shareholder debt
31.12.2011
31.12.2012
31.12.2013
31.12.2014
31.12.2015
-
-
-
2'524
-
-
-
-
-
-
-
2'524
6'394
5'048
6'394
51'313
-
Interest and amortisation
Exit @ EV/EBITDA X.0x
Total
46'265
-16'180
IRR
28%
Money multiple
3.7x
3 years to exit
30.06.2011
Equity investment
31.12.2011
31.12.2012
31.12.2013
-
-
-
-
-
-
2'524
-
Interest and amortisation
Exit @ EV/EBITDA 5.0x
Total
31.12.2014
-16'180
FCF to new shareholders (dividends)
Shareholder debt
31.12.2016
-16'180
47'813
-16'180
IRR
38%
Money multiple
3.1x
-
-
-
50'337
65
Active Gold Holding PLC
10.8
Investment Proposal
Exit multiples
To derive the exit multiple of 5x EBITDA we have considered the quoted multiples of the main
gold mining companies. In order to take into account the Russian base of Active Gold, we have
used the EV/multiple of South African mining companies (5x) instead of the global average
(mean of 8.3x).
Company
Geography
Market cap. (USD bn)
EV/EBITDA 09e
Newcrest
Australasia
9,6
11,1x
Agnico-Eagle
North America
7,7
21,9x
Barrick
North America
25,1
5,6x
Centerra
North America
0,8
2,5x
Goldcorp
North America
21,5
16,4x
Kinross
North America
11,0
8,8x
Newmont
North America
17,2
5,9x
AngloGold Ashanti
South Africa
10,6
4,8x
DNDGOLD
South Africa
0,3
3,5x
Gold Fields
South Africa
7,1
4,7x
Harmony
South Africa
4,8
7,8x
Hochschild
Europe
1,0
6,5x
Median (all)
6,2x
Mean (all)
8,3x
Median (South Africa)
4,8x
Mean (South Africa)
5,2x
Source: UBS, March 10th 2009
66
Active Gold Holding PLC
10.9
Investment Proposal
Return Sensitivities
5 year return to shareholders (IRR)
Below we have compounded the sensitivity of the investment to the gold price and to exit
multiples more in line with the global average.
USD
Gold Price
Exit multiple
per ounce
per kg
5.0x
6.0x
7.0x
8.0x
1950
62'694
38%
41%
43%
46%
1850
59'479
36%
39%
42%
44%
1750
56'264
34%
37%
40%
42%
1650
53'049
32%
35%
38%
40%
1550
49'834
30%
33%
36%
38%
1450
46'619
28%
31%
34%
36%
1350
43'404
26%
29%
31%
33%
1250
40'188
23%
26%
29%
31%
1150
36'973
20%
23%
26%
28%
1050
33'758
17%
20%
22%
25%
950
30'543
13%
16%
18%
21%
67
Active Gold Holding PLC
Investment Proposal
11 RISK MANAGEMENT
11.1
GOLD PRICE
As can be seen in the sensitivity analysis, the gold price has a major impact on the results of the
Company. In the financial model, a gold price of 1’450$/ounce has been assumed. Various
forecasts show, however, that there is a high likelihood that the gold price will go up. Even at a
price of 530$/ounce, the Company would still be breaking even. To hedge the gold price only
makes sense in case of a strong indication that the gold price will fall.
11.2
DIESEL
Diesel is not only used for the trucks and excavators but also to generate electricity. The business
plan is based on the current diesel price of 0.9 $/l.
11.3
POLITICAL
Doing business in Russia involves a certain political risk. Concessions could be blocked or
withdrawn, taxes could rise or new taxes be introduced. In recent years, this has - to our
knowledge - not happened anymore, and certainly not regarding the Company’s barriers. As we
have a strong link into the political circles through one of the shareholders, we deem this risk as
small and manageable.
11.4
OPERATION
a
Work force
As we have experienced in 2008-2010 it is not always easy to keep the work force and get new
skilled workers. Competitors tried to hire our work force. With the success of 2008-2010, the
Company has sufficient resources to pay the workforce throughout the winter. As of 2011-2013
the Breccia hard rock mine will be in operation; as this will be a year-round operation this will
reduce the revenue seasonality and the cash flow fluctuations.
b
Spare part
Spare parts have been another area of concern in the start-up phase. By now, however, we have
reliable suppliers, such as Caterpillar, who provide us with spare parts within a very short time
frame. For certain other machines, the company stores spare parts in its own facilities to avoid
any loss of production.
68
Active Gold Holding PLC
c
Investment Proposal
Equipment Lead Times
In the current environment certain equipment items can take as long as 12 months from order
to delivery. This affects more expensive items such as trucks, bulldozers and excavators.
Adequate planning helps to reduce the lead time.
d
Close Circuit Water Supply
This is a newly developed technology and the Company has to optimize its use over time.
e
Vegetation
Unfavorable vegetation at some deposits may adversely impact mining preparation works and
development of infrastructure.
11.5
RISK & PROBABILITY ESTIMATIONS
The amount of gold reserves and their classification is certainly an issue in Russia. The measuring
system is not directly comparable to JORC guidelines. Active Gold has conducted its own drilling
and also obtained positive confirmation during the mining at Chuika. Additional drillings have
already been executed at Albas and Breccia. It forms the basis to complete the Form “43-101”
for Breccia in 2011.
11.6
ENVIRONMENT
For the exclusion of formations of cyanide solution drainages, all solid waste (heap leaching
wastes) is treated in calcium hypochlorite solutions and lime-soda suspensions. These solutions
replace cyanides and non-ferrous metal salts from the ore materials.
The solution, leaking out from the heap, is treated by the calcium hypochlorite at pH = 10.511.5. Cyanide salts are decomposed with formation of oxides of nitrogen, carbon and nonferrous metals; the formers form non-bleeding and non-soluble hydroxides.
Neutralized ore material is preserved while reclamation of lands will be covered with bushes
and grass; wash waters are treated in accordance with the scheme stated above.
Wastes from waters treatment and used zeolites will be specially stored, which will exclude any
pollution of the environment.
If metalized drainages are formed under the heaps, an operation providing for fixation of
movable metals will be performed, followed by the filtration-proof reclamation of lands.
All storages for liquid and solid waste materials will be supplied with effective filtration-proof
devices, preventing leakage of materials to the natural basins.
Gray waste waters will be reused after treatment.
69
Active Gold Holding PLC
Investment Proposal
As to the commercial fishing, the Churya River and its inflows are not important, because there
are no fish resources there. That is why it is not necessary to refill fish resources.
All listed measures planned to be performed at the deposit will provide for effective protection
of the surface and underground waters from technological environmental impact. As a whole,
all surface and underground waters will be influenced weakly, and no irreversible effects are
expected.
Calculations of the gold mining in the business-plan include costs for calcium hypochlorite as a
consumable material. Besides, the prime costs of ore include 10 ruble per each gram of gold for
reclamation of lands.
70
Active Gold Holding PLC
Investment Proposal
12 DISCLAIMER
The information in this business plan does not contain a complete set of information about
Active Gold Holding PLC. It is a summary of the major aspects for information purposes only.
This business plan may include information which is forward-looking regarding financial
performance and results and other statements that are not historical facts. Forward-looking
information involves known and unknown risks, uncertainties and other factors which may
impact the actual outcome.
This business plan has been prepared by the managers of Active Gold Holding PLC and has not
been independently verified. No representation, warranty, express or implied, is made as to, and
no reliance should be placed on, the fairness, accuracy, completeness or correctness of the
information and opinions in this presentation. None of the managers of Active Gold Holding PLC
or any of its agents or advisers, shall have any liability, in negligence or otherwise, for any loss
whatsoever arising from any use of this presentation or its contents or otherwise arising in
connection with this presentation.
This business plan and all other information, material or documentation provided in connection
therewith, shall not, either in whole or in part, be reproduced, redistributed or made otherwise
available to any other person.
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