Savkino

Savkino License Access, Climate and Topography

The Savkino gold deposit is located approximately 400 km east of Chita, the administrative capital of the Zabaikalsky Territory, Russian Federation. The deposit is situated 15 km from the Chinese border. The location, property boundaries and general infrastructure of the mine area are shown in Figures 1 and 2. The distance to the nearest railway stations at Dosatui and Priargunsk is 120 km and 160 km, respectively. The property is connected to the stations via upgraded all-weather gravel roads. Access from Chita is via the Chita-Khabarovsk federal highway and then by upgraded all-weather gravel roads, a travel distance of approximately 700 km. The drive-in/drive-out camp and other infrastructure at the mine site are linked by all-weather gravel roads constructed and maintained by Ildikangold.

The topography in the mine area is characterized by subdued terrain with elevation differences ranging from 100 m to 300 m and a maximum elevations up to 1,000 m. The vegetation is predominantly steppe with small birch, aspen and larch forests, mainly on northern slopes of hills and in the valleys between them. The climate is severe continental; winters are long and cold, with temperatures falling to -55°C. The average annual temperature is 3°C, with average temperatures in January and July of -27°C and 18°C, respectively. The average annual precipitation is 430 mm. Permafrost is widespread but is mainly found at the bottom of river and stream valleys and on north-facing slopes. There is no permafrost at the Savkino deposit.

Ildikan License Details

The Ildikan Licence covers 37 km and the coordinates for the property are shown on Table 1. The project area is under the control by the authorities of the settlements of Chashino-Ildikan and Mikhailovka of Nerchinsky District, Zabaikalsky Territory. Ildikangold has received permits from the Nerchinsko-Zavodsky District authorities to use the land for exploration and gold production and has received permits from the appropriate Federal authorities related to all of their mining and exploration activities. The Savkino gold deposit is located in the south extremity of the Ildikan license area and the Savkino mine covers a surface area of 3.1 km.  The licence for exploration and production of hard-rock gold and subsidiary components in the Ildikan area was issued by the Federal Ministry of Natural Resources to Ildikangold on the 11th July 2006 and expires on 15th June 2031. The design for trial mining of the Savkino gold deposit was prepared for Ildikangold in 2007 and approved for construction and commencement of operations by the Federal authority Glavsgosexpertiza on 30th May 2008.

Property History

The Savkino deposit was discovered in 1975 during prospecting for polymetallic mineralization. The Chita State exploration company prospected for hard-rock gold at the deposit between 2000 and 2002. The mining and exploration rights for the “Ildikan mineralization area”, including the Savkino deposit, were acquired by Ildikangold through auction in May 2006. In 2007, Ildikangold retained Vostokgeologiya, a licensed Russian exploration contracting company, to explore the central portion of the deposit. The “Techniko-Ekonomicheskie Obosnovie” (TEO), a Russian State-approved feasibility assessment, including estimates of Russian category Сand С mineral reserves, was prepared by Vostokgeologiya, based on the exploration results and subsequent studies. The mineral reserves estimates, which are not CIM compliant, were approved by the Chita Territorial Committee on Mineral Reserves (TKZ) on 17th August 2007. Ildikangold continued to explore the Savkino deposit with additional diamond drilling during 2008 and prepared an updated Russian mineral reserve estimate. Heap irrigation commenced in September 2008, after completion of construction of the processing facilities and receipt of the appropriate operating permits. The first gold doré was produced in October 2008.

Geology Savkino License Area

The Savkino gold deposit lies in the Eastern Trans-Baikal polymetallic belt, within the Smirnovsko-Mikhailovsky Mineral district. The regional geology map is displayed Figure 3. The project area hosts a large number of base metal and precious metal hard rock prospects including placer gold. The notable base metal-gold prospects include Smirnovskoe, Mikhailovskoe, Vtoro-Arbukanskoe, and Novobarsuchye. Gold placer deposits are found in the Lower Borzya, Ildikan and North Ildikan River valleys. The Savkino deposit is located between the Smirnovskaya and Mikhailovskiy regional fault zones. The currently explored portion of the deposit is confined within the northeast-trending Savkino Thrust Fault where folded Lower Cambrian carbonate rocks are thrust over Lower Jurassic terrigenous units.

The stratigraphic units have been folded into an anticline-syncline pair separated by a regional northeast normal fault during the Jurassic coinciding with late Jurassic magmatism. In the vicinity of the Savkino deposit, the geology is dominated by the Savkino Anticline, which is bounded by the Savkino and Mihkailovskiy thrust faults which verge to the east. Verdian basement rocks comprising mica-schist have been thrust over the younger sequences. The Savkino Anticline is approximately 250 m wide and is overturned to southeast. The majority of the mineralization is controlled along the northeast trending Savkino Thrust Fault, which is developed at the contact between the Bystrinskaya and Gosudarevskaya Formations.

The magmatic complexes in the Savkino area include Lower Permian granite, Jurassic granodiorite and the Cretaceous rhyolite. Gold mineralization shows a close spatial association with northeast-trending Jurassic granodiorite and syenite porphyries dykes. Intrusive dykes range from 1 m up to 140 m in width and are predominantly oriented sub parallel to the Savkino Thrust Fault. The emplacement of these dykes was accompanied by significant hydrothermal alteration of the calcareous rocks and disseminated and stringer gold mineralization. The intrusion of Cretaceous andesite porphyry dykes introduced intense hydrothermal alteration of the older rocks and resulted in significant argillic alteration overprint.

The Savkino deposit exhibits an alteration zone that is 3 km long and up to 1.5 km wide and characterized by elevated As and Hg geochemistry. Economic zone of gold mineralization is asymmetric in shape and is controlled by an overturned anticline, with the best mineralization occurring along the steeply dipping foot wall and the hinge zone. The mineralization ranges in width from 30 m to 50 m and has been defined to a depth of 175 m and is still open.  Gold mineralization also occurs in the hanging wall of the anticline but is narrower, lower grade and pinches out to the northeast.  High grade mineralization, above 1 g/t Au, is associated with the contacts of the Upper Jurassic dykes. In the Central Zone, the mineralization is steeply dipping to the west and hosts 95% of the known gold resource.  As illustrated in Figure 4, similar gold mineralization has been identified in the North East and South West Zones and is presently being drilled tested. Dykes introduced gold-bearing hydrothermal fluids into the brecciated foot wall and hinge zone of the recumbent fold.  The gold was accompanied by silica-sericite-pyrite-barite alteration, which graded laterally into more argillic dominated assemblages with lesser quantities of pyrite and silica.

Alteration ldikan Gold Deposit

The Savkino deposit exhibits an alteration zone that is 3 km long and up to 1.5 km wide and characterized by elevated As and Hg geochemistry. Due to the porous and sulphide-rich character of the brecciated mineralization, strong weathering and oxidation was developed to depths exceeding 200 m. Retrograde alteration related to oxidation and weathering during the post-Cretaceous period has totally destroyed the earlier alteration assemblages in the majority of the oxide gold zone. Garnet-bearing hornfels represents the earliest stage of prograde metasomatic alteration of more calcium-rich sedimentary sequences. The garnet is accompanied by silica and carbonate and grades laterally to silica-chlorite-calcite. In the dolomitic and calcareous siltstones. Carbonate removal is accompanied by deposition of replacement silica (jasperoids) in the centre of the hydrothermal conduit grading laterally into an argillic alteration assemblage comprising sericite-kaolinite-smectite-illite-montmorillonite. The argillic assemblage passes distally into propylitic-type alteration dominated by chlorite-calcite-kaolinite. Large boulders of jasperoid-like rocks were observed in the low-grade stockpile at the mine. These are thought to represent the central core of the hydrothermal conduit. Examples of the mineralization are shown on Plates 1-4.

Geological Model-Savkino Gold Deposit

The Savkino mineralization displays similar geological and geochemical characteristics to Carlin-type sedimentary-hosted, disseminated gold deposits. Most deposits consist of structurally controlled strata-bound zones of disseminated-replacement mineralization hosted by specific limy siltstone horizons or by fault-controlled high-grade silica-sulphide breccia bodies. Anticlinal structures and the presence of cap rocks such as sills and moderately-dipping dykes are particularly favourable for the development of replacement-type mineralization. Carlin-type mineralization can also form in the hanging wall of major structures, or as disseminated mineralization in felsic and mafic intrusive rocks. Alteration consists of widespread decalcification of the host rocks with multistage proximal silicification. Alteration mineral zoning includes illite+kaolinite+dickite and smectite within the decalcified zones with overprinting kaolinite and powdery silica+zeolites on fractures within the silicified zones. Intense decalcification leads to large scale dissolution and development of collapse breccias, which form favourable sites for mineralization. Mineralogy studies indicate that the Savkino mineralization contains cinnabar, realgar, orpiment and mercury, and a low silver content. The geochemical characteristics of Savkino are typical of high-level Carlin-type mineralization. Different deposit settings & alteration features are shown in Figures 5 and 6.

JSC TOMS Engineering created a mineral resource block model and mineral resource statement compliant with the CIM Standards. The Micon block model utilized three dimensional wireframes defined using a cut-off grade of 0.2 g/t Au to limit the mineralization. The block size used was 10 x 10 x 5 meters and the composite length was 1 meter. TOMS used Inverse Distance Squared and Cubed (IDW2 and IDW3) to interpolate block model gold grades. The search radius for grade interpolation ranged from 10-14 meters for the Southwest Zone and 5-18 meters for the Central Zone. The TOMS mineral resource estimate is based on a cut-off grade of 0.5 g/t Au and a top cut of 11.5 g/t Au for the Southwest Zone and 13.5 g/t Au for the Central Zone and is shown in Table 1.

TOMS generated an optimized open pit design and mine production schedule based upon Measured and Indicated mineral resources using cut-off grade of 0.5 g/t Au a gold price of US$1500/oz and recovery rates of 78.56% for the Central Zone and 72% for the Southwest Zone. The optimized pit utilized Whittle pit optimization software. The cut-off grade is supported by actual mine, process plant and G&A operating costs along with design parameters from the TEO. The optimized pit shell was re-worked to a formal pit design with internal ramp and final pit slope designs. Other economic factors such as dilution and ore losses were applied to mineral resources within the open pit design to derive the mineral reserves. The TOMS mineral reserve estimate is based on a cut-off grade of 0.5 g/t Au and is shown in Table 2.

For the reserve estimate TOMS block model utilized cell parameters 10 x10 x 5 meters with sub-blocking, without lateral rotation. The minimum cell was 2.5 x 2.5 x 2.5 meters. The optimised pit was developed using Micromine software. The parameters used for optimization of the open pits are shown in Table 3.

Table 3: TOMS Reserve Estimate* Savkino as at December 1, 2011 (Cut-off 0.5 g/t)
Open Pit Optimization Parameters
Pit Slope	52°
Mining Losses	2.8%
Mining Dilution	13.6%
Currency Exchange Rate $USD to Rouble	30.0 Rb
Mining Cost For Waste	US$ 3.4per m
Mining Cost For Ore	US$ 2.7 per t
Processing Costs	US$ 3.9 per t
Affinage	US$ 0.5 per t
G&A Costs	US$ 5.6 per t
Tax	US$ 2.3 per t
Gold Price	US$ 1500 per oz
Gold Recovery Central Zone	78.56%
Gold Recovery Southwest Zone	72.00%

Mining Savkino Deposit

Mining the Savkino deposit commenced in 2008 as an open pit, using conventional truck and shovel methods. The pit operates year-round, with two 12 hour shifts seven days per week. Open pit mining conditions are favourable and much of the intensely weathered rock was mined without drilling and blasting. The proportion of rock that requires drilling and blasting has increased now that the pit has advanced to depth. The soft friable nature of the ore can been observed in Plates 5 and 6

 The open pit was designed considering the physical and mechanical properties of the host rocks with an inter-ramp angle ranging from 37º to 45º. The final bench height is 20 m with a face angle of 65º. The final pit design was 1.1 km along strike and 400 m wide. The maximum depth of the pit is planned to be 178 m.

No significant ground water inflow into the pit is anticipated until a depth of around 70 m from surface, below which inflow is estimated to be in the range of 350 m3 per hour to 480 m per hour.

The installed process facilities are designed for 500,000 t/y of ore at a grade of 2.0 g/t Au. Crushing, agglomeration and stacking operate for six months from spring to autumn on a 16-hour, two-shift basis. Heap leaching and adsorption, desorption and recovery (ADR) are designed for continuous 24 hours/day operation, 365 days/year. Design ultimate gold recovery to doré bullion is 86.4%. The crushing equipment, agglomerator and extraction plant are shown on Plates 7-10.

The ore is loaded from the run-of-mine stockpile to a two stage crushing circuit consisting of a grizzly, a primary jaw crusher with a vibrating screen. Screen oversize goes to secondary jaw crusher for a second stage of crushing. The nominal -20 mm (34% passing 63 µm) combined grizzly and screen undersize is conveyed to a surge bin. The crushed ore is conveyed from the surge bin to an agglomeration drum. Cement and lime are added to the ore and barren solution is sprayed into the drum. The resulting agglomerated ore is conveyed by a series of mobile conveyors to a radial stacker, which is used to construct the heaps for leaching. The design leach cycle consists of ten days saturation with dilute cyanide solution followed by up to 60 days leaching. The barren solution is distributed over the heap surface from an array of pipes and wobblers and drip emitters.

The pregnant solution containing the dissolved gold drains from the base of the heap and is collected in the pregnant solution pond, for where it is pumped to the ADR building. The gold is absorbed onto activated carbon in two lines of two pachuca tanks in parallel; each line operated counter current to the solution flow. The barren solution from the pachuca tanks is returned to the heap leach via the barren solution pond after addition of sodium cyanide makeup and sodium hydroxide for pH control. The ponds are of sufficient capacity to accommodate full drain down of the heaps under leach. The pond linings and leak detection are of the same construction as the leach pad.

The loaded carbon from the first pachuca tank is transferred to the elution and electrowinning circuit of Chinese supply. After acid and caustic washes, the gold is stripped from the carbon in a column using a hot solution of caustic soda. The hot strip solution is pumped to an electrowinning cell operated under pressure to prevent boiling. The resulting cathode sludge is smelted with fluxes in an induction furnace to doré bullion for transport to the refinery. After acid washing, the stripped carbon is reactivated in a kiln and returned to the adsorption circuit.

An additional pond is provided to accommodate excess solution from process flow variations, high rainfall events and spent leach heap detoxification. Provision is also included for detoxification of any discharge from the emergency pond should the situation arise. The detoxification process uses calcium hypochlorite and pH regulation in a series of agitated tanks with the final solution being discharged to drain or re-circulated to the heaps, as appropriate. After detoxification, the spent leach heaps will be graded, covered with a layer of clay and topsoil, and grassed.

The initial process design was based on characterization and test work conducted by Vostokgeologiya, LITSIMS, Zabaikal Institute of Technology and others in mid-2007. The results of this work are summarized by Vostokgeologiya in the TEO and this is the main source of information reviewed by Micon. Further test work, on which the final process design was based, was conducted in late-2007. Subsequent to the commencement of operations in September 2008, further test work was conducted in 2009 to investigate certain aspects of process performance.

The resource mineralization is almost 100% oxidized, as a result of weathering of metasomatically-altered host rock breccias with low-sulphide, high-quartz, stringer, pocket and disseminated hypogene mineralization. Two textural and mineral sub-types were identified. The first type is gold-argillite ore which comprises 42% of the tonnage and contains 58% of the gold. It is soft and fine grained with 65% passing 63 μm. The gold is predominantly colloidal and dispersed. The second type is gold-hematite ore comprising 58% of the tonnage and 42% of the gold. It is hard, competent material more typical of oxidized primary sulphide mineralization. It forms the coarser size fraction of the deposit.

The mineral composition consists of native gold with quartz, hydrosericite, clay minerals and hematite. Other widespread minerals include barite, goethite, hematite with lesser pyrite and arsenopyrite. Galena, cinnabar, realgar, orpiment, molybdenite and sphalerite are rare. Based on polish section work, the majority of the gold is fine grained, averaging 7 μm and is present in the iron hydroxides. Phase analysis indicates 12% of the gold is free milling while 77% occurs as cyanide soluble intergrowths. The remaining 11% is hosted by oxide films and quartz. Chemical analysis indicates that the mineralization contains only minor deleterious elements. The gold fineness varies from 790 to 853. Overall, although the characterization indicates that the deposit is free-milling and amenable to cyanide leaching, the TEO concluded that the high proportion of the gold-argillite sub-type and its physical properties would be potentially deleterious to heap leaching.

The 2007 laboratory scale test work was conducted on two composite samples, the first weighed 525 kg and averaged 2.5 g/t Au and 0.74 g/t Ag. The second sample weighed 89 kg and averaged 1.9 g/t Au and 0.7 g/t Ag. Agitated cyanide leach tests were conducted at crushed and ground sizes from 5 mm to 91% passing 63 μm. The gold dissolution after 24 hours was from 80.6% and 92%, respectively. Percolation cyanide leach tests showed poor filtration due to a high clay content in the ore. This problem was overcome by agglomeration with optimum additions of cement and lime, after which leaching of 20 mm material for 21 days resulted in gold dissolution of 88.3% and 89.4% respectively. Test work was also conducted on activated carbon adsorption of the dissolved gold from the leach pregnant solution and desorption from the loaded carbon using hot sodium cyanide and sodium hydroxide solutions. The resulting solution was determined to be amenable to electrowinning for recovery of the dissolved gold.

Exploration Targets Savkino License Area

A number of significant gold and silver anomalies are shown on Figure 7. A number of subtle, coincident anomalies have been interpreted but have not been tested by drilling. Future work will focus on these geochemical anomalies and explored with ground geophysics and trenching with the priority targets drilled. With reference geophysical maps shown on Figures 8 and 9, the mineralised bodies show a weak magnetic response however, some of the known mineralization zones are associated with intrusive dykes, tectonic faults and contacts between major regional rock formations which have a strong magnetic signature and are considered highly priority targets. IP chargeability shows a good response over some of prospect areas in the northwest part of the license area.

Environment and Social Considerations

Savkino operation has adopted a progressive approach to environmental protection. The heap leach facility, solution ponds and gold recovery circuits are designed in accordance with sound international practice. Cyanide storage and mixing facilities are well designed, with automatic cyanide detectors fitted in the main storage areas. Personnel handling cyanide, and other reagent solutions, receive specialist training. First aid, including antidote in the event of exposure to cyanide, is available in the plant. Emergency response plans in the event of fire, spillage or other incidents have been prepared in accordance with regulatory requirements. To date no cyanide discharges have been reported. The operation has implemented an environmental management plan and monitoring programme under the supervision of a qualified environmental manager. The management system, which is being designed in accordance with ISO14001 principles, is in its early stages of development. Environmental monitoring, which focuses on water quality, principally groundwater, has been undertaken from the early stages of plant operation. Monitoring records do not indicate any contamination of groundwater downstream of the site. The camp facilities are depicted on Plate 11.

The operation is compliant with current Russian regulations with respect to mine closure and rehabilitation and accordingly, the operation has, to date, given little consideration to the technical or financial implications of eventual closure with the exception that provision has been made for the de-contamination of spent heaps prior to re-vegetation.

Micon has prepared an National Instrument 43-101 compliant technical report describing the mineral resources and reserves of Ildikangold’s Savkino gold mine and heap leach operation. Micon’s complete technical report titled “Savkino Gold Project, Chita Region, Russian Federation – Mineral Resources and Reserves – NI 43-101 Technical Report”, dated November 22, 2010 is available at the following link: click here to view.

At the request of Ildikangold, JSC TOMS Engineering (TOMS Engineering) completed this technical report (Technical Report) describing the mineral resources and reserves, industrial activities and financial state of the Ildikangold’s Savkino gold mine located in the Zabaikalsky Territory of the Russian Federation. The report was prepared in compliance with the Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects. Click here for the report.