First Dynasty Concludes Armenian Gold Acquisition

YEREVAN (PRNewswire)–Global Gold Armenia–an affiliate of First Dynasty Mines Ltd.–has successfully concluded an agreement with the government of Armenia to acquire a 50 percent joint venture interest in the Zod and Meghradzor gold mines in Armenia–Marcus Randolph–President of First Dynasty Mines–announced Wednesday.

The two mines currently have a combined estimated resource of six million ounces of gold. First Dynasty has the right to acquire a 100 percent interest in Global Gold Armenia pursuant to previously announced earn-in agreemen’s with Global Gold Corporation by making investmen’s in GGA’s Armenian projects and issuing First Dynasty shares to Global Gold Corporation. Pending earn-in–First Dynasty is entitled to control and manage GGA.

Randolph said that the principal terms of the agreement between GGA and the Government of Armenia are as follows: *50 percent ownership of the projects by each of GGA and Armgold–the Armenian state gold mining company–by way of joint venture. *Management of the projects by GGA–reporting to a board of directors with equal representation by the two co-venturers. *The projects have the right to export gold and to hold offshore accounts. *The projects will have a two-year profit tax holiday–followed by eight years at half tax (equivalent to 15 percent at current rates). *All capital to be supplied by GGA–with pay-back of 100 percent of invested funds from 70 percent of operating profits–until repaid. *The project boundaries include mineral rights within a 20-kilometer radius of the mines.

First Dynasty has requested that the Armenian government ratify the agreement with government decree.

The Zod mine started production in the late 1970s; Meghradzor began producing in 1988. The two mines–with respective design capacities of 800,000 and 150,000 tons of ore a year–were shipping ore to a central processing facility at Ararat–located 235 kilometers from Zod and 110 kilometers from Meghradzor.

Although the cost of mining and processing has historically been very low–the high cost of transporting ore has reduced profitability severely.

Earlier this year–an existing joint venture between GGA and Armgold started building a new $12 million cyanide-in-leach plant to recover gold from tailings piles that have been accumulating at Ararat since 1977. The reprocessing plant–to be commissioned in December–is expected to produce 24,000 ounces of gold a year. Cash production costs are expected to average $240 an ounce.

"Our ventures with the Armenian Government are progressing very well," Mr. Randolph said. "Construction at Ararat is on schedule. The positive experiences we have had working with Armenian contractors–Armgold and the government lead me to believe that our planned development of Zod and Meghradzor should be timely and profitable."

Armenia’s Minister of Industry and Trade–Garnik Nanagoulian–said "We announced in mid-August that we would conclude this agreement by the 30th of September and have done so. The Armenian Government is committed to supporting foreign investment and views this mutually beneficial agreement with First Dynasty as a major milestone in attracting additional investors."

In August of this year–Watts–Griffis and McOuat completed an independent review and due diligence of the Armenian projects. Their conclusions included: *The resource estimates are well supported and the projects appear to be economically viable under current conditions. *First Dynasty’s cost estimates are of the right order of magnitude. *Further drilling at Zod should increase the down-dip resource base by 50 percent and an expansion of the resources at Meghradzor is expected. *Exploration drilling beyond the mine limits at Zod can be expected to reveal heap leachable ore and/or new deposits of milling ore.

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