Positive Results Reported for Gold Development

SINGAPORE (CNW-PRN)–Marcus Randolph–President of First Dynasty Mines–announced Monday that pre-feasibility studies had concluded that redevelopment of the Zod and Meghradzor mines should proceed in two steps–beginning with Meghradzor. Restarting Meghradzor would cost $22.8 million to produce 36,000 ounces per year at an average cash cost of $142 per ounce. Initial production would begin late in 1998; processing would occur by modifying the Ararat tailings plant (which is currently being commissioned at 25,000 ounces per year). Introducing Meghradzor feed would increase production at Ararat to 61,000 ounces per year.

Redeveloping Zod would require an initial capital investment of $63.3 million to produce 136,000 ounces per year at an average life-of-mine cash cost of $182 per ounce produced. Zod redevelopment would include a new–on-site reprocessing plant. Combined with Meghradzor and Ararat–First Dynasty’s projects in Armenia would be producing 200,000 ounces per year at a life-of-mine average cost of approximately $178 per ounce by the end of 1999.

The pre-feasibility studies were completed by a joint venture between Kilborn SNC-Lavalin and CMPS&F (KCMP). Snowden Associates calculated the ore resources. These results are an interim step in the completion of a full bankable feasibility study–expected in the second quarter of 1998.

First Dynasty–through Global Gold Armenia–is earning a 50 percent interest in the two mines. Zod Snowden has applied the rigid Australasian JORC code to the ore resource calculation. This classification method only considers ore blocks classified as Measured or Indicated. Using these criteria–and a 3.0 grams per ton cut-off grade–the Zod resource is calculated to be 10.7 million tons containing 6.01 grams of gold per ton. There is also a large Inferred resource that has not been re-estimated. Previous work by the Armenian state gold mining company–Armgold–estimated this resource to be a further 13 million tons.

For the pre-feasibility study–tonnage and grade estimates were made for the surface and underground mines.

The underground estimates include dilution of 10 percent and mining losses of 20 percent.

The study assumed an annual ore-processing rate of 1.0 million tons per year from a new on-site plant. The selected processing technology is gravity separation followed by a simple cyanide-in-leach (CIL) circuit. The assumed metallurgical recovery is 70 percent–which represents the average metallurgical testwork results obtained to-date with the various orebodies. Average annual gold production is estimated to be 136,000 ounces per year.

Zod’s initial capital cost was estimated to be $63.3 million–including a 15 percent contingency–working capital–and owner’s costs. Steady state operating costs are estimated to be $23.80 per ton processed–equivalent to $177 per ounce produced. Year 1 operating costs of $27.65 per ton raise the life-of-mine average operating cost to $182 per ounce produced.

KCMP has estimated the accuracy of the capital and operating cost estimates to be plus 15 percent to minus 5 percent. Meghradzor Snowden has estimated the Meghradzor mining inventory to be 815,000 tons with an average grade of 12.25 grams gold per ton at a cut-off grade of 6.0 grams per ton. This estimate assumes 30 percent dilution and 20 percent mining loss.

The study assumed an annual ore-processing rate of 125,000 tons per year. Metallurgical testwork–using the same simple metallurgical process as was applied at Zod–has produced 90 percent recovery. Average annual gold production is projected to be 36,000 ounces of gold per year.

The study scope of work assumes that the Meghradzor production is shipped over the existing railroad line to the existing plant at Ararat. The estimated capital cost of $22.8 million will upgrade the nearly complete 1.5 million ton per year tailings reprocessing facility at Ararat to handle the additional material produced from Meghradzor plus redevelop the mine and upgrade the railroad and related equipment.

Steady state operating costs at Meghradzor are estimated to be $43.83 per ton processed–equivalent to $142 per ounce produced. Ararat Tailing Project Commissioning has begun at the Ararat tailings plant and the initial gold pour is expected in February. This project–which is expected to be completed within its $12 million budget–will produce 24,000 ounces per year of gold. Combined with production from Zod and Meghradzor–First Dynasty’s operations in Armenia’should produce just under 200,000 ounces of gold per year.

By integrating Meghradzor production into Ararat–it should be possible to introduce feed from Meghradzor during the third quarter of 1998.

Commenting on the study results–Randolph said: "We completed this pre-feasibility study as an interim check point in the feasibility study–not as a stand-alone study. The quality of the mined tonnage and grade estimate and the metallurgical work significantly exceed the level of analysis typically associated with a pre-feasibility study. We are very pleased with these results and are highly confident that they will be maintained or improved through the feasibility study."

First Dynasty’s shares trade on The Toronto Stock Exchange under the symbol FDM and are quoted on NASDAQ under the symbol FDYMF.

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