Dundee Precious Metals (TSX: DPM) released its much anticipated maiden resource estimate for the Shahumyan deposit at its Kapan mine in Armenia, and the market likes what it sees.
Indicated resources at the mine came in at 2.8 million tonnes with an average gold grade of 5.2 g/t AuEq for 467,000 oz of gold equivalent. It also has plenty of upside potential as evidenced by inferred resources coming in at an impressive 10.6 million tonnes grading of 4.5 g/t AuEq for 1.54 million oz of gold equivalent.
Those results are just for the underground portion of the deposit, as Dundee plans to release a separate resource estimate for open pit resources shortly. But the underground news was enough to push the company's stock up 11% to $6.84 on August 29th — the day the news was released.
Kapan is a polymetallic underground mine that is already producing two saleable concentrates: a copper-gold-silver and a zinc-silver-gold concentrate, both of which are transported by road and rail to an exporting port on the Black Sea.
Last year the mine produced roughly 22,000 oz of gold, 2.5 million lb of copper, 15.5 million lb of zinc and 450,000 oz of silver. It expects to produce between 25,000 and 30,000 oz of gold at the mine this year.
Dundee says while an expansion of the underground mine is likely, it is doing its own internal study on the economics of the project, which should be done in the first quarter of next year.
The company is well financed, as it currently has $99 million in its treasury and another $150 million available to it via an undrawn revolving credit facility. Last year the company managed to generate $121 million in operating cash flow.
Dundee acquired Kapan in 2006 and has done over 230,000 metres of surface and underground drilling since then. The resource estimate on Shahumyan incorporates not only those seven years of drilling done by Dundee, but also more than 50 years of historic state-managed exploration activity.
The area hosted a small scale mine during World War II with more detailed exploration coming in the mid 1970s. The bulk of the historical surface and underground exploration drilling was done down to the 550 metre mine level which is roughly 370 metres below the ground surface.
Shahumyan is an intermediate sulphidation epithermal vein-breccia system made up of more than 80 steeply dipping polymetallic quartz carbonate veins ranging between 0.2 to 3.5 metres in thickness. The veins have an east-west strike of up to 500 metres and a known vertical extent of approximately 300 metres; however, most veins remain open at depth.
It also has a clear plunge component within the deposit's higher grade portions and Dundee says that the plunge is a good place to target high grade gold shoots, which it plans to do next month.
There are currently three drill rigs turning on the deposit with the chief aim of upgrading inferred mineral resources.
Kapan is in the Deno gold mining area, which is in the south eastern corner of Armenia roughly 320 km south of the capital of Yerevan.
Dundee's exploration license covers 350 km2 and beyond the Shahumyan underground mine also hosts both rail and mechanized diesel transport systems, two primary crushing stations, ore stockpiles and a processing plant.
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