GPM Gold Plans to Increase Annual Gold Production to 150,000 ounces Beginning from 2014

Posted on Mar 20, 2012 in GPM in the media

GPM Gold Plans to Increase Annual Gold Production to 150,000 ounces Beginning from 2014

ARKA – Bulletins (Armenia)
20 March 2012

Exclusive interview with GPM GOLD CEO Vladimir Kozlov.

Q. Mr. Kozlov, what achievements did GPM GOLD make in 2011?

A. The past year was very important for the company because in 2009 and 2010 its financial results were not positive. Mining business is inert, and in order to get results one needs to work long and hard, to invest heavily in the company to bring it to a certain level and reach the break-even level. If we take dry numbers and compare the 2010 and 2011, the dynamics of our performance indicators will look as follows: in 2011 the Ararat gold recovery factory processed more than 870 thousand tons of ore, up from 550 thousand tons in 2010. The growth was approximately 60%. In 2011 the company produced about 880 thousand tons of ore against 490 thousand tons in 2010. The growth was almost 80%. Uncovering and ore reservation work saw a 14% increase. The increase in output if compared to 2010 surged by 90%; in other words we produced about 1,280 kg of gold against 650 kg in the previous year. We closed the year of 2011 on a positive wave with a profit and in this sense it can be regarded as a landmark year.

Q. What is the indicator of profit for the 2011?

A. The fact is that the international audit of the company will be completed in April or May, and we will publish the results. Prior to it I can not provide specific figures.

Q. What was the main reason that helped you to post a 90% rise in output?

A. One of the reasons why the previous owner sold this business in Armenia was the depleted reserves. In 2009 and 2010 we were investing in production, we completely reversed the direction of the work and began developing sections of the Sotk deposit which were considered unpromising. As a result, in 2010 we took the risk and started development of Gabromassiv bloc that gave us an opportunity to work quietly and wait for the introduction of Albion technology.

Q. How much did the company invest in 2011, including investment in introduction of Albion technology at Ararat gold recovery factory?

A. In 2011 our combined investments totaled $17.8 million. To date, the main focus in our investment program is on the introduction of Albion technology at Ararat gold recovery factory.

Q. What can you say about the pace of introduction of this technology?

A. I want to emphasize that the Ararat gold recovery factory will be the third in the world to use Albion technology after plants in the Dominican Republic and Romania. This technology meets the highest international standards, its advantages include environmental safety, use of harmless chemicals such as lime, and oxygen, as well as technological simplicity. The technology has passed the environmental test and the design work is in the final stage. The bulk of the construction work at the Ararat plant will be accomplished this year. The project includes not only the reconstruction of the factory itself, but also preparation of raw materials base, namely, the increase in ore production at Sotk field.
About 70% of the deposit are heavy sulphide ores, and to uncover them we need to modernize our equipment, increase the volume of uncovering and preparatory work to ensure that when Albion technology is ready to work, we have sufficient reserve of ore. In 2011 we signed all contracts for delivery of equipment and machinery and the first batch has already arrived. The second and third batches, including dump trucks, bulldozers, excavators and drilling rigs will arrive in April and August. Therefore, total investment in acquisition of equipment and machinery will reach $35 million. We expect Albion to come online in the second quarter of 2013.

Q. How much do you plan to invest in 2012?

A. We have planned to invest around $100 million in the next several years. Approximately 50% of this amount are loans, and the rest will come from our proceeds. The funds will be channeled into reconstruction of the old factory, renovation of the flotation workshop and the purchase of equipment for Sotk deposit. The bulk of that amount- about $80 million- will be utilized this year. Part will be directed to resolution of social problems. A small portion of the funds will be invested in the first quarter of 2013. According to our estimates, we expect return on investments within 5-6 years.

Q. What performance indicators the company plans to achieve in 2012?

A. The existing technology and the volumes that we achieved in 2011 will not change much in 2012. The growth in ore production and processing is projected at 2-3%. The emphasis will be on uncovering operations, which are expected to post a 40% rise. We will have to ensure these indicators over the next three years. In 2013-2014 we expect our major indicators to rise 3-4 times due to the commissioning of Albion technology.

Q. Is the company considering the possibility of subsurface development of the Sotk mine?

A. In 2009, when we considered options for developing the field, one was development of underground mining. However, after the stock assessment and exploration it was decided to apply open pit manner.

Q. And what is the planned production volume for these years?

A. On average, it is planned that production will be one million tons of ore per year. As I said the figure will rise 3-4 times after the introduction of Albion technology to about 150,000 ounces of gold per year.

Q. What is the situation with observance of environmental norms in the development of the deposit?

In 2011 an ad hoc commission of the Ministry of Energy and Natural Resources inspected the company and found no violations. Recently, a decision was made to set up a second commission with the participation of independent experts and representatives of the Ministry of Nature Protection; we are ready to answer any questions. I would like to note that monthly monitoring of water, air and soil is conducted by experts from the Institute of Mining Metallurgy, without our involvement. Besides, we conducted a series of studies on the environmental conditions at the mine. We invited also independent experts from DigByWellsEnvironmental Company, one of the most advanced companies in terms of environmental control, to conduct an independent study. Their findings confirmed the conclusions of local experts made in 2009.

Q. What is the situation regarding social security in the company?

A. With regard to social security of our employees, in 2011 we introduced a full package of benefits including insurance of employees, health care, providing clothing. In 2011 our personnel rose by 13% to 785. The average wage before taxes for middle-level workers increased by 22%. In 2012 we will create more than 100 new jobs, mainly in Sotk mine and as many jobs will open in 2013 at Ararat gold recovery factory.

Q. How much does the company plan to invest in 2012 in social projects?

A. Our budget has earmarked $550,000 to finance social projects in Ararat and Vardenis. Last year we spent $500,000 on social projects. We are supporting children with disabilities, show assistance to veterans of World War II, as well as to orphans. The main projects in 2012 are the reconstruction of the House of Culture in Vardenis which we started in 2010 in cooperation with the administration of Gegharkunik region and the Armenian Social Investment Fund, as well as the construction of a kindergarten in the community of Ayntap in Ararat province, which we started this year. Both projects are scheduled to be completed by the end of 2012.

Q. Mr. Kozlov, given the unstable situation on world markets, what do you think will be the dynamics of the price of gold?

A. The fact is the two major currencies – the dollar and the euro- have become less reliable. Given U.S. debt it is clear that another crisis is brewing up and it’s not a secret. Therefore, the role of gold as a universal monetary equivalent will increase. I this regard, I think that the price of gold in the near future will not fall, unless there is some new cash equivalent. Gold is an inert metal, out of all gold production the industry uses only 15%, 25-30% goes to the production of jewelry, and the rest of this precious metal goes to banks, where about 50% is stored in the form of gold reserves.