YEREVAN. – Shahumyan gold-polymetallic mine will not be transformed from underground into an open pit. According to the comments of the press service of Polymetal Plc, a mining industry holding based in Russia, there are no plans at present to move away from underground extraction at that mine near the town of Kapan in southern Armenia.

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On March 1, 2016, Polymetal announced buying the mining license and ore mill from Dundee Precious Metals, based in Canada.

DPM, which had acquired the license in 2006, started a program to identify potential open pit areas, as far back as in 2007. In 2008, exploration drilling was halted and recommenced in 2010-11. Above the mine an exploration grid was drilled with 160 x 160 m spacing, with infill drilling at 80 x 80. Potential starter pits were identified.

Nevertheless, Polymetal is not going to revisit those plans in near term, as well as take over with exploration.

 “To do this, we need a thorough analysis of the geological conditions and the amount of work already performed. This will take tame”, Polymetal company said in its comment to Armenian News – NEWS.am.

New owner plans to keep the current production: gold-copper and zinc concentrates. No plans for lead concentrate are considered right now.

Earlier, DPM had plans to produce lead concentrate, considering that lead content in gold-copper concentrate exceeded contractual specifications for supply. Excessive lead content often incurs penalty charges, as most copper smelters cannot treat lead. In some cases, DPM had to delay shipments of concentrate because of that.

Polymetal inherited supply contracts of DPM and will hold on to them in 2016.

“We will not change our sales schemes and will fulfill all those obligations,” said the press service of Polymetal.

They preferred not to disclose target volumes for extraction and concentrate production, as well as average metal content in concentrates.

According to the report of Dundee Precious Metals in 2015, the company extracted 411 thousand tons of ore at Shahumyan mine, with total content of 24.8 thousand troy ounces of gold, 461.2 oz silver, 2.7 million pounds of copper (around 1,225 tons – editor) and 11.9 million lbs zinc (almost 5,400 tons – editor).

In the opinion of Polymetal, DPM had been maintaining Kapan ore mill in a very good condition.

“Previous owners had invested a lot in upgrades. Its equipment can deal with different types of ore. We don’t find it necessary to replace the existing equipment, but even if sometime we’ll have to, the changes will not be significant,” the company said.

At the same time, in 2014-15, Polymetal reported assets depreciation at Kapan mine. In the second quarter of 2014 it reached $70 million, and in the fourth quarter of 2015 - $42.7 million.  Answering the question on whether Polymetal studied the case, they said: “Depreciation occurred because Dundee did not succeed in ensuring profitability to match their investment”. 

On March 1, Canada-based Dundee Precious Metals announced concluding a definitive agreement for the sale of its interest in Shahumyan polymetallic mine in the south of Armenia to Polymetal International Plc from Russia. The license for the mine is to be sold for $25 million —of which $15million in Polymetal ordinary shares—, and a two percent net smelter return royalty on future production, capped at $25 million.