Dundee Precious Metals plans to finish prefeasibility study of open-pit at Kapan gold-polymetallic mine, Armenia, in Q3 2012, DPM's President and CEO, Jonathan Goodman, told Armenian News - NEWS.am.

Dundee's wholly-owned subsidiary, Deno Gold, is managing Kapan mine with copper, zinc, silver and gold resources.

The drilling program for the potential open pit started in 2007 but was suspended in 2008 due to the global financial crisis. "We restarted the program again in late 2010 and, through the course of 2011, have completed the initial 160 m x 160 m drill spacing on the open pit deposit. We are now drilling at 80m x 80 meter spacing and expect to complete this by the end of February 2012", told Mr Goodman.

Based on this drilling density, DPM will produce a new Inferred Resource estimate and carry out a prefeasibility level study on the deposit that is expected to be completed by Q3 2012. This will not be a definitive study, underscored DPM's CEO. If the study proves technically and economically viable, it will be followed by further drilling at 40m x 40 meter spacing to establish a Canadian National Instrument 43-101 compliant Measured and Indicated Resource, and then with a full definitive feasibility study. "At this time we cannot say what the method of mining will be or even if we have a viable project. That will be determined after the next level of study is completed in Q3 2012", said J. Goodman.

Today, the mine is being exploited in underground mode, but the company conducts an open-pit study. The drilling program for the potential open pit was started in 2007 but was suspended in 2008 due to the global financial crisis. The program restarted again in late 2010. In 2011 DPM has completed the initial 160 m x 160 m drill spacing on the open pit deposit.

“We are now drilling at 80m x 80 meter spacing and expect to complete this by the end of February 2012,” said Goodman. 

A new Inferred Resource estimate will be produced and a prefeasibility level study will be carried out, which is expected to be completed by Q3 2012. This, he underscored, will not be a definitive study. If the study proves technically and economically viable, a further drilling at 40m x 40 meter spacing will be conducted to establish a Canadian National Instrument 43-101 compliant Measured and Indicated Resource, which will be followed by a full definitive feasibility study.

“At this time we cannot say what the method of mining will be or even if we have a viable project. That will be determined after the next level of study is completed in Q3 2012,” he added. 

In the framework of the underground mine, Deno Gold has already completed the mine and mill expansion project, which increased the annual ore extraction capacity from 400 to 600 thousand tons yearly.

There's a significant amount of Soviet drilling data, which nevertheless cannot be applied, explained J. Goodman, because of incompliance to CIM compliant Canadian 43-101 requirements, and absence of split cores remaining from Soviet program which could verify its results.

“Therefore we have chosen to re-drill the entire deposit in order to meet current standards for QA/QC and validation of all results,” he said.

The last Inferred Resource estimate produced by an independent consultant, Australia-based Coffey Mining, was publicly released in September 2008 and was based on a combination of the Soviet era drilling data plus the DPM drilling conducted up to September 2008. The resource was categorized as Inferred because the lack of supporting quality assurance and control for Soviet drilling data involved in resource estimate.

According to the classification, the ore resource with 0.00 – 2.00 g/t cut-off grade of gold equivalent, equals 1836,4 million metric tons (including 400,7 million tons with 1 – 2 g/t Au equivalent cut-off grade). Gold grade varies from 0,37 to 1,68 g/t, silver – 6,5 to 20,87 g/t, copper – 0,09 – 0,19%, and zinc – 0,32 – 0,83%.

The company produces two types of concentrate – copper/silver/gold and zinc/silver/gold. In the 3 quarters of 2011 the company extracted 388 k tons of ore, and processed around 427 thousand tons. Concentration of metals in concentrate has totaled 20,8 k oz gold, 395,8 k oz silver, 2,25 million lbs (around 1021 thousand tons) copper and 14,455 Mlbs (around 6557 thousand tons) zinc.

Production estimate for 2011, as projected in DPM's Q3 2011 financial report, was 27 – 29 k oz Au, 520 – 530 k oz Ag, 3 – 3,5 Mlbs Cu and 19,5 – 21,5 Mlbs Zn. (around 1474 k tons and 9299 thousand tonnes respectively).