MUTSK GOLD PROJECT, ARMENIA

Highlights

  • Six initial shallow vertical and inclined drill holes drilled by Orogen in 2013 confirmed strong grades and widths within what appears to be a high level structural conduit – up to 17.3m @ 3.68g/t Au, including 10.2m @ 5.73g/t Au
  • Further drilling in 2014 – 2016 discovered extensive zones of hydrothermal alteration within a volcanic suite over a 2.5km strike length and confirmed gold mineralization along more than 1.3km of strike
  • Hydrothermal zones contain extensive intervals of medium to lower grade gold mineralisation, including 60.0m @ 1.21g/t Au and 21.0m @ 2.68g/t Au
  • Mineralised zones remain open in several directions
  • Orogen has earned an 80% interest in the project through a JV Agreement with the title-holder Georaid CJSC and is currently further increasing its equity interest in the property
  • Project located 30km southeast of Lydian International’s Amulsar gold deposit (5 million ounces in Measured, Indicated and Inferred Resources at an average grade of 0.7g/t Au) which is in construction for production start-up in early 2018

Mutsk Gold Project Location Map

 

Access/Infrastructure

Mutsk is located in southern Armenia at about 2,000m elevation and is approximately three and a half hours’ drive from the capital Yerevan along tarred roads, with the last 15 kilometres being along a gravel road. The site, which is accessible much of the year other than the core winter months, is situated about 3 kilometres from Mutsk village which has grid electric power.

Geology

The host rocks are Upper Eocene to Oligocene volcanics, comprising mainly andesitic, dacitic and basaltic tuffs which are of a similar age to Amulsar. One small granitic intrusive is mapped in the northern part of the target area. Regional scale N-NW faulting is extrapolated through the permit. The gold deposit is interpreted to be of low-sulphidation epithermal type.

Historic Exploration

There is little rock exposure over the prospect and only very limited historic Soviet-era work. The region was targeted primarily for Cu-Mo porphyry/polymetallic vein mineralisation rather than gold. Three short adits were driven to test the polymetallic veins.

Exploration by Georaid in 2011 comprised chiefly ground geophysics and diamond drilling. Seven shallow vertical diamond drill holes were completed totalling 355m – the deepest running to 61m. Most of these were drilled along the east side of a small valley along a north-south traverse covering an 850 metre strike length. Several intersected disseminated and fracture-hosted pyrite-gold mineralisation in high-angled structures within altered and brecciated tuffs.

Exploration by Orogen

Verification drilling of six short vertical and angled holes undertaken by Orogen in summer 2013 repeated the medium to high tenor of gold grades recorded in earlier Georaid drill holes, including:

Hole No. Drillhole orientation Depth From (m) Depth To (m) Interval
(m)*
Au (g/t)
OG13-01 Vertical 7.0 13.0 6.0 0.79
OG13-01   37.0 48.0 11.0 5.56
           
OG13-02 Vertical 29.0 46.3 17.3 3.68
including   34.8 45.0 10.2 5.73
OG13-02   50.0 53.0 3.0 1.67

*Downhole intervals reported – true width of the intercepts not yet established

Mapping and drilling work carried out by the Company suggests that the alteration and mineralised zone extends over more than 2km of strike. Within that zone, diamond drilling by Orogen has discovered thick sections of lower grade gold mineralisation which appear to represent flatter-lying mineralisation related to the more steeply-dipping structural zone drilled previously. The 2016 drilling campaign of step-out holes extended the strike length of the gold mineralization to more than 1.3km.

Among the intercepts in this zone to date are:

Mutsk – significant gold intercepts in step-out holes 2013-15
Hole No. Angle Depth From (m) Depth To (m) Interval (m)** Au g/t
OG13-04 -55o 12.0 50.0 38.00 0.84
including   15.0 24.0 9.00 2.50
           
OG14-25 -55o 108.0 132.0 24.00 1.25
           
OG14-27 -55o 12.0 72.0 60.00 1.21
including   19.0 29.0 10.00 3.11
           
OG14-28 -55o 69.5 116.0 46.5 0.93
including   85.0 103.0 18.0 1.27
           
OG15-46 -50o 29.0 50.0 21.0 2.68
OG16-50 -50o 8.0 21.0 13.0 1.13
including   9.0 15.0 6.0 1.63

** Downhole intervals reported are believed to be close to true width – however true widths may be less

The results demonstrate an exciting new gold discovery at shallow depths within an established epithermal district. The Company is particularly encouraged by the high grades encountered in several of the vertical holes, the extensive widths of lower grade gold intersected in angled step-out holes and the large strike extent of the system demonstrated by the 2016 drilling.

Metallurgy

Limited microscopic studies of drill core suggest that gold occurs as fine free gold and as inclusions within pyrite. A preliminary gold comportment study indicates that a high proportion of the gold can be recovered by gravity and flotation processes.

JV Agreement Terms

Orogen Gold (“Orogen”) signed an initial Memorandum of Understanding with Georaid CJSC (“Georaid”), an Armenian registered company, covering the Mutsk gold project in southern Armenia in January 2013. This was superceded by a Joint Venture Agreement (“JV Agreement”) signed in February 2014.

The JV Agreement signed with Georaid covers the following main points:

  • Orogen has the right to earn an 80% interest in the Mutsk project by spending US$2.5m on exploration by 31st August 2016. This interest has now been achieved.
  • Once Orogen vests its 80% interest (now completed) then both parties are required to contribute pro-rata to further costs or dilute their interest. The Company is currently increasing its interest in the property by sole-funding ongoing exploration.
  • If Georaid’s interest falls to 5%, then Orogen will carry Georaid’s costs through to mine production, if/when this is achieved. Orogen will recover the costs of this carried interest from Georaid’s share of production from a mining operation.
  • If a positive Bankable Feasibility Study is obtained on the project, then Orogen will issue further Ordinary Shares in the Company to the Georaid principals to a value of US$300,000

Armenia Overview

Key Facts
Area: 29,743km2
Capital: Yerevan
Population: 2,970,495
Currency: Dram

The Republic of Armenia is a landlocked, mountainous country in the South Caucasus region of Eurasia. Located at the crossroads of Western Asia and Eastern Europe, it is bordered by Turkey to the west, Georgia to the north, the de facto independent Nagorno-Karabakh Republic and Azerbaijan to the east, and Iran and the Azerbaijani exclave of Nakhchivan to the south. The climate is markedly continental. Summers are dry and sunny, lasting from June to mid-September. The temperature fluctuates between 22 and 36 °C. Winters are quite cold with plenty of snow, with temperatures ranging between -10 and -5 °C.

Infrastructure is reasonably well developed. There are good road links running through the country from Georgia in the north to Iran in the south. The new international airport at Yerevan is well served by flights from Europe, the Middle East and the former Soviet Union. Electric power is widely available – Armenia has surplus generation capacity.

The Kingdom of Armenia became the first state in the world to adopt Christianity as its religion, in the early years of the 4th century. A former republic of the Soviet Union, Armenia gained its independence on 21st September 1991.

Armenia is democratic and is currently experiencing steady economic growth. The 2013 World Bank report on ‘ease of doing business’ rates Armenia as 35 out of 189 – ahead of many EU member states. There is an independent judiciary and laws protecting foreign investors against legislative changes. Armenia is a member of the World Trade Organisation and is a signatory to the International Centre for Settlement of Investment Disputes (ICSID).

Mining Sector

The World Bank’s advised changes to the mining code, including royalties, have been in force since the start of 2012. According to the new mining law, a Special Prospecting License (SPL) runs for a period of three years and then up to three extensions are possible for periods of two years each. On application for an SPL, the licensee can conclude a stabilization contract, which is a written agreement with the Armenian Republic that regulates the licensee’s advanced exploration activities under the law.

A mining licence is valid for a period of up to 25 years, although the actual term is based on a mining plan submitted as part of the application and the time required to exploit the resource.

Effectively, the taxes under the new mining law are as follows: A charge of 4% on turnover, 12.5% on earnings before interest costs and the turnover charge, and a 20% corporation tax on profits after interest and royalties (Mining Journal Armenia Supplement, July 2011).

Armenia has a number of mining projects at various stages of the lifecycle, ranging from early exploration to those with a long history of production. According to the country’s ministry of energy and natural resources, minerals account for just over half of annual exports. In 2015, total mining production in Armenia was reported to have increased by 51.5%, against an international background of falling commodity prices.

The mineral potential of Armenia has attracted a number of explorers and miners. Companies currently active in the Armenian minerals sector include Lydian International (TSX), Dundee Precious Metals (TSX), Polymetal International Plc (AIM), Centerra Gold (TSX), Cronimet Mining AG (Germany), GeoProMining (Russia) and Vallex Group (Armenia).

Lydian International Ltd discovered the Amulsar gold deposit in 2006, 30km from Orogen’s Mutsk project. A Proven and Probable open pit reserve has been delineated in September 2012 totalling 2.3M Oz Gold at 0.8g/t and 9.98M Oz Silver at 3.4g/t. A feasibility study has been completed and a mining permit granted. Construction start-up commenced in 2016 following the raising of over US$250m in finance and the deposit is planned for production in early 2018.