Velocity Minerals Ltd. announces initiated underground drilling at the operating Chala Gold Mine. A total of 45 diamond drill holes have been planned for more than 5,000m of underground drilling from 8 drill positions. The drilling is being initiated by Velocity in connection with the successful negotiation and settlement of the terms of a property option agreement and joint venture agreement to be entered into between a wholly-owned Bulgarian subsidiary of Velocity and Velocity’s Bulgarian partner Gorubso Kardzhali A.D., whereby Velocity will be granted the option to acquire a 50% interest in the Chala Mine.
Chala Underground Exploration Potential
The Chala Mine is an underground gold mine exploiting high-grade epithermal gold-bearing veins. Since being acquired by Gorubso, the mine has been producing gold for approximately 11 years, with run-of-mine material trucked 40km to Gorubso’s CIL processing plant. Gold recoveries at the plant are in excess of 95% and gold dore is produced for sale to a Bulgarian smelter.
Velocity believes that mineralization could be continuous at depth, below the levels of current mine development, and the current underground exploration drilling program is aimed at defining a mineral resource of sufficient size to justify future capital investment for further development and expansion of the Chala Mine. If the Company is successful in defining a new resource at Chala, changes in mining methods and increased mechanization could be justified thereby substantially increasing production and lowering unit costs.
“Working together with our partner Gorubso at Chala, we have begun underground drilling and are excited at the prospect of defining new resources that can extend the life of the mine and build on the work that Gorubso has completed through mine development to date,” stated Keith Henderson, Velocity’s President & CEO. “We believe there is a good opportunity at Chala to discover resources and increase rates of production and the current drill program will allow us to begin to quantify that opportunity.”
Planned Underground Drilling
Drilling will begin at Zone 8 West and is focused on identifying depth extensions to the previously mined Vein 8. Targets have been generated following digital capture and interpretation of extensive paper-based mine production records. A total of 45 underground drill holes will test depth and strike extensions to 6 priority target areas. Access for underground drilling has been created by Gorubso through rehabilitation of old mine workings and new exploration development, which has been crucial in allowing Velocity to access priority drill targets.
3D Mine Model Developed
Over the past year, Velocity has completed extensive due diligence and resource targeting at the Chala Mine and has identified multiple high-priority targets adjacent to or below existing mine infrastructure. Velocity has digitally captured all available paper datasets at Chala, including 20,798m of surface trenching, 55 historical surface drill holes, all existing underground development and production stopes including details of underground sampling within 31,664m of exploration and mine development plus face sampling of 657 mining stopes. The resulting data set allowed Velocity to build a comprehensive 3D geological model, which was then used to generate priority drill targets.
Chala Mine Agreement
Velocity has settled the terms by which it will be granted the option to acquire a 50% interest in the Chala Mine. The agreed terms provide that Velocity, through its wholly-owned Bulgarian subsidiary, will be granted the option by Gorubso to acquire a 50% legal and beneficial interest in the Chala Mine (and the associated mining concession) by incurring CAD 1 million in aggregate exploration expenditures over an 18-month period, of which CAD 500,000 must be incurred within 12 months. Upon the exercise in full of the Option, Velocity will have the option to form a joint venture with Gorubso for the further exploration, continued development and operation of the Chala Mine or receive a 5% gross smelter returns royalty on the gross value of all metals contained in an inferred mineral resource, discovered, directly or indirectly, as a result of Velocity’s exploration efforts at the Chala Mine.
Shares for Services Arrangement
The Company also announces that its drilling contractor for the Drill Program, GEOPS – Balkan Drilling Services Ltd., has agreed to complete 600m of underground drilling under a shares for services arrangement, subject to acceptance for filing thereof by the TSX Venture Exchange . Under the terms of the Shares for Services Arrangement, the Contractor will invoice the Company for drilling services performed, which invoice(s) will be settled in full by the Company issuing to the Contractor fully paid and non-assessable common shares in the capital of the Company at a deemed issuance price equal to a 15% discount to the closing price of the Velocity common shares on the TSXV on the date that the Company issues the Payment Shares. In Canada, the Payment Shares will be subject to a hold period of four months and one day following the date of issuance.
“The collaboration and support we have received in Bulgaria has been exceptional; the drill contractors continue to show support by effectively investing in the Company’s strategy,” Mr. Henderson continued.