Velocity Minerals Ltd. announced that it has entered into a binding letter agreement with current partner Gorubso Kardzhali A.D. to substantially expand the scope of its relationship with Gorubso. The Agreement sets out the terms by which Velocity and Gorubso will form an exploration and mining alliance covering all existing and future Gorubso and Velocity projects within an area of 10,400km2 covering the prospective Eastern Rhodope Gold Mining District in southeastern Bulgaria.
“The primary objective of the Alliance is the expansion and development of existing precious metals deposits with the Alliance Area. The ultimate goal is for Velocity to manage and operate all exploration and mining activities on optioned properties in the district, and for Gorubso to manage and operate all aspects of upstream processing and gold marketing,” stated Keith Henderson, President & CEO of Velocity. “The Alliance is designed to move us towards those common objectives. It allows us to exploit our technical strengths, while maximizing value for the shareholders of both companies.”
“Gorubso has been partnered with Velocity over the past seven months and the rate of progress at Rozino has been impressive, with Velocity completing over 7,500 meters of drilling so far and moving towards completion of a PEA,” stated Jivka Kovacheva, CEO of Gorubso Kardzhali A.D. “It was important for us as a mining company to choose a partner capable of executing on deliverables and we believe we have found that partner in Velocity.”
Gorubso gold processing plant
Gorubso owns and operates a modern gold processing plant, which provides crushing, grinding, gravity, carbon-in-leach, elution, electro-winning and gold dore production facilities. The Plant is centrally located within the Alliance Area. Under the terms of the Agreement, Gorubso will make the Plant available for the processing of mineralized material from current and future Projects. Material processed by the Alliance at the Plant will be processed on a cost-plus basis.
Securing the use of the Plant provides significant technical and financial risk reduction, as well as potential capital and time savings. Most importantly, securing the use of the processing facility significantly reduces permitting risk and time that might otherwise arise if a processing plant had to be permitted and built prior to mine construction.
The use of the Plant is being considered as one option for the preliminary economic assessment being completed for Velocity’s Rozino project where the Company intends to assess the possibility of producing a low-volume concentrate through flash-flotation on site and transporting a concentrate to the Plant for vat leaching and gold recovery. There are no assurances that such assessment will produce positive economic results or that such results, even if possible, will be included in the final PEA.
Chala mine option
The Agreement commits Velocity to incurring $0.5 million in exploration expenditures at the Chala Mine within an initial 12-month period. Thereafter, if Velocity incurs an additional $0.5 million in exploration expenditures at the Chala Mine, Velocity will have the exclusive option to:
acquire an initial 50% undivided beneficial interest in the Chala Mine, in which case Velocity will form a joint venture with Gorubso for the further development and expansion of the mine, or
elect to receive a 5% gross smelter royalty on resources discovered directly or indirectly through Velocity’s exploration efforts.
The Chala Option will be governed by a separate option agreement, which is expected to be negotiated by the parties in the coming weeks.
Historical resources at the Chala Mine are reported as 1.5Mt @ 9.83 g/t gold (450,000oz). The historical resources were published by Kestebekov C, 1998, in “Chala gold-polymetallic deposit, Spahievo ore field. Results of 1983-1997 geological exploration with estimated resources of gold and gold-polymetallic ores as of 01/01/1998”. Total historical production at the Chala Mine is estimated to be approximately 120,000 oz. The historical resource estimate was produced using the Bulgarian classification scheme, based on manual polygonal methods of resource classification. A qualified person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves. In order to verify the potential existence of additional unmined mineralization at the Chala Mine, significant drilling will be required.
The Company is not treating the historical resources as current mineral resources or mineral reserves. Historical resources are not consistent with the standards of disclosure defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and may not necessarily be consistent with Canadian Institute of Mining, Metallurgy and Petroleum best practice with respect to reporting mineral resources and reserves. Historical resources are included because they are considered relevant by the Company as they provide additional support for the potential exploration drilling at the Chala Mine by Velocity. The inclusion of historical resource estimations provides information as to the potential size and nature of the immediate exploration targets in the vicinity of the Chala Mine. There are no more recent, published historical resources available for the Chala Mine.
Over the past 10 months, 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 and face sampling within 657 mining stopes.
The resulting data set allowed Velocity to build a comprehensive 3D geological model (Figure 2), which was then used to generate priority drill targets. Velocity has hired a mining engineer with extensive gold mining experience in Bulgaria and Russia, having over 10 years’ experience at Dundee Precious Metals’ Chelopech gold mine in Bulgaria and most recently at Kinross’ Kupol gold mine in Russia, where he was responsible for both short and long-term mine planning.
Gorubso properties option
Under the terms of the Agreement and subject to any applicable regulatory and stock exchange approvals, Velocity will have the exclusive option to earn an undivided 70% interest in all existing and future Gorubso properties located within the Alliance Area, with the exception of the Chala Mine which is dealt with separately. The existing Gorubso Properties are summarized in Table 1 below. Depending on how advanced the particular property is, the associated option is exercisable by Velocity by the delivery of either a mineral resource estimate (for grass roots properties), a PEA (for advanced exploration properties) or a feasibility study (for properties with a mining concession).
Velocity is currently earning-in on its option to acquire a 70% interest in the Tintyava prospecting licence, and is completing extensive diamond drilling at the advanced Rozino gold deposit located on the Tintyava prospecting licence area. Before electing to option any additional Gorubso Properties, the Company will complete extensive due diligence. This process is underway and is close to completion at the Sedefche gold deposit, where Velocity has completed internal resource estimation and pit optimization in preparation for exploration drill planning.