Operations - Bulgaria - Chelopech Gold/Copper Mine

Last Updated:  August 2010

CHELOPECH MINE
Sofia District, Bulgaria

Profile

The Chelopech mine is an operating gold/copper mine and ore concentrating facility located at Chelopech, Bulgaria (the “Chelopech Mine”), which DPM has operated since late 2003.  The concentrate produced contains a high concentration of arsenic which may only be treated at a limited number of smelters in the world.  Since 2008 the Chelopech concentrate has been treated at the Tsumeb smelter located in Namibia, Africa.  In December 2008, Chelopech contracted with Namibia Custom Smelters ("NCS"), then a wholly-owned subsidiary of Weatherly International Plc ("WTI"), for the sale of all or substantially all of its concentrate production through the year 2013.  In July 2009, the concentrate purchase arrangement between NCS and Chelopech was extended from 2014 to, and including the year 2020, giving Chelopech the right to sell up to 140,000 tonnes of concentrate per year to NCS in that period.  On March 24, 2010, DPM completed the purchase of the smelter from WTI thereby securing the long-term processing of the Chelopech concentrate through the current life of mine. 

Background

The Chelopech Mine is located in central-western Bulgaria approximately 70 kilometres east of Sofia, the national capital, on the southern flank of the Balkan Ranges. The deposit lies in the northern part of the Panagyurishte mining district where a number of cupriferous massive sulphide and porphyry copper deposits exist.

The Mining License covers an area of 266 hectares. Under Bulgarian regulations, the Mining License area is applied for on the basis of geographical coordinates. The Mining License covers the immediate area of the Chelopech mining operation and the immediate surrounds.

The Company owns the land upon which the facilities are constructed and operates under a Concession Agreement that was granted in 1999 for a period of 30 years.

Production, Costs, Deliveries and Net Revenue
[Click To View Data Table]

Mineral Reserves and Resources

3.2g/t AuEq Cut-Off Grade;  Cut-off Grade AuEq formula: Au (g/t) + 2.5 x Cu (%). Mineral Resources are inclusive of Mineral Reserves.

The "Mine/Mill Expansion Project, Bulgaria, Technical Report for the Chelopech Project" was prepared by Brian R. Wolfe and Peter Wade from Coffey Mining Pty Ltd. ("Coffey"), Gary Jobson from MacroMet, David Morgan from Knight Piesold Pty Ltd. ("KPP") and J. Fergus Anckorn from AMEC Earth and Environmental UK Ltd. ("AMEC"), all of whom are Qualified Persons under NI 43-101 and independent of the Company, and was filed on Sedar at www.sedar.com on January 22, 2010.

Mine/Mill Expansion Project

Chelopech is presently expanding its mine and mill operations to approximately double its annual concentrate production capacity to 150,000 tonnes, containing on average, from 2012 to 2017, 50.7 million pounds of copper and 148,000 ounces of gold.  The Project comprises: (i) the expansion of mine production capacity to 2.0 million tonnes of ore per year, including the installation of an underground crushing and conveying system, upgrade of the mine ventilation system and construction of a paste fill plant, (ii) the installation of a new SAG mill, and (iii) the modernization and upgrade of the existing concentrator.  

An updated life of mine plan, reflecting the expanded 2.0 million tonnes of ore per year mine rate, was approved by the Bulgarian Ministry of the Economy, Energy and Tourism ("MoEET") and the Bulgarian Ministry of the Environment and Waters ("MoEW") in November 2009. 

As at June 30, 2010, the estimated cost to complete the Project was $82.7 million of which $39.8 million is projected to be spent in the remaining six months of 2010.  As of June 30, 2010 the Company had invested $59.0 million in the Project.  The capital cost includes owner’s costs and contingency but excludes special projects associated with the ongoing operations and sustaining capital.  Following commissioning, the unit operating cost for the expanded facility is expected to decrease by approximately 40% relative to the year 2009 average cash cost per tonne of ore processed.  

Activities related to the mine and mill expansion steadily progressed throughout 2009.  During the year 2009, preliminary work related to the upgrade of the concentrator and the construction of the paste fill plant, including demolition, excavation and preparation for foundations, was completed.  Works related to the tailings management facility (“TMF”) completed in the year 2009 included upgrades of the seepage pump station at the base of the dam and the first phase of the buttressing of the dam wall.  Modifications to the process circuit to allow tailings reclaim and to increase the rate of placement of hydraulic backfill were successfully completed in 2009.  

During the second quarter of 2010, work related to the various facets of the concentrator upgrade and the paste plant (above-ground) continued.  The construction of the paste plant (above-ground) is scheduled for completion in the beginning of the third quarter of 2010.  Installation of the underground paste pipe work and wet commissioning of the total system is also scheduled for the third quarter of 2010.  The lime slaking facility for the concentrator upgrade is complete and in operation.  The SAG mill, the concentrator load-out and the general flocculation facility are scheduled for completion and commissioning during the fourth quarter of 2010.  The totally automated control system for the mill is being engineered in-house by a team which includes personnel from operations and will be completed in time for plant commissioning.  

The underground crushing and conveying project commenced in January 2010 with hard rock mining of an inclined tunnel (the "Vyara" incline).  The tunnel will be 4,295 metres long and 5 metres in diameter lined with fibrecrete and is mined by drilling and blasting at an inclined angle of 16%.  Seven conveyors are to be installed in the inclined tunnel and an underground crusher will be situated at the bottom end of the tunnel on level 165.  Tunnelling works are in progress from three headings.  As of June 30, 2010, approximately 30% of the required 4,295 metres of hard rock tunnelling for the conveyor drives had been completed.  Work on engineering of the ore passes, transfer stations, crushing station and all mechanical, electrical and instrumentation works have commenced.  Equipment identification and evaluation is also in progress for some long lead time items such as the underground crusher and reciprocating feeders.  During the second quarter of 2010, the excavation for the removal of the overburden of the surface portal of the Vyara incline was completed.  The portal itself will be constructed in the third quarter of 2010 and tunnelling from the surface will commence after sufficient back fill and compaction to support the excavated face has been completed.

The Project is currently scheduled for completion during the second half of 2011.  

 

             New paste fill plant                                     New SAG mill




     Underground crushing and conveying system - tunnelling 30% completed.


 
 
                       Excavation and concrete work for the external portal

Exploration Activities

Diamond drilling programs continue to define Blocks 145 and 147 while an extension of the current 149 development is scheduled for the fourth quarter of 2010 to drill out Targets 181 and 182. Following an assessment of the results of a down-hole geophysics survey performed in the first quarter of 2010, a target ranking exercise downgraded the Central Deeps area relative to the highly prospective south west Chelopech zone. As a result, an exploration drive was commenced to provide drill access to the south west zone. 

Results from diamond drilling in Block 145 indicate that a number of zones exist within the silica envelope. The ore zones, which remain open to the south east and down dip, are 5 to 20 metres wide, 40 metres in strike and extend at least 80 metres down dip. The ore zone is made up of a number of ore-types consisting of poddy sulphides associated with vuggy quartz, normal to weak stockwork and disseminated sulphides hosted by a silicified andesitic breccia. Drilling is planned to continue during the third quarter of 2010 to define its limits and commence infill on a 25 by 25 metre pattern. 

Block 147 continues to be drilled out to measured and indicated status in order to be included in the 2010 Mineral Resources and Mineral Reserves calculations planned for the fourth quarter of 2010. Drilling has defined the ore zone along strike, while up and down dip still remains open. The ore zone continues to mirror the mineralogy, geometry and grade of Block 149 consisting of a narrow vuggy quartz silica envelope 15 to 20 metre thick hosting ore-bearing massive pyrite with minor sulfosalts (e.g. enargite & tennantite-luzonite). The economic interval is 5 to 10 metres wide, 70 metres in strike length and has a 150 metre down-dip extent. Assay results show copper grades ranging from 0.02% to 6.58% and gold grades ranging from 2.05g/t to 68.8g/t (using a 4g/tAuEq cutoff where AuEq = 2.5Cu + Au). Diamond drilling will continue on a 25 by 25 metre grid to determine its true dimensions. Drilling of Targets 181 and 182 is scheduled to commence in the first quarter of 2011 after the extension of the 149 ramp development has been completed.

The south west Chelopech region located behind Blocks 151 and 103 represents a greenfield area along strike and down plunge within the Chelopech deposit ‘corridor’. The area has a very similar structural and geological makeup to the existing mine area, confirmed by surface mapping, limited deep surface drilling and geophysical surveys. The re-ranking of targets in the Chelopech ‘corridor’ has elevated the south west Chelopech zone to the key volume for the discovery of significant high sulphidation mineralization, of a similar stature to the 150, 151 and 103 orebodies. Development of this area is scheduled for the third quarter of 2010 and preliminary drilling is expected to commence in the fourth quarter of 2010.