KRUMOVGRAD GOLD PROJECT
Kurdjali District, Bulgaria
The Krumovgrad gold property is a feasibility stage project located in southeast Bulgaria. The project is presently awaiting regulatory approvals from the Bulgarian government for the construction and operation of what is expected to be an 850,000 tonnes per year open pit to produce approximately 150,000 ounces of gold/silver doré bullion per year over the first four years. The current exploration license on this property expires in June 2008. The Company has applied for a mining license and is waiting for government approvals.
A definitive feasibility study completed in 2005 estimated construction costs for the proposed open pit mine and related facilities of $75 million, with comparatively low unit cash operating costs, after tax payback in less than two years and annual gold production of 150,000 ounces per year for the first four years. The project is currently held under an Exploration License issued in May 2000 and recently extended until June 2008. The Company has applied for a mining license and is waiting for government approvals.
In September 2004, DPM initiated proceedings to the MoEW for issuance of a commercial discovery certificate, which is required in order to obtain a mining license. Bulgarian officials advised DPM that a commercial discovery certificate would be issued following the delivery of an EIA approved by the MoEW. DPM filed an EIA with the Bulgarian MoEW in April 2005, incorporating best available techniques designed to meet or exceed Bulgarian and EU guidelines, which, to date, is being held in abeyance by the MoEW without explanation. To protect the Company’s interests, a legal appeal was filed in December 2005 with the Court against the MoEW for failure to rule on DPM’s EIA submission within the timeframe allowed by Bulgarian legislation. The Company requested the Court to revoke the silent refusal of the MoEW and approve the EIA or, alternatively, to instruct the MoEW to address the matter appropriately in compliance with Bulgarian law.
On February 13, 2007, the Court revoked the silent refusal of the MoEW on the Krumovgrad EIA. The Court ruled that, by failing to issue a pronouncement on the EIA within the statutory timeframe, the MoEW has breached the procedural rules under the Environmental Protection Act. This Act does not provide for a silent refusal and therefore the MoEW has been required to issue a pronouncement on the Krumovgrad EIA. The MoEW appealed the decision in front of the appellate instance of the Court and the appeal was heard on May 10, 2007. On July 13, 2007, the appellate Court upheld the Court’s original decision and instructed the MoEW to issue a decision on the Krumovgrad EIA. This resolution is final and cannot be appealed.
The Company is pursuing all available avenues, including additional legal actions in both the Bulgarian and the International Courts, in order to protect its rights to the property. On June 2, 2007, in order to further attempt to protect the Company’s rights, an application for a mining license was filed in lieu of having had all the statutory requirements for registering a commercial discovery satisfied. The application is currently under review by the MoEE. Although the MoEE has taken steps to review the Company’s application, the failure to formally issue an administrative act certifying opening of the administrative proceedings within the general administrative statutory timeline is considered, under the Bulgarian law, a silent refusal to start the proceedings. As a result, on December 21, 2007, the Company filed with the Court an appeal against the MoEE for silent refusal to open proceedings for direct granting of the mining concession. The appeal was filed to ensure that the Company’s rights were protected and were not going to be precluded because of the delay on the part of the state administration.
All engineering and procurement activities on the project were suspended in May 2006. This is in addition to the suspension of the resettlement program which occurred at the end of February 2006. Consequently, the Krumovgrad Gold Project will be delayed until such time as the MoEW meets its legal obligations and approves the EIA which has been deemed to be fully compliant by independent international and licensed Bulgarian environmental experts. As of the date of this report, the Company has had no formal response from the MoEW.
On March 10, 2008, DPM announced that the Company and the Bulgarian Government had commenced discussions with respect to the advancement of the Krumovgrad gold project, including initiating the next step in its EIA approval process. An update of the year 2005 feasibility study will be prepared upon confirmation of the permitting process going forward.