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Property Description and Location
The Avlayakan Project is located in the Khabarovsk Kray, a territory of the Russian Federation. The Khabarovsk Kray occupies 4.6% of the Russian land mass. In the west it borders on two other Russian states and China, while on the east the shore line is washed by the Sea of Okhotsk. The Tatar Gulf separates it from Sakhalin Island. The territory stretches 1,802 km from north to south; the maximum width from west to east is 750 km, and the minimum, 126 km. The distance between Moscow and the territorial capital (Khabarovsk) is 8,530 km. As of January, 2005, the territory had a population of 1,420,200 people. Over 80% of the population lives in the cities.
The Avlayakan Project is located in volcanic rocks that are largely of intermediate composition which host the steeply dipping gold-bearing veins. The exploration and development program for the project will initially target two previously identified gold deposits (Avlayakan and Kirankan) and the Company will also conduct exploration on the Mayvachan Kundumi license area.
The Avlayakan and Kirankan gold deposits are located along the Avlayakan River and are respectively part of the Ayano Maysky and Tuguro Chuchikansky regions of the Khabarovsk Kray territory of the Russian Federation, approximately 500 km north of the city of Khabarovsk. The Mayvachan Kundumi exploration area is located to the northwest of the Avlayakan and Kirankan gold deposits, and is part of a single combined license (the "Mayvachan Kundumi License"). The latitude and longitude for the Avlayakan Project site range from approximately 55º25' N to 55º40' N and from 134º40' E to 134º44' E.
Avlayakan holds the properties via three mineral licenses covering 276.5 square kilometres (sq km). Vostok transferred the Avlayakan and Kirankan licenses, in 2006, to Avlayakan. The Avlayakan and Kirankan licenses give the holder the right to use the subsoil for the purposes of final exploration and production of hardrock gold and silver on the license areas. The Mayvachan Kundumi License gives the holder the right to use the subsoil for the purposes of geological exploration and production of hardrock gold on the license area.
In accordance with the mineral license requirements, the owner of the licenses has to perform the following principal types of work (among others) within fixed periods after the license registration (the summary of the licenses below is derived from the text of the actual licenses and not the Avlayakan Technical Report):
Kirankan License (KHAB 01968 BE)
- Complete exploration on of before January 1, 2009;
- Present an exploration report on the deposit which is prepared in accordance with the established procedures and estimation of C1 and C2 reserves for a state review on or before May 1, 2010;
- Prepare a technical design plan of development of the license area and have it approved and obtain positive opinions thereon from the state environmental assessment authorities and the state industrial safety and subsoil protection authorities on or before January 1, 2011;
- Commence the construction mining facilities and other infrastructure on or before April 1, 2011;
- Commission a mine, having an annual output of at least 50,000 tonnes of ore on or before January 1, 2013; and
- Prepare a closure plan for the mine and have it approved at least six months prior to the time limit for the development of the deposit.
Avlayakan License (KHAB 01969 BE)
- Complete exploration on or before January 1, 2008;
- Present an exploration report on the deposit which is prepared in accordance with established procedures and estimation of C1 and C2 reserves for a state review on or before May 1, 2009;
- Prepare a technical design plan of development of the license area and have it approved and obtain positive opinions thereon from the state environmental assessment authorities and the state industrial safety and subsoil protection authorities on or before January 1, 2010;
- Commence the construction of mining facilities and other infrastructure on or before April 2010;
- Commission a mine, having an annual output of at least 50,000 tonnes of ore on or before December 1, 2010; and
- Prepare a closure plan for the mine and have it approved at least six months prior to the time limit for the development of the deposit.
Mayvachan - Kundumi License (KHAB 02027 BP)
- Submit an exploration and appraisal plan for the property and submit it for approval by April 1, 2008;
- Commence exploration on the property by September 1, 2008 with the following minimum work requirements:
Year 1 of geological exploration works
1,000 vertical metres of trenching
Year 2 of geological exploration works
1,000 metres of drilling
2,000 vertical metres of trenching
Years 3 to 4 of geological exploration works
2,000 metres of drilling
2,000 vertical metres of trenching
- Completion of exploration and evaluation works on the license area on or before December 31, 2011, and submission of a geological report with a calculation of C2, P1 and P2 reserves and resources for consideration by Dalnedra (territorial department of Federal Agency for Subsoil Use) and submission of the geological report to the territorial and federal funds of geological information;
- Preparation and approval in the prescribed order of a design plan for the final exploration of the deposits revealed as a result of exploration on or before July 1, 2012. The design plan must be reviewed and approved by the state ecological expert;
- Commencement of final exploration works on or before December 31, 2012;
- Completion of final exploration and submission for review to the state expert of the report prepared in the prescribed order regarding the final exploration of the revealed deposits with a calculation of C1 and C2 reserves in accordance with state guidelines relating to the calculation of reserves on or before December 31, 2016;
- Preparation and approval in the prescribed order of a technical design plan regarding the exploitation of the deposits with approved reserves on or before September 1, 2017. The design plan must be approved and receive positive opinions thereon from the state environmental assessment authorities and the state industrial safety and subsoil protection authorities;
- Commencement of construction of the mining plant infrastructure facilities - on or before May 1, 2018;
- Commission a mine with an annual output of not less than 50,000 tons of ore - on or before July 1, 2019; and
- Develop a closure plan for the mine and have it approved at least six months prior to the time limit for the development of the deposits.
There are additional environmental requirements outlined in the licenses. Silver Bear has not been notified of any default under the above licenses and believes Avlayakan is in compliance in all material respects.
The subsoil use payments for the mineral licenses at the Avlayakan Project as prescribed by the government on each property are set forth in each license. All other payments are made in accordance with the legislation of the Russian Federation.
Avlayakan Project Location Map
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