Etruscan's Youga Gold Mine nears completion



    HALIFAX, Oct. 3 /CNW/ - Etruscan Resources Inc. (EET.TSX) reported today
that construction at its Youga Gold Mine located in Burkina Faso, West Africa
is nearing completion with commissioning of the main plant circuits scheduled
to be completed in November and first gold production in December.
    The Youga Gold Project will initially be comprised of open pit mining of
five pits with the ore being processed though a conventional CIL/gravity plant
having a design capacity of one million tonnes per annum. Mineable reserves
are 6.6 million tonnes with an average grade of 2.7 grams per tonne containing
580,000 ounces of gold. The project will benefit from year-round water supply
from a nearby major river system (the White Volta) and access to grid power
supplied by the northern grid of the Volta River Authority in Ghana. A full
back up power plant has been installed to ensure constant power to the site.
The plant has been designed for maximum operating availability and in
particular, the mill drive system is being supplied new with a second new
drive train (motor and gearbox) being stocked on site as a spare.

    Project Construction and Commissioning

    Exceptionally heavy rains throughout West Africa over the past months,
together with transport delays have extended the time required to complete the
construction of the plant and related infrastructure at the Youga Gold Mine.
In particular, the rains have delayed the completion of the tailings storage
facility and have caused significant flooding near the pumping station
location, which suspended its installation. The main access routes to the site
have also been impacted by the heavy rains which have slowed the delivery of
critical construction equipment and supplies.
    Fortunately, the rains have started to subside and construction
activities are ramping back up and repairs to the roads are underway.
Notwithstanding these challenges, the project is in the final stage of
completion as highlighted by the following:

    
    - The contract mining fleet operated by PW Mining has been fully
      mobilized and has completed overburden and waste stripping of the main
      pit. The drill and blast contractor, Nitro Chimie, is also fully
      mobilized and has blasted in excess of 500,000 cubic meters to date.
      The on-site infrastructure for both contractors is nearing completion.

    - The initial phase of the ROM (run-of-mine) pad has been completed which
      represented the placement of approximately 300,000 cubic meters of
      waste rock. The pad will be expanded over the life of the project to
      allow for extra ore stockpiling capacity.

    - A clay liner and the starter wall and the return water pond for the
      tailings storage facility have been completed and the remaining piping
      and liners are currently being installed.

    - A primary grade control drill rig is now on site and in operation. The
      initial ore will be mined from the main pit (A2 Main) and stockpiled on
      the ROM pad for commissioning and early production. The grade control
      staff has been hired and is now on site.

    - The 10 MVA diesel-fired back up power plant has been completely
      installed and is ready to operate.

    - Construction of the main electrical power line from Ghana is continuing
      and the first phase power delivery is scheduled to be completed by
      December.

    - Installation of the 11 kilometer water pipeline to the Volta River and
      the overhead power line to power the pumping station has been
      completed. Installation of the pumping units will be completed when the
      water in the Volta River recedes. Temporary pumping capacity is being
      put in place.

    - Important plant circuits (including the crushing and screening, the
      mill and cyclone tower, the carbon in leach and process building) are
      nearing completion with the majority of the steelwork erected and the
      mechanical equipment placed.

    - The mine camp is complete and fully operational. Construction of
      various infrastructure buildings such as the main workshop, chemical
      stores, crusher workshop, security/change building and the office
      blocks are complete.
    

    Plant Commissioning Sequence

    The Youga Gold Project is being commissioned in three phases before
ramping up to full production. Each circuit will go through an initial dry,
then wet and finally an ore based commissioning process. The commissioning of
the main plant units is scheduled to be completed in November with testing of
the carbon in leach (CIL) circuit, the crushing and screening circuit,
grinding and cyclone circuit and finally the elution and gold room areas. With
a successful commissioning achieved, the first gold pour is scheduled for
December.

    Geological Potential to Increase Mine Reserves

    An updated feasibility study for the Youga Gold Project was completed in
October 2006 by RSG Global of Perth, Australia (see news release dated
October 31, 2006). The Updated Youga Feasibility Study and project financing
was based on an initial reserve of 580,000 ounces from five pits. The
potential to extend the Youga mine life beyond the initial 6.6 year period is
considered to be excellent. In addition to the current mineable reserves, six
additional mineralized zones have been identified by drilling and trenching
and all are within a three kilometer distance of the central milling facility.
These additional zones will be systematically upgraded into resource and
reserve categories as mining progresses in the first five open pits.
    Etruscan also holds a strategic land position covering 1,075 km2 of
contiguous ground in the Youga Gold Belt in Burkina Faso and an additional
773 km2 of the continuation of the belt into Ghana. Regional exploration on
these permits has identified target areas at Zerbogo (25 kilometers southwest
of Youga), Bougré (13 kilometers southwest of Youga) and Bitou (25 kilometers
northeast of Youga). Three historic mining sites are known on the Ghanaian
side at Nangodi, Dusi and Zug. Etruscan has on-going exploration programs
covering all these targets and is evaluating the potential to develop stand
alone and/or satellite mining operations from these areas.

    Financing, Gold Price Protection Program and Project Economics

    The total funding required for the development of the Youga Gold Mine is
estimated at US$67 million including capital costs, preproduction costs,
working capital and financing costs. These costs are being funded in part by a
US$35 million senior debt facility provided by RMB Australia Holdings Limited
("RMBAH") and Macquarie Bank Limited (Macquarie). The senior debt facility was
arranged by RMB Resources Limited ("RMB Resources") of Melbourne, Australia.
RMB Resources and RMBAH are members of the FirstRand Group of South Africa
which specializes in the financing of mineral resource projects in Africa. The
loan is structured as a secured facility with limited recourse to Etruscan
until economic completion conditions are achieved when it becomes non-recourse
project financing. Standard project finance undertakings and security
provisions apply. The loan is repayable on a quarterly basis over a 4-year
term. The Company drew down the remaining balance of the facility in September
2007.
    The Company has also received an offer of subordinated project debt
financing for up to US$7.5 million from RMBAH and Macquarie. These proceeds
will be used to fund the completion of the Youga Project and for other
Etruscan working capital requirements. The offer of finance is subject only to
completion of the formal financing agreements, which are currently being
prepared. The subordinated loan is repayable in two equal quarterly
installments following the repayment of the senior debt facility and bears
interest at LIBOR plus 3.5%. The terms of the loan also include the issuance
to the lenders of a calculated number of financier warrants with the number of
warrants estimated at 1.2 million. The exercise price of the warrants will be
set at issue on the basis of the lowest of $3.50 per share, 120% of the
closing market price on the date of acceptance of the offer of finance and
120% of the closing market price on the date of execution of the subordinated
facility documentation. RMB Resources also acted as arranger in the
structuring of the subordinated debt facility.
    In conjunction with the senior debt facility, RMBAH and Macquarie
provided Etruscan with a margin free credit line for purposes of implementing
a gold price protection program. The gold price protection program is
comprised of a combination of bought put options and sold call options whereby
100% of gold production for the first five years of the project
(456,000 ounces) is price-protected at a minimum price of US$629 per ounce.
The put options were funded by writing call options covering 45% of the
feasibility study life-of-mine production (246,000 ounces) having a strike
price of US$700 per ounce. Consequently 100% of production is available to be
sold at spot prices up to US$700 per ounce with 55% of the feasibility study
life-of-mine gold production (298,000 ounces) uncapped and fully exposed to
any upward increase in the gold price above US$700 per ounce. The fixed
monthly ratio of call options to put options is 0.54 to 1 (246,296 ounces /
456,102 ounces) with the put option volumes matched to the production schedule
from the October 2006 Youga Feasibility Study Update. During August the
Company closed out the end of September call options (3,518 ounces) and put
options (6,516 ounces) at no cost to the Company
    The life of mine average cash operating costs are estimated to be
US$345 per ounce assuming 100% grid power. The Project will be commissioned
with on-site diesel generated power with grid power to be installed in two
phases that will be completed by end of first quarter 2008. When used, the
on-site diesel power generation is expected to add approximately US$50 per
ounce to the operating costs. The operation is forecast to ramp up in terms of
mill through put and head grades over the first full two months of operation
with steady state production rates being achieved in the third month of
operation.

    About Etruscan Resources Inc.

    Etruscan Resources Inc. is a gold focused Canadian junior mining company
with dominant land positions in district scale gold belts covering more than
10,000 square kilometers in West Africa. Its principal properties include the
Youga Gold Project in Burkina Faso, the Agbaou Gold Project in Côte d'Ivoire
with an 11,000 meter feasibility study diamond drilling program in progress
(Press release dated May 31, 2007), the Diba Gold Project in Mali where a
major drill program was recently completed (Press release dated July 26,
2007), the Finkolo Gold Project in Mali where an 8,200 meter reverse
circulation and diamond drilling program is being carried out (Press release
dated August 30, 2007) and the Banfora Gold Belt in Burkina Faso with eight
major gold targets identified and where a single sample auger drilling program
began in March 2007 (Press release dated November 27, 2006). Etruscan recently
announced a significant acquisition of strategic properties in Ghana (Press
release dated August 7, 2007). Etruscan also has a 51% interest in Etruscan
Diamonds Limited which has a dominant land position in the Ventersdorp Diamond
District located in South Africa. (Press release dated March 14, 2007). The
common shares of Etruscan are traded on The TSX Exchange under the symbol
"EET". More extensive information on Etruscan can be found on its home page at
http://www.etruscan.com.

    This press release may contain certain forward-looking statements which
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking
statements may include statements regarding exploration results and budgets,
mineral reserve and resource estimates, work programs, capital expenditures,
mine operating costs, production targets and timetables, future commercial
production, strategic plans, market price of precious metals or other
statements that are not statements of fact. Although the Company believes the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Various factors that may affect future results include, but are not limited
to: fluctuations in market prices of precious metals; foreign currency
exchange fluctuations; risks relating to mining exploration and development
including reserve estimation and costs and timing of commercial production;
requirements for additional financing; political and regulatory risks, and
other risks and uncertainties described in the Company's annual information
form filed with the Canadian Securities regulators on SEDAR (www.sedar.com).
Accordingly, readers should not place undue reliance on forward-looking
statements.

    NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS
    RELEASE




For further information:

For further information: from Etruscan contact: Richard Gordon, Investor
Relations, (877) 465-3674, Fax (902) 832-6702, rgordon@etruscan.com; Tony
Hayes, (866) 638-3338, Fax (905) 468-8407, thayes@etruscan.com

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ETRUSCAN RESOURCES INC.

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