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TRANS-SIBERIAN GOLD PLC

ASACHA GOLD PROJECT

KAMCHATKA, RUSSIA

Asacha Hill looking south along the main vein system

ENVIRONMENTAL ASSESSMENT

Asacha Gold Project – Environmental Assessment Final Report

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ASACHA GOLD PROJECT

KAMCHATKA, RUSSIA

ENVIRONMENTAL ASSESSMENT

MDS MINING & ENVIRONMENTAL SERVICES LTD

November 2004

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FOREWORD

This Environmental Assessment for the Asacha Gold Project located in the Kamchatka Region of Eastern Russia was prepared by MDS Mining & Environmental Services (MDS) for:

Trans-Siberian Gold plc Church Barn Old Farm Business Centre Church Road Toft Cambridge CB3 7RF United Kingdom

All environmental and other factual information on the Asacha Gold Project used in the preparation of this document was provided by Trans-Siberian Gold in reports commissioned by them (and by others who have had an interest in the Asacha deposit) from a number of Russian and international consultants. The original sources of this information are referenced at the appropriate places in this document. The information has been accepted in good faith by MDS and has not been independently validated by MDS, who accepts no responsibility for any inaccuracies, errors or omissions in the information provided.

Dr Mark Dodds-Smith Director MDS Mining & Environmental Services Ltd 2 Aldeby Hall Cottages Aldeby Beccles Suffolk NR34 0AJ United Kingdom

31 March 2004 (revised November 2004)

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CONTENTS

EXECUTIVE SUMMARY

1. INTRODUCTION

1.1 Background 1.2 Location 1.3 Permitting and other regulatory requirements in Russia 1.4 Environmental Assessment methodology 1.5 Environmental standards 1.6 Health and safety management 1.7 Consideration of alternatives 1.8 Scoping, public and statutory consultations and the identification of key issues

2. BASELINE ENVIRONMENTAL CONDITIONS

2.1 Context 2.2 Sources of information 2.3 Climate and meteorology 2.4 Geology, seismic and volcanic activity and hydrogeology 2.5 Surface water resources 2.6 Fisheries 2.7 Air quality 2.8 Soils and vegetation 2.9 Wildlife and nature conservation 2.10 Socio-economics 2.11 Cultural heritage

3. PROJECT DESCRIPTION

3.1 Site description 3.2 Access road 3.3 Mining 3.4 Processing 3.5 Tailings disposal 3.6 Waste management 3.7 Transport links 3.8 Power supply 3.9 Water supply 3.10 Site water management and treated effluent discharge 3.11 Atmospheric emissions 3.12 Employment 3.13 Construction schedule

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4. IMPACT ASSESSMENT AND MITIGATION MEASURES

4.1 Summary of predicted impacts 4.2 Impacts on groundwater resources 4.3 Impacts on surface water resources and fisheries 4.4 Impacts on air quality 4.5 Impacts on soils, vegetation and land-use 4.6 Impacts on wildlife and nature conservation 4.7 Socio-economic impacts 4.8 Impacts on cultural heritage 4.9 Impacts arising from unforeseen circumstances 4.10 Cumulative impacts

5. HEALTH, SAFETY AND ENVIRONMENTAL MANAGEMENT

5.1 Background 5.2 Occupational health and safety 5.3 Environmental management

6. CONCEPTUAL CLOSURE AND REHABILITATION PLAN

6.1 Objectives 6.2 Implementation 6.3 Financial considerations

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EXECUTIVE SUMMARY

1. INTRODUCTION

Project details

Trans-Siberian Gold plc (TSG) is a UK company established with the objective of acquiring and developing gold deposits in Russia. TSG currently owns 90.05% of the Russian company ZAO Trevozhnoye Zarevo (TZ), which has held mining and exploration licences covering the Asacha deposit in Kamchatka since 1994.

Asacha is a high grade epithermal gold deposit with a mineral resource currently defined as 909,000 tonnes grading 22.2 g/t Au. Between 2000, when TSG acquired a controlling interest in TZ, and 2004, TSG commissioned additional technical and economic studies culminating in the production, by the South African company MDM Ltd, of a full Bankable Feasibility Study in March 2004.

The MDM Bankable Feasibility Study is based upon a mineable reserve of 934,000 tonnes grading 16.1 g/t Au and 31.4 g/t Ag with an additional inferred resource of 199,000 tonnes grading 14.9 g/t Au and 38.2 g/t Ag. The mine will be an underground operation with gold/silver recovery by conventional gravity and carbon-in-leach techniques. The nominal mining and processing rate is 204,000 tonnes per annum giving a mine life of approximately 6 years. With construction, other pre-production activities and final decommissioning and rehabilitation, the total project life will be approximately 8 years.

Location

The Kamchatka peninsula covers an area of some 470,000 km2 in Russia’s Far East (RFE) between the Sea of Okhotsk to the west and the Bering Strait to the east. The Asacha deposit is located within the Yelizovo administrative district in the south-eastern part of Kamchatka, at approximate latitude 52o16’ longitude 157o20’, some 190 km due south-west of the regional capital of Petropavlovsk-Kamchatski.

The nearest settlement to Asacha is the village of Termalniy, some 115 km to the north. Access to the site currently is by a combination of all weather road and rough track from Termalniy. Termalniy is linked by asphalt road to Petropavlovsk-Kamchatski.

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Permitting procedures

Russian permitting procedures encompass two distinct phases – project initiation (which essentially covers project development and construction) and operation. Russian practice identifies four stages in project development, roughly equivalent to the “conceptual”, “pre-feasibility”, “full feasibility” and “detailed design” stages adopted internationally. Environmental, health and safety (and other) issues are expected to be addressed during each of these stages culminating in the production of a full scale assessment of environmental impacts, known by its Russian acronym “OVOS”.

Essentially, the OVOS procedure is broadly compatible with Environmental (Impact) Assessment (EIA or EA) process applied internationally and incorporates: a description of the development, a characterisation of the existing environment, impact predictions, an assessment of the significance of impacts and details of proposed mitigation measures. Statutory and public consultations are expected throughout the preparation of the OVOS.

Once construction has been completed, operational control is exercised through a system administered by the regional authorities (sometimes known as a system of “ecological passports”). These controls set agreed limits for emissions, discharges, waste arisings and define environmental actions required of the operator. The controls, which can be reviewed at intervals ranging from 1-5 years, also form the technical basis for the annual payment of fees (taxes) by the operator to the local authorities.

EIA methodology

An OVOS prepared by the Russian institute VNIPI was completed in accordance with the methodology required by the permitting process in Russia. TSG has indicated an intention to secure project finance for at least part of the estimated US$54 million capital cost of developing the Asacha deposit from international financial institutions. These institutions will likely require the Bankable Feasibility Study to be supported by an EIA prepared in accordance with internationally recognised methodologies.

The Russian OVOS procedures are broadly similar in most respects to those adopted by international institutions including the World Bank Group. There are, however, a number of differences in the scope, methodology and style of the two approaches. This is not to say that one approach is necessarily superior to the other – but that it is difficult, if not impossible, to produce a single OVOS/EIA report that will satisfy both audiences. Consequently, in 2004, TSG commissioned MDS Mining & Environmental Services Ltd

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(MDS) to produce an EIA compatible with international expectations to support the MDM Bankable Feasibility Study.

Environmental standards

Since the 1970s Russia has developed a very extensive system of environmental standards covering aspects such as water quality, air quality and the content of solid wastes. Environmental protection in Russia continues to be based around the application of over 5,000 specified MACs covering atmosphere (both for workplace environment and for ambient air quality and including average daily and maximum concentrations), water quality (for drinking water, recreational usage and fisheries protection). Additional MACs apply to soils, sediments, vegetation and other environmental components.

In almost all cases, the MACs currently applied in Russia are as stringent as their direct western European or North American counterparts (where these exist), if not more so. Indeed, in some cases the MACs have been criticised as being too stringent, as having little scientific justification, as being impossible to achieve and monitor effectively or of taking no regard of natural background levels (which not uncommonly exceed the MAC). Precise comparisons between Russian MACs and World Bank standards, however, are not always straightforward.

Health and safety management

All technical equipment and operating practices are subject to scrutiny for compliance with Russian norms and labour recruitment and training is required to conform to a series of regulatory requirements that includes issues relating to industrial safety.

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The management of health and safety during operations in Russia is the direct responsibility of the operating company. A series of regulatory requirements and guidelines are used to establish a health and safety management system that is not unlike its western European counterparts, such as the international document OHSAS 18001 and the British Standard 8800 (on which OHSAS 18001 is based), and includes provision for aspects such as: management structures and responsibilities, documentation, planning procedures, operating practices, training, enforcement, incident reporting and investigation and auditing.

Scoping and consultation

As a consequence of the review of earlier reports prepared in the 1990s, the scoping exercise conducted by VNIPI in 2002 and the programme of statutory and public consultations undertaken in 2003, TSG has been able to identify a number of key environmental, socio-economic and cultural issues that require assessment within the OVOS and EIA. These are:

i) Environmental issues

• The effect of the mine on groundwater and surface resources, particularly with respect to the need to protect important fisheries in the Asacha River catchment.

• Waste disposal, particularly tailings management and the control of seepages, discharges and dust emissions from the tailings storage facility.

• The issues associated with construction and operation in a seismically active area.

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• The effect of the mine on air pollution, particularly associated with emissions from the on-site power generation and traffic.

• The need to protect ecologically important areas and the rare and endangered species within them.

• The need to ensure rehabilitation of the site after decommissioning.

ii) Socio-economic issues

• The need for employment and economic development in an under-developed region.

• The effect of the mine on the development of tourism in the region.

• The effect of traffic to and from the mine on the local road system and the communities adjacent to it.

• The effect of the mine (and the associated improvements to the road system) on poaching and interference with legitimate hunting activity in the region.

iii) Cultural issues

• The need to protect the rights of native aboriginal people.

• The need to preserve sites of cultural importance.

2. BASELINE ENVIRONMENTAL AND SOCIO-ECONOMIC CONDITIONS

Socio-economic context

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from those connecting the major settlements, is poorly developed, consisting principally of a few un-surfaced all weather roads and numbers of rough tracks.

Historically, the principal industries have been fishing, based around Petropavlovsk- Kamchatski, forestry and agriculture. Hunting, principally for the fur market, is an important part of the rural economy and local culture. The region was of considerable military importance during the 1950s-1990s and, although much reduced, a significant military presence remains. Although rich in mineral resources, Kamchatka does not have a history of mining and only one mine is currently operating in the region.

The region is one of the poorest in Russia and unemployment is high. The population of the region is declining, partly due to outward migration to parts of Russia where employment opportunities are greater and the decline of military activity. Life expectancy is relatively low, even by Russian standards, and public health indicators are deteriorating.

Climate and meteorology

South-eastern Kamchatka is characterised as temperate continental with strong maritime influences from the Pacific Ocean.

Kamchatka is located in the temperate monsoon zone and experiences cyclones

The average daily temperatures recorded at the two meteorological stations range from - 19oC in January to +13oC in July. The maximum recorded temperature at Nachiki is +32oC; the minimum recorded temperature is -53oC.

The average annual precipitation at Nachiki is 1062mm. Precipitation is experienced in each month, usually falling as snow between November and March although snow storms can be experienced from October through to May.

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Wind patterns are complex due to the interaction of the influences of the Pacific Ocean and the high mountainous interior. In summer, the prevailing winds are northern and north-western, whilst in summer eastern and south-western winds prevail.

Geology, seismic and volcanic activity and hydrogeology

The Asacha project is located within a major NE trending structural corridor at the southern end of the Quaternary East-Kamchatkan Volcanic Belt where it intersects the southern end of the Oligocene-Pliocene Central-Kamchatkan Volcanic Belt. Based on K-Ar dating, the age of the Asacha deposit is 4.5 ± 1 million years which equates to the Pliocene age.

Asacha lies within an eroded volcanic edifice 28 kilometres in diameter in which sub- volcanic domes, sometimes in the form of laccoliths, have been emplaced. The entire area has been overlain by locally consolidated post-mineral pumice tuffs and soil horizons up to 10 metres thick. The final stage of deposition includes laying down of unconsolidated glacial sediments 18 metres to 120 metres thick in low-lying areas around the Vichaevskaya and Semeyniy Rivers.

More than 90% of all earthquakes occur within the Pacific Seismofocal Zone, including the strongest ever measured (M=8.51). Their epicentres are located 50 km to 70 km off the Eastern Kamchatka coast. In the Asacha area the return period of the strongest earthquakes (M>8) is about 140 years, but the frequency of much smaller earthquakes is high. Seismic activity in the area of the Asachinsky volcano coupled with contemporary volcanic activity suggests the potential for intensive seismic processes in the area, although none of the mapped faults in the area show any signs of contemporary movement.

At Asacha, ashfalls from the volcanoes are the most likely volcanic event, although they would have limited impact. During eruptions, electrified ash clouds may disrupt communications, cause temporary darkness and provide light ashfalls. In turn these may have a sharp odour and induce intensive snow melting with associated runoff.

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The area has a complex geological structure with intensive manifestation of fracturing tectonics. Deep fracturing contributes to the creation of hydrothermal systems. The complexity of the geological structures leads to a wide variety of hydrogeological conditions with a high degree of discontinuity between aqueous horizons and complexes.

Surface water resources

The Asacha deposit is situated on the watershed between two catchments, the Asacha River catchment to the south and the Mutnaya River catchment to the north. Flow rates vary greatly on a seasonal basis; at times the watercourses may be almost dry with a baseflow confined within the gravel bed, at other times flow rates can be substantial.

The water quality in the Asacha catchment is generally very good. In contrast, the chemical composition of the Mutnaya River is very variable, the principal influence being in its upper reaches from the highly mineralized Vulkanny Stream, a tributary which drains from the caldera in the Mutnovsky Volcano where glacial waters mix with mineralised geothermal waters.

Many river systems provide important spawning grounds and/or nursery areas (for young fish before they migrate to sea) for a wide range of migratory salmonid fish species. Many of these rivers support fisheries, based principally on five species of Pacific salmon, which are exploited by local people. Although individual rivers are often small, they can support very large numbers of spawning fish, which together represent an important commercial resource.

The Asacha River system supports important spawning grounds and nursery areas and is classified as a 1st order fishery under the Russian system. The Mutnaya River system, however, supports lesser spawning and nursery areas (presumably as a consequence of the very poor water quality throughout much of its length associated with the drainage from the Mutnovsky Volcano).

Air quality

Given the remoteness of the location and the lack of any local anthropogenic sources of air pollution, baseline air quality is presumed to be very good. Nevertheless, significant temporary impacts upon air quality do arise from the consequences of volcanic activity.

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Soils and vegetation

Volcanic processes play a significant role in formation of the soil profile in Kamchatka. The Asacha Deposit is located in an area of intensive ash fall and, over time, has developed principally volcanic laminated ash soils. The chemical and physical properties of soils are largely determined by the properties and composition of soil-forming ash sediments.

The area in the immediate vicinity of the Asacha Deposit is largely covered with forests (up to 90% of the area), comprising a mixture of birch forests along river valleys up to 400 metres above sea level, alder elfin forests on the slopes up to 1,000 metres above sea level and other vegetation types, including various types of tundra at higher altitudes (bushy, blueberry, tussock, blueberry-lichen tundra), heathland and grassland vegetation (principally gramineous-herb, subalpine-herb, subalpine geranic-false-avens meadows), and some marshland.

The natural vegetation remains mostly undisturbed except where historic exploration activity has resulted in the localised clearance of vegetation.

Wildlife and nature conservation

A number of rare and endangered species are known to occur at other locations in Southern Kamchatka. No detailed field survey has been undertaken at Asacha but it is known that many of the Red Data Book species are associated with either the coastal zone or the more remote high altitude interior. Nevertheless, the possibility that some of these species are present on the site area cannot be excluded.

In addition to the rare and endangered species, the remote and undeveloped Kamchatka peninsula supports sizeable populations of many species that have a commercial importance, associated traditionally with hunting or, more recently, with attempts to develop ecotourism.

In recent years a number of protected areas have been established in Kamchatka to support the protection of both ecologically and commercially important species. Two large protected areas have been established adjacent to the Asacha deposit. One of these, the South Kamchatka Nature Park, is part of the Kamchatka Volcanoes World Heritage Site, designated by UNESCO in 1996. Both protected areas are close to the Asacha deposit but the boundaries lie outside the project site itself (when the reserves were

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created in the 1990s the commercial importance of the Asacha gold deposit was recognised and this area was deliberately excluded from the reserve boundaries).

Indigenous peoples and cultural heritage

South-eastern Kamchatka has a number of small aboriginal communities. These are confined to the area between Yelizovo and Petropavlovsk-Kamchatski more than 100 km north of Asacha and are usually associated with the more productive lowland soils and coastal areas. There are no records of any aboriginal communities living closer to Asacha. The area around Asacha, however, does form part of the traditional hunting grounds of some of these communities.

3. PROJECT DESCRIPTION

Site description

In the absence of any existing economic activity and habitation in the vicinity of Asacha, all facilities and associated infrastructure, including road access, water and power supply will be constructed.

The general layout of the site makes provision for:

• An access road entering the site from the north and connecting with the all- weather road that links the geothermal power station at Mutnovskaya with the village of Termalniy.

• A mine site, with essential facilities, adjacent to the entrance to the underground mine.

• A plant site and associated tailings disposal facility, the location of which has been selected to ensure that all processing takes place out of the sensitive Asacha River catchment.

• Garage, maintenance and storage facilities adjacent to the west side of the plant compound.

• Accommodation facilities for 240 mine personnel and up to 16 visitors, comprising insulated living, dining and recreation areas, medical clinic and a

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camp administration building, located mid-way between the mine site and the processing plant.

No permanent residential settlement will be constructed; all accommodation will be offered in accordance with the requirements of the shift system. Employees will be required to leave site between working periods.

Mining and processing

A total of 1,133,000 tonnes of ore will be mined from underground workings over a six year period at a production rate peaking at 200,000 tonnes per annum. A total void of 440,000 m3 will require backfilling; allowing for backfill dilution a total backfill requirement of 484,000 m3 has been predicted. This will be provided by development rock supplemented with locally won material.

The principal mineral components of the Asacha ore are quartz and adularia, which together make up 90 – 95% of the ore grade material. Lesser amounts of montmorillonite and other clays make up around 1 – 7% and gold- and silver- bearing minerals around 1%. The detailed chemical composition of the ore reveals generally low levels of trace metals and other environmentally significant components.

Significantly, total sulphur concentrations (and consequently sulphide-sulphur) tend to be very low, averaging less than 0.3%. An assessment of the potential for acid rock drainage from ore (and hence from tailings) was commissioned by TSG in 2004 (Scapa Mining Services Ltd, 2004). This study concluded that the conditions for significant acid generation did not exist in ore grade material or tailings.

Careful consideration was given to the selection of the most appropriate location for the processing plant. In principle, the plant and associated tailings disposal facility should be as close as possible to the mine (to minimise total site area and transport distances). A suitable location was identified but, was found to be within the catchment of the Asacha River, a river system supporting important salmonid spawning grounds. In order to reduce the potential adverse impacts associated with wastewater discharges and the risk of accidental discharges, an alternative site, some 2 km from the mine portal, was selected, located in an adjacent catchment. This catchment, the Mutnaya River system, is characterised by naturally occurring poor water quality (as a consequence of drainage from the Mutnovsky volcano) and supports only very limited spawning grounds.

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Tailings from the carbon-in-leach process are thickened to recover water, which is re- used in the milling process, prior to treatment to remove residual cyanides and trace metals and eventual disposal. The INCO process has been selected as the preferred option for treatment. The process variables (retention time, reagent additions etc.) can be varied to achieve the desired treated effluent quality. At Asacha, detoxification will be undertaken to ensure that total cyanide concentrations in the effluent discharged to the tailings facility do not exceed 1 mg/l.

Detoxified tailings from the process plant are pumped to the tailings disposal facility via a steel pipeline. The facility has been designed according to Russian norms by VNIPI and audited for compliance to international practice by ECMP in South Africa.

The facility is a pouring/hillside design impoundment enclosed on three sides by an earth bund constructed from material recovered from within the dam footprint. The facility, which will be built in two stages (in 2005 and 2007), has a total void capacity of 1,380,000 m3. The dam has a maximum height of 15 metres with a crest width of 8.0 metres.

The base of the facility will be lined with a 1.0 mm high density polyethylene (HDPE) liner to prevent uncontrolled seepage of tailings waters into groundwater.

A cut-off drain will be constructed around the tailings facility to collect run-off from the surrounding land. This clean water will be channelled directly to the Vichaevskaya River.

Other wastes generated on site will include:

• Waste oils, which will be sent off-site for recycling or burnt on site.

• Spent reagent containers, which will either be returned for re-use or disposed of on-site.

• Domestic and kitchen wastes, which will be disposed of on-site.

• General office wastes, which will be disposed of on-site.

• Sludge from the sewage treatment plant, which will be disposed of on-site.

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Access, power and water supply

The rough access track currently connecting the site with the existing all-weather road to Termalniy will be upgraded to an all-weather road to cater for increased traffic.

The installation of an oil-fired generating power plant on site is the preferred method of power generation.

Water for the mine, process plant and potable supply will be obtained from a small well- field located 2 km from the process plant.

4. IMPACT ASSESSMENT AND MITIGATION MEASURES

Summary of predicted impacts

The scoping and the public and statutory consultation process identified a number of potential negative impacts, including:

• Potential impacts on surface water quality and fisheries

• Potential impacts on wildlife and nature conservation

• Potential impacts associated with increased road traffic

• Potential impacts on tourism and recreation (principally hunting)

• Potential impacts on indigenous communities

Consultation also identified the potential positive impact on the local economy resulting from the payment of taxes to the local treasury and the creation of employment opportunities in an economically under-developed region with high levels of unemployment (and under-employment).

The potential negative impacts have been assessed and appropriate mitigation measures developed. All identified impacts are amenable to mitigation using industry standard management procedures and good environmental practice.

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5. HEALTH, SAFETY AND ENVIRONMENTAL MANAGEMENT

Environmental, health and safety and socio-economic considerations are regarded by TSG to be an integral part of the effective development of their assets in Russia. TSG considers that the implementation of an appropriate health, safety and environmental (HSE) management system is essential for ensuring that Asacha operates in a way consistent with both Russian regulations and international expectations.

The environmental, health and safety management system will need to address both Russian requirements and international practice.

International practice is based around a practical “hands-on” approach which includes extensive ongoing site assessment, monitoring and management; Russian requirements are based more around a detailed reporting system in which the assessment, monitoring and development of management practices is provided by regulatory authorities and state institutes. The HSE management system at Asacha will have to incorporate both these of approaches.

The HSE management system will be based upon the key components of international standards for health and safety and environmental management (including OHSAS 18001and ISO 14001). Accordingly, the system will include:

• Health & safety and environmental policies that are endorsed by senior management and a commitment made with respect to operating policy and resources that ensures their implementation.

• A commitment to continuous improvements in performance in response to developments in national and international expectations.

• A positive engagement with all employees and communities within south- eastern Kamchatka to explain the objectives of the system.

• Ongoing training to increase an awareness of environmental and health and safety issues amongst all employees and contractors. (This is particularly important for health and safety issues given the generally adverse safety culture that exists within much of Russian society).

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6. CONCEPTUAL CLOSURE AND REHABILITATION PLAN

Closure planning develops throughout the project period, with the conceptual closure plan being developed alongside the Feasibility Study and progressively developed and refined prior to implementation. Under Russian regulations the final closure plan must be approved by the regulatory authorities prior to its implementation.

The primary objectives of mine closure and rehabilitation will be:

• To allow a productive and sustainable after-use of the site that is acceptable to the mine owners and the regulatory agencies.

• To protect public health and safety.

• To minimise or eliminate environmental damage;

• To conserve valuable attributes;

• To minimise adverse socio-economic impacts.

At Asacha, the only feasible after-use is to return the site to a mixture of forestry and grassland consistent with its original vegetation cover. Most of the site, with the exception of the tailings facility, will be amenable to standard revegetation procedures for the re-establishment of forestry. A separate closure strategy will be developed for the tailings facility.

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1. INTRODUCTION

1.1 Background

Trans-Siberian Gold plc (TSG) is a UK company established with the objective of acquiring and developing gold deposits in Russia. TSG currently owns 90.05% of the Russian company ZAO Trevozhnoye Zaryevo (TZ), which has held mining and exploration licences covering the Asacha deposit in Kamchatka since 1994.

Asacha is a high grade epithermal gold deposit with a mineral resource currently defined as 909,000 tonnes grading 22.2 g/t Au. The deposit was discovered in the 1970s and extensive exploration work was commissioned by the Russian state-controlled institutions between 1980 and 1990. During the 1990s, the Canadian company TVX Gold Inc, which at that time owned 50% of TZ, commissioned additional drilling and completed a full feasibility study. Between 2000, when TSG acquired a controlling interest in TZ, and 2004, TSG commissioned additional technical and economic studies culminating in the production, by the South African company MDM Ltd, of a full Bankable Feasibility Study in March 2004.

1.2 Location

The Kamchatka peninsula covers an area of some 470,000 km2 in Russia’s Far East (RFE) between the Sea of Okhotsk to the west and the Bering Strait to the east (see Figure 1.1). The Asacha deposit is located within the Yelizovo administrative district in the south-eastern part of Kamchatka, at approximate latitude 52o16’ longitude 157o20’, some 190 km due south-west of the regional capital of Petropavlovsk-Kamchatski (see Figure 1.2).

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Figure 1.1

Geographical Location of Kamchatka

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Figure 1.2

South-eastern Kamchatka

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The nearest settlement to Asacha is the village of Termalniy, some 115 km to the north. Access to the site currently is by an all-weather road to kilometre 51 on the road linking Termalniy with the Mutnovskaya Power Station and by rough track from this point to the site. Termalniy is linked by asphalt road to Petropavlovsk-Kamchatski. There are no direct road or rail connections out of Kamchatka; all transport is via sea or air through Petropavlovsk-Kamchatski.

Kamchatka is a sparsely populated under-developed region. This arises in part from its geographical location and isolation and in part from its significant military importance between 1950s and 1990s; Kamchatka was “a closed region” to both foreigners and Russians until the 1990s.

1.3 Permitting and other regulatory requirements in Russia

Environmental protection measures are now fully enshrined within the Russian regulatory system. A series of environmental regulations were introduced in the 1990s that broadly mirrored similar regulations in force within the European Union. These regulations have subsequently been amended and codified but the essential principles remain unchanged. Most recently, for example, The Federal Law on Environmental Protection (no. 7-FZ of January 2002) requires that the environmental impact from all development and construction projects be assessed and appropriate mitigation measures taken.

A number of documents covering the regulation of the OVOS process and providing guidance to developers and federal and regional authorities were adopted by the then Ministry of Environmental Protection and Natural Resources in the 1990s. Essentially, the OVOS procedure is broadly compatible with Environmental (Impact) Assessment (EIA or EA) process applied internationally and incorporates: a description of the development, a characterisation of the existing environment, impact predictions, an

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assessment of the significance of impacts and details of proposed mitigation measures. Statutory and public consultations are expected throughout the preparation of the OVOS.

The MDM Bankable Feasibility Study is based largely on a feasibility study commissioned by TSG in 2002 from the Russian design institute VNIPIPROMTECHNOLOGY (VNIPI). The VNIPI feasibility study, which included the completion of an OVOS report, was prepared in accordance with Russian norms and is being used to support the application for specific project approvals from a range of federal and regional authorities. The number of authorities from which approval is required varies according to the nature and location of the project. For the Asacha project, at least 13 separate approvals that have a significant environmental or health and safety component are required (see Table 1.1). The granting of these approvals may require modifications or additions to the OVOS (or other parts of the VNIPI feasibility study). Additional approvals are also required for other parts of the feasibility study but these have no implications for the OVOS itself.

Table 1.1 Project Approvals Required for Asacha

Federal Department of Ministry of Natural Resources* Federal Federal Office of Mining & Industry Inspectorate Gosgortechnadzor)* Authorities Federal Office of Construction Inspectorate (Gosstroy)* Regional Department of Ministry of Natural Resources* Regional Department of Labour and Social Development* Regional Office of Mining & Industry Inspectorate (Gosgortechnadzor)* Kamchatka Regional Administration Yelizovo Area Administration Regional Regional Office of Sanitary and Epidemiological Inspectorate Authorities (Gossanepidemnadzor) * Regional Office of Fire & Safety Inspectorate (Pozhnadzor) Regional Fisheries Office Regional Hunting Office* Regional Office of Emergency Planning*

Note : * Approval obtained as of March 2004.

Once all the necessary approvals have been obtained, the final OVOS document is submitted to the “State Environmental Expertise” (SEE) for review by a panel of experts

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under the supervision of a chairman appointed by the Ministry of Natural Resources and comprising relevant regional and national “experts”. The OVOS may also be subject to a Public Environmental Review by interested parties, public organisations and local citizens. Whilst the Expert Review is a fundamental part of the permitting process, the Public Environmental Review is dependent upon whether or not there is a demand from local people for such a review and whether or not the regional authorities endorse this demand. Acceptance of the OVOS by the SEE (and, if required, by the Public Review) enables the developer to undertake detailed engineering design, initiate procurement and begin construction.

As of March 2004, VNIPI has completed a full draft version of the Russian feasibility study, including the OVOS; TSG and VNIPI are in the process of acquiring the necessary project approvals and completing the modifications to the OVOS requested by the authorities. To date, of the thirteen approvals required which include environmental or health and safety considerations, nine have been obtained (see Table 1.1). TSG anticipates that all approvals will have been obtained by June 2004 at the latest, after which the final OVOS will be presented for Expert Review. The duration of the Expert Review is uncertain but, under Russian regulations, must be completed within a maximum of 6 months following submission of the final OVOS. To date, TSG has received no indication that a Public Environmental Review will be requested.

Construction work on site is expected, therefore, to start no earlier than the second half of 2004. However, in accordance with Russian requirements, the improvement to the access road (which is a fundamental pre-requisite for the commencement of major site works) has been the subject of a separate permitting application. The permitting of the road improvements is a much simpler process dependent principally on the approval of a relatively small number of local authorities. The approval of these authorities for the improvements to the road access was obtained by the beginning of May 2004 and road improvement is expected, therefore, to start early in the summer of 2004.

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“polluter pays” principle. The fees are calculated according to regional norms, which must be consistent with national guidelines (although these guidelines do allow for significant regional variation in response to local conditions and policies).

1.4 Environmental Assessment methodology

The OVOS prepared by VNIPI was undertaken in full compliance with Russian regulations as defined in SNiP (Construction Norms and Rules) 11.01-95 and the associated environmental protection guidelines, most recently those produced by the state company Centreinvestproject in 2000. As such, the OVOS has been prepared in accordance with the methodology required by the permitting process in Russia.

TSG has indicated an intention to secure project finance for at least part of the estimated US$54 million capital cost of developing the Asacha deposit from international financial institutions. These institutions will likely require the Bankable Feasibility Study to be supported by an EIA prepared in accordance with internationally recognised methodologies. Indeed, a group of 20 of the leading banks have committed themselves to the “Equator Principles”, which require, for all projects with a capital cost exceeding US$50 million, completion of an EIA consistent with the methodology adopted for Environmental Assessment by the World Bank Group.

• The approach adopted by the World Bank requires consideration of up to 6 subject areas (depending on the nature of the project) not normally addressed directly within the OVOS procedures (see Table 1.2) (although some of these subject areas, such as Health & Safety and Fire Prevention are addressed elsewhere within the Russian project development and permitting process).

• The methodology for the prediction of environmental impacts (and for the prediction of the effectiveness of proposed mitigation measures) can differ considerably, with Russian methodology being heavily reliant on a series of theoretical calculations based on accepted norms and mathematical models produced by state research organisations and formally adopted by the regulatory authorities.

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Table 1.2 Comparison of OVOS and World Bank Environmental Assessment Requirements World Subject1 OVOS Bank Baseline environmental and social conditions Y Y Requirements under host country regulations, international treaties N2 Y Sustainable development and use of renewable resources. N Y Protection of human health, cultural properties and biodiversity Y Y Use of dangerous substances Y Y Major hazards Y Y Occupational health and safety N3 Y Fire prevention N3 Y Socio-economic impacts Y Y Land-use Y Y Involuntary resettlement Y Y Impacts on indigenous peoples Y Y Cumulative impacts of existing, proposed and anticipated projects N Y Public consultation and participation Y Y Consideration of feasible alternatives Y Y Efficient production, delivery and use of energy N Y Pollution prevention and waste minimisation Y Y Preparation of Environmental Management Plan Y Y Closure and rehabilitation Y Y Calculation of compensation arising from environmental impacts Y N

Source documents: compiled from www.equator-principles.com and Environmental Assessment of Mining Projects, The World Bank 1998.

Notes : 1 Not all subject areas are appropriate to every project. 2 Implied but not explicitly stated. 3 Considered elsewhere within the feasibility study but not within the OVOS itself.

• The format and style of the presentation of environmental information can also differ considerably: making reports written in one style appear cumbersome and unclear to those used to the other approach.

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This is not to say that one approach is necessarily superior to the other – but that it is difficult, if not impossible, to produce a single OVOS/EIA report that will satisfy both audiences. Consequently, in 2004, TSG commissioned MDS Mining & Environmental Services Ltd (MDS) to produce an EIA compatible with international expectations to support the MDM Bankable Feasibility Study.

This EIA has been prepared in parallel with the OVOS and, whereas the OVOS is intended to fulfil the requirements of permitting, the EIA is intended to fulfil the requirements of project financing. The EIA draws heavily on much of the OVOS report (and other parts of the VNIPI feasibility study), particularly for its characterisation of the existing environment (Section 2), project definition (Section 3), record of public and statutory consultation, identification of key impacts and identification of appropriate mitigation measures (Section 4). Accordingly, the substance of this EIA is entirely consistent with the OVOS report. The information is, however, presented in a somewhat different manner within the EIA and the scope of the document has been modified, consistent with the expectations of the international financial institutions and their technical advisors, to include environmental and health and safety management (Section 5) and a conceptual closure and rehabilitation plan (Section 6).

1.5 Environmental standards

Since the 1970s Russia has developed a very extensive system of environmental standards covering aspects such as water quality, air quality and the content of solid wastes. By the 1990s, there were, for example, over 2,000 specified “maximum acceptable concentrations” (MACs) for the protection of air quality in the workplace alone. Although attempts have been made to rationalise some of these standards, environmental protection in Russia continues to be based around the application of over 5,000 specified MACs covering atmosphere (both for workplace environment and for ambient air quality and including average daily and maximum concentrations) and water quality (for drinking water, recreational usage and fisheries protection). Additional MACs apply to soils, sediments, vegetation and other environmental components.

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The international financial institutions usually make reference to the environmental standards contained within the World Bank Pollution Prevention and Abatement Handbook and other guidelines produced by the World Bank Group, including the Environment, Health & Safety Guidelines for Mining and Milling. Indeed, those financial institutions that have subscribed to the Equator Principles are committed to evaluating projects with reference to these World Bank standards.

Precise comparisons between Russian MACs and World Bank standards are not always straightforward. Thus, for example, for the water environment, The World Bank Environment, Health and Safety Guidelines tend to set guidelines for the effluent discharge itself rather than MACs for the receiving environment (which allows for dilution of the effluent in the watercourse); whilst, for air quality, there are subtle but significant differences between the chemical form of the contaminant (and the method of measurement) to which the broadly comparable standards apply.

Where direct comparison is possible, Russian MACs are usually at least as stringent as World Bank guidelines. Where direct comparison is difficult, as in the case of some water quality standards, given that the Russian MACs for receiving waters are invariably at least an order of magnitude more stringent than the World Bank guidelines for effluent discharges, compliance with Russian MACs for the protection of fisheries, for example, usually requires meeting the World Bank guidelines for effluent discharges (see Table 1.3).

Environmental degradation in Russia, where it has occurred, has largely been a consequence not of poor regulatory standards but of inadequate enforcement and the permitting of authorised exceedence of MACs within the system of operational controls, albeit at the cost of increased fee payments to the local authority. The approach that TSG will adopt to ensure full compliance with both Russian environmental standards and accepted international practice is discussed in Section 5.

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Table 1.3 Comparison of Some Key Russian and World Bank Water Quality Standards Russian MAC World Bank guidelines Parameter (for protection of fisheries) (for effluent discharges) Oil products 0.05 20 Total suspended solids 10.25 50 Cadmium 0.005 0.1 Copper 0.001 0.3 Iron 0.1 2.0 Lead 0.006 0.6 Zinc 0.01 1.0 Total cyanide 0.05 1.0

All values presented as mg/l.

1.6 Health and safety management

The responsibility for workplace health and safety in Russia is the responsibility of several different regulatory authorities, including:

• The State Standards and Certification Committee (Gosstandart), which originally specified mandatory production standards and certified compliance (although their importance was greatly reduced in 2003 when the need to adhere to state standards for production in most industries was removed).

• The Federal Sanitary and Epidemiological Inspectorate (Gossanepidemnadzor), which sets standards for the regulation of biological (viral, bacteriological), chemical (air and soil pollutants), physical (noise, vibration, ultrasound, infrasound, heat), social (food preparation for public purposes, drinking water, workplace conditions) and other factors which may impact living conditions.

• The Federal Mining and Industry Inspectorate (Gosgortechnadzor), which sets standards and implements normative regulations to ensure industrial safety in the fields of mining, oil and gas exploration and production and other hazardous

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occupations; equipment used in these industries must be approved by Gosgortechnadzor.

As part of the project permitting system for mining operations in Russia, the feasibility study is submitted for approval to Gosgortechnadzor. All technical equipment and operating practices are subject to scrutiny for compliance with Russian norms and labour recruitment and training is required to conform to a series of regulatory requirements that includes issues relating to industrial safety.

The management of health and safety during operations is the direct responsibility of the operating company. A series of regulatory requirements and guidelines are used to establish a health and safety management system that is not unlike its western European counterparts, such as the international document OHSAS 18001 and the British Standard 8800 (on which OHSAS 18001 is based), and includes provision for aspects such as: management structures and responsibilities, documentation, planning procedures, operating practices, training, enforcement, incident reporting and investigation and auditing.

It is widely acknowledged internationally that the management of health and safety issues is an integral part of other aspects of management philosophy. Russian management structures and practices often lack the ease of communication, clarity and simplicity apparent elsewhere and this often has a major implication for health and safety. Health and safety performance is also dependent to some extent on the existence of an appropriate “safety culture”, within which individuals place a high value on personal safety and well-being. This safety culture is not well developed in Russian society, which also has a major implication for occupational health and safety.

As with environmental performance, the poor health and safety record evident in much of Russian industry has largely been a consequence not of inadequate regulatory provisions but of inadequate enforcement, inappropriate management practices and an adverse safety culture. The approach that TSG will adopt to ensure full compliance with both Russian health and safety management standards and accepted international practice, and the ways in which the adverse safety culture will be addressed, are discussed in Section 5.

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1.7 Consideration of alternatives

The consideration of alternatives to the proposed development is an integral part of both the OVOS and EIA procedures. As with all mining projects, however, the project location is pre-determined by the presence of the orebody and the consideration of alternative locations (or routes) that characterises the EIAs for many other types of development is greatly constrained (although consideration of the precise location of individual facilities within a localised area and the consideration of alternative design criteria and operating practices is highly relevant). Where appropriate these alternatives are discussed in Section 3.

1.8 Scoping, public and statutory consultations and the identification of key issues

The scoping process, which identifies relevant issues and supports the definition of the required environmental and social baseline studies, is a key component of both the OVOS and EIA procedures. A comprehensive scoping exercise was undertaken by VNIPI in 2002, which included reference to earlier studies commissioned in the 1990s by TVX, site reconnaissance and meetings with statutory authorities.

A formal process of public and statutory consultation is a legal requirement in Russia (Federal Law On Ecological Expert Evaluation, No. 174-FZ 1995, revised by No. 66-FZ 1998). Details of the nature and extent of the consultation process are given in Regulation on the undertaking of Environmental Impact Assessment, 1995 and subsequent revisions. In principle, the Russian procedures in this respect are consistent with good international practice. Information concerning the project is released into the public domain, potential interested parties are identified and attend one or more public meetings and the findings of the process are incorporated in the final OVOS report. Finally, interested parties have the right to participate in a final Public Expert Evaluation if they so request.

Initial public consultations incorporating a formal public hearing were held in 1997 as part of the work commissioned by TVX. The records of these consultations have been useful to TSG in identifying key issues to be addressed as part of the OVOS process. However, given the lapse of time between these consultations and the completion of the current feasibility study and some changes in the detail of the proposed development (and the requirements of the Russian permitting system), TSG repeated the entire consultation process in 2003.

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The consultation process consisted of:

• The preparation by TSG and release into the public domain of information on the project; this information was released mainly through the local press (see Table 1.4), public library and direct to interested parties and statutory consultees.

Table 1.4 Record of Project Information Released into the Public Domain

Project information • Full technical report available in the public library in Yelizovo and released to statutory consultees. Announcement of public • Articles in the regional newspaper Yelizovsky vestnik hearing on 12.09.03, 19.09.03, 26.09.03, 10.10.03.

• Formal consultations over an extended time period with statutory consultees and local authorities (see Table 1.5).

Table 1.5 List of Key Statutory Consultees with Environmental and/or Health and Safety Interests Regional Fisheries Authority Regional Committee on Land Resources Regional Department of Natural Resources Association of Native Small People of Yelizovo Region Federal Ministry for Emergency Planning Regional Fisheries Research Institute Regional Sanitary Inspectorate Federal Mine Technical Inspectorate

• A public meeting, held on 14th October 2003 in the district administrative centre of Yelizovo, located some 150 km north of Asacha. The meeting, which was advertised one month in advance, attracted some 90 participants (see Table

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1.6) and was chaired by the Head of the Yelizovo Municipal Department for Resources, Environmental Management and Tourism. Note: Yelizovo is the nearest settlement of any size, the local base for most district authorities, NGOs and public organisations and the location of choice for most participants in the process; there was no practical alternative location closer to Asacha.

• A report summarising the opinions expressed, and the questions asked, at the public meeting, which covered environmental, socio-economic, cultural and other issues (see Tables 1.7a – 1.7d) was produced by VNIPI/TSG and released into the public domain, through the local press and public library (see Table 1.8).

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Table 1.6 Attendance at the 2003 Public Hearing Local, Regional and National Authorities, including: Representative of the Administration of the President of Russian Federation Representative of the Office of Nature Resources, Kamchatka Representative of Regional Administration, Kamchatka Principal Specialist on Hunting, Regional Hunting Office Head of Local Administration, Yelizovo Section leader, Local Administration, Yelizovo Cultural organisations, including: Head of Yelizovo Association of “Native Small People of the North” Representative of the Yelizovo “regional tribal community corporation” Representative of the tribal community “Koyana” Representative of the tribal community “Yayar” Representative of the tribal community “Pimchuk” Representative of the tribal community “Tiriya” Representative of the “Council of pedagogical labour veterans” Representative of the “public native people organisation Luch” Technical and academic institutions, including: Director of Regional Geological Survey Representative of the Kamchatka Geodesic Organisation Representative Institute of Vulcanology Environmental organisations: Representative of environmental organisation “Rodnik” Representative of the Pacific Ocean Centre on Environmental Protection Representative of Kamchatka “Friends of World Wide Fund for Nature” Director of South Kamchatka nature reserve Director of environmental organisation “Eco-geo-lit” Media, including: Journalists and local radio Members of the general public, including: Students in tertiary education Engineers and geologists Members of the armed forces Teachers and university lecturers Pensioners

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Table 1.7a Summary of Environmental Issues Raised at 2003 Public Hearing Issue Response i) Tailings facility Is there a risk of contaminated seepage from The tailings facility will be fully lined. the tailings facility? Is the thickness of the proposed liner for the Yes, the tailings is treated prior to discharge tailings facility sufficient? into the facility ii) Seismicity Do the design engineers have experience of Yes, the design engineers have operated in development in seismically active regions? areas with a similar seismic activity. iii) Payments What will be the payments for environmental Payments will be made in accordance with damage made in accordance with Russian legal requirements norms? iv) Air pollution Will traffic for the project increase air The effect on air pollution in the city will be pollution in Petropavlovsk-Kamchatski? insignificant v) Water treatment Water pumped from the mine will be treated Yes, excess process water and domestic only to remove oils and SS – is this wastewater are treated separately sufficient? How has the method for treatment of Comparison has been made of many options cyanide-containing effluents been decided? Will the use of natural systems for effluent Natural systems are not the only systems that treatment be effective? will be used but they are proven technology vi) Fisheries Is any rehabilitation planned for any damage Yes, a rehabilitation programme lasting up to to fisheries, and how long will this take? 10 years is planned vii) Groundwater Will the project impact upon groundwater No uncontrolled seepage to groundwater is resources? allowed. viii) Closure Will there be any revegetation of the site Yes, a full closure and biological after mining has ceased? rehabilitation programme is planned.

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Table 1.7b Summary of Socio-economic Issues Raised at 2003 Public Hearing Issue Response ix) Tourism Will the project impact upon the movement of No tourists on roads in the vicinity of the site? Will the project conflict with attempts to improve the tourist industry of the region? An assessment will be made of the x) Roads impact on tourism Who will pay for the improvements proposed to the road system? xi) Power The company will pay for the Why is electricity being generated on site rather improvement than taken from the regional grid? xii) Economics The distance to the nearest point on the Will the project improve the socio-economic grid is 40km – a connection is not cost- situation in the region? effective xiii) Hunting and poaching About 95% of the 400 jobs created by the What measures will be in place to prevent an project will be for local people; the increase in poaching of game in the area? project will also pay local taxes. Has agreement been reached with the hunting Employment contracts will prohibit authorities and hunters? involvement in hunting

Yes

Table 1.7c Summary of Cultural Issues Raised at 2003 Public Hearing Issue Response xiv) Aboriginal peoples How will the rights of native aboriginal peoples Native peoples do not inhabit the area in be protected? the immediate vicinity of the site Will any sites of cultural importance be No degraded by the project?

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Table 1.7d Summary of General Issues Raised at 2003 Public Hearing Issue Response xv) Operator experience What is the experience and reliability of Trans- TSG operates in three regions of Russia. Siberian Gold? xvi) Alternatives Have any alternative designs been considered? Alternative sites for the plant and process xvii) Insurance options have been considered Will the operator have insurance against environmental damage caused by accidents? There is no provision in Russian legislation for such insurance.

Table 1.8 Release of Report on Public Hearing and Additional Information

Project information • Full report available in the public library in Yelizovo and released to statutory consultees. Announcement of public hearing • Articles in the regional newspaper Yelizovsky vestnik directing attention to the report on 12.12.03, 23.01.04, 30.01.04. • Additional articles in Yelizovsky vestnik on 22.10.03 and 06.05.03. • Additional article in the newspaper Aboriginals of Kamchatka on 31.10.03.

i) Environmental issues

• The effect of the mine on groundwater and surface resources, particularly with respect to the need to protect important fisheries in the Asacha River catchment.

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• Waste disposal, particularly tailings management and the control of seepages, discharges and dust emissions from the tailings storage facility.

• The issues associated with construction and operation in a seismically active area.

• The effect of the mine on air pollution, particularly associated with emissions from the on-site power generation and traffic.

• The need to protect ecologically important areas and the rare and endangered species within them.

• The need to ensure rehabilitation of the site after decommissioning.

ii) Socio-economic issues

• The need for employment and economic development in an under-developed region.

• The effect of the mine on the development of tourism in the region.

• The effect of traffic to and from the mine on the local road system and the communities adjacent to it.

• The effect of the mine (and the associated improvements to the road system) on poaching and interference with legitimate hunting activity in the region.

iii) Cultural issues

• The need to protect the rights of native aboriginal people.

• The need to preserve sites of cultural importance.

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2. BASELINE ENVIRONMENTAL AND SOCIO-ECONOMIC CONDITIONS

2.1 Context

Kamchatka is a remote under-developed peninsula. There is no direct road or rail transport link with the rest of Russia. The population density outside of the regional capital of Petropavlovsk-Kamchatski (population 200,000) is low; the second largest settlement, Yelizovo has a population of only 50,000. Transport infrastructure, apart from those connecting the major settlements, is poorly developed, consisting principally of a few un-surfaced all weather roads and numbers of rough tracks.

The region is one of the poorest in Russia and unemployment is high. The population of the region is declining, principally due to outward migration to parts of Russia where employment opportunities are greater and the decline of military activity. Life expectancy is relatively low, even by Russian standards, and public health indicators are deteriorating.

The Asacha deposit is located in a forested mountainous area, more than 100km from the nearest village settlement and some 190km south-west of Petropavlovsk-Kamchatski. The natural vegetation remains mostly undisturbed except where historic exploration activity has resulted in the localised clearance of vegetation. Exploration activity at Asacha dates from the 1970s and has been undertaken sporadically ever since. The visible legacy of exploration includes:

• Drilling sites (some 170 boreholes have been drilled in total) totalling some 69,000 m2 in surface area.

• Shallow exploration trenches covering a total of some 550,000 m2 in surface area.

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• An adit excavated into the orebody, which yielded some 17,000 m3 of waste rock deposited close to the adit entrance. • A number of shallow surface pits totalling some 1,500 m2 in surface area.

• A clearing of some 100,000 m2 used for a temporary camp for accommodation and storage of supplies.

There was little attempt to manage the environmental impacts associated with the early exploration activity and no rehabilitation work was undertaken (which was consistent with the normal practices of the time). As a consequence, some localised environmental impacts can be seen. More recent exploration commissioned by TVX and TSG, however, has been undertaken in accordance with current good industry practice and any impacts associated with this work are insignificant.

2.2 Sources of information

The characterisation of the baseline environmental and socio-economic conditions is based upon a combination of extensive fieldwork, desk studies and literature searches undertaken in two phases:

• An initial phase of baseline data collection, commissioned by TVX, and completed in 1996 by the state research institute, the Kamchatka Environmental Centre (KEC) and the specialist fisheries institute, Kamchatka Fishing Industry and Oceanographic Research and Development Institute (KamchatNIRO).

• An updating and extension to the 1996 work, commissioned by TSG, and completed in 2003 by VNIPI, again with the assistance of KamchatNIRO.

Both the 1996 and 2003 studies included consideration of physiography, climate, air quality, geology and geomorphology, hydrology and hydrogeology, soils, vegetation and wildlife, natural hazards (volcanoes, seismicity etc.), landscape, demography and socio- economics. The findings of these two studies were documented separately, in five substantial volumes and appendices:

• Background Environmental Survey of the Asacha and Rodnikova Deposits, Volumes I and II. Kamchatka Environmental Centre, 1996.

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• Geo-Ecological Survey of the Asacha Mining Site and Access Road to the Asacha Mining and Processing Enterprise in the Kamchatka Region, Volumes I and II. VNIPI, 2003.

• Report on the study of current fish stocks of the watercourses in the area of the Asacha gold deposit. KamchatNIRO, 1996.

• Project to identify water protection zones for objects within the area of the Asacha deposit. VNIPI, 2003.

• Protection of fisheries in the course of the development of the Asacha deposit. KamchatNIRO, 2003.

These volumes form the basis of the environmental baseline sections of the OVOS report; much of the baseline information presented within this section of the EIA is based upon those sections of the OVOS report, with reference to the original five volumes and appendices where appropriate.

Additional studies were undertaken by international consultants on a number of specific technical issues, including:

• Preliminary Report on Geochemical Testwork on Rocks from Asacha, Kamchatka. SRK (UK), 1997.

• Asacha Gold/Silver Project. Hydrogeological Modelling to Predict Impacts of Mine Closure. SRK (UK), 1997.

• Environmental Review of Infrastructure Alternatives. Asachinskoye Gold/Silver Deposit Feasibility Study. Golder Associates, 1997.

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2.3 Climate and meteorology

South-eastern Kamchatka is characterised as temperate continental with strong maritime influences from the Pacific Ocean.

Kamchatka is located in the temperate monsoon zone and experiences cyclones.

i) Meteorological stations

Meteorological data is available from two hydrometric stations (HMSs) in southern Kamchatka:

• HMS Mys Poyorotniy, which is located 40km to the east of Asacha close to the Pacific coast at an elevation of 18 metres above sea level.

• HMS Nachiki, which is located 105km to the north of Asacha at an elevation of 326 metres above sea level.

Data from both stations have been used in the characterisation of the meteorological conditions Asacha. However, the data from HMS Mys Poyorotniy is considered more representative despite the greater distance from Asacha, given that its elevation is comparable to Asacha and given the much greater maritime influence prevailing at HMS Nachiki.

ii) Temperature

The average daily temperatures recorded at the two meteorological stations range from - 19oC in January to +13oC in July (see Table 2.1). The maximum recorded temperature at Nachiki is +32oC; the minimum recorded temperature is -53oC.

Table 2.1 Average Temperatures (oC) Station J F M A M J J A S O N D Year M. Poyorotniy -6 -6 -4 0 3 7 12 13 10 5 -1 -4 2 (coast) Nachiki -19 -18 -12 -5 2 8 12 12 8 1 -9 -17 0 (interior)

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The maximum predicted depth of soil freezing in winter, calculated according to Russian norms, ranges from 60cms (for loam soils) to 160cms (for rocky soils).

iii) Precipitation

The average annual precipitation at Nachiki is 1062mm (see Table 2.2). Precipitation is experienced in each month, usually falling as snow between November and March although snow storms can be experienced from October through to May. Average monthly precipitation is usually highest in the period October – December, although cyclones in August and September can bring torrential rainfall of 150 mm to 200 mm in one day. Torrential rains can cause local landslides and mudflows, although the risk in the immediate vicinity of Asacha is low.

Table 2.2 Precipitation (mm) Station J F M A M J J A S O N D Year Nachiki 90 69 91 69 50 39 74 80 90 144 135 124 1062 (interior)

The average depth of snow cover in winter exceeds 130cms, the maximum average depth experienced can exceed 250cms, although under blizzard conditions, which are not uncommon, there is high potential for drifting of snow and avalanches are common. The usual avalanche season lasts from November to June, with the greatest hazard in November/December and May/June. Approximately 70% of avalanches occur on the leeward western and north-western slopes of mountains. In the area of the Asacha deposit and in the Mutnaya River basin, 43 possible avalanche centres have been identified, five of which are adjacent to the proposed mine site although the site itself is rated as low risk. Possible avalanche sites along the access road are found at the confluence of the Gribnaya and Mutnaya Rivers and along the Vichaevskaya River valley, generally 0.5 km to 1 km south of the road.

The magnitude of extreme (1% probability) precipitation events, calculated according to Russian norms is:

• Maximum 24 hour precipitation … 180mm.

• Maximum 30 day precipitation … 440mm

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• Minimum 30 day precipitation … 44mm.

There is a 50% probability that total annual precipitation will exceed 2000mm and a 2% probability that it will exceed 2500mm.

Precipitation is much higher in coastal areas (more than twice that of the interior) with annual average precipitation exceeding 2500mm, peaking in August with an average of 160mm of rainfall.

iii) Humidity

Humidity is high throughout much of Kamchatka (except the central mountainous area) with relatively little seasonal variation, particularly close to the coast. At Nachiki and M Povorotniy humidity ranges between 60% (in winter) and 80% (in summer).

iv) Wind speed and direction

Wind speeds tend to be higher in coastal areas (see Table 2.3). Around 70 cyclones pass across or near to Kamchatka each year. Wind speeds exceeding 15m/s are usually experienced on between 13 (Nachiki) and 44 (M Povorotniy) days each year.

Table 2.3 Average Wind Speed (m/s) Station J F M A M J J A S O N D Year Nachiki 3 2 3 3 3 3 2 2 2 2 2 2 2.5 (interior) M Povorotniy 6 5 5 4 3 2 2 2 3 4 4 5 3.8 (coastal)

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The highest wind speeds likely to be experienced at Nachiki, calculated according to Russian norms are:

• Annual maximum … 27m/s

• Once in 5 years … 34m/s

• Once in 10 years … 37m/s

• Once in 20 years … 41m/s

v) Evapotranspiration

The average annual rate of evapotranspiration is relatively low, at around 200 – 250mm per year (see Table 2.4). The theoretical evaporation rate from an open water surface, calculated according to Russian norms, is 350mm +/- 50mm.

Table 2.4 Evapotranspiration (mm) Station J F M A M J J A S O N D Year Nachiki 4 4 4 10 40 48 40 29 19 8 5 4 216 (interior) M Povorotniy 7 7 10 20 46 44 40 30 25 14 12 8 263 (coastal)

2.4 Geology, seismic and volcanic activity and hydrogeology

i) Regional setting

The Kamchatka peninsula occurs as a Tertiary volcanic arc that extends north into the Chukotka province of mainland Russia and which continues to be active to the present time. The mountainous spine of Kamchatka may contain several NNE trending major arc parallel structures defined by linear valleys or the alignment of volcanoes. The arc- parallel structures are seen to be offset by a series of transverse fault systems that may be comparable to those that localise intrusion-related ore systems in many other Pacific Rim magmatic arcs (see Figure 2.1).

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Epithermal-type, porphyry-type copper-nickel, and placer gold and platinum deposits occur in Kamchatka. Asacha is an example of the epithermal type deposits. Most of the Kamchatka epithermal deposits can be classified as low-sulphidation quartz-adularia type consisting of narrow, high-grade, sheeted vein systems. In south Kamchatka, vein systems typically have strike lengths of up to several kilometres and widths of several metres. Vein systems tend to occur clustered in favourable host rocks and are especially associated with post-volcanic magmatic domes of Tertiary age.

Seven gold deposits on the peninsula each contain more than 0.5 million ounces of gold. Average gold grades for the deposits range from 10g/t (Mutnovka) to 43g/t (Aginskoye). Four deposits in Kamchatka, including Asacha, have been registered with the state gold resources inventory of the Russian Federation.

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Figure 2.1 Asacha Structural Setting

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ii) Local geology

The Asacha project is located within a major NE trending structural corridor at the southern end of the Quaternary East-Kamchatkan Volcanic Belt where it intersects the southern end of the Oligocene-Pliocene Central-Kamchatkan Volcanic Belt (see Figure 2.2). Based on K-Ar dating, the age of the Asacha deposit is 4.5 ± 1 million years which equates to the Pliocene age.

Asacha lies within an eroded volcanic edifice 28 kilometres in diameter in which sub- volcanic domes, sometimes in the form of laccoliths, have been emplaced. Altogether 40 veins and vein zones have been mapped within the Asacha ore field, many of which have been subjected to a limited amount of exploration. The entire area has been overlain by locally consolidated post-mineral pumice tuffs and soil horizons up to 10 metres thick. The final stage of deposition includes laying down of unconsolidated glacial sediments 18 metres to 120 metres thick in low-lying areas around the Vichaevskaya and Semeyniy Rivers.

The deposit is divided into the Main Zone, which contains most of the resources, and the Eastern Zone, approximately 1000m to the east, which to date has only been subjected to limited drilling. The Main Zone consists of five steeply dipping veins that occur as splays and hanging-wall splits hosted by the mineralised Asacha structure. The two principal veins average over 2m in width but can be up to 7m wide. The ratio of Au to Ag decreases from over 2:1 at the top of the system to 1:20 at the bottom, over a vertical interval of 200m-250m.

Within the vicinity of the Asacha deposit the dominant host rock lithologies are propylitized lithoclastic tuffs of andesitic-dacitic and andesitic composition that are intruded by sub-volcanic bodies of andesitic to dacitic composition. Deep-seated sub vertical re-activated basement faults localised these high-level intrusions and volcanics, together with associated mineralization. The andesite-dacite sub-volcanic intrusions or dome structures are the most important host rocks because they are interpreted as being more amenable to brittle deformation and contain wider and more continuous veins than the surrounding and overlying tuffs.

The two main volcanic units are distinguished as the Upper and Lower Volcanics. Upper Volcanics occur as coarse-grained dacite-andesite tuffaceous or fragmental units. These units are relatively permeable and incompetent rocks, and are not susceptible to brittle

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Figure 2.2 The Asacha license area

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deformation. The Lower Volcanics are described in the Russian literature as volcaniclastic tuffs developed as part of a pre-mineral volcanic edifice.

iii) Seismic activity

Scientific observations have been carried out since 1900, and the Kamchatka Regional Network, established in 1961, has catalogued over 50,000 events in the Kamchatka/Komandorskiye Islands.

In the Asacha area the return period of the strongest earthquakes (M>8) is about 140 years, but the frequency of much smaller earthquakes is high. Seismic activity in the area of the Asachinsky volcano coupled with contemporary volcanic activity suggests the potential for intensive seismic processes in the area, although none of the mapped faults in the area show any signs of contemporary movement.

In 2002 TSG commissioned Geoseis Ltd. to conduct seismic micro-zoning at the Asacha site. The operation was sanctioned by Gosstroi (the State Construction Agency) and aimed at specifying the expected magnitudes for particular construction sites. The seismic micro-zoning results identified that about 85 percent of the site area lies in the zone with a seismic intensity of 8, the balance located in zones with seismic intensity measuring 9. There are no 10 seismic intensity zones in the area.

iv) Volcanic activity

The main risk of volcanic activity is from the Gorely and Mutnovsky volcanoes some 28 km and 20 km from Asacha respectively. Studies conducted by the Volcanic Institute of the Far East Division of the Russian Academy of Science and the Academy of Science of the USSR on South Kamchatka between 1974 and 1991 indicate that:

• The Gorely volcano has long passed the phase of active growth and has entered a phase of gradual weakening of volcanic activity. Historically the eruption frequency has been one eruption per four to sixty years, the latest in 1980-1981

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and 1985-1986. There is no reason to assume any significant change in Gorely’s activity, although several eruptions may well occur within the next fifty to one hundred years. They will either be relatively frequent weak eruptions (five to ten year interval) like those in 1869 and 1985-1986, hazardous within a radius of 4 to 5 km or of a medium strength like those in 1828-1832, 1929-1931 and 1980-1981. Regardless of the type of eruption, they are not expected to represent any serious hazard to the Asacha deposit area other than the consequences related to ash falls (of 1 mm to 10 mm).

• The Mutnovsky Volcano passed the stage of active growth much earlier, at the end of the Pleistocene. During the past 9,000 to 10,000 years it has generally been characterised by moderate explosive activity with the prevalence of weak and medium strength eruptions, mostly phreatic and separated by intervals of hundreds (rarely tens) of years. The fact that the nature of Mutnovsky’s activity has not substantially changed throughout the Holocene era gives grounds to assume that it will remain the same for the next 50 to100 years. The assumed intensity of ashfalls and the extent of the hazard associated with the Mutnovsky Volcano will be similar to those associated the Gorely Volcano.

The principle volcanic threat in the area, however, is to the access road, which passes close to the Gorely Volcano. In terms of volcanic threat, this access road may be divided into three sections:

• The safest section in terms of volcanic activity is the section along the valley of the Paratunka River, which it is relatively far from all active or potentially active hazardous volcanoes.

• At the section of road from the Paratunka River valley to the ignimbrite plateau and the section of road on the plateau itself, the volcanic risk is restricted to ashfall. The amount of discharge is predicted to be in the order of 10 to 100 g/m2 of finely divided volcanic ash. An eruption may cause the passage of an

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electrified ash cloud that would result in electrical radio interference, temporary darkness, sharp sulphuric odour and discomfort to people from discharged tephra. The accumulation of a thin 1 mm to 10 mm layer of dark gray tephra onto snow may cause intensive melting and consequent flooding on the upper reaches of the Paratunka and Vilyucha rivers.

• The section of road most at risk passes through the bottom of the Gorely Caldera where the road is only 3 to 5 km from the active crater. Intensive ashfalls and lakhares are expected in this area, even after weak or moderate top eruptions of Gorely. A probable hazard here is the formation of a new slide- centre presenting a variety of impacts and growth of slag/lava cones, usually accompanied by the discharge of large amounts of tephra, lava streams, lakhares and volcanic earthquakes. Similar hazards excluding lakhares are likely along the section of road on the border of the western sector of Gorely Caldera’s bench.

v) Hydrogeology

Hydrogeological conditions in the vicinity of Asacha are defined by climatic, geo-tectonic and geothermal factors. High precipitation, low evaporation rates and the presence of highly permeable alluvial and colluvial sediments promote high levels of infiltration, especially during the spring-summer snow melt.

Hot springs have not been identified in the immediate vicinity of Asacha (and there were no indications of thermal inflows into the exploration adit). The nearest identified hot springs are some 4km to the south of Asacha and their presence closer to Asacha would be consist with the geological and hydrogeological information.

There are two main types of groundwater present in the vicinity of Asacha:

• Near-surface groundwater within the quaternary sediments.

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• Deep aquifers within the competent rock.

Desk study researches distinguished eight distinct hydrogeological units according to Russian systems for characterising groundwater resources:

1. Local contemporary loose sediments of different genesis (denoted in Russian as

pr, d, c OIV)

These sediments comprise a mixture of sand, sandy loams, gravel and larger rocks and form an unbroken cover over watersheds, with small accumulations in shallow depressions and at the base of slopes. The thickness of the sediments varies from 0.3-0.5 metres at watersheds to 20+ metres at the base of slopes and significant groundwater resources are usually confined to the accumulations at the base of slopes. Flow rates of springs normally range from 0.1 to 1.0 l/sec, occasionally up to 20 l/sec. The aquifers are usually recharged directly by localised infiltration and may be seasonal, disappearing completely in the drier months. The hydrochemistry is usually characterised as hydrocarbonate type with calcium the predominant cation; pH ranges from 6.5-7.2, total mineralisation from 50-101 mg/l.

2. Contemporary alluvial sediments (denoted in Russian as alQIV)

These sediments are found in the valleys of larger watercourses and in flood plains and usually comprise laminated deposits of boulders and gravel with sand. The depth rarely exceeds 5 metres. Groundwaters may be discharged via springs or direct into river channels; flow rates vary from 0.01 l/sec to 2.5-3.0 l/sec. The aquifers are fed by direct infiltration of precipitation, snow melt and by inflow from surface watercourses. The hydrochemistry is usually characterised as hydrocarbonate type with calcium and sodium the predominant cation; pH ranges from 7.9-8.0, total mineralisation from 50-95 mg/l, total hardness from 0.55-0.95 meq/l.

3. Middle-Upper Quaternary Tuffaceous Sediments (denoted as α – ζ QII-III)

These sediments are highly localised and are notable mostly for their contribution to baseflow in a number of local streams which emerge from the base of the sediments.

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2 4. Upper Quaternary glacial-glacio-aqueous sediments (denoted as g, ƒQIII )

These sediments are well developed in the valleys of the Semeyniy Stream and the Vichaevskaya River and their tributaries and usually comprise deposits of boulders, pebbles and gravel with sand and sandy loam. The total thickness can range from 9.0 – 117.0 metres. Groundwaters may be discharged via springs or direct into river channels; flow rates vary from 0.01 l/sec to 25 - 30 l/sec. The aquifers are fed by direct infiltration of precipitation and snow melt, by inflow from adjacent water- bearing strata and by inflow from surface watercourses. The hydrochemistry is usually characterised as chloride-hydrocarbonate type with calcium and sodium the predominant cation; pH ranges from 6.6 – 8.0, total mineralisation from 50 - 109 mg/l.

These aquifers have the potential to support abstraction for local industrial and potable water supplies.

5. Upper Quaternary - contemporary volcanic sediments (denoted as α, βQIII-IV)

These sediments are well developed on the eastern slopes of Zheltava Hill and the right bank of the Semeyniy Stream and usually comprise deposits of basalt, andesite- basalt and its tuffs. For the larger part of its range, these sediments are overlaid with sediments of glacial, proluvial and diluvial - proluvial genesis. The total thickness can range up to 500 metres. Groundwaters are usually discharged into adjacent water-bearing strata. The hydrochemistry is usually characterised as chloride- hydrocarbonate type with calcium and sodium the predominant cation; pH ranges from 6.8 – 7.0, total mineralisation around 72 mg/l, hardness is 0.29 meq/l.

These aquifers have the potential to support abstraction for local industrial and potable water supplies.

6. Pliocene –Lower-Quaternary volcanic sediments (denoted as N2 – Q1)

These sediments of volcanic origin are widely spread across the area usually comprise deposits of basalt, andesite, andesite-basalt with tuff interleaves and lenses which form plateaus on the watersheds and to the east and south of the site. The total thickness can range up to 600 metres. The aquifers are fed by direct infiltration of precipitation and snow melt, by inflow from adjacent water-bearing strata and by

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inflow from surface watercourses. Groundwaters are usually discharged at the base of slopes and at points of contact with impermeable volcanic lenses. The hydrochemistry is usually characterised as hydrocarbonate, sulphate-hydrocarbonate or chloride-hydrocarbonate type with calcium, sodium and magnesium the predominant cation; pH ranges from 6.2 – 7.8, total mineralisation from 30 – 131 mg/l.

These aquifers have the potential to support abstraction for local industrial and potable water supplies.

7. Upper Miocene-Pliocene effusive piroclastic formations (denoted as N 1- 2)

Primarily found in the in the eastern part of the area and in the valleys of the Vichaevskaya River and Semeyniy Stream, these sediments are represented by tuffs of andesite-dacites, dacites, less frequently interlayers and lenses of dacites, andesite-dacites, andecites, as well as interlayers of tuffsand stone and tuff gravel stone. The aquifers are fed by direct infiltration of precipitation and snow melt, by inflow from adjacent water-bearing strata and by inflow from surface watercourses. The hydrochemistry is usually characterised as hydrocarbonate or sulphate-hydrocarbonate type with calcium and magnesium the predominant cation; pH ranges from 7.3 – 7.7, total mineralisation from 51 – 93 mg/l, total hardness from :0.50 - 1.20 meq/l.

These aquifers have the potential to support abstraction for local industrial and potable water supplies.

8. Jointing of Miocene-Upper-Quaternary intrusive and sub-volcanic rocks

(denoted as α- β N1 – QIII)

Primarily found in the in the central, northern and eastern part of the area, these sediments are represented by andesite-dacites and dacites of subvolcanic facies and may reach thicknesses of up to 300 metres. The aquifers are fed by direct infiltration of precipitation and snow melt and by inflow from adjacent water- bearing strata. The hydrochemistry is usually characterised as hydrocarbonate or chloride-hydrocarbonate type with calcium and sodium the predominant cation; pH ranges from 6.4 – 7.8, total mineralisation from 20 - 420 mg/l, total hardness from 0.30 – 5.60 meq/l.

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These aquifers have the potential to support abstraction for local industrial and potable water supplies.

vi) Hydrgeochemistry

Samples of groundwater were taken from the adit and a well excavated to supply potable water to the exploration camp in 2002 (see Table 2.5). The analyses indicate that:

• The quality of water in the well is generally good, although three parameters exceed the Russian MAC for drinking water (iron, zinc and lead) and two would exceed the comparable international standard (iron and lead). It is likely, however, that these parameters have been influenced by the well construction and disturbance of sediment during sampling rather than being a reflection of a wider presence of these metals in groundwater.

• The quality of adit water is characterised by much higher concentrations of certain trace metals (including iron, copper, zinc, cadmium and lead and oil products [petroleum hydrocarbons]) many of which exceed the Russian MAC by two orders of magnitude. These elevated metal concentrations reflect the nature of the mineralisation in the orebody and the potential for some metals to be mobilised, particularly after the oxidation of exposed sulphide minerals, although they may also be influenced by the disturbance of sediment during sampling.

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Table 2.5 Results of Analysis of Groundwater Samples (mg/l) Well Adit pH 7.0 6.6 Chloride 1.1 1.4 Fluoride 0.24 0.14 Nitrate 0.02 0.07 Sulphate 18.6 <3.7 Ammonia <0.02 0.04 Phosphate 0.014 0.31 Iodide <0.3 <0.3 Total dissolved solids 127 165 Oil products 0.03 0.28 Iron 0.55 11.2 Copper 0.0005 0.14 Zinc 0.1 0.23 Cadmium <0.0003 0.011 Nickel 0.0007 0.009 Lead 0.013 0.4 Manganese 0.011 0.98 Cobalt 0.005 0.18 Strontium 0.1 0.13 Lithium 0.003 0.002 Molybdenum 0.007 0.024 Tin <0.1 <0.1 Antimony 0.03 0.08 Calcium 6.5 5.2 Magnesium 2.6 1.9 Sodium 3.7 2.8 Potassium 1.0 1.2

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2.5 Surface water resources

i) Regional drainage

The rivers in Kamchatka tend to flow either eastwards into the Bering Sea and the Pacific Ocean or westwards into the Sea of Okhotsk. The main watershed on the Peninsula is the Sredinny Ridge, which lies to the west of Asacha, such that all drainage from the area of the deposit is to the east into the Pacific Ocean.

In general, surface watercourses in southern Kamchatka are characterised by:

• Being relatively short in length (less than 100km) and draining numerous small forested mountainous catchments in deep narrow valleys with more extensive flood plains in their lower reaches.

• Having variable but seasonally very high runoff (after snowmelt and during periods of intense rainfall) with low water levels typically in March/April (i.e. before snowmelt).

• A low baseflow (fed from springs) and a high component of precipitation and snowmelt.

ii) Drainage at Asacha

The Asacha deposit is situated on the watershed between two catchments, the Asacha River catchment to the south and the Mutnaya River catchment to the north (see Figure 2.3). Small tributaries draining the site area discharge into the middle reaches of one of these two rivers systems, which are typical of many catchments in southern Kamchatka being characterised by:

• A width of 10 - 50 metres

• A hydraulic radius of 0.3 – 1.0 metres

• A maximum depth in river pools of 0.5 – 1.3 metres

• A maximum depth on the riffles of 0.3 – 0.9 metres

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Figure 2.3

Surface drainage at Asacha

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• An average flow rate of between 0.8 – 3.2 m/sec

• A gradient of water surface of 100 – 230% in the upper reaches to 5 - 7 0% in the lower reaches.

The Asacha River is 78 km long with a total catchment area of 970 km2 and discharges into the Asachinskaya Bay on the Pacific coast. The principal tributaries, the Left Asacha Stream, the Yasny, the Right Asacha Stream, the Prozrachny (all of which discharge into the Asacha River via the Semeyniy River) and the Bolshoi Stream., are all short (<10 km), relatively narrow (<10 metres) and shallow (<0.5 metres). Flow rates vary greatly on a seasonal basis; at times the watercourses may be almost dry with a baseflow confined within the gravel bed, at other times flow rates can be substantial with significant contributions from snowmelt and run-off following periods of intense rainfall.

The Mutnaya River is 54 km long with a total catchment area of 721 km2 and discharges into the Mutnaya Bay on the Pacific coast. The principal tributary, the Vichaevskaya River, is also short (<20 km), relatively narrow (<10 metres) and shallow (<0.5 metres) with flow rates varying on a seasonal basis.

The water quality in the Asacha catchment is generally very good (see Table 2.6a), although some parameters still exceed the very stringent Russian MACs for the protection of fisheries, and is characterised by:

• Total mineralization of water generally less than 100 mg/l

• pH is usually close to neutral

• Waters predominantly of the hydrocarbonate type, occasionally chloride- hydrocarbonate and sulphate-hydrocarbonate

• Mixed cation composition where calcium normally prevails

• Total hardness of 0.05-11.8 meq/l

• A negligible leaching capacity

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• Low aggressiveness towards concrete

• Suitability for potable and industrial water supply.

Highly localised influences arising from the discharge of adit water and seepage from the waste rock stockpile, however, can be detected in the Asacha catchment immediately downstream of the site, with depressed pH and elevated concentrations of sulphate, manganese, iron and oil products.

In contrast, the chemical composition of the Mutnaya River is very variable (see Table 2.6b), the principal influence being in its upper reaches from the highly mineralized Vulkanny Stream, a tributary which drains from the caldera in the Mutnovsky Volcano where glacial waters mix with mineralised geothermal waters. At the discharge point from the caldera, this tributary is characterised by low pH (4.0) and elevated concentrations of iron (Fe+3 3.0 mg/l, Fe+2 18.0 mg/l) and sulphate (157 mg/l). The upper reaches of the Mutnaya River are often characterised by the presence of significant quantities of iron hydroxide precipitate.

Further downstream, the quality of the Mutnaya River improves as the mineralised water is diluted by the inflows from other tributaries, although the influence continues to be apparent in the middle reaches until the confluence with its major tributary, the Vichaevskaya River, which drains the northern part of the Asacha deposit.

Most watercourses in the area are also characterised by a degree of seasonal variation in water quality reflecting the changes in the contributions made by snowmelt, direct-run-off, good quality groundwater inflows and mineral springs. The concentrations of certain parameters can change dramatically on a seasonal basis; this has important implications for the design of environmental monitoring programmes.

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Table 2.6a Water Quality in the Asacha Catchment Location (see key) Parameter 1 2 3 4 5 6 7 8 9 10 11 12 13 pH 7.2 7.2 7.0 6.9 7.1 6.9 6.8 5.9 5.9 7.0 7.0 6.8 7.2 Chloride 1.4 0.9 1.4 0.5 <0.4 0.4 0.4 0.5 0.5 <0.4 <0.4 0.7 0.9 Fluoride 0.21 0.18 0.17 0.16 0.15 0.12 0.12 0.14 0.12 0.26 0.24 0.2 0.21 Nitrate 0.013 0.032 0.013 0.033 0.07 0.02 0.02 0.008 0.008 0.009 0.007 0.005 0.025 Sulphate 3.7 5.6 3.7 3.7 3.7 3.7 3.7 53.8 52.0 3.7 3.7 3.7 3.7 Ammonia 0.04 <0.02 0.04 <0.02 <0.02 <0.02 <0.02 <0.02 <0.02 0.18 <0.02 <0.02 <0.02 Phosphate 0.023 0.014 0.092 0.014 0.038 0.017 0.014 <0.014 <0.014 0.042 0.009 0.009 <0.02 Total dissolved 123 131 44 114 62 98 110 204 160 107 21 107 135 solids <0.02 <0.02 <0.01 <0.02 <0.02 <0.01 0.05 0.05 <0.01 <0.02 <0.01 <0.01 <0.02 Oil products 0.04 0.04 0.04 0.011 0.01 0.016 0.011 0.06 0.06 0.15 0.10 0.23 0.07 Iron <0.0003 0.0011 0.0011 <0.0003 <0.004 <0.0003 <0.003 <0.0005 <0.0005 0.004 0.004 0.004 0.004 Copper 0.028 0.13 0.23 0.027 0.05 0.027 0.028 0.028 0.027 0.06 0.07 0.14 0.028 Zinc <0.005 0.001 <0.005 0.001 0.003 0.009 0.0009 0.0015 0.0015 0.001 0.0007 0.0009 0.001 Cadmium 0.005 0.005 0.002 0.005 0.006 0.005 0.005 0.007 0.007 0.001 0.002 0.005 0.001 Nickel <0.005 0.01 0.017 0.01 0.01 <0.004 0.006 <0.005 0.004 0.004 <0.002 0.0025 0.004 Lead 0.0008 0.0008 0.0008 0.006 0.01 0.0009 0.0009 0.14 0.01 0.003 0.007 0.007 0.003 Manganese 0.01 0.05 0.05 0.03 0.03 0.016 0.016 0.03 0.01 0.004 0.05 0.007 <0.007 Antimony 4.0 20.5 4.3 5.5 5.8 5.9 6.5 20.5 4.0 7.0 7.2 6.8 4.0 Calcium 1.8 1.9 1.8 1.5 2.5 1.9 3.3 3.3 3.0 1.9 1.8 1.7 1.5 Magnesium 4.6 3.6 4.6 3.5 3.0 3.6 3.6 0.88 0.88 3.3 3.4 1.12 2.8 Sodium 1.1 1.3 1.3 1.1 1.1 0.8 0.8 2.2 1.2 1.1 3.5 3.6 1.2 Potassium

Table 2.6b Water Quality in the Mutnaya Catchment Location (see key) Parameter 14 15 16 17 18 19 20 21 22 pH 6.6 6.9 6.4 6.8 6.6 7.0 6.9 - - Chloride 0.9 2.21 0.7 <0.4 0.7 0.9 0.9 5.6 4.8 Fluoride 0.23 0.19 0.19 0.22 0.20 0.2 0.33 - - Nitrate <0.001 0.015 0.007 0.007 0.007 0.005 0.031 1.88 1.8 Sulphate 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.71 1.8 Ammonia 0.15 0.03 0.18 0.18 0.18 <0.02 0.08 <0.05 0.054 Phosphate 0.009 0.023 0.42 0.099 0.050 0.009 0.061 0.21 <0.03 Total dissolved solids 109 39 152 89 155 113 113 55 34 Oil products <0.01 <0.01 <0.01 <0.02 <0.02 <0.01 0.02 - - Iron 0.08 0.07 0.08 0.10 01. 0.20 0.08 0.07 0.05 Copper 0.001 0.004 0.005 0.005 0.005 0.004 0.05 <0.0005 <0.0005 Zinc 0.06 0.06 0.06 0.06 0.06 0.02 0.05 0.0022 0.002 Cadmium 0.0002 0.0008 0.0002 0.0002 0.0002 0.0009 0.003 0.0002 0.0005 Nickel 0.001 0.002 0.001 0.002 0.001 0.002 0.0005 <0.002 <0.002 Lead 0.04 <0.004 <0.004 0.06 0.004 0.01 <0.01 0.01 0.01 Manganese 0.006 0.003 0.006 0.003 0.006 0.006 0.018 0.004 0.0026 Antimony 0.03 0.012 0.017 0.03 0.017 0.03 0.03 <0.002 <0.002 Calcium 4.2 4.4 4.0 4.9 4.0 7.0 4.9 3.55 3.6 Magnesium 1.5 1.5 1.8 1.8 1.8 1.8 1.7 1.22 1.21 Sodium 2.5 3.3 5.3 3.3 5.3 1.1 3.6 4.3 422 Potassium 1.1 1.1 1.4 1.4 1.4 3.4 1.2

Key to Tables 2.6a and 2.6b

All data, except pH presented as mg/l.

Locations: 1. The Asacha river (upstream the Semeyniy stream) 2. Outflow of the Semeiniy Stream 3. The Asacha river (downstream the Semeyniy stream) 4. Yasniy stream 5. L.Asachinskiy stream 6. R.Asachinskiy stream 7. The Semeyniy stream (200 upstream of waste rock) 8. The Semeiniy stream (500 m downstream waste rock) 9. Water discharging from beneath waste rock 10. Right tributary of the Semeiniy # 1 11. Right tributary of the Semeiniy # 2 12. The Prozrachniy stream (right tributary of the Semeyniy) 13. The Semeyniy stream 14. Outflow of the Ireda river 15. The Vichaevskaya river 16. The Vichaevskaya river (upstream the Ryabinoviy stream) 17. Outflow of the Ryabinoviy stream 18. The Vichaevskaya river (downstream the Ryabinoviy stream) 19. The Glukhoy stream 20. Water discharging from spring 21. The Vichaevskaya river 22. The Vichaevskaya River (opposite the proposed tailings storage)

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iii) Stream sediments

Analysis of samples of stream sediment taken from the Asacha catchment (see Table 2.7) indicates that:

• Concentrations of some metals at the reference site exceed the stringent Russian MACs for sediments (Cu, Cr, Mo, V, Zn).

• Elevated concentrations of a number of metals appear to correspond to the influence of the waste rock stockpile adjacent to the adit (As, Cd, Cu, Hg, Pb, Zn).

Table 2.7 Summary of Analysis of Stream Sediments from the Asacha Catchment

Parameter (mg/kg) Location As Cd Cu Cr Hg Pb Mn Mo V Zn Reference site (Asacha River) 0.5 2.4 42 19 0.09 13 1271 16 175 86 Semeyniy adjacent to adit 18 3.6 100 17 0.11 25 1860 15 128 109 Semeyniy 500 m d/stream adit 200 51 12 <1 31 3 68 23 97 97 Confluence with Asacha 92 32 12 - 20 1 32 81 195 192 200 m d/stream confluence 195 40 12 - 38 3 48 41 270 270

2.6 Fisheries

Freshwater fish species are entirely absent from most river systems in south-eastern Kamchatka, reflecting the extreme hydrological conditions that exist at certain times of year (notably, the very low flows in the dry period and freezing during winter). However, many river systems provide important spawning grounds and/or nursery areas (for young fish before they migrate to sea) for a wide range of migratory salmonid fish species. Many of these rivers support fisheries, based principally on five species of Pacific salmon, which are exploited by local people:

• Chinook salmon (also known as king salmon), Oncorhynchus tshawytscha

• Humpback salmon (also known as pink salmon), Oncorhynchus gorbuscha

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• Calico salmon (also known as chum salmon), Oncorhynchus keta

• Blueback salmon (also known as sockeye salmon), Oncorhynchus nerka

• Silver salmon (also known as coho salmon), Oncorhynchus kisutch.

Although individual rivers are often small, they can support very large numbers of spawning fish, which together represent an important commercial resource.

The Asacha River system supports important spawning grounds and nursery areas (which may or may not be in the same location), being classified as a 1st order fishery under the Russian system. For example, aerial survey data collected in 1995 and 1996 identified, within a single 4 km stretch of the Asacha River near its confluence with the Semeyniy Stream:

• Up to 11,000 humpback salmon

• Up to 1,600 calico salmon

• Up to 1,100 silver salmon

These adult fish represent only 5-7% of the spawning population of the Asacha catchment, which can number many 100,000s of fish in a good year. The Semeyniy Stream itself, however, does not support extensive spawning grounds.

The Mutnaya River system, however, supports lesser spawning and nursery areas (presumably as a consequence of the very poor water quality throughout much of its length associated with the drainage from the Vulkanny Stream, a tributary which drains from the caldera in the Mutnovsky Volcano). Nevertheless, the Mutnaya River does support some spawning grounds, notably in the 8 km stretch of river between the mouth of the Vichaevskaya River and the confluence with the Glubokii Stream, where nearly 65% of the catchments fish stocks spawn, and in the Vichaevskaya River itself in this area. Total annual spawning numbers (mostly calico salmon, humpback salmon and silver salmon), however, rarely exceed 3,000 fish in total and the Mutnaya River does not support any commercial fishery interests.

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2.7 Air quality and noise

No baseline monitoring of ambient air quality at Asacha has been undertaken. Given the remoteness of the location and the lack of any local anthropogenic sources of air pollution, baseline air quality is presumed to be very good for all relevant parameters, including sulphur dioxide, carbon dioxide, nitrogen oxides and particulate matter (this assumption has been endorsed by the regional office of the Ministry of Natural Resources).

Nevertheless, significant temporary impacts upon air quality do arise from the consequences of volcanic activity. The volcanoes, the Mutnovsky and to a lesser extent the Gorely, which are in the stage of fumarole activity, can from time to time release varying quantities of steam, carbon dioxide, carbon monoxide, sulphur dioxide, ammonia, and acid mist (HCl).

No background noise monitoring has been undertaken at Asacha. The area around Asacha has remained undisturbed apart from the exploration activity conducted by TSG and its predecessors. Ambient noise levels are likely to be low for much of the time, although the noise created by high wind and intense rainfall and their interaction with vegetation should not be underestimated

2.8 Soils and vegetation

i) Soil types Volcanic processes play a significant role in formation of the soil profile in Kamchatka. Ash and other volcanic materials periodically fall on many areas. The Asacha Deposit is located in an area of intensive ash fall and, over time, has developed principally volcanic laminated ash soils. Pronounced lamination results in intermittent polygenetic profiles consisting of several elementary soil profiles. Each elementary profile is the result of intermittent volcanic activity leading to ash materials covering the existing soil and low vegetation. Such events stop the soil formation process for a long time and the landscape may acquire the appearance of sub-volcanic deserts. The ashes are grey or light grey in colour and can form pisolites – balls of weakly cemented ashes from 0.3 to 3.5 cm (up to 5 cm) in diameter. Where significant ash falls have occurred historically, the soil depth may exceed 2 metres.

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Locally, the soils may also have thick organic layers (up to 50 cms) and contain alluvial and colluvial sediments.

The chemical and physical properties of soils are largely determined by the properties and composition of soil-forming ash sediments. Granulometric, mineral and chemical composition of these sediments is usually fairly mixed and depends on the nature of eruptions supplying aerial material. The ash layers are usually characterised by being:

• Loose, dry and is easily eroded by water and wind at the places where vegetation is disturbed

• Increasingly compacted with depth (and consequently form stable sediments)

• Predominantly represented by volcanic glass and feldspar

• Fresh ash sediments feature high acidity caused primarily by presence of sulphur compounds.

• Highly permeable – moisture penetrates to 1.5 – 3 m and does not return to the humus layer; overland flow is rare even on steep slopes.

• High acidity results in intensive leaching of soils which results in its sub- acid/acid make up, with low saturation of bases; increased iron and aluminium content is often observed.

• The soils can be highly susceptible to erosion if the vegetation cover is removed and the soil surface disturbed. Near-surface horizons are often unconsolidated and friable. Erosion channels of up to 1.5m deep and 5.0m wide can be observed where vehicle access has disturbed the surface.

ii) Soil chemistry A series of soil samples were collected from the Asacha area for chemical analysis (see Table 2.8). The results of the analyses indicate that:

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• The concentration of a number of metals in soils from the reference site exceeds the stringent Russian MACs (Cr, Cu, Mo, V and Zn), although all these values would be considered compatible with uncontaminated soils in western European countries.

• The soil samples collected from the proposed site area itself were generally consistent with the reference site, although localised contamination with oil products was recorded.

• Samples taken from the waste rock stockpile and adjacent areas contained elevated concentrations of arsenic.

Table 2.8 Summary of Analyses of Soil Samples (mg/kg dry wt) Location Parameter Reference Site Stockpile Natural soils As 0.5 103 0.5 – 1.9 Cd 2.6 2.4 2.9 – 3.4 Co 37 33 26 – 27 Cr 16 15 16 – 17 Cu 43 67 40 – 52 Hg 0.1 0.3 0.07 – 0.12 Mn 1305 1323 1348 – 1418 Mo 16 21 14 – 16 Ni 24 17 18 – 19 Pb 28 30 26 – 39 Sb 48 42 37 – 50 V 179 98 140 – 153 Zn 85 92 82 – 84

iii) Vegetation types Vegetation types present in southern Kamchatka include:

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• Elfin forests, mostly with alder elfins (elfin forests are forests of stunted trees, usually growing at high altitudes in moist environments or under extreme climatic conditions, and are characterised by the presence of abundant epiphytes – mosses, ferns, orchids etc.).

• High mountain and grass meadows

• Lowland swamps

• Heathland

• Mountain tundra

• Birch forests following river valleys.

The area in the immediate vicinity of the Asacha Deposit is largely covered with forests (up to 90% of the area), comprising a mixture of:

• Birch forests along river valleys up to 400 metres above sea level.

• Alder elfin forests on the slopes up to 1,000 metres above sea level.

• Other vegetation types, including various types of tundra at higher altitudes (bushy, blueberry, tussock, blueberry-lichen tundra), heathland and grassland vegetation (principally gramineous-herb, subalpine-herb, subalpine geranic- false-avens meadows), and some marshland.

The natural vegetation remains mostly undisturbed except where historic exploration activity has resulted in the localised clearance of vegetation.

Samples of grasses growing on the waste rock stockpile were analysed (see Table 2.9) and elevated concentrations of some elements, notably arsenic and zinc, were detected on samples recovered from the waste rock stockpile.

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Table 2.9 Summary of Analyses of Grass Samples (mg/kg dry wt) Location Parameter Reference Site Stockpile Cleared areas As 11 200 10 – 12 Cd 9 8 8 – 9 Co 108 311 100 – 340 Cr 100 100 100 Cu 43 103 32 – 45 Mn 2356 8382 2473 – 2350 Mo <5 6 5 Ni 49 67 52 Pb 24 25 20 Sb 5 5 5 V 200 200 200 Zn 245 1612 200 – 235

2.9 Wildlife and nature conservation

i) Rare and endangered species A number of rare and endangered species are known to occur at other locations in Southern Kamchatka (see Table 2.10).

No detailed field survey has been undertaken at Asacha and it is known that many of the Red Data Book species are associated with either the coastal zone or the more remote high altitude interior. Nevertheless, some of these species are quite common across south-east Kamchatka and it is likely that some of these species are present, both on the site area itself and along the route of the proposed access road. For all these species, desk study researches have shown that the populations in Kamchatka are stable and their viability is good.

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Table 2.10 Red Data Book Species Recorded in Southern Kamchatka Plant species Yatabe shoe (Cypropedium jatabeanum) Gale (Myrica tomentosa) Weak lily (Lilium debite) Kamchatka wake-robin (Trillium kamchatsence) Bluegrasses (Roa radula, R. shumushhensis) Rose stonecrop (Rhodiola rosea) Ermania (Ermania parryoides) Asian quillwort (Isoetus asiatica) Invertebrates Butterflies (Phoebus & Swallow-tail butterfly) Bumblebee (Sporadicus) Bumblebee (Shrenkii) Birds White-billed diver (Gavia adamsii) Pacific black brant (Branta bernicla nigricans) Emperor goose (Chem canagica) Golden eagle (Aquila chrysaetos) Erne (sea eagle) (Haliaeetus albicilla) Steller’s sea eagle (Haliaeetus pelagicus) Peregrine (Falco sp.) Spoon-billed sandpiper (Eurynorhynchus pygmaeus) Eastern solitary snipe (Gallinago solitaria) Glaucous –winged gull (Larus glaucescens) Aleutian tern (Sterna aleutica) Long-billed “pyzhik (Brachyramphus sp) Mammals Northern sea otter Enhydra lustris

ii) Commercially important species In addition to the rare and endangered species, the remote and undeveloped Kamchatka peninsula supports sizeable populations of many species that have a commercial importance, associated traditionally with hunting or, more recently, with attempts to develop ecotourism (see Table 2.11).

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Table 2.11 Commercially Important Species Recorded in Southern Kamchatka Reindeer Ronyifes tarandus, including three isolated (and, therefore, vulnerable) groups Brown bear Ursus arctos Fox Vulpes vulpes Sable Martes zibilina Mink Mustela vison

iii) Protected areas In recent years a number of protected areas have been established in Kamchatka to support the protection of both ecologically and commercially important species. Two large protected areas have been established adjacent to the Asacha deposit (see Figure 2.4):

• The Bereg Chubuka reserve (South Kamchatka Nature Park), established under Regional jurisdiction, stretches from the boundaries of the Yuzhno-Kamchatskii Republican Preserve (the Ilyinskaya River) to the Asacha River and includes the 5 km strip of land along the sea shore. The South Kamchatka Nature Park was one of the areas included in the designated World Heritage Listing of the Kamchatka Volcanoes in 1996.

• The Olenii Dol reserve, established under Regional jurisdiction, is located in the watershed between the upper reaches of the Levaya Tolmachevka and the Levaya Opala.

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Figure 2.4

Protected Areas

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Both protected areas are close to the Asacha deposit but the boundaries lie outside the project site itself (when the reserves were created in the 1990s the commercial importance of the Asacha gold deposit was recognised and this area was deliberately excluded from the reserve boundaries). The boundary of the South Kamchatka Nature Park is some 3 km from the mine adit at its closest point.

2.10 Socio-economics

i) Population and demographics The Kamchatka peninsula, which has a total land area of 472,000 km2, supports a total population of approximately 500,000 (2001 data). 40% of the population live in the regional capital of Petropavlovsk-Kamchatski.

Asacha is located within the Yelizovo District. The total population of the district in 2002 was approximately 61,000 of which more than 50% (36,400) lived in the administrative centre of Yelizovo town, which is also the second largest settlement in Kamchatka. The remaining 25,000 inhabitants reside in one of eight rural administrative areas, which contain a total of 25 settlements (villages). None of the villages has a population exceeding 3,000.

The nearest village to Asacha is Termalniy, part of the Paratunka rural administrative area, which lies more than 100km to the north of the site. In 2002, the population of Termalniy was 2,400, representing more than 50% of the total population in the Paratunka rural administrative area.

The population of Yelizovo District has declined significantly in recent years. In 1991, more than 78,000 residents were registered in the district; the population of Yelizovo town probably exceeded 50,000 inhabitants. Demographic trends have seen the birth rate fall below the mortality rate (-2.6/1000 in 2001), whilst the national economic decline of the early 1990s had a dramatic effect in Kamchatka as a whole, and particularly in Yelizovo, as people migrated to parts of Russia where employment opportunities were considered to be more favourable. Within 10 years the population of the Kamchatka region had declined by more than 10% and that of the Yelizovo district by 20%.

Significantly, the “economical active workforce” (i.e. those registered as available for employment) had shrunk by more than 50% (from around 50,000 to less than 20,000).

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The biggest job losses were in construction (down by 50%) and agriculture (down by 75%) and were associated with the closure of almost all the collective farms and other state controlled companies. Even allowing for the population decline, unemployment in Yelizovo District has risen to more than 15% of the workforce. The decline in economic performance is associated with deteriorating indices of public health, including increased alcoholism and preventable diseases.

The general level of education and skills within the population, however, remains high. In 1992, more than 95% of the workforce was educated to at least high school standard and almost 40% of the population were certified as “professional people or other specialists”.

ii) Industry and employment

In 1990, agricultural production (including fisheries) accounted for 75% of the gross regional output. Petropavlovsk-Kamchatski was the basis for a multi-million dollar fisheries industry. The fishing industry remains an important part of the regional economy, although catch rates have declined in recent years apparently as a consequence of over-fishing. The decline in other agricultural sectors, however, has been dramatic. Between 1995 and 200, the production of meat fell by 63% (from 99.5 kg/capita to 36.6 kg/capita), milk by 14% (from 155 kg/capita to 134 kg/capita) and poultry and eggs fell by 18%. The decline was initiated by the closure of the state-controlled farms but has been maintained by the essentially high production costs associated with much agricultural production in Kamchatka, a factor related to the remoteness, poor infrastructure and adverse climate.

Between 1945 and 1990, the Kamchatka peninsula attained very significant strategic military importance and the region maintained a large military presence. Although somewhat reduced (a feature that has also had an indirect impact of the region’s economy), the military presence remains significant.

Despite its mineral resources, the Kamchatka peninsula does not have a history of mining and only one mine is currently under construction in the region (Aginskoye).

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Within the Yelizovo district, forestry, power generation, small scale industrial activity and agricultural activity are the dominant activities. Yelizovo hosts 80% of the Petropavlovsky Industrial Region’s electricity generating capacity.

As part of an attempt to diversify the local economy, resources are being directed at developing the local tourism industry. The main focus for recreation within the Yelizovo District is Paratunka health resort, located between Termalniy and Petropavlovsk- Kamchatski. The resort comprises some 30 recreational centres, 5 health farms and 14 countryside centres for children. Tour operators based in Paratunka make use of the forest tracks in the area and occasional venture as far as the Asacha area. Tourism and recreation are based around a combination of health/spa facilities and countryside activities, including hunting.

2.11 Indigenous peoples and cultural heritage

South-eastern Kamchatka has a number of small aboriginal communities. These are confined to the area between Yelizovo and Petropavlovsk-Kamchatski (see Figure 2.5) more than 100 km north of Asacha and are usually associated with the more productive lowland soils and coastal areas.

There are no records of any aboriginal communities living closer to Asacha. The area around Asacha, however, does form part of the traditional hunting grounds of some of these communities.

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Figure 2.5

Location of Aboriginal Communities

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3. PROJECT DESCRIPTION

3.1 Site description

The general layout of the site (see Figure 3.1) makes provision for:

• An access road entering the site from the north and connecting with the all- weather road that links the geothermal power station at Mutnovskaya with the village of Termalniy.

• A mine site, with essential facilities, adjacent to the entrance to the underground mine.

• A plant site and associated tailings disposal facility, the location of which has been selected to ensure that all processing takes place out of the sensitive Asacha River catchment.

• Garage, maintenance and storage facilities adjacent to the west side of the plant compound.

• Accommodation facilities for 240 mine personnel and up to 16 visitors, comprising insulated living, dining and recreation areas, medical clinic and a camp administration building, located mid-way between the mine site and the processing plant.

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Figure 3.1

General Site Layout

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3.2 Access road

i) Options considered

Two principal options were considered for the improvement of access to the site:

• Upgrading of the existing rough track between the site and its junction at kilometre 51 with the existing all-weather road linking the Mutnovskaya Power Station with Termalniy.

• Upgrading of the existing rough tracks between the site and Mutnaya Bay, where a new port facility would be constructed.

The selection of the preferred route of the access road was made following a detailed evaluation of the environmental, engineering and economic implications of each option. On every basis, the option of upgrading the existing rough track between the site and kilometre 51 on the Termalniy-Mutnovskaya road was preferred.

Within the preferred option, a number of small variations in the precise route of the access road were also evaluated. The detailed route was selected taking into account a number of factors, including:

• The need to avoid incursions into the Oleny Dol protected area, both to minimise the direct impacts of road access and to minimise indirect impacts on the protected areas associated with improved access (such as greater exposure to poaching).

• The need to avoid areas of known ground instability, avalanche and mudslide risk.

• The need to minimise the number of major river crossings.

• The need to make maximum use of existing rough tracks (to minimise the need for additional vegetation clearance.

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ii) Road construction

The access road will be based on a 4.5m wide single carriageway road surface with frequent passing places. Drainage ditched will be excavated on both sides of the road surface. The road surface will consist of compacted locally available natural materials based on proven Russian engineering designs for all-weather roads.

Security barriers will be erected to ensure use of the improved access road is restricted to mine traffic and legitimate hunting/tourist organisations. This will minimise the risk of an increase in poaching associated with “improved” access to the wildlife reserves.

3.3 Mining

i) Options considered

In principle, the Asacha orebody can be accessed by either underground working alone or a combination of underground and open-pit working. The option of working part of the orebody through a small open-pit operation was considered within the scope of the pre- feasibility study. This option, however, has not been included within the current development plan, principally because TSG acknowledges that open-pit mining may raise a number of environmental issues that could significantly increase the permitting schedule and delay the development of the larger underground operation.

ii) Ore production

A total of 1,133,000 tonnes of ore will be mined from underground workings over a six year period at a production rate peaking at 200,000 tonnes per annum. The mine design is based on the ramp access mechanised cut-and-fill mining method on the basis of:

• Safety: no handheld raising is required in contrast to conventional in-stope cut- and-fill methods.

• Practicality: mechanised cut-and-fill is the only method that utilises waste rock as backfill (removing the need for permanent waste rock disposal facilities at surface); it is simpler than conventional in-stope handheld cut-and-fill and access will be easier.

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The selected method is also considered to be the most productive and economic option. Bulk mining methods are not appropriate due to poor ground conditions, which are likely to be encountered in may areas.

The mine will be accessed via two portals located in the footwall. The first (most easterly) portal will be the main access for the mine; the second portal will house the main ventilation fans and mine air heating system. The first portal has been designed as an exhaust airway so that vehicles can exit the mine without the need for ventilation doors.

The orebody extends over a strike length of some 1.4 km, as a consequence of which the mine has been divided into three “districts” each accessed by a decline located in waste or sub-economic material (see Figure 3.2).

Stoping will comprise both mechanised and handheld stope drilling depending on the width of the orebody. After completion, the stope will be backfilled with waste rock generated in other areas of the mine or recovered from surface stockpiles located near the entrance portals.

A total void of 440,000 m3 will require backfilling; allowing for backfill dilution a total backfill requirement of 484,000 m3 has been predicted. This will be provided by development rock supplemented with locally won material. Around 40% of the total backfill requirement will be met by development rock, some 330,000 tonnes of which will be excavated, mostly in the first two years of operation. This material will be stored in a temporary stockpile near the adit portal prior to use as backfill. The temporary stockpile will cover a maximum area of 60,000 m2 and have a maximum height of 5 metres.

The mining schedule is based on the following rates of production:

• Stoping at a rate of 120 metres per month – equivalent to approximately 1,500 and 3,150 tonnes per month for a typical stope worked by handheld and mechanised means respectively.

• Backfilling at a maximum rate of 9,000 tonnes per month.

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Figure 3.2

Asacha Underground Mine Design

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• Idle time due to backfill unavailability and other non-productive time equal to backfilling time.

• Maximum jumbo productivity of 180 metres per month with multiple headings available.

• Maximum lateral development at a rate of 90 metres per month for each heading.

• Maximum vertical development at a rate of 90 metres per month for each raise.

iii) Removal of material deposited during exploration

Exploration activity in the 1970s and 1980s resulted in the creation of a stockpile of excavated material at a site adjacent to the Semeyniy Stream. The stockpile contains some 27,000 tonnes and comprises a mixture of ore grade material and waste rock containing on average around 5 g/t Au and 50 g/t Ag. Surface run-off and seepage from the stockpile has given rise to a localised impact on water quality in the Semeyniy Stream (see Section 2.4). This material will be removed and transported to the plant for processing, removing the risk of further contamination of surface waters.

iv) Chemical composition of Asacha ore

The detailed chemical composition of the ore (see Table 3.1) reveals generally low levels of trace metals and other environmentally significant components.

Significantly, total sulphur concentrations (and consequently sulphide-sulphur) tend to be very low, averaging less than 0.3%. An assessment of the potential for acid rock drainage from ore (and hence from tailings) was commissioned by TSG in 2004 (Scapa Mining Services Ltd, 2004). This study, which included a review of geochemical testwork (acid-base accounting and 24 hour contact tests) undertaken in 1995 and 1996,

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concluded that the conditions for significant acid generation did not exist in ore grade material or tailings.

Mineralised quartz veins are hosted by propylitized lithoclastic tuffs of andesite-dacite and andesitic composition. In contrast to the orebody, however, the sulphide-sulphur (principally pyrite) levels in some of these host rocks can range up to 7%. The potential for the generation of acid rock drainage from these materials under the appropriate conditions cannot be discounted. The slightly reduced pH of waters draining from the exploration adit and the waste rock stockpile (see Section 2.4) is almost certainly a consequence of the oxidation of pyrite within this host rock material rather than from ore grade material.

Table 3.1 Chemical Composition of Asacha Ore Parameter Concentration (%) Silica (as oxide) 81 – 88 Aluminium (as oxide) 5 – 10 Calcium (as oxide) 0.4 – 0.7 Magnesium (as oxide) 0.3 – 0.8 Titanium (as oxide) 0.04 - 0.1 Phosphorous (as oxide) 0.02 – 0.04 Manganese (as oxide) 0.06 – 0.17 Sodium (as oxide) 0.2 – 0.6 Potassium (as oxide) 2.5 – 3.8 Iron (as oxide) 0.24 – 2.10 Sulphur (total) 0.1 – 0.2 Arsenic <0.01 – 0.10 Chromium <0.01 – 0.10 Copper <0.01 – 0.02 Lead <0.01 – 0.07 Zinc <0.01 – 0.01

The longer the exposure of this material in an oxidising environment, the greater will be the risk of acid generation and the subsequent mobilisation of trace metals. This has

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implications both for the management of development rock and for minewater discharge, including:

• The need to ensure all development rock is ultimately used as backfill, where sulphide oxidation will be constrained by exclusion of oxygen.

• The need to monitor high pyrite development rock during the period of temporary storage at surface for signs of acid generation (although it is expected that the duration of surface storage will be insufficient for extensive oxidation to occur) and to take appropriate management action if required (e.g. collection and treatment of run-off).

• The need to monitor and manage the minewater pumped from the underground workings, which could have a low pH and contain slightly elevated concentrations of some trace elements and sulphates.

3.4 Processing

i) Options considered

A comprehensive programme of testwork was commissioned between 1995 and 2002 to evaluate the options for recovery of gold from Asacha ore:

• Testwork at the TsNIGRI Laboratory in Moscow in 1995 and Lakefield Research in South Africa in 2001 evaluated the use of gravity concentration, flotation and cyanidation.

• Testwork at Lakefield Research in Ontario, Canada in 1996 included cyanidation, solid-liquid separation, and zinc precipitation as well as assessing the optimum means of cyanide destruction for wastewaters.

• Testwork at the laboratories of Inco in Ontario, Canada in 2003 assessed aspects of cyanidation, including acid generating potential in the ore and the detoxification of cyanide in wastewater.

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In principle, gold and silver can be recovered by each of the three process routes evaluated. However, total recovery using only gravity separation or flotation processing was low and uneconomic. In contrast, cyanidation yielded gold recoveries of between 92 – 98%. The optimum processing route was found to be based on production of a gravity concentrate to recover coarse gold followed by cyanidation using conventional carbon- in-leach technology.

Additional consideration was given to the selection of the most appropriate location for the processing plant. In principle, the plant and associated tailings disposal facility should be as close as possible to the mine (to minimise total site area and transport distances). A suitable location was identified but, was found to be within the catchment of the Asacha River, a river system supporting important salmonid spawning grounds (see Section 2.5). In order to reduce the potential adverse impacts associated with wastewater discharges and the risk of accidental discharges, an alternative site, some 2 km from the mine portal, was selected, located in an adjacent catchment. This catchment, the Mutnaya River system, is characterised by naturally occurring poor water quality (as a consequence of drainage from the Mutnovsky volcano) and supports only very limited spawning grounds.

ii) Ore handling

Run-of mine ore is delivered to the plant by 15-tonne haul trucks, which will feed directly into a crusher feed bin. A run-of-mine (ROM) stockpile will exist to allow for fluctuations in the schedule of ore delivery.

ROM ore will be crushed in a primary jaw crusher and secondary cone crusher to 100% passing 15 mm. The crushed ore is stored in an enclosed bin from where it is fed to a single stage ball mill operating in closed circuit with a classifying cyclone cluster to produce a ground ore with 80% passing 75 microns.

Crushers will be equipped with dust extraction systems and bag filters to capture dust emissions. Captured dust (which is essentially finely ground ore) will be returned to the circuit.

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iii) Gold recovery

A portion of the cyclone underflow is sent to gravity concentration for the recovery of coarse free gold. The gravity concentrate is further upgraded on a shaking table before being smelted to produce bullion.

Tailings from gravity concentration, together with the remainder of the milled ore, are fed to the carbon-in-leach (CIL) circuit for cyanidation. The pH during cyanidation is maintained at >10 by the addition of lime slurry. The average rate of cyanide addition will be between 1.15 and 1.22 kg NaCN/tonne ore.

Gold and silver are leached from the ore in the cyanide solution in a series of six tanks and absorbed onto activated carbon moving counter-current to the solution. Carbon loaded with gold and silver is washed with dilute hydrochloric acid and then stripped of its gold in a concentrated cyanide solution at 120oC.

Gold and silver are removed from the resultant pregnant solution by electrowinning onto steel wool cathodes. The barren solution is returned to the elution process. The stripped carbon is regenerated and returned to the CIL tanks. Gold and silver sludge from electrowinning is dried and smelted in the presence of fluxes to produce doré.

iv) Support facilities

All processing operations, together with associated infrastructure including generators, switchgear, workshops, reagent store, offices and assay laboratory , are contained within a secure, weather-proofed building to allow 24 hour, 7 day, year-round operation. The plant processing capacity is 204,000 tonnes per annum.

A range of dedicated storage facilities will be provided, including:

• Food storage and essential supply storage at the accommodation camp.

• Heated and ambient temperature storage units at the process plant.

• A secure explosive magazine, designed in accordance with Russian and international norms.

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• A dedicated cyanide storage facility, designed in accordance with Russian and international norms.

• Diesel and oil storage tanks, located at a dedicated fuel storage facility adjacent to the process plant. Diesel storage tanks with a total capacity of 5,000 m3 will be replenished via road tanker deliveries. The storage tanks and refuelling area will include a compacted impermeable base and bunding to contain accidental spillage.

v) Detoxification of residual cyanides

Tailings from the carbon-in-leach process are thickened (a process assisted by the addition of flocculant) to recover water, which is re-used in the milling process, prior to treatment to remove residual cyanides and trace metals and eventual disposal.

Consideration was given to the detoxification either of the total tailings stream prior to discharge into the tailings disposal facility or, alternatively, of the excess supernatant water discharged from the facility. Given the environmental sensitivity of the location, the option of detoxifying the total tailings stream was selected.

A number of options for the detoxification of residual cyanide were evaluated:

• Testwork indicated that the “INCO process” would be the preferred process. The INCO process uses a combination of sulphur dioxide and air to convert free and weak acid dissociable (WAD) cyanide to cyanate, which in turn hydrolyses to ammonia and carbonate; iron complexed cyanides are reduced to the ferrous state and precipitated as insoluble metal salts. Residual metals in solution are precipitated as hydroxides. The acidity generated during the reactions is neutralised by the addition of lime to maintain a pH of at least 8.0.

The INCO process represents proven technology and is considered one of the most effective techniques for cyanide detoxification; it is in use at many gold mines worldwide. WAD cyanide concentrations in treated effluent are typically less than 1 mg/l and, depending on solution chemistry and the rate of reagent addition, can be as low as <0.2 mg/l.

• Consideration has also been given to the use of alkaline chlorination. This

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technique, which uses hypochlorite to oxidise cyanide to cyanogen chloride and thence to cyanate, has been widely adopted in Russia (and elsewhere). Residual metals are precipitated as hydroxides and thiocyanate is oxidised and removed.

Alkaline chlorination also represents proven technology and is highly effective at removing cyanides. Alkaline chlorination is particularly effective at removing thiocyanates (which the INCO process does not). However, the end products of alkaline chlorination include free chlorine and chloramines which are toxic to aquatic life. For this reason, alkaline chlorination is not usually the preferred treatment option unless high concentrations of thiocyanates are present.

Testwork indicates that the thiocyanate concentration of the tailings discharge will be low (see Section 3.4). Consequently, the INCO process has been selected as the preferred option. The process variables (retention time, reagent additions etc.) can be varied to achieve the desired treated effluent quality. At Asacha, detoxification will be undertaken to ensure that total cyanide concentrations in the effluent discharged to the tailings facility do not exceed 1 mg/l.

Further breakdown of cyanide within the tailings facility as a consequence of a combination of volatilisation, dilution, precipitation and oxidation is expected, such that the total cyanide concentration of the supernatant water returned to the plant will be less than 0.2 mg/l.

v) Reagent usage

Process reagents will include sodium cyanide, lime, hydrochloric acid, sodium hydroxide and flocculant (see Table 3.2). All reagents will be delivered to site in internationally recognised containers and stored in secure dedicated storage areas.

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Table 3.2 Process Reagents Reagent Delivery Usage Sodium cyanide 100 kg drummed briquettes 1.15 – 1.22 kg/t ore Lime (as 100% CaO) 1000 kg bags hydrated 1.5 kg/t ore Hydrochloric acid powder 1.5 t/month Sodium hydroxide 30 kg polycan 1.2 t/month Flocculant 5 kg bags 0.03 kg/t ore Carbon 25 kg bags 50 g/t ore Smelter flux 1 tonne bags variable 25 – 50 kg bags pellets

3.5 Tailings disposal

i) Design and operation

Detoxified tailings from the process plant are pumped to the tailings disposal facility via a 280 metre long steel pipeline. The facility has been designed according to Russian norms by VNIPI and audited for compliance to international practice by ECMP in South Africa. The following key design criteria were adopted:

• Provision of a safe and stable tailings management facility designed to be technically and environmentally appropriate.

• Provision of an engineering design, which is appropriate for future closure of the facility.

• Accommodation of the extreme climatic conditions experienced at the site of the facility.

• Accommodation of the seismic conditions experienced at the facility location.

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• Appreciation of the local environment sensitivities with particular respect to the regional fisheries industry.

• Compliance with the Russian requirements for water protection zones around surface watercourses, which preclude construction of tailings facilities within a designated distance from the river (dependent upon the size of the river).

The base of the facility will be lined with a 1.0 mm high density polyethylene (HDPE) liner to prevent uncontrolled seepage of tailings waters into groundwater.

A cut-off drain will be constructed around the tailings facility to collect run-off from the surrounding land. This clean water will be channelled directly to the Vichaevskaya River.

The facility will be divided into two operational compartments to reduce the rain/snowmelt catchment. Three vertical penstock chambers will be installed in each of the two compartments of the dam and equipped with two submersible pumps that return the recovered water to the process plant for re-use or final discharge.

A network of groundwater monitoring wells will be drilled around the tailings impoundment.

The facility will be surrounded by a 1.9 metre high wire fence to prevent access by unauthorized personnel and wild animals.

ii) Tailings characteristics

The physical characteristics of the tailings and the chemical composition of the supernatant water have been determined by testwork (see Table 3.3 and Table 3.4).

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Table 3.3 Physical Characteristics of Asacha Tailings Density 2,480 kg/m3 Percentage grains <0.074mm 45 – 85% Pulp density (at plant) 1,310 kg/m3 Pulp temperature (at plant) 15 – 18oC

Table 3.4 Chemical Composition of Supernatant Water (mg/l) Total cyanide 0.2 – 2.0 WAD cyanide 0.1 – 1.0 Cyanate 316 Thiocyanate 17 Ammonia 52 Nitrate <1 Nitrite <1 Aluminium 0.2 Antimony <0.1 Arsenic <0.1 Cadmium <0.1 Calcium 300 Copper 0.1 – 0.7 Iron 0.1 – 0.5 Lead <0.1 Magnesium 4 Nickel 0.1 – 1.2 Zinc <0.1

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3.6 Waste management

Solid waste generated on site will include:

• Waste oils, which will be sent off-site for recycling or burnt on site.

• Spent reagent containers, which will either be returned for re-use or disposed of on-site.

• Domestic and kitchen wastes, which will be disposed of on-site.

• General office wastes, which will be disposed of on-site.

• Sludge from the sewage treatment plant, which will be disposed of on-site.

A small (12,500 m3 capacity) on-site landfill facility will be constructed in the Mutnaya River catchment for the disposal of waste materials that cannot be sent off-site. The landfill, which is designed according to Russian norms, will be lined with a high density polyethylene liner. The landfill will be constructed and operated in five compartments, each measuring 50 * 50 m2 and providing a maximum of two years storage capacity. 2.0 metre layers of waste will be covered with intermediate soil covers.

3.7 Transport links

In addition to the improvements to the access road, a helipad will be constructed to the west of the processing plant to allow for rapid transport of important supplies, medical and other emergencies and for the secure transport of gold.

3.8 Power supplies

Two options for the supply of electric power to site have been considered:

• Overland connection to the existing transmission line from the Mutnovskaya geo-thermal power station.

• Installation of an oil-fired electricity generating facility on-site.

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An agreement was available that would have allowed construction of a 60 km overhead power line linking to the existing 110-KV grid close to Mutnovskaya. However, given the distance to the existing grid, the lengthy construction period and the possible interruptions to any overland supply due to bad weather and avalanches, the installation of an oil-fired generating power plant on site is preferred.

The plant, which will comprise five Caterpillar 3512B 6KV 1056 KW 1320 KVA 50Hz continuous diesel generator sets, will operate 24 hours per day, 365 days per year. The plant will supply all electric power at the site as well as steam for heating buildings.

3.9 Water supply

Water for the mine, process plant and potable supply will be obtained from a small well- field located 2 km from the process plant. Water will be pumped from three boreholes (two operating, one standby) to a water treatment plant prior to distribution across the site to the plant, accommodation area and firewater storage tanks.

Treatment will consist of a UV sterilisation unit supplying a 50 m3 potable water storage tank. Water will also be fed directly through gravity pipelines feeding 100 m3 storage tanks at the mine, plant and explosive magazines.

The estimated average water consumption is:

• Plant make up: 51 m3/hr, roughly 50% of which is provided by recycled tailings supernatant

• Accommodation area: 16 m3/hr

• Mine: 5 m3/hr

A full site water balance, including both annual average and maximum predicted daily flows has been calculated according to Russian norms (see Figure 3.3). An average of 250,000 m3 per annum will be abstracted from the well-field. The maximum demand is predicted to be 710 m3/day.

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3.10 Site water management and treated effluent discharge

i) Sewage effluent

Domestic waste water will be purified in a treatment plant (Biodisk – 350). The sludge produced will be disposed of in the on-site landfill. An estimated 100 m3/day of treated water will be discharged to the Ireda Stream, a tributary of the Vichaevskaya River (see Table 3.5). The quality of this discharge complies with both Russian norms and World Bank guidelines.

Table 3.5 Predicted Quality of Discharge from Biodisk Plant (mg/l) Parameter Before treatment After treatment Suspended solids 197 10 BOD 228 3 Chlorides 27 31 Ammoniacal nitrogen 24 0.5 Phosphates 10 0.2

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Figure 3.3Water Balance Scheme – thousand m3 / year (max daily flow m3 / day)

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ii) Minewater

Average groundwater flows into the mine are expected to be in the order of 10,000 m3/day, with short term peak flows up to 15,000 m3/day (excluding water supplied to the mine for dust control etc.). Higher flows may occur where the underground workings intersect fault zones, although these structures have a finite storage capacity and increased inflows will be temporary.

Minewater will be pumped continuously at a rate of up to 10,000 m3/day (115 l/sec) from three separate pump stations with a 100% spare standby capacity (the maximum instantaneous pumping capacity will be 19,000 m3/day). It is estimated that 10% of the inflow will report to the base of the south decline, 40% to the central decline and 50% to the north decline.

Pumped minewater will be treated to remove oil and suspended solids. Although the quality of the minewater is expected to be suitable for discharge direct to the Asacha River catchment, there is a risk that the oxidation of high pyrite host rocks exposed in the underground workings could result in a depressed pH and slightly elevated concentrations of trace metals. Accordingly, to ensure maximum protection for the Asacha catchment, the water will be pumped across the watershed, mixed with excess tailings supernatant and discharged to the Ireda Stream part of the Vichaevskaya River catchment.

iii) Excess tailings supernatant

The tailings water discharged from the plant amounts to a total of some 300,000 m3 per annum, of which an estimated 80,000 m3 per annum will be retained within the consolidated tailings. Annual net precipitation (precipitation – evaporation) amounts to a total of some 85,000 m3 per annum. The total demand for return water to the plant is around 200,000 m3 per annum. The excess water, some 100,000 m3 per annum will require discharge.

This water has been treated for the removal of cyanide and trace metals; the quality will have further improved through natural degradation of any residual cyanide and dilution within the tailings facility. Nevertheless, it is proposed that this water be mixed with pumped minewater and the combined flow subject to a further “polishing” treatment through discharge into a soil filtration channel. This type of treatment system, which has 85 ______

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been designed by NVIPI, is used elsewhere in Russia and conforms to Russian norms. The treatment processes are similar to those of constructed wetland systems that are widely used in western Europe. The final discharge will be to the Ireda Stream, a tributary of the Vichaevskaya River

The quality of the combined final discharge has been estimated using Russian normative calculations (see Table 3.6). The predicted quality of the final discharge is well within World Bank guidelines.

Table 3.6 Predicted Quality of Final Discharge (mg/l) Discharge World Bank Parameter quality guidelines Suspended solids 10 50 Oil products 0.10 20 Total cyanides 0.02 1.0 Chloride 66 Fluoride 0.12 Nitrate <0.01 Ammonia 0.01 Sulphate 34 Phosphate 0.07 Cadmium <0.001 0.1 Cobalt <0.01 Copper <0.001 0.3 Iron 0.3 2.0 Lead 0.006 0.6 Manganese <0.01 Nickel <0.01 0.5 Zinc 0.05 1.0

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iv) Surface run-off

Surface run-off from the mine area (including temporary waste rock stockpile) and plant area is predicted to average approximately 1,000 m3/day and 865 m3/day respectively. This water will be channelled to settling ponds prior to discharge to the Ireda Stream/Vichaevskaya River.

Run-off from the equipment maintenance area will be treated through an ECOS-95 purification unit to remove oil products before being discharged to the settling pond.

All settling ponds are designed to provide a retention time of 24 hours under the maximum predicted daily rainfall calculated according to Russian norms.

3.11 Atmospheric emissions

Sources of air emissions will include:

• Mine ventilation

• Ore and waste haulage and other on-site traffic

• Diesel-fired power generation

The total quantity of pollutants emitted to the atmosphere from all sources has been calculated in accordance with Russian norms (see Table 3.7).

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Table 3.7 Predicted Quantity of Selected Atmospheric Emissions Quantity emitted Parameter (tonnes/year) Nitrogen dioxide 200 Nitrogen oxide 32 Amylene 6.0 Anhydride sulphide 40 Benzopyrene 0.0003 Benzene 0.011 Hydrogen cyanide 0.5098 Iron oxide 0.061 Sodium tetraborate 0.116

Dust (Sio2 < 20%) 0.029

Dust (Sio2 > 70%) 8.403 Soot 10.972 Lead compounds 6.003 Toluene 0.087 Hydrocarbons (from kerosene) 67.719 Carbon dioxide 154 Formaldehyde 2.545

These calculations do not allow direct comparison with World Bank guidelines although, given the nature of the emission sources, it is not expected that the guideline values will be exceeded.

3.12 Employment

The Feasibility Study is based on the appointment of a total workforce (excluding construction workers) varying between 90 and 263 depending on the phase of operation. This will include 7 senior expatriate specialists for the first 3 or 4 years depending on the position (after which the workforce will be exclusively Russian).

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The workforce comprises:

• Mining: between 40 (year 1) and 125 (year 5)

• Process plant and infrastructure: 132

• General and administration: varying between 50 and 106 (including 24 support personnel based in Petropavlovsk-Kamchatski and an intermediate supply base at Mutnovskaya).

The staff complement includes provision for:

• 1 Environmental Officer

• 1 Safety Officer

• 2 Environmental Technicians

• 2 Medical personnel

• 8 Emergency service personnel (fire and rescue)

The Russian workforce will operate a shift system based on a 12 hour day, 7 days a week on a 2 weeks on and 2 weeks off roster. Expatriate staff and supervisors will work a nominal 7 day week on an 8 weeks on and 2 weeks off roster with 4 rest days to be taken during the working period. Transport will be provided to all personnel between the site and Petropavlovsk-Kamchatski.

It is a requirement of the mining licence that at least 90% of the production workers and 75% of the technical specialists be recruited from within Kamchatka. There is no existing pool of labour with experience of the mining industry in Kamchatka. However, a substantial pool of skilled workers with experience in the manufacturing, construction and power generating industries exists. Many of these individuals will be amenable to training for work at Asacha. Key individuals with mining experience will be required for

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specialist roles; these can be recruited from the adjacent region of Magadan, which has an active mining industry.

3.13 Construction schedule

The upgrading of the access road and the supply of construction material to Asacha are constrained by winter snows from roughly mid-November to mid-May. During the winter period limited on-site construction will be possible, together with off-site detailed design, procurement and fabrication. Consequently, it is expected that the work will be completed primarily in two phases:

• Road improvements and initial civil engineering works: summer/autumn 2004.

• Plant construction and commissioning: summer/autumn 2005.

• Plant start-up: November 2005.

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4. IMPACT ASSESSMENT AND MITIGATION MEASURES

4.1 Summary of predicted impacts

The assessments of potential impacts and the effectiveness of appropriate mitigation measures are based upon a combination of:

• The project description, including the predicted magnitude and characteristics of emissions and discharges, as described in Section 3.

• An assessment of the extent and severity of impacts based principally on mathematical predictions and modelling undertaken by VNIPI in accordance with Russian norms.

• An assumption that a comprehensive health, safety and environmental management system is introduced in accordance with the framework outlined in Section 5.

• An assumption that closure and rehabilitation are undertaken in accordance with the framework closure plan outlined in Section 6.

The scoping and the public and statutory consultation process identified a number of potential negative impacts, including:

• Potential impacts on surface water quality and fisheries

• Potential impacts on wildlife and nature conservation

• Potential impacts associated with increased road traffic

• Potential impacts on tourism and recreation (principally hunting)

• Potential impacts on indigenous communities

Consultation also identified the potential positive impact on the local economy resulting from the payment of taxes to the local treasury and the creation of employment

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opportunities in an economically under-developed region with high levels of unemployment (and under-employment).

The impact assessment gives particular attention to these issues raised during scoping and consultation, and to the mitigation measures designed to manage the impacts in accordance with both Russian requirements and international good practice. The impact assessment also addresses other potential impacts identified during the OVOS process, including potential impacts on groundwater, air quality and cultural heritage.

4.2 Impacts on groundwater resources

i) Impacts during construction and operation

The potential impacts on groundwater resources during construction and operation are associated with:

• The abstraction of groundwater for potable and process water supply

• The pumping of groundwater inflows into the mine and their discharge to surface waters

• Seepage of contaminants into the groundwater system.

The abstraction of up to 700 m3/day from local groundwater resources is not predicted to have any significant impact: the aquifer from which the water will be abstracted supports no other abstractions, does not make a significant contribution to baseflow in surrounding streams and will be replenished by natural recharge after cessation of pumping.

Detailed hydrogeological modelling has been undertaken to assess the potential impacts of groundwater inflows into the mine workings. The dewatering effect of the mine is expected to extend for up to 100 metres from the workings. This will dewater a number of near-surface and deeper aquifers. The effect is highly localised and, given that mine dewatering is not predicted to have a significant effect on groundwater levels within the glacial sediments, it is not expected to have a significant effect on baseflow in the Semeyniy Stream, which drains the corresponding surface catchment. Following the

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cessation of pumping, the groundwater contours will return to their current levels (which are already controlled locally by the exploration adit).

The principle sources of contaminant seepage are:

• Fuel and reagent storage areas and the process plant

• Tailings disposal facility

The fuel and reagent storage areas and the process plant will be constructed on impermeable concrete bases and surrounded by a bund wall to contain spillages. All spillages will be collected and either returned to storage or treated prior to discharge to surface waters.

The tailings disposal facility receives tailings effluent that has already been treated to remove cyanide and trace metals. The tailings facility is fully lined with 1mm high density polyethylene liner. There will be no seepage to groundwater.

ii) Impacts post-closure

There are no potential impacts on groundwater resources post-closure.

4.3 Impacts on surface water resources and fisheries

i) Impacts during construction

The potential impacts during construction will be associated with:

• Surface run-off from the construction site

• The risk of the accidental discharge of diesel from temporary storage tanks and during refuelling.

Management of construction work, including controlling land clearance, construction of peripheral storm-water diversion channels and settling ponds will minimise the local impacts. All temporary fuel storage facilities will be controlled and any spillages promptly remediated through excavation of contaminated soils.

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ii) Impacts during operation

The potential impacts during operation will be associated with:

• The discharge of pumped minewater

• The discharge of excess tailings supernatant.

• The discharge of surface run-off from the site area

• The discharge of treated sewage effluent

All waters will be subjected to treatment processes consisting of:

• Settling and oil removal (minewater and site run-off)

• Cyanide destruction and metals precipitation (tailings water)

• Biological treatment (sewage effluent).

The combined effluent stream is further treated through discharge into a soil filtration channel prior to final discharge (although pumped minewater may be discharged directly subject to the results of water quality monitoring). All final discharge will be to the Ireda Stream, a tributary of the Vichaevskaya River, part of the Mutnoya river system. This river system receives the natural discharge from the Mutnovsky volcano and is characterised throughout much of its length by poor quality water (see Section 2). As a consequence, this river system supports very low fish stocks. There will be no discharge to the Asacha river system, which supports regionally important salmonid spawning grounds.

The predicted quality of the receiving water after discharge of the effluent has been calculated using an approved Russian model (see Table 4.1). The quality of the Vichaevskaya River downstream of the discharge (after complete mixing) generally complies with the stringent Russian MACs for the protection of fisheries, although the concentrations of oil products, iron and zinc may cause concern. These predicted values are heavily influenced by higher than expected background concentrations, which

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themselves exceed the MAC, and the use of extreme values for the discharge water quality. Nevertheless, this will require careful monitoring during operations.

Table 4.1 Predicted Quality of Vichaevskaya River (mg/l) Parameter Upstream 500 m below discharge 5 km below discharge Russian of MACs Low flow1 Average2 Low flow1 Average2 discharge Susp solids 10 7 6 7 6 10.25 Oil products - 0.07 0.06 0.08 0.07 0.05 Total CN - 0.01 0.01 0.01 0.01 0.05 Chloride3 2.2 45.8 43.1 37.0 34.4 300 Fluoride 0.19 0.14 0.15 0.08 0.07 0.75 Nitrate 0.015 0.012 0.012 2.045 2.114 40 Ammonia 0.03 0.02 0.02 <0.01 <0.01 0.50 Sulphate 4 25 23 31 30 100 Phosphate 0.023 0.055 0.053 0.048 0.045 0.2 Cadmium <0.001 <0.001 <0.001 <0.001 <0.001 0.005 Cobalt <0.001 0.001 0.001 0.001 <0.001 0.01 Copper 0.004 0.001 0.001 <0.001 <0.001 0.001 Iron 0.07 0.21 0.20 0.17 0.16 0.1 Lead 0.004 0.006 0.005 0.029 0.029 0.006 Manganese 0.003 0.005 0.003 0.004 0.003 0.01 Nickel 0.002 <0.001 <0.001 <0.001 <0.001 0.01 Zinc 0.06 0.05 0.05 0.03 0.03 0.01

Note: 1 Concentration calculated during low flow conditions – 0.052 m3/sec (mean monthly flow, 95% probability). 2 Concentration calculated during normal flow conditions – (mean monthly flow, 80% probability). 3 Calculated on the basis that hypochlorite could be used during treatment to remove cyanides

The limited spawning grounds in the Vichaevskaya River system are at least 5km downstream of the site, after the confluence with other tributaries, including the

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relatively large Rubnaya River, such that the flow rate here is at least 10 times that at the site, offering a further dilution of treated effluent.

iii) Impacts post-closure

The potential impacts post-closure will be confined to the drainage from the adit, which will act as the natural control on groundwater levels within the abandoned underground workings. The predicted quality of this water will be determined during the mine life and decommissioning period. At this stage, it is not expected that this water in the long term will require any treatment prior to discharge. However, for a short time during mine dewatering treatment may be required to remove residual oil products and nitrates/ammonia (from blasting residues).

4.4 Impacts on air quality

i) Impacts during construction

The principle sources of emissions during construction will be from vehicle exhausts and dust generated during earth moving in the construction of the plant site, tailings facility and support infrastructure.

These emissions are not considered to be significant and will have no more than a localised impact.

ii) Impacts during operation

The principle sources of emissions during operation will be from:

• Mine ventilation and operations around the mine portal

• Transport, dumping and re-handling of material from the temporary waste rock storage facility

• Transport of ore to the plant

• Ventilation from the plant

• Emissions from the diesel power station

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• Vehicles and routine activities around the plant, fuel and other storage areas.

• Tailings disposal

• Transport along the access road to site

The principal influence on air quality is the diesel power station.

An assessment has been made of the combined total of emissions from all sources, except transport along the access road, which is considered separately (and in this case is considered insignificant). The assessment has taken into account the incorporation within the engineering design of:

• Dust extraction systems on the ventilation from the crusher.

• Control of dust generated during the transport of materials and from stockpiles by the use of water sprays.

• Control of dust emitted from the tailings surface by careful management of tailings deposition to ensure maintenance of appropriate moisture content in the tailings.

The total quantity of pollutants emitted to the atmosphere from all sources has been calculated in accordance with Russian norms (see Table 3.7). Normative calculations and mathematical models were used to predict the maximum concentrations of emitted air pollutants that will be experienced at ground level given prevailing economic conditions (see Table 4.2).

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Table 4.2 Predicted Maximum Ground Level Concentrations (mg/m3) At boundary of Maximum Russian MAC Parameter sanitary within working for residential protection zone 1 area areas Nitrogen dioxide 4.160 5.080 0.085 Nitrogen oxide 0.140 0.180 0.40 Amylene 0.070 0.330 1.50 Anhydride sulphide 0.170 0.230 0.50 Benzopyrene 1.100 2.950 0.0001 Benzene 0.290 1.330 0.30 Hydrogen cyanide 0.020 0.200 0.01 Iron oxide 0.070 1.400 0.04 Sodium tetraborate 0.240 3.520 0.02

Dust (Sio2 < 70%) 0.160 0.750 0.30

Dust (Sio2 > 70%) 0.021 1.070 0.15 Soot 0.120 0.150 0.15 Lead compounds 0.020 0.270 0.001 Toluene 0.100 0.480 0.60 Hydrocarbons (from kerosene) 0.100 0.470 1.20 Carbon dioxide 0.050 0.110 5.0 Formaldehyde 0.210 0.310 0.035

Note : 1 300 metres around source of emission

The maximum concentrations of most parameters are compatible with Russian MAC for residential areas. Where maximum predicted concentrations exceed this MAC, as for nitrogen dioxide and hydrogen cyanide for example, all these concentrations are within the MAC values specified for working areas.

These calculations do not allow direct comparison with World Bank guidelines or other international standards because of the mode of calculation, the assumptions made and the chemical form of many of the parameters. The relatively high maximum predicted concentrations for sodium cyanide, for example, reflect the inclusion in Russian norms of

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the possible need for emergency ventilation following cyanide spills within the plant. However, given the nature of the emission sources, it is not expected that the equivalent international guideline values will be exceeded.

iii) Impacts post-closure

There will be no atmospheric emissions from the site after completion of the decommissioning and rehabilitation work.

4.5 Impacts on soils, vegetation and land-use

i) Impacts during construction and operation

The principle impacts in soils, vegetation and land-use during both construction and operation will be from:

• Land take and vegetation clearance

• Possible effects of atmospheric emissions on vegetation

• Risk of soil erosion

The total land take during construction work at the Asacha site and the subsequent operational period will be 77 hectares. The existing site area is primarily forest (mostly birch with some alder) and some grassland.

The improved access road will occupy a total area of around 60 hectares, although almost all of this is already taken up with rough forest tracks. Indeed, the road improvements are likely to offer a modest environmental benefit in that they will constrain the uncontrolled development of alternative track routes through the forest that currently affects some areas (as wheel ruts develop in existing rough tracks vehicles seek easier routes across adjacent areas resulting in a proliferation of parallel tracks in some areas).

The impact of the clearance of this area and the change in land-use is considered insignificant in the context of the area. Nevertheless, under Russian regulatory requirements, compensation is payable to the Yelizovo District for the loss of this

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resource. The payment will be based on the loss of an estimated 71 hectares of forest, which is calculated to contain contain 2,700 m3 of usable timber.

An assessment of the possible impact of atmospheric emissions on vegetation has been undertaken according to Russian norms. The predicted maximum concentration of nitrogen dioxide is expected to exceed the Russian MAC for forestry protection (0.05 mg/m3) in the immediate sanitary protection zone (within 300 metres of the plant) but the impact is not expected to extend far beyond the boundary of the protection zone into undisturbed forestry. The corresponding MAC for sulphur dioxide (0.35 mg/m3) is not exceeded at any point.

The largest potential impact arising from the change in land-use is associated with soil erosion. The area is characterised by steep slopes and most of the soils in the area are susceptible to erosion when the vegetation is cleared. An assessment of the land around the Asacha deposit based upon topography and soil type, undertaken according to the Russian classification system, identified:

• 25% of the area as having a “low erosion risk”.

• 20% of the area as having a “risk of erosion”.

• 55% of the area as having an “extreme erosion risk”.

The construction activities have been designed in a manner compatible with good practice in areas with high erosion potential and make provision for:

• Minimising the total area of land clearance.

• Scheduling clearance such that the areas of exposed soils are minimised.

• Construction of peripheral drainage channels around cleared areas.

• Use of settling ponds for all surface drainage from site areas that are designed to accommodate the maximum predicted 24-hour rainfall event.

• Revegetation of bare ground/top soil stockpiles as soon as practicable.

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ii) Impacts post-closure

After decommissioning, all the disturbed site area will be revegetated in a manner compatible with the topography and soil conditions and will be returned to a mixture of forestry and grassland.

4.6 Impacts on wildlife and nature conservation

i) Impacts during construction and operation

The potential impacts during construction and operation will be:

• Loss of 77 hectares of primarily woodland habitat.

• Possible disturbance of adjacent habitat through noise, vibration, interruption to migration routs etc., both around the site and the improved access road.

The direct impact through loss of habitat is considered minor given that all of the habitat types present within the proposed project site are common across these protected areas. Although rare and endangered species are known to occur within the boundaries of the nearby two protected areas, there are no records of any species have been identified on site.

The indirect impact through disturbance is difficult to quantify. The major sources of noise are likely to be:

• Mine ventilation fans

• Ore transport

• Crushing

No detailed assessment of noise levels has been undertaken, although the extent of the impact is expected to be highly localised.

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Under Russian regulations a compensation payment will be made based on a combination of direct loss of habitat and, more significantly, the predicted indirect effect of disturbance to adjacent lands as a consequence of noise. The basis for these compensation payments is an anticipated area of disturbance of between 2,000 and 7,000 hectares (depending on the species under consideration), i.e. an area up to 100 times that of the site itself. The calculations assume a small reduction in the population of key species across this area (see Table 4.3). In practice, the reductions will be less than calculated since the calculation is based upon a prediction of the maximum possible loss of income from hunting; many animals within the anticipated area of disturbance will adjust to the presence of the mine without any difficulty.

Table 4.3 Predicted Reductions in the Population of Key Animal Species Across an Area of 7,000 hectares Species Effective habitat Average Expected (‘1000s ha) population/1000 ha population reduction Sable 4.5 1.07 5 Squirrel 4.5 4.60 25 Otter n/a n/a 3 Ermine 7.0 2.08 15 Hare 7.0 29.93 210 Fox 7.0 0.38 3 Mink n/a n/a 15 Lynx 4.5 0.18 1 Brown bear 7.0 0.9 6 Reindeer 7.0 1.42 10

In addition to the direct and indirect effects on wildlife through habitat disturbance, it is also possible that the proposed road improvement scheme will make the area more accessible to poachers. Poaching, both of rare species and of commercially important species, is a major problem in parts of the Russian Far East. In order to minimise the risk that the development will inadvertently lead to an increase in poaching:

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• No hunting will be allowed to be undertaken by employees during their stays on site (all employees will leave the site during rest periods).

• A manned security gate will be constructed at a strategic location on the access road; mine personnel and authorised hunters/tourist groups will be granted security passes – all other personnel will be denied passage through the security gate.

ii) Impacts post-closure

The site will be revegetated to a mixture of woodland and grassland. Although the initial quality of the restored ecosystem may not match that of the undisturbed vegetation, it is expected that many species will rapidly re-colonise the restored land, reversing much of the impacts experienced during construction and operation.

4.7 Socio-economic impacts

The principal potential impacts of the development include:

• Possible negative impacts on tourism and recreation

• Possible negative impacts on income from hunting

• Positive impacts on the economy

The main centre for the development of tourism and recreation in south-eastern Kamchatka is Paratunka, some 100 km north of the site. Although some visitors to this resort do currently visit the Asacha area, these numbers are small and the mine development is not expected to impact on the continued development of this resort.

The hunting rights in the area around Asacha form part of the Paratunsko-Mutnovsky and Asachinsky hunting grounds, which are assigned to an aboriginal community near Yelizovo. Hunting in this area is administered by the Kamchatka Association of Small Peoples of the North. The proposed development will affect only a small proportion, around 3%, of the hunting land assigned to this community (a maximum of 7,000 hectares out of a total assigned hunting area of 225,000 hectares). However, since hunting represents a significant source of income to the community (and is the sole

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source of income for some individuals) compensation appropriate to the loss of income from hunting will be payable.

The proposed development will have a significant, if short-term economic benefit to south-eastern Kamchatka. In accordance with the terms of the mining licence, at least 90% of the permanent workforce, i.e. some 230 individuals, must be recruited from within Kamchatka. Additional employment opportunities will be created through contractors, particularly during site construction and road improvement, and suppliers.

An estimate of the wages payable and taxes accruing to the local treasury is included within the MDM Feasibility Study. The wages and tax payments are expected to have a significant and direct beneficial impact upon the local economy. In addition, it is widely accepted that direct payments such as these have an additional benefit that accrues as the money circulates within the local economy (the so-called multiplier effect). It is notoriously difficult to predict (and indeed even to measure) the magnitude of this effect but many studies have shown that the real value to a local economy of cash payments is around 2.5-3.0 times the value of the initial direct payments.

Although the precise magnitude of the economic benefit is difficult to quantify, it is expected that the benefit will be very significant whilst the possible negative impacts associated with disruptions to tourism and hunting will be insignificant.

4.8 Impacts on cultural heritage

Although the area is used by aboriginal people as a hunting ground, there are no records of any historic settlements in the area. The nearest areas with cultural or archaeological significance known to the Kamchatka Regional Museum and existing aboriginal communities are in the vicinity of the current settlements around Yelizovo, some 100 km to the north.

4.9 Impacts arising from unforeseen circumstances

An assessment has been undertaken of the potential for adverse environmental impacts arising from accidents and other unforeseen circumstances (see Table 4.4). This

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assessment indicates that the risk from these types of incidents is either negligible or manageable with appropriate emergency response procedures (see Section 5).

Table 4.4 Possible Impacts Arising from Unforeseen Circumstances Incident Probability Impact Response Dam failure due to Very low Localised impact on - instability Vichaevskaya Stream Spillage of cyanide/ Low Localised impact on Spillage control other reagents on site Vichaevskaya Stream procedures Spillage of cyanide/ Low Localised impact Spillage control reagents during transport procedures Fire in storage or process Low Localised impact Fire control plant procedures

4.10 Cumulative impacts

There are no existing industrial or infrastructure developments in the area. The Asacha project is the only known project under consideration within a 100km radius of the site.

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5. HEALTH, SAFETY AND ENVIRONMENTAL MANAGEMENT

5.1 Background

Environmental, health and safety and socio-economic considerations are regarded by TSG to be an integral part of the effective development of their assets in Russia. Accordingly, TSG has been committed to ensuring that:

• The significant environmental, health and safety and socio-economic issues associated with the type of mining and processing operations envisaged have been identified at an early stage; this has enabled the development of the technical aspects of the project to be undertaken in the full knowledge of the potential constraints that might be imposed by these considerations.

• All mitigation measures that have been identified as appropriate to reduce any significant impacts have been identified as soon as possible and their associated costs included within the technical-economic model.

• The key requirements both of the Russian regulatory authorities and of potential sources of project finance are addressed at the appropriate time.

These three objectives are consistent with industry good practice and are acknowledged by TSG both as an integral part of this study and as an essential pre-requisite for the efficient management of the environmental, health and safety and socio-economic aspects of the operation that will be required later in the project life.

The management of both health and safety and environmental issues in the Russian mining industry has a variable record. The Russian regulatory system, and the standards specified within various regulations, stands comparison with similar systems elsewhere and is capable of providing a sound basis for management of these issues. However, inadequate implementation and poor enforcement of these requirements has resulted in some operations falling some way short of good international practice.

TSG considers that the implementation of an appropriate health, safety and environmental (HSE) management system is essential for ensuring that Asacha operates in a way consistent with both Russian regulations and international expectations, irrespective of the degree of enforcement provided by the regulatory authorities. The

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development of the HSE management system for Asacha will be the responsibility of two key technical personnel – the Safety Officer and the Environmental Officer – and must be undertaken in conjunction with the detailed engineering and development of operating practices. It is, however, appropriate at this stage to establish a number of principles that will guide the development of this management system:

i) The system will need to address both Russian requirements and international practice.

The HSE management system at Asacha will have to incorporate both these of approaches.

ii) The HSE management system will be based upon the key components of international standards for health and safety and environmental management (including OHSAS 18001and ISO 14001).

Accordingly, the system will include:

• Health & safety and environmental policies that are endorsed by senior management and a commitment made with respect to operating policy and resources that ensures their implementation.

• A commitment to continuous improvements in performance in response to developments in national and international expectations.

• A positive engagement with all employees and communities within south- eastern Kamchatka to explain the objectives of the system.

• Ongoing training to increase an awareness of environmental and health and safety issues amongst all employees and contractors. (This is particularly

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important for health and safety issues given the generally adverse safety culture that exists within much of Russian society).

5.2 Occupational health and safety

i) Management approach and objectives

The primary objectives of the health and safety management system will be to:

• Develop and actively promote safe working practices.

• Ensure a high level of protection of all employees.

• Integrate high standards of health and safety work into an overall commitment to efficient and productive operation.

The Safety Officer will develop the occupational health and safety management system with input from international and local experts. Occupational health and safety on site will be managed by the Safety Manager who will report directly to the General Manager.

Health and safety issues will be addressed using a risk assessment method along with necessary engineering or procedural controls. Hazardous tasks, such as cyanide and explosives handling and usage, will be described in detailed safety procedures.

All employees will be trained in general health and safety as well as specific job-related safety. An allowance of 2.5% of total labour costs has been provided for occupational health and safety training.

A comprehensive monitoring system will be established to assist the control of potentially noxious gases and hazardous dusts, both underground and in the process plant.

Safety performance will be monitored and tracked using a recognised recording system incorporating standard computer software packages. Compliance to site procedures and Russian regulations will be ensured through regular internal audits. Further external audits to ensure best practice will be conducted annually.

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ii) Underground operations

The safety procedures underground will need to be based upon Russian normative procedures, including:

• Unified safety regulations on development of ore, rock and gravel deposits by mining, Volume 1, 2; Moscow, 1999;

• Unified safety regulations for blast operations, Moscow, 2001;

• Regulations on excavations in mines, fields and adits, developing non-ferrous, rare and precious metals, Moscow, 1980.

• Procedures will also include elements of good international practice where appropriate.

The mine design allows for emergency exits from the mine at both of the two declines with portals at 193mRL and via ladders installed in the intake ventilation raises located at the central and north declines. Four refuge chambers (primarily for fire protection) are to be located around the mine close to the stopes being mined. All the operating openings, rooms and chambers, as well as work places are to be equipped with stationary lamps. There are two primary ventilation fans that are capable of reversing the airflow in case of emergency.

The mine-rescue service includes a commander and volunteer miners headquartered at a mine-rescue point located in the camp to support the mine and the plant. The mine-rescue service personnel will be equipped to counter fires, mine accidents, rescue people from underground openings in case of emergency, help the injured and take preventative measures. In case of emergency, the mine-rescue team will take measures in the area of accidents in accordance with the approved plans for accident management.

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ii) Alcohol

Alcohol related issues pose a significant challenge to many operations in Russia. The misuse of alcohol is implicated in a significant number of safety incidents on Russian mines.

The company will develop and implement a fitness for work procedure including alcohol testing on site coupled with the appropriate HR procedures. The mine camp will be strictly alcohol free.

iii) Fire protection

All buildings have been designed to inhibit the spread of fire and comprehensive alarm and fire fighting systems are installed throughout the site. The project will have fully equipped emergency response teams for plant and underground deployment including a fire engine.

To ensure effective firefighting at the adit entrances, fire-protection means and assets will be stored on the main haulage level and at active stope accesses. All development will have water pipelines to provide water for firefighting.

Electro-mechanical equipment is to be used in accordance with the requirements of the Regulations on Installations of Electric Devices and the Unified Safety Regulations.

To ensure fire safety of buildings and facilities cognisance has been taken of:

• Adequate spaces between separate buildings and facilities

• Arranging equipment to facilitate safe evacuation by foot.

• Fire escapes.

• A comprehensive fire alarm system will be installed and monitored from a central control room.

• Additional optical fire alarm system at the oil products storage facility

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• A fire station to accommodate the fire engine, mine rescue teams, volunteer fire crews and their equipment.

• Double capacity water supply tanks and pumps for indoor and outdoor fire fighting at the mine, plant and camp premises.

• Two 1000m3 water tanks at the process plant for cooling the process tanks and increasing the efficiency of foam fire extinguishing in the case of fire.

• As far as is possible, only materials with fire retardant properties will be used in the construction of buildings and structures.

• Additional fire fighting equipment, such as dry chemical powder extinguishers, water hydrants and hose reels as stipulated by local regulations and standards will be provided at all facilities.

A volunteer fire unit will be set up under the command of the chief of the fire department. The fire truck will be provided for outdoor fire fighting. Water will be supplied from the fire extinguishing water supply reticulation (plant site, refueling station, camp) or from fire tanks (mine central site and explosives storage facility).

5.3 Environmental management

Environmental management will be the responsibility of the Environmental Officer who will report directly to the General Manager. The Environmental Officer will work closely with the Safety Officer on matters of common interest (such as the transport and management of hazardous reagents).

Environmental management will be based on:

• A register of impacts, emissions, discharges and waste arisings based initially on the studies completed as part of the preparation of the OVOS, modified as appropriate during the detailed design phase and continually re-assessed during operations.

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The register will include impacts arising, or likely to arise, as a consequence of construction activity, normal operations and unforeseen (emergency) situations.

• The specification of key environmental standards for each impact source based on a combination of Russian MACs supplemented where appropriate with international guidelines.

Monitoring and reporting systems will address compliance with these standards.

• The definition of a series of practical control systems for impact mitigation including, for example: detailed procedures for erosion control during construction, dust control, management of surface run-off, management of hazardous chemicals, waste disposal etc.

The control systems and procedures will include the specification of appropriate objectives and targets for all key aspects of performance. Objectives are likely to be retained throughout the project life; targets, however, will be reviewed annually in line with the commitment to continuous improvement. Standard operating procedures will be developed for all relevant practices.

• The specification of an environmental monitoring programme to allow rapid on- site assessment of the effectiveness of all control systems and operating procedures.

The environmental monitoring programme will include regular sampling and on-site analysis of key emissions and discharges, including emissions to atmosphere from point and non-point sources, discharges to surface watercourses and groundwater monitoring wells around the tailings facility, and solid waste arisings, including tailings and waste rock. The on-site laboratory facilities will be equipped to analyse for all relevant parameters, including free-, WAD- and total cyanide, trace metals, and basic physico-chemical parameters in water, air and solid samples.

Particular attention will be given within the monitoring programme to the need to demonstrate the maintenance of the water quality within the Asacha River system.

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This monitoring will be in addition to the statutory monitoring programme that the Russian regulatory authorities are expected to require (and which will likely be undertaken through a state research institute).

• The establishment of an incident reporting and response procedure such that any actual or suspected breaches of standards, and any incidents that might have given rise to breaches of standards, are evaluated and appropriate actions taken.

Standard reporting and response procedures will be developed for all aspects of the project. Particular attention will be given to the risks associated with the transport and usage of cyanide. Specialist procedures will be developed covering the safe transport of cyanide to site, the storage of cyanide and its use in the plant. These procedures will be based on industry good practice and will incorporate both the requirements of Russian regulation and the principles contained within the International Cyanide Management Code for the Production, Transport and Use of Cyanide in the Production of Gold, produced by the International Cyanide Management Institute in 2002.

• The development of environmental awareness training for all employees.

All employees and contractors working on site will be required to undergo environmental awareness training, will be encouraged to contribute to the development of appropriate procedures and to report any suspected breaches of environmental standards.

• Routine audits

The Environmental Officer will conduct regular audit inspections of all facilities. These audits will be supplemented by annual external audits undertaken by experienced international environmental personnel. The records of all audits will be presented to senior management; programmes of corrective action will be agreed as appropriate.

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6. CONCEPTUAL CLOSURE AND REHABILITATION PLAN

6.1 Objectives

Central to the development of the conceptual closure plan is the concept of “design for closure” in which all aspects of the project are designed and operated taking into account the requirements of eventual closure. Early closure planning is particularly important in projects with a short operational life where anticipated closure occurs a relatively short time after the start of the development.

The primary objectives of mine closure and rehabilitation will be:

• To allow a productive and sustainable after-use of the site that is acceptable to the mine owners and the regulatory agencies.

• To protect public health and safety.

• To minimise or eliminate environmental damage;

• To conserve valuable attributes;

• To minimise adverse socio-economic impacts.

At Asacha, there are two feasible after-uses for the site:

• To return the site to a mixture of forestry and grassland consistent with its original vegetation cover.

Most of the site, with the exception of the tailings facility, will be amenable to standard revegetation procedures for the re-establishment of forestry. A separate closure strategy will be developed for the tailings facility.

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• To use some of the buildings and infrastructure developed for the mine as the basis of a tourist and research facility.

This option was first raised in 1997 and opinions on the wisdom of this after-use among interested parties were mixed. Some considered this after-use as providing a useful opportunity to support the development of tourism in the area and to enhance the management of the wildlife and fisheries resources of the area. Others, however, questioned the compatibility of such an initiative with other similar ventures proposed elsewhere, doubted whether there was sufficient demand (or resources) to support all such developments and were concerned that uncontrolled tourist development might itself have a significant impact on wildlife and hunting in the area.

TSG will be guided by the wishes of the local authorities and public opinion on this issue. At present, TSG’s closure strategy is based around the complete removal of all buildings and infrastructure. However, this can be modified at any time should the alternative strategy become the favoured option of local authorities.

6.2 Implementation

The key components of the mine closure and rehabilitation plan at Asacha will be:

i) The mine site

• The removal of all potential sources of contamination (such as fuel storage tanks)

• The sealing of the adit portals to prevent access

• Construction of appropriate structures to allow for natural drainage from the workings (if appropriate)

• Demolition and removal of structures

• Removal of any contaminated surface soils

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• Grading of the site area

• Spreading of stored topsoil

• Revegetation with appropriate grassland and tree species.

ii) Plant site

• The removal of all potential sources of contamination (such as fuel storage tanks)

• Demolition and removal of structures

• Removal of any contaminated surface soils

• Grading of the site area

• Spreading of stored topsoil

• Revegetation with appropriate grassland and tree species.

Equipment and materials with a re-sale or scrap value will be cleaned, removed off site and sold. All other materials will be cleaned, if necessary, and deposited on site in the underground workings. Uncontaminated construction rubble will be used to fill and seal all declines and ventilation raises, which will then be plugged in accordance with current good practice. Any contaminated construction rubble will be disposed of in the tailings facility prior to its decommissioning.

The predicted volume of waste materials requiring disposal is:

• Metals: 1,350 tonnes – to be removed from site for recycling

• Concrete and other inert materials: 2,190 m3 – to be disposed of in underground workings

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iii) Tailings facility

• The tailings facility will be covered by a 1 metre layer of topsoil and locally won till and revegetated to grassland initially.

• All pumping equipment and pipelines for the tailings storage facility will be dismantled.

• The concrete canals on the slopes of the dam are designed for controlled discharge of clean run-off from the tailings impoundment surface direct to the Ireda Stream.

iv) Access road

Subject to discussions with the regulatory authorities, it is proposed that the access road be left in place.

v) Monitoring

A comprehensive environmental monitoring programme will be developed as part of the operational environmental management. This monitoring programme will be continued and modified throughout the closure period until acceptable and stable environmental conditions have been achieved. Key monitoring targets during closure in addition to those covered during operations will include :

• Chemical analysis of surface soils and other materials utilised in restoration works to ensure that concentrations of key trace elements are comparable with the pre-mining baseline.

• Analysis of water quality in the underground workings.

• Monitoring of the success rate in the establishment of forest cover on the restored site.

6.3 Financial considerations

Preliminary costs for closure have been identified as follows. These costs are subject to

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confirmation and take no account of works undertaken during operations (such as progressive restoration of disturbed lands and the tailings facility). In accordance with current good practice no account is taken of receipts from the sale of equipment.

• Plug decline and ventilation raise US$20,000 (estimated at US$10,000 per entry)

• Demolish surface structures and disposal underground US$250,000 (lump sum estimate)

• Covering 50 ha with stored topsoil and till US$100,000 (estimated at US$0.2/m2)

• Revegetation to forestry and grassland after-use US$25,000 (estimated at US$500/hectare)

• Covering and revegetation of the tailings facility US$440,000 (estimated at US$2/m2)

• Monitoring and management costs US$80,000 (estimated at US$40,000 per annum)

SUB-TOTAL US$915,000

Contingency (20%) US$183,000

TOTAL US$1,098,000

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