Korab Resources shares spike on Bobrikovo gold deposit resource upgrade

Korab Resources (ASX: KOR) has announced an update of the global resource at the Bobrikovo deposit located in Eastern Ukraine in the Lugansk Region within Nagolny Ridge.

As a consequence of the incorporation of additional data received after work on the initial resource statement commenced, the resource has been increased by 5% from 19.3 Mt to 20.2 Mt at 1.55 g/t for 1.012 million ounces. The global resource prior to the update was 0.96 million ounces.

The measured resource has increased by 77% from 0.939 Mt to 1.660 Mt at 2.05 g/t for 109,614 ounces. The measured, indicated and inferred resource includes a high grade component of 0.51 million ounces contained in 3.7 Mt of rock with an average grade of 4.30 g/t Au.

This includes 0.33 million ounces (2.23 Mt of rock grading at 4.6 g/t) in measured and indicated categories.

The updated resource model has confirmed the conclusions of the first model that Bobrikovo deposit remains open at depth and along strike offering excellent potential for substantial increase in resource. Additional drilling and trenching will be undertaken in 2010 to extend the mineralisation.

Following the strategic review undertaken in 2009, the Korab board has decided to seek a separate stock exchange listing on the ASX and overseas for Lugansk Gold Ltd. Following the IPO, Lugansk will continue to develop the Bobrikovo gold and silver mine located in eastern Ukraine.

On the basis of the company's discussions with European and North American brokers and investment banks, Korab expects that the IPO of Lugansk will seek to raise (in aggregate) between US$40 and US$50 million in new equity to fast-track the development of the Bobrikovo mine.

Out of this amount, approximately 4-5 million will be raised in Australia with the rest of the funds raised overseas.

Korab is currently finalising the documentation required to call an Extraordinary General Meeting (EGM) where Korab’s shareholders will be asked to approve the demerger and the in-specie distribution of free shares in Lugansk Gold to Korab shareholders at a pro-rata ratio of between 1 and 1.5 free Lugansk Gold Ltd shares for each Korab share held on the record date.

The record date is likely to be 7-10 days after the EGM which is planned for April 2010. Work on the Lugansk Gold Prospectus is well advanced and should be completed prior to the EGM taking place.

Lugansk Gold Ltd intends to use the funds raised under the proposed IPO to cover the construction of the processing plant and for working capital requirements. It is the intention of the company to achieve initial production of 60,000 oz of gold pa from Bobrikovo mine and to continue exploration at Bobrikovo while mining and processing of the resource classified as measured category is taking place.

This exploration program will aim to increase the JORC Code compliant resource to over 2 million ounces within the next 2 years. Mining of the oxide ore (corresponding to the measured resource) re-commenced at Bobrikovo gold mine last week. Production of gold and silver is expected to start in the second quarter of 2011.

Gold production cost is expected to be in the range from US$260 to US$280 per ounce.

Korab Resources shares rose 11% to 43 cents in trading today.

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