Chalice Gold Mines' joint venture firm Zara Mining Share (ZSMC) has signed a mining agreement with the Government of Eritrea for the financing and development of the Koka gold mine at the Zara project in West Africa.
The Koka gold mine has a probable mineral reserve of 760,000oz at a grade of 5.1g/t gold and an indicated mineral resource of 840,000oz at a grade of 5.3g/t gold.
According to the project's feasibility study, the mine is estimated to have an average production capacity of 104,000oz of gold a year at a cash cost of $338/oz of gold.
The firm is also awaiting government approval regarding its application for an 18-year mining licence.
The Government of Eritrea holds a 30% interest in the Zara project through the Eritrean National Mining Corporation.
Koka gold mine is expected to commence production in late 2013.