Bluebird Merchant Ventures, a gold company primarily focused on bringing historic mines back into production, has signed a US$2 million farm-out agreement for the Kochang gold and silver project in South Korea, which will fully fund it to production stage.

The company has not revealed any further details on the company it has signed the agreement with, other than saying it is a consortium of successful South Korean business professionals with a broad range of expertise, including metal trading.

Kochang has significant historic data and a non-JORC estimate 550-700Kt grading between 5.2-6.6 g/t Au and 27.3-34.8 g/t Ag and its 2.5km strike is open at depth and laterally.

Production could start as early as between 6-9 months, it said, following relevant permitting with the initial plan being to process via a toll treatment agreement.  

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According to the terms of the agreement, the farm-out is over three stages with milestones needed to be achieved for the grant of equity. It is essentially contingent on the outcome of a review being conducted by the Korean Board of Audit and Inspection the granting of a Mountain Temporary Use Permit.

The Korean Mining Registration Office  has already agreed to extend the Kochang Licence until the KBAI review is complete, Bluebird said.

The company's JV partner has already committed US$5 million to develop the company's Gubong Mine, Bluebird added, and will provide JV management and finance and as well as corporate and planning expertise at local, district and governmental level. Bluebird will provide technical assistance chargeable to the JV at market rates, it added.

Of the two projects, Kochang is accepted as the easiest to bring back into production, the company said.

A scoping study for Kochang and Gubong included a post-tax NPV of US$181 million, free cash of $50 million pa, an IRR of 111% and a $630/oz all in sustaining cost on a US$1,750/oz Au price.

Bluebird now has US$9 million committed to develop its three high grade gold mines in South Korea and the Philippines against a current market cap of £11m.

South Korea has a hard risk rating of 50 in Mining journal Intelligence's World Risk Report, and an investment risk of 52 (both out of 100). It has a CCC rating overall, which means it is moderate to high risk.

Shares in Bluebird were at 1.40p/share in afternoon trade, down 6% on the previous session.