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Last Updated: Monday, 30 October 2006, 23:59 GMT
Digging for Northern Ireland's gold
By Clare Matheson
Business reporter, BBC News, Northern Ireland

Galantas goldmine
As an open cast mine, overheads at Galantas will be lower

Nestled in the green hills near Omagh in Northern Ireland is a vast mudpit that mining firm Galantas hope will soon - literally - become a goldmine.

The temporary buildings serving as the firm's headquarters are buzzing with staff and the noise of digging.

Just minutes away, along a path only traversable by a 4x4 offroader, is a vein of ore the group hopes will be producing as much as 30,000 ounces of gold a year.

As vice president of exploration Moe Lavigne tells the story of the group's beginnings, it seems as though the firm has had the luck of the Irish in getting off the ground.

Originally set up "for tax purposes" in the late 1980s by mining giant Rio Tinto, the site was later acquired by Jack Gunter who had been planning to retire from the mining giant.

"Rio Tinto were here as they used to have a tin mine in Cornwall, which had stopped production and so their tax treatment was going to change as it was a UK company with no UK mine," says Mr Lavigne.

"So they found this site, and started a four-year exploration, including tests and so on.

"Then the tax laws changed and Rio decided it no longer wanted the site."

'Piecemeal' funding

But while Jack got a lucky break there were still problems setting up the business, with money being one of the key hurdles.

"The reason it got off the ground is Roland Phelps underwrote it with 1m of his own money," Mr Lavigne adds.

Roland Phelps had already bought out the Gwynfynydd gold mine in Wales forming Welsh Gold.

Although the site stopped production in 1998, Mr Phelps recently said the mine was still bringing in a "modest profit" each year, mainly through the sale of premium priced "pure Welsh gold jewellery".

Galantas gold jewellery
We get a very large premium on protecting our Irishness
Moe Lavigne, Galantas

The tie-up was very beneficial as Mr Phelps could bring his expertise of managing small mines and marketing niche jewellery to Galantas.

But financing has admittedly been a "piecemeal" process so far.

The group has funded itself through stock issues - it is worth around 25m Canadian dollars (11.7m; $22.3m) on the Toronto stock exchange and is also listed on the UK's Alternative Investment Market.

But, the Canadian float came just months before the Bre-X scandal in 1997, which turned prospective investors away from all other gold exploration and mining investments.

Bre-X had claimed to have found the world's biggest gold deposit in Indonesia - a claim which later turned out to be false. Bre-X had found not an ounce of gold.

Lucky break

Locals have also raised fears about environmental damage. There are strong fears about the use of cyanide to "leach" gold from rock during the refining process, with many critics complaining that the mine's surroundings would suffer.

These fears led to planning permission which include restoration of the site when it closes and reinstating its peat bogs.

1985-1990 - Rio Tinto explores area in Omagh and discovers gold
1990 - Jack Gunter forms Omagh Minerals and buys mining rights and licences to 189sq km area from Rio Tinto
1996 - Company renamed Galantas Gold and listed in Toronto stock exchange
1997 - Roland Phelps takes majority stake in firm after pumping 1m into business
2000 - Test gold recovered from samples sent to South Africa goes on sale
2002 -Full planning permission, including more than 30 conditions, given for site.
2006 - Lists on AIM index in London

A factor that worked in the firm's favour was the fact that the gold deposit was of such a high grade that explosives would not have to be used to extract it - a key consideration in the 1990s when the IRA was still in operation.

Instead of detonating the seams, the gold rock could simply be dug out of the ground.

So, after a "lengthy and elaborate" planning process, Mr Gunter's firm finally got the full go-ahead to develop the site in 1995. Now after meeting further planning conditions, and much preparation, production is set to begin soon.

Rich seam

Out on the open-cast site, the JCBs and tractors are uncovering the first vein to be exploited.

Erupting from the muddy hole, like the back of a whale, is the Kearney seam, littered with blue and red markings.

"It's a very rich seam," Mr Lavigne says. "We'll generate about two-thirds of an ounce of gold per tonne of rock - each tonne will be worth about 200, and it will cost 75 to extract the gold. So we'll make a profit of 125 per tonne."

He expects the mine to go into full production by the end of the year.

By then the processing hangar will be in operation, grinding and sifting the Kearney rock for pyrite (fool's gold) and gold itself.

Dual markets

Galantas - which is Gaelic for elegant thing - is also selling high-end jewellery.

Its "free gold", the stuff that is shaken out on site at its processing plant, will be used to make 18 carat and 20 carat exclusive trinkets. The group already has seven stores around Ireland and markets on the internet.

Galantas goldmine processing machinery
The mine should be going into production by the end of the year

"We get a very large premium on protecting our Irishness," says Mr Lavigne.

"We've already sold 300,000 of jewellery from the test rock we sent to South Africa - 85% of those sales were wedding bands.

"And there's a big market out there. Not just Ireland, but a huge market on the eastern seaboard of the USA."

Compared with many of the mining giants, Galantas could be considered a small operation. But they have big hopes for the future.

"Our objective is to find more gold and operate this mine in perpetuity, making between 5m and 8m profit per year on 35,000 ounces of gold," says Mr Lavigne.

"Mining companies always want to be bigger and our future is in going underground," he explains. "We've identified a possible 15 veins on the site."

Apart from this glittering endorsement, when mining finally does begin at the site, Galantas will have the distinction of being the only working goldmine in the UK.

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