NEW FRONTIERS IN MINING — Opportunities in China

One advantage to exploring for minerals in China, which recently opened its doors to foreign mining companies, is the excellent geological data available on specific sites, says the president of a Vancouver-based company.

“The level of data acquisition (in China) is higher than here,” said David Owens of Asia Minerals (ASE). “They (the Chinese) are extremely thorough in exploration, pre-feasibility and feasibility. The quality of their presentation is extremely high.”

However, where the data collection falls short is in the interpretative stage. “They don’t have the facilities to do the complex data manipulations that we have,” he said, adding that although Canadian companies may have to suffer delays in obtaining such information, the waiting is worthwhile. Owens speaks from experience. Late last year, Asia Minerals entered into the first Sino-Canadian joint-venture mining development agreement — the result of dramatic economic reform within China, begun in 1992. The company has two non-ferrous properties under consideration, and is looking at several gold properties with Royal Oak Mines (TSE) of Vancouver. Owens anticipates Asia Minerals will spend $750,000-1 million in 1994 in project generation and evaluation before pre-feasibility.

In August, 1993, AMC signed a “memorandum of intent” to acquire a 55% joint-venture interest in the Qiandongshan (QDS) zinc-lead project in the northeastern province of Shaanxi. Its joint-venture partners are the Shaanxi provincial government and China National Nonferrous Metals Industry (CNNC), the latter being China’s largest mining company.

This proposal, now awaiting final approval from the Bejing national government, calls for Asia Minerals to earn its controlling interest by providing or arranging 55% of the required capital to place a 1,200-tonne-per-day underground mine into production. The Chinese partners are charged with securing the other 45% of required capital and acquiring land and mineral rights, as well as mine development permits. The decision to sign the memorandum came after Asia Minerals entered an earlier agreement for right-of-first-offer to acquire up to 60% of QDS. Three independent mining institutes in China had prepared feasibility studies. Owens says the company hired Cominco Engineering Services (CESL) in January, 1993, to conduct an independent feasibility study using data generated from the site. This study confirmed the QDS reserves (12.2 million tonnes at 1.8% lead, 7.9% zinc and 23 grams silver per tonne) plus the technical and economic viability of the mine development plan. The findings prompted AMC to enter into the memorandum agreement.

“Within the next three months, we expect a decision (from Beijing) on the proposal,” said Owens. Approval would see mine construction begin in 1994 and be completed in 1996. Currently, a 200-tonne-per-day operation exists on site. The company has also signed a first-stage, joint-venture agreement with the Altay regional government to evaluate and develop the Ashele volcanogenic massive sulphide (VMS) copper-zinc deposit in northwestern China. Asia Minerals can earn a 60% controlling interest in the project. However, Royal Oak also has an agreement (with Asia Minerals) which would see it acquire a minimum 50% of the project by funding a full mine feasibility study. Owens says CESL was hired to conduct a pre-feasibility study of a 3,000-tonne-per-day underground operation.

“It was completed Dec. 15, just before Christmas,” said Owens. “We are currently reviewing the results of the conclusion of the pre-feasibility.” He added he is reluctant to discuss the findings, as they have yet to be made public. “We are planning to return to Altay after the Chinese New Year. At or about that time, we will issue a press release.”

Initial information on the Ashele deposit places reserves at 24 million tonnes grading 3.1% copper and 1.0% zinc. This includes a high-grade core of 17 million tonnes at a grade of 3.8% copper and 1.5% zinc, together with significant gold, silver and lead values.

Owens said China’s open-door policy for mining, initiated in 1992, has been extremely successful. “The opportunities there are better than in any other part of the world.

“One has to be very patient,” he conceded, alluding to cultural differences between Chinese and Western businessmen. “It is difficult to make a plan and to keep to it.”

Owens feels his company is further along the “learning curve” than other Canadian mining ventures which are considering mining ventures in China and other countries. (One Australian mining company has also signed joint-venture agreements in the country.)

To manage the new foreign investment flowing into the country, China has set a goal of US$1 billion by 1995. It has also begun drafting a new mining act which allegedly takes international standards into account. A final draft was to have been completed in 1993; however, it was found that further revisions were required.

For Westerners, an appealing aspect of Chinese mine development is that local joint-venture partners are responsible for seeing that permitting and environmental regulations are met. While the Chinese do have environmental laws and concerns, Owens said the process seems to be much more streamlined than in North America.

— The author is a freelance writer in Vancouver, B.C.