Urumchi, China —
Dynasty can earn up to 80% in each of three separate Sino joint ventures by way of a recent share purchase agreement with Terrawest Minerals, a privately held Canadian company. The remaining 20% is retained by the Chinese partners. Business licences have been received for the Hatu and Red Valley joint ventures, and one is expected shortly for the Wildhorse project.
Dynasty is headed by Jonathan George, a Canadian geologist with international expertise. The company was previously known as Lucero Resources and focused on copper-gold projects in Chile. Stuart Angus, better known as “Tookie,” a highly regarded lawyer specializing in the mining industry, is secretary and a director of Dynasty.
The company is determining the potential for large gold deposits on its three areas of interest in western China, and independent reports, in accordance with National Instrument 43-101, are planned for each. Initially, Dynasty will attempt to define the resource at Hatu, where two drills are turning.
The Chinese government is keen on developing new policies in an effort to improve the technology of Chinese gold companies and encourage foreign investment, as well as improve the raising of capital through the public listing of gold companies. In September, China’s President replaced the nation’s military chief with Premier Wen Jiabao, a geologist who has worked for the Ministry of Geology and Natural Resources. Wen is in charge of all metallurgical projects in China and was supportive in China’s efforts to provide incentives to companies willing to invest in the poorer, underdeveloped western provinces.
Hatu
The Hatu gold project is in Tuoli Cty., in the northwestern portion of the Xinjiang Uygur Autonomous Region, 80 km from Karamay City. Karamay is a newer city built to service the local oil industry. Road conditions are excellent.
The joint venture has set up a business office in Urumqi, a modern city with a new airport, which in turn is about a 4-hour drive from Karamay.
Hatu is in an area of low hills with elevations of 1,300 metres and sparse vegetation comprising mostly grasses. Horses graze nearby. The climate is severe, with temperatures ranging from -39C in the winter to 40C in the summer.
Dynasty can evaluate this area of interest comprising 2,500 sq km in the region, as stated in an agreement negotiated between Terrawest Minerals and Xinjiang Nonferrous Metal Industrial (Group) (XNF), which has a 20% stake in the project. XNF was established in 2002 after reforming from its Chinese-Russian predecessor. The mining group is one of the 30 main industrial enterprises in the autonomous region.
Dynasty began exploring the Hatu project last May in a program headed by Brian McEwen of Calgary-based Norwest Consulting.
Four main structural belts run northeast for some 60 km: Hatu, Anqi, Dalabute and Baogutu. XNF has gold operations at Qiqiu 1 and Qiqiu 2, which are about 7 km apart. There are several small independent mining operations along the belt, in addition to several known gold occurrences. About 17 km along the fault is the Boabei deposit.
According to a 2002 report on gold in northwestern China, carried out in part by the U.S. Geological Survey, the Hatu property is in the western Junggar Basin, which is characterized by Devonian to early Carboniferous metasediments, as well as basalts and common ophiolitic sequences.
Major northeast-trending fault zones are associated with tectonism and lode gold formation, as well as magmatism. More than 300 gold deposits and occurrences have been identified in the western Junggar area, on the northern side of the Dalabute fault zone. Resources in the area contain about 2.5 million oz. gold. Evidence suggests the yellow metal was mined as early as the 1300s, and a large amount of placer mining was carried out in the early 1800s. The gold occurrences are largely structurally controlled, and some think they are volcanic-related and epithermal in nature.
The two main deposits are Qiqiu 1, on the northern side of the Anqi shear zone, in a tholeitic basalt unit, and Qiqiu 2, which is hosted by metasediments. There is considerable post-ore deformation. A large batholith is present in the district, as are widespread mafic and granite porphyry dykes.
“A resource estimate is the number-one priority, and the focus of exploration is around Qiqiu 2,” McEwen told The Northern Miner and assorted analysts during a recent site visit. “We are targeting deposits of half a million ounces, which we hope we can develop together.”
Qiqiu 1 and 2 were stand-alone operations with their own mills. A cutoff grade of 2 grams gold per tonne is being applied to the whole area in preparation for the resource estimate.
In the past, McEwen said, the government decided on the cutoff grade and did not factor-in metallurgy until the milling stage.
“Many of the previous operations were mined by underground methods, which would have entailed higher cutoff grades to make them minable,” he explained. “However, these are being re-evaluated for bulk mining using open-pit methods.”
Primitive methods were used to recover 45-50% of the gold.
At Q1, the gold resource is hosted in 27 quartz veins and altered metabasalt host rocks typically grading 5-10 grams gold per tonne. Visible gold is abundant, and pockets of higher grades are common. The deposit has been mined from the 1,434-metre level down to 943 metres, as a result of which 250,000 oz. have been recovered to date. Pyrite and arsenopyrite are the dominant sulphides around the veins, and alteration comprises carbonate, sericite and chlorite in the wall rocks.
“The underground workings would now be flooded and likely collapsed,” said McEwen.
The lower-grade Qiqiu 2 deposit, which grades on average of 4-5 grams gold, has a historical total resource of 150,000 oz. It occurs in the carbonaceous volcaniclastic and metasedimentary rocks in the footwall of the Anqi fault.
The fault zone between the Qiqiu 1 and 2 deposits is also the subject of more exploration. At least 13-14 holes have been drilled at Qiqiu 2.
Some 3.2 km of trenching (3,000 samples) and 8,700 soil samples were collected as part of this year’s program. Geophysical surveys were done by the partners, including 87 km of induced-polarization and 44 line km of mag; however, no obvious anomalies could be found.
In the past, the Chinese did not store their drill core, so the results from previous drilling had to be taken at face value, and some were confirmed by new drill holes.
A Western-style drill was being set up during our visit. It was viewed as something of an oddity by the Chinese drillers, who were used to larger rigs that can drill only vertical holes.
The Western drill is now in operation, and Edco has been contracted to sink more than 6,000 metres this year.
The turnaround time at the lab run by Dynasty’s Chinese partners has been disappointing, to say the least. What’s more, the lab is not set up to do fire assaying and uses only geochem methods.
“The assay turnaround is frustrating,” said McEwen, “but finally we’re seeing some of the results from our work at the Boabei deposit. Boabei wasn’t part of the original deal, and now that we see the drill results, we may decide to walk away from this relatively small area before the next payment comes due.”
By the end of September, the company had drilled 3,300 metres in eight holes using Chinese rigs. Results from four of these holes included one spectacular intersection that graded 5.1 grams gold over 64.7 metres. The gold in this intercept does not appear to be associated closely with sulphides, but it does seem to be concentrated in a tectonic breccia unit. Determining the extent of this unit has become the chief priority.
Results from more recent drilling include 6 metres grading 3 grams gold at a de
pth of 20 metres, and 6 metres of 3.5 grams gold at a depth of 39 metres.
The tectonic breccia unit, which carries high gold in hole 421, has since been intersected by several holes using the Western angle drill. This will allow the company to determine the true width of the zone. Results are still pending for much of the recent drilling.
Said McEwen: “Our exploration focus this year has been on a small area of about twenty-five square kilometres, the goal being to establish a resource. But that’s only one per cent of the area of mutual interest we’re evaluating.”
Red Valley
In another Sino joint venture, Dynasty and the government surveyors are exploring a 1,100-sq.-km land package in Qinghai province. Through its purchase agreement with Terrawest Mining, Dynasty can earn an 80% interest in the property. A business licence was recently granted to the joint venture.
The area of interest lies in the Qilian metallogenic belt, which also hosts major copper deposits and has seen widespread placer gold mining in stream valleys.
The joint venture is focusing on a zone of alteration that has been traced for 6 km and is up to 500 metres wide. Past trenching outlined several zones of structurally controlled gold grading 5-10 grams over widths of 20-30 metres.
The Qinghai Institute reported two showings of potentially ore-grade gold over minable widths as a result of trenching along the northwest-trending structure.
The Hongtugou gold showing was investigated by the Qinghai Institute over a strike length of 1,800 metres; the exploration involved 60 surface trenches and two adits.
Dynasty had, by mid-October, collected more than 5,000 soil samples; the results will help determine follow-up work in the spring.
The Wildhorse project comprises 3,000 sq. km in the northwestern portion of Gansu province, along the Qinghai border, and also occupies part of the Qilian metallogenic belt.
The company is awaiting a business licence for this Sino joint venture, which it formed with Gansu Geological Brigade 2.
Regional exploration of the Heicigou gold belt in the 1990s outlined several gold occurrences and associated ring structures. A deep-seated fault bisects the project area. The gold occurs in strata or quartz veins cutting volcanics and sediments that have been intruded by granitic rocks emplaced along this fault.
Fifteen gold-copper occurrences were outlined, as well as a large magnetic anomaly and numerous ring structures.
Dynasty is required to spend US$1 million within a year of getting the business licence. Geochemical soil and rock sampling are planned, as is trenching.
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