Asia Minerals advances Chinese joint venture

An independent feasibility study prepared for Asia Minerals (VSE) by Cominco Engineering Services has firmed up reserves at the QDS project in Shanxi province, northeastern China.

The deposit is estimated to contain 12.2 million tonnes at 1.8% lead, 7.9% zinc and 23 grams silver per tonne.

The junior intends to acquire a 55% interest in a joint venture to develop the project. The Chinese partners are the China National Nonferrous Metals Industry (the largest metals mining company in the country) and the Shanxi government.

Asia Minerals recently formed an alliance with Royal Oak Mines (TSE), which agreed to acquire a 32% equity interest (see story this issue) in the company through a $2-million private placement. Royal Oak also has options to increase this equity interest to 50.1%, plus rights to acquire 50% and operate all properties acquired by Asia Minerals in China.

“This is a positive development which provides us with working capital to carry out our work in China,” said David Owens, president of Asia Minerals. “We are pleased to have the backing of a forward-looking partner with a good track record and the depth and resources necessary to build mines.” Royal President Margaret (Peggy) Witte said the company is reviewing the feasibility study for the QDS project before it decides whether to participate in the venture. Royal Oak’s agreement with Asia Minerals covers both existing and future mining opportunities.

QDS is being mined at 200 tonnes per day. The joint venture has proposed building a 1,200-tonne-per-day mine, to be completed in 1996. The agreement is contingent on the partners completing a business plan and joint-venture contract, as well as on Chinese regulatory approval. To acquire the 55% controlling interest, Asia Minerals must also provide or arrange financing for 55% of the capital requirements to build the 1,200-tonne-per-day underground mine.

The Chinese partners would provide 45% of the capital and secure all necessary mineral rights and mine development permits. Power, water, transportation and town-site facilities are already available. Capital costs are estimated to be US$25 million. At full production, the mine would produce 8,000 tonnes of lead concentrate and 50,000 tonnes of zinc concentrate each year.

The company plans to raise its portion of capital costs through a combination of debt and equity financing. Owens said concentrates could be sold either to Southeast Asian markets, or domestically in China at international prices.