VVC options Chinese gold mine (October 18, 2004)

VVC Exploration (VVC-V), through subsidiary Orient Will Investments, has signed an option agreement to acquire a half-interest in the small Chen Er gold mine in China.

To acquire the interest and become co-operator, Orient Will must spend US$4 million on exploration within four years.

Situated in the Kunlun-Xinling mountains of gold-rich Shaanxi province, Chen Er is an underground mine that produces about 500 tonnes per day.

The mine started up in 1986, and since 1991 has cranked out an average of 30,000 oz. gold per year. Last year, Chen Er produced 32,000 oz. at an average grade of 5 grams gold and 20 grams silver per tonne, 8% lead and 1% copper — figures typical of the surrounding gold camp.

The mine is serviced by a mill complex that includes multi-line production and tank leaching, with 500- and 200-tonne-per-day ball mill circuits. The 200-tonne-per-day circuit has been rented to an arm’s-length company until July 2006.

VVC says the mine is “profitable and performing with a satisfactory recovery rate,” though some upgrading may be warranted.

Despite 18 years of production, exploration is described as “almost non-existent.” Indeed, no drilling has been carried out. The property does not host a documented resource.

Subject to reguatory approval of the option agreement and to VVC’s due diligence, the subsidiary will carry out US$2 million worth of exploration over the next two years, including underground diamond drilling and drifting on mineralized veins from a newly completed 500-metre vertical shaft. The aim is to test and define known zones and extensions of zones currently being mined, with an eye towards developing a significant resource.

VVC is meanwhile refurbishing and exploring the dormant Beaver Brook antimony mine in Newfoundland (T.N.M., April 23-29/04) and carrying out grassroots gold exploration in Newfoundland’s Botwood basin and China’s Yunnan province.