Pinnacle Mines lands major Chinese partner

Vancouver — Pinnacle Mines (PNL-V) has scored a major coup in the Canadian resource scene by securing a significant investment from a Chinese mining company.

Reversing a common trend of Canadian exploration capital landing in China, the $2-million investment by Zijin Mining Group into Pinnacle gives the Chinese miner an initial 21% stake in the Vancouver-based junior. The bulk of the funds are earmarked for Pinnacle’s Silver Coin polymetallic project, situated just north of Stewart in northwestern British Columbia. The project was recently visited by six Zijin executives and technical personnnel.

The deal marks the first direct Chinese investment into a Canadian mineral project. Zijin Chairman Chen Jing He stated that “the investment is not that big for Zijin, but important,” as it represents how a growing number of capital-rich Chinese resource and investment companies are expanding their scope worldwide. Chen added that Zijin is “looking for feasibility-stage projects.”

The agreement has Zijin privately placing 3 million units in Pinnacle at a price of 65 apiece. Units consist of a share and half a warrant, with each full warrant exercisable at 83 within two years. Zijin will also appoint two directors to Pinnacle’s board, adding to the one Zijin representative already in place.

The companies have also agreed to participate, on a joint venture basis, in future projects worldwide, potentially using Pinnacle as the exploration and development vehicle. Zijin also acquires a right of first refusal to directly participate any of the junior’s current projects.

In addition to Silver Coin, Pinnacle Mines is involved in the Surprise Creek polymetallic project, situated 32 km northeast of Stewart, and in the Yang Wen Chong gold project in southeastern Yunnan province, China.

Zijin operates gold mines throughout China and reports 2004 group output of 416,000 oz. gold at an average cash cost of about US$140 per oz. Within China, the major controls unclassified reserves of about 10 million oz. gold, 3.45 million tonnes (7.6 billion lbs.) copper, 600,000 tonnes (1.3 billion lbs.) zinc, 188 million tonnes of iron ore and 60 million tonnes of coal.

Zijin has a Hong Kong Stock Exchange listing, with about one-third of its shares publicly held and the remainder owned by regional Chinese government agencies and other state companies.

Shares in Pinnacle Mines rallied on news of Zijin’s investment and then, within a week, were propelled even higher as drilling by Pinnacle and joint-venture partner Mountain Boy Minerals (MTB-V) at Silver Coin intersected impressive gold values.

Five holes had tested the newly discovered Main Breccia zone and cut significant gold and silver mineralization. Hole 52 intersected 119 metres (from 88 metres down hole) grading 5.4 grams gold per tonne and 32.8 grams silver per tonne, including 15.3 metres of 34.1 grams gold and 206.7 grams silver.

The high-grade hole was lost in a heavily mineralized, faulted breccia at 207 metres, with the last 1.5 metres assaying 6.8 grams gold.

Visible gold in the core is found within very fine-grained sulphides that give the quartz component a black mottled appearance, similar to mineralization found at the nearby past-producing Silbak-Premier mine, operated by Westmin Resources until 1996.

Extensive historical exploration has been done on the claims at Silver Coin, delineating discontinuous VMS lenses and zones. The joint-venture partners have recently focused on the heavily faulted breccia structures for their precious metal potential.

Whereas past exploration showed the breccia zones had limited widths, more recent work has demonstrated widths of up to 120 metres and significant strike and depth potential.

The Main Breccia zone has extensive sericite-pyrite-quartz alteration. Mineralization is associated with quartz stockworks, breccia and silica flooding, and gold occurs with disseminated pyrite, sphalerite, galena and chalcopyrite. A later stage of mineralization consists of semi-massive sulphide pods containing significant base metals.

In contrast to the abundantly apparent mineralization at lower elevations along the Granduc mine road and below, it was observed during a recent site visit by The Northern Miner that much of the higher-level mineralization discovered above 950 metres is “blind,” with minimal surface expression.

Blind targets mean lots of drilling. As such, Pinnacle is planning to drill up to 15 more holes totalling 3,000 metres on the Main Breccia zone this season. Higher drill density may help join the known pods and zones, and thus add tonnage to mineralization.

The partners are also considering bulk sampling to better determine both the grade and the homogeneity of the mineralization.

Drill holes 48 and 49 are on the Kansas claim, which is held by Tenajon Resources (tjs-v), with Pinnacle and Mountain Boy able to earn up to a 70% interest. Holes 50-52 are located on the Big Missouri claim, an option-joint venture between Pinnacle and Mountain Boy.