Sino Gold adds China asset

Several years ago, Australian gold producer Sino Gold (SIOGF-O, SGX-A) identified the Eastern Dragon gold-silver deposit in northern China’s Heilongjiang province as a high-priority acquisition target.

Sino Gold finally got its wish, recently acquiring a 72% interest in the high-grade, near-surface deposit — which it believes has the potential to become a low-cost mine — for US$90 million.

Sino Gold says Eastern Dragon has production potential of 80,000 to 120,000 oz. gold per year at a cash cost of less than US$100 per oz., after silver credits.

The company is aiming to confirm 600,000 to 800,000 contained ounces gold, with grades of 7-8 grams gold per tonne and 70-75 grams silver, as well as a potential tonnage of 2.3 to 2.9 million tonnes at the project.

The plan is to start with a small open pit and then move to an underground operation with an initial production startup date anticipated in 2010.

“We believe this acquisition will add significant shareholder value and reinforce our first mover position in a country that [has] become the world’s largest producer this year,” Sino Gold chief executive officer Jake Klein said in a statement.

In order to finance the acquisition and advance development of its China projects, Sino Gold completed an A$170-million (US$149 million) private placement through a book-build.

Gold Fields (GFI-N, GOFD-L), Sino Gold’s largest shareholder and strategic partner, participated in the placement pro-rata to their shareholding of about 16.5%.

Eastern Dragon Lode 5 is a high-grade, low-sulphidation epithermal gold-silver deposit, which has been tested by extensive trenching, diamond drilling and underground development.

Sino Gold’s local joint-venture partner, the Heilongjiang Exploration Brigade, discovered Eastern Dragon Lode 5 quartz vein in 1998 and completed 45 diamond-drill holes and 1.9 km of underground development.

It defined low-sulphidation epithermal gold and silver mineralization over a 600-metre strike length to a depth of 250 metres. Near- vertical veins averaged 6 metres in thickness and initial recoveries were greater than 90% for gold and greater than 70% for silver.