ASIAN EXPLORATION — Vietnamese laws lure junior financing — Canadian firms show newfound interest

In 1995, foreign investors poured an estimated US$750 million into Vietnam, largely as a result of a series of free market reforms. And yet, despite this and other other economic improvements (diminishing inflation, a healthy gross domestic product and a high level of literacy, to name a few), the Southeast Asian nation has been slow in adjusting to the rudiments of modern capitalism.

Despite Vietnam’s geological potential, the political and social upheaval that has shaken the country over the past four decades has made it virtually impossible for mineral exploration to take place. Indeed, intensive geological mapping of the country has occurred only in the past 30 years, with large-scale mapping having occurred only very recently.

Among the metallic minerals known to exist in Vietnam are gold, nickel, copper, lead, zinc, tungsten and iron ore. Non-Metallic minerals include coal, hydrocarbons, phosphates, graphite and kaolin.

Today, with relative political stability restored and foreign investment initiatives in effect, exploration is being carried out at an unprecedented rate.

An estimated 25 to 30 mining firms are currently active in Vietnam, including Canada’s own Teck (TEK-T), Indochina Goldfields (ING-T) and Olympus Pacific Minerals (OYM-V), Australian-based Normandy and Golden Tiger Resources (GTS-V), and New Zealand-listed Spectrum Resources and Iddison Group Vietnam.

With an area of 325,360 sq. km, Vietnam is comparable in size to Malaysia and 15% smaller than Japan.

Although a new constitution, adopted in 1992, separated the role of the communist party from that of the state, the government still maintains tight controls on most business transactions. The local currency is non-Convertible, and companies with foreign-owned capital must open bank accounts both in Vietnamese Dong and foreign currency, and only at banks permitted to operate in the country.

The government has made considerable efforts to industrialize, but infrastructure is poor, and agriculture still dominates the economy. Vietnam is the world’s third-largest exporter of rice.

“Heavy industry in our country is still very small,” says Ha Quang Doan, a commercial attach at the Vietnamese embassy in Ottawa. “Through foreign investment, we hope we can reinforce heavy industry, create jobs and exploit our mineral resources.”

Mining will be key to the country’s industrialization initiatives. To date, 14 mining exploration licences have been approved, most as joint ventures with the Vietnamese government.

The spate of exploration is largely a result of the Law on Foreign Investment, which permits foreigners to establish a wholly foreign-owned enterprise, establish a joint venture with a local Vietnamese entity or enter into a business co-operation contract. Each form of investment has a restricted time frame — typically 50 to 70 years — in which to exist.

The government decided the draft the new law after it consulted with foreign companies, many of which have interests in the oil sector.

“The oil companies have been in there since the mid-1980s,” says Kevin Flaherty, secretary-Treasurer of Calgary-based Tiberon Minerals (TBR-A).

“They’ve paved the way by getting the Vietnamese up to speed in terms of joint ventures and contract law.”

.STiberon

Together with unlisted Vietnam Resources, Tiberon has entered into two joint ventures, both of which — the Nui Phao tin-Copper project and the Coi Ky lead-zinc-silver project — are in northern Vietnam.

The two companies own a combined 70% stake in the projects, with Vietnamese parters holding the remainder. Tiberon President Loren Komperdo says that while it is possible for a foreign company to own a 100% interest in a Vietnamese property, most companies prefer to work with a local, usually state-owned, partner.

The joint-Venture group has a combined in-Country staff of 12 and has spent $2.5 million accumulating properties in the South Asian country. The exploration licence for Coi Ky was one of the first granted under the new foreign investment law.

Mapping has confirmed the deposit is stratabound within a silicified envelop of host shales and slates. The style of mineralization is

sedimentary-exhalative, consisting of lead, zinc and silver. Coi Ky also contains narrow, crosscutting faults in which gold appears to be concentrated.

“It started out as an alluvial pit, and we came upon the ore zone,” says Komperdo. “You can stand in the pit and see the orebody. Our intent is prove up reserves and construct an open-pit operation.”

At the Nui Phao project, Tiberon is completing a program of geophysics, to be followed by drilling. “Vietnamese drill rigs accomplish about 10 metres a day,” explains Tiberon’s president. “They’re the old Russian-style rigs and, as such, are efficient, though recoveries are slow.”

.SOlympus Pacific

Meanwhile, another joint venture project — Bong Mieu, or “Fields of Gold” — is being explored by a joint venture consisting of Indochina Goldfields (out of its Singapore office), Olympus Pacific Minerals and Iddison Group Vietnam.

Between 1895 and 1942, French miners extracted 112,000 oz. gold from the area.

In March, Indochina sold its direct interests in Bong Mieu and the adjoining Tien Ha licence area to Olympus Pacific. The US$7.5-Million cash-And-share sale allowed Indochina to recover its costs at the two prospects, and acquire 19.5% of Olympus. For its part, Olympus acquired Indochina’s Vietnamese subsidiary and is managing the joint venture.

Olympus was already involved in a joint venture with Iddison Group on the Na Pai gold prospect in northern Vietnam. Indochina, which is 34%-owned by mining promoter Robert Friedland, has also joined Olympus and Iddison to explore the Phuoc Son area.

In northern Bac Giang province, Palmer Resources (PMD-V) is targeting widespread, sediment-hosted, stratiform copper mineralization.

The junior has 100% ownership in three exploration licences covering 203.7 sq. km in the Cam Son, Lang Cha and Bien Dong areas. Reconnaissance exploration in 1995 identified copper mineralization in both stratigraphically and structurally controlled settings.

Mineralization is confined to greenish sandstone and siltstone beds in a thick sequence of red sediments. The primary copper sulphide is chalcocite, with minor bornite and rare chalcopyrite. Mineralization occurs in the matrix of the host sediments and as a replacement of diagenetic pyrite and organic material.

Palmer President George Sanders says previous exploration failed to recognize the extent and grade of the copper mineralization because it is extensively leached in surface exposures.

“There are sediment-hosted copper occurrences scattered throughout those concessions, so we are going back to geology basics,” Sanders says.

Chip sampling has returned values ranging from 0.97% copper and 11 grams silver per tonne in a surface exposure to 6.7% copper and 53 grams silver from an old underground exploration adit. In February, the company began geological mapping, trenching and sampling. Depending on results, drill targets will be selected later in the year.

One of the property’s main features is what Sanders calls “a graben, a drop-down structure filled up by sediments draining volcanics to the north.” The company is attempting to identify paleo-Channels and other rock units that are known to host this style of copper deposits.”

.SSpectrum

Spectrum Resources of New Zealand recently finished 1,200 metres of drilling on the Ban Phuc nickel project, west of Hanoi. The program was designed to establish the continuity of a massive sulphide resource of 1 million tonnes grading 3.5% nickel, 1.3% copper and 0.1% cobalt, as well as evaluate mineralization in a nearby ultramafic intrusive.

Individual samples from the shear-hosted massive sulphide deposit assayed up to 7.49% nickel, 2.36% copper and 0.16% cobalt over 1.3 metres, confirming results of drilling between 1959 and 1963.

The olivine-rich intrusive returned disseminated mineralization of up to 1.4% nickel and 0.16% copper over 22 metres, including 8 metres grading 2.27% nickel and
0.23% copper at a depth of 80 metres. Spectrum, seeking a listing on the Toronto Stock Exchange, believes that intersection may represent a zone that, in 1962, returned 62.8 metres of 1.38% nickel.

The Ban Phuc deposit is one

of 30 targets identified by the Vietnamese on the 600-sq.-km Ta Khoa concession, which lies along the Da River. Spectrum subsidiary Asian Minerals holds a 70% interest in the project, while its partners hold the remainder.

Drilling is also under way at the Na Ka target, 25 km west of Ban Phuc, where previous work returned up to 4.7% copper over 14 metres.

.SGolden Tiger

Besides its wholly owned Na Tum manganese lead-zinc prospect, Golden Tiger Resources is involved in two joint ventures with Teck: the Khau Au and Kim Hoa projects.

Active in Vietnam since 1993, the junior started up the projects in 1995. The Teck deal calls for 50-50 participation in future precious and base metal projects. Na Tum, which Golden Tiger acquired beforehand, is excluded from the arrangement.

Khau Au encompasses 190 sq. km in an area of small-scale gold workings covering several northeast-Trending, parallel structures. The principal focus has been the crest of Khau Au Mountain, where more than 120 small underground mines are working a series of shallow-dipping, stacked shear zones measuring 0.5 to 3 metres wide and situated 4 to 10 metres apart from each other.

Workings extend over a 200-Metre width and a 3-km strike along the major structural trend. Production is estimated at 13,000 oz. per year.

Using small, portable rigs that can reach depths of 150 metres, Golden Tiger is testing the downdip extension of the zones being mined.

Kim Hoa takes in 164 sq. km and covers a deep shear zone. Vietnamese workers identified gold mineralization in steep vein systems, and reported values exceeding 5 grams per tonne. Lower-grade disseminated gold occurs between the veins. The company is using portable drill rigs to confirm the zones’ potential.

At the Na Tum project, the company has doubled the previously reported size of the resource, based on new assays from samples from the Geological Survey of Vietnam. The new in-house figure is 12.76 million tonnes grading 9.95% manganese. Golden Tiger says the resource could be sufficient for a mine life exceeding 20 years.

Prefeasibility studies put the project’s capital cost at US$35.4 million, with annual operating costs of US$9.6 million and annual sales revenue of US$23 million.