Canadians option project in China

The economic boom in the People’s Republic of China is being fuelled in part by burgeoning foreign investment in almost every industry sector. Asia Minerals, a private company formed by a group of Vancouver mining professionals, recently visited the country and spent almost two months evaluating 52 mining opportunities.

Late last year, the junior signed an agreement allowing it to acquire up to a 60% interest in the Qiandongshen (QDS) zinc-lead project in Shaanxi province, and an exclusive 5-month period to conduct a feasibility study. In the meantime, the company will further evaluate five additional base metal and gold deposits identified as having economic potential in 1992. “We believe we are the first Canadian company to do a deal in China,” said geologist David Owens, president of Asia Minerals. The company’s two remaining directors are geologists David Trueman and David DuPre. Financing for these and other projects will likely be raised by ASE-listed American Exploration, which recently signed a letter of intent to acquire 100% of Asia Minerals by issuing three million of its shares. Asia Minerals retained Cominco Engineering Services to complete a feasibility study on the project, which has total reserves of 12 million tonnes, including 6.4 million tonnes grading 1.6% lead, 8.2% zinc and 23 grams silver per tonne. The property is also considered to have drill-indicated potential for a further 5-6 million tonnes of similar grade reserves.

A Chinese state mining agency already completed a detailed domestic mine feasibility study and received state authorization to put the QDS mine into production. This study recommended developing a 1,200-tonne-per-day mine which could be expanded if further reserves were upgraded and defined to increase the planned 17-year mine life. Major infrastructure requirements for the mine and rail transportation are already in place.

Capital costs were estimated at US$28 million, allowing for a capital payback of 2.5 years from startup. Total production costs were estimated to be US$16 per tonne of ore, and the discounted cash flow return on investment (for 1,200 tonnes per day) was estimated to be 25%.

Owens said the low-cost base in China makes mineral opportunities in the country attractive, particularly now that sweeping economic reforms are taking hold in the country. Owens said Chinese mining corporations are interested in joint ventures as a vehicle to introduce modern mining techniques and technology, as well as western management practices.