Dachang returns good gold hits for Inter-Citic

Vancouver – A slew of strong intercepts from the Dachang gold project in China has put Inter-Citic Minerals’ (ICI-T) share price on a steady climb, lifting it from 20¢ a year ago to almost $1 today.

Inter-Citic has seven drills turning at Dachang, advancing a 20,000-metre drill program that has two goals: to increase confidence in the defined deposit and to probe nearby areas with expansion potential. With infill efforts returning consistent, well-mineralized intercepts and expansion work uncovering new areas of interest, it seems Inter-Citic is on a roll at Dachang.

Dachang is a 279-sq. km land package in central Qinghai province home more than 50 gold-in-soil anomalies spread across six districts. The deposits defined to date, known as the Dachang Main zone or DMZ, is in the Dachang East district, which is actually in the southeast corner of the property. The DMZ is a 4-km long zone already home to 12.4 million measured and indicated tonnes grading 3.37 grams gold per tonne plus 11.9 million inferred tonnes averaging 3 grams gold, for 2.5 million contained oz. gold. Another small deposit in the North River district, known as NR-2, hosts 2.4 million inferred tonnes grading 4.82 grams gold for another 370,000 oz. gold.

The data used to calculate the DMZ resource left the deposit open at depth, to the west, and partially to the east. Inter-Citic is currently working to expand the deposit by drilling in those areas, while also infill drilling the main deposit.

Some of the best infill results from the latest set are as follows. Hole 737 cut multiple mineralized zones, ending with 17.3 metres grading 2.62 grams gold. Hole 742 started with 13.2 metres grading 1.63 grams gold from 54 metres depth, then cut through multiple zones before ending with 10.4 metres averaging 4.49 grams gold. And hole 746 intersected 8.8 metres grading 8.26 grams gold starting 28 metres downhole.

Earlier infill drilling results include 3.4 metres grading 6.48 grams gold, 12.4 metres of 3.99 grams gold, 11.2 metres averaging 2.46 grams gold, 12.2 metres grading 4.08 grams gold, 9.5 metres of 5.01 grams gold, and 25 metres averaging 5.88 grams gold.

The company is also trenching at Dachang. Trenching has proven to be a highly successful and cost-effective method of exploration at the project because of the thin soil cover in the area and the fact the mineralization extends essentially to surface in most areas. Recently trenching work revealed a new, 2-km long zone gold prospect east of Placer Valley, an area just 1 km south of the DMZ that is home to extensive historic placer workings.

Trenching in Placer Valley is difficult, as the terrain is low-lying and wet, but Inter-Citic’s efforts exposed fresh sulphide material in three separate trends all striking southeast. Each trend contains one to four south-dipping, mineralized faults that can be traced through historic placer workings east for up to 2 km.

The best trenching result came from trench 6801, which returned 62.36 grams gold over 10.5 metres. Other good results include 3.87 grams gold over 4 metres, 10.9 grams gold over 3 metres, 1.87 grams gold over 29 metres, and 5.56 grams gold over 2 metres.

Inter-Citic has already punched several holes into the new Placer Valley target. Hole 755 intersected multiple mineralized zones, including 4 metres of 5.73 grams gold. Similarly, hole 756 hit 3.1 metres of 2.27 grams gold essentially from surface, then a few metres later cut 7.8 metres of 3.21 grams gold. And hole 761 returned 13.2 metres averaging 1.64 grams gold from 7 metres downhole.

Earlier this year Inter-Citic reported results from the first stage of metallurgical testwork on Dachang ore. A combination of flotation and carbon-in-leach (CIL) technologies produced a gold recovery rate of 85%.

In July Inter-Citic produced a preliminary assessment of the economics of mining the DMZ deposit. An open pit mine producing 2 million tonnes of ore annually would feed a flotation and CIL facility, to produce 1.5 million oz. gold in dore bars over a 9-year mine life. At a gold price of US$705 per oz., a mine at Dachang carries an after-tax net present value of US$198 million, at a 5% discount, and produces a 40% after-after internal rate of return. The operation would cost US$104 million to develop and would be able to produce an ounce of gold for US$404.

Pursuant to an earn-in agreement signed in late 2003 with the Qinghai Geological Survey Institute, Inter-Citic can earn an 83% interest in the Dachang project by spending $13.5 million on exploration, completing metallurgical and pre-feasibility reports, and making a cash payment of $1.6 million upon the issuance of a mining licence. The company met the exploration expenditure requirement in late 2008.

As of the end of August Inter-Citic had $5.4 million in the bank. Then, in late October, the company added $5 million to its treasury through a private placement, selling 6.7 million units for 75¢ apiece. Each unit comprised a share and half a warrant exercisable at $1.45 for two years.

On news of its latest drill results Inter-Citic lost a penny to close at 85¢. The company has a 52-week trading range of 17¢ to 97¢ and has 89 million shares outstanding.