Inter-Citic advances Dachang gold project

Toronto-based junior Inter-Citic Minerals (ICI-T, ICMTF-O) is making good progress in its third year of grassroots exploration at its Dachang gold prospect in west-central China’s Qinhai province.

The 391-sq.-km Dachang property is situated near the headwaters of the Yellow River, some 350 km southeast of the regional centre of Golmud. The elevation is 4,500 metres, and the land is flat, bleak and subject to permafrost. Access is by road only, owing to the high altitude.

The property encompasses a large number of gold-in-soil anomalies stretching across 22 km, many of which have been exploited by artisanal miners over the centuries. By modern exploration standards, though, only about 5% of the surface anomalies have been properly tested.

Within only two small parts of the property, named Dachang East and North River, there is a combined near-surface, National Instrument 43-101-compliant inferred resource of 7 million tonnes averaging 6.78 grams gold per tonne, or 1.5 million contained ounces gold.

Geologically, the host rock is mostly thrust-faulted Triassic sandstone and siltstone, and gold mineralization is associated with silica, pyrite, arsenopyrite and other sulphides. This gold-mineralized material has proved highly refractory in past cyanidation tests, but Inter-Citic hopes ongoing metallurgical research can improve recoveries.

In the previous two years, Inter-Citic carried out some selective drilling and trenching, and collected almost 30,000 soil samples over the entire property, identifying 24 new major gold zones.

But this year’s $5.4-million exploration program has been far more ambitious, including plans for 20,000 metres of shallow drilling and 50 km of trenching, with a particular focus on the Dachang East zone. Early drill results were typified by an intersection of 29 metres grading 2.3 grams gold at Dachang East.

The provincial government-owned Qinghai Geological Survey Institute (QGSI) carried out regional geochemical and geological mapping over the Dachang property during the 1960s, ’70s, and ’90s, identifying seven large gold-in-soil anomalies. It followed this up with geological mapping, trenching and shallow drilling until Inter-Citic’s arrival in late 2003.

That year, Inter-Citic signed its key joint-venture agreement with QGSI at Dachang. To earn an 83% interest, Inter-Citic must spend roughly $5 million on exploration over three years and pay about $1.5 million in cash on receipt of a mining licence. An additional 7% interest can be acquired once a prefeasibility study is completed. The remaining interest is carried by QGSI.

Since then, Inter-Citic has clearly been making a good impression with its Chinese hosts: in August, the country’s State Administration of Industry and Commerce granted a 27-year business licence to Inter-Citic’s joint-venture company exploring Dachang.

“This is one of the longest business licenses ever issued to a foreign mining company in China,” said Inter-Citic president James Moore in a statement. “This is a good example of the commitment of the Qinghai government to encourage foreign investment, the maturation of the Chinese regulatory environment, and the ability of Inter-Citic to successfully execute on its Dachang project.”

Financially, the company is in good health, having raised a gross $11 million in the spring — more than sufficient to fund this year’s exploration efforts at Dachang.

Meanwhile in Inner Mongolia, Inter-Citic has an option to acquire an 85% stake in the Zalantun gold-copper-silver porphyry project from the Beijing Institute of Geology for Mineral Resources (BIGM), China’s only national geological institute, by spending around $2.4 million on exploration over three years. If Inter-Citic exercises an option to acquire a further 5% stake, BIGM’s remaining 10% interest will be carried.

Despite the significant progress on the ground at Dachang, Inter-Citic shareholders having been feeling some pain of late: After holding steady around 95 during the first four months of the year, shares have steadily declined to a new 52-week low of 64 at presstime.