Jinshan’s Dadiangou to be sold to Zhongjin

Jinshan Gold Mines (JIN-T) has agreed to sell its Dadiangou gold project in China’s remote Gansu province to Gansu Zhongjin Gold Mining Co., a subsidiary of Zhongjin Gold.

Zhongjin Gold is listed on the Shanghai Stock Exchange and is affiliated with China National Gold Group. China National Gold is the largest gold producer in China and is 100%-owned by the government-owned Assets Supervision and Administration Commission of the State Council.

Dadiangou will be sold for 88 million renminbi ($13.1 million) and Jinshan is entitled to a 53% share of the proceeds, or $7 million. Its joint-venture partner, the Nuclear Industry Northwest Economic and Technology Co., will get the rest.

The gold project is at the advanced exploration stage on a 14.91- sq.-km licensed area of the province in western China.

Jinshan and its joint-venture partner had identified an indicated resource of 20 million tonnes grading 0.87 gram gold per tonne for 544,910 oz. of contained gold.

Adding to that is an inferred resource of 16.6 million tonnes grading 0.96 gram gold for 497,950 oz. contained gold, all at a 0.4 gram gold cutoff.

According to Jinhsan, the project’s tonnage fell below its threshold and did not mesh with its strategy.

News of the sale sent Jinshan’s share price down 5.1% or 32¢ per share to close at $5.94. (Over the last year, the gold producer has traded in a range of 63¢-$6.60 per share.)

Jinshan produces gold in Inner Mongolia at its CSH mine, which began producing gold in July 2007. From startup to the end of December 2009, the mine produced a total of 161,625 oz. gold.

In March, a new National Instrument 43-101 compliant reserve and resource estimate for the CSH gold mine demonstrated total reserves at the end of December 2009 of 3.43 million oz. gold (including 433,000 mined oz.), up from 2.26 million oz. in March 2008.

The reserves stand at about 138 million tonnes at an average grade of 0.67 gram gold.

The project’s updated measured and indicated resources, using a 0.3 gram gold cutoff grade, stand at 243 million tonnes averaging 0.64 gram gold for 4.88 million oz. contained gold (after 2.5 years of mining).

A new mine plan envisages a mine life extending from 2018 to 2023, with four more years of leaching after that.