Pinnacle Mines lands Chinese partner

Vancouver – Pinnacle Mines (PNL-V) has scored a major coup in the Canadian resource scene by securing a significant investment from a Chinese mining company.

The $2 million investment by Zijin Mining Group into Pinnacle gives the Chinese miner an initial 21% stake in the Vancouver-based junior. The bulk of the funds are earmarked for Pinnacle’s Silver Coin project located just north of Stewart in northwestern B.C.

The deal marks the first direct Chinese investment into a Canadian mineral project. Zijin chairman Chen JingHe’s statement that “the investment is not that big for Zijin, but important,” seems very much an understatement, as a growing number of capital-rich Chinese resource and investment companies expand their scope worldwide. Mr. Chen further elaborated that Zijin is “looking for feasibility-stage projects.”

The cooperation agreement between the two companies has Zijin subscribing to a 3 million unit private placement in Pinnacle priced at 65 apiece. The units are comprised of a share and one-half a warrant, with each full warrant exercisable at 83 per share for two years. Zijin will also appoint two directors to Pinnacle’s board, adding to the one existing Zijin representative already in place.

The scope of the agreement holds significant potential beyond just Pinnacle’s flagship Silver Coin polymetallic project. The companies have agreed to participate, on a joint venture basis, in yet selected projects worldwide potentially using Pinnacle as the vehicle. Zijin also acquires a right of first refusal to directly participate any of the junior’s current projects.

Zijin operates a number of gold mines throughout China and reports 2004 group output of 416,000 oz. gold at an average cash cost of about US$140 per oz. Within China, the producer controls unclassified reserves of about 10 million oz. of gold, 3.45 million tonnes (7.6 billion pounds) of copper, 600,000 tonnes (1.3 billion pounds) of zinc, 188 million tonnes of iron ore and 60 million tonnes of coal.

Zijin is a Hong Kong Stock Exchange listed company with about one third of its shares publicly held and the remainder owned by regional Chinese government agencies and other companies.

Investors, warm to the idea of a Chinese partner, rallied trading in Pinnacle over the past few days, pushing up the stock about 15% to the 87 per share level on strong volume.