THE GLOBAL SEARCH FOR GOLD SPECIAL — China the `last frontier’ for mining companies

Attempting to secure rights to explore, develop and mine gold projects in China is no easy task. The geological potential is enormous, and so, of course, is the interest being demonstrated by foreign companies. However, several such companies have walked away frustrated and empty-handed, finding that the legal framework for Western-style mining deals is still in its infancy.

China would seem to be one country where juniors with plenty of patience have an advantage. Witness Asia Minerals (AMP-A), which, after years of hard work and perseverance, was the first to secure a gold-mining joint venture in the country.

This summer, the company, which is held 47% by Royal Oak Mines (RYO-T), closed a $7-million financing. Most of the proceeds will be used to fund its first-stage investment in the Yingezhuang gold joint venture in Shandong province.

The goal is to increase the mine’s annual output to 80,000 oz. by optimizing throughput and implementing an expansion program. Last year, Yingezhuang turned out 13,500 oz. of the yellow metal at a cash cost of US$205 per oz.

Once Asia Minerals expands its rate of production, it will have a 50% interest in the mine and be a joint operator.

The project hosts proven, probable and possible reserves totalling 19.48 million tonnes grading 2.8 grams gold per tonne, for a gold content of 1.78 million oz. This total includes proven reserves of 7.5 million tonnes of 2.8 grams.

First phase

The first-phase program also includes a 10,000-metre drill program, which got under way earlier this summer. The work will be carried out by the geological team of the Zhaoyun Gold Industrial Group.

Asia Minerals intends to use a portion of the recent private placement to help fund the acquisition and exploration of additional gold projects in Shandong province. The company has a “strategic alliance” with ZGIG to explore and develop gold projects in the region, the first being a program to explore an 8-km strike extension of the Yingezhuang mine shear zone.

David Williamson Associates, a British research investment firm, describes the region as having “distinct geological similarities to the Timmins gold belt in Ontario, where over 100 million ounces of gold have been recovered in the past century.”

The Jiaodong Peninsula, within Shandong province, is reported to produce about 25% of China’s annual gold output and about 33% of the country’s gold reserves. The coastal province has three deep-water ports, two major airports and a superior network of railway and roads.

Global-Pacific Minerals (GPJ-V) has spent the past three years acquiring properties in China and is one of the first foreign companies to receive a metal mining permit. Its most advanced project is the Hucan copper-gold-silver mine, a 51% owned joint-venture in Tongling.

Global-Pacific has funded a 400-tonne-per-day flotation mill at a cost of US$1.26 million. Annual production is projected at 2.9 million lb. copper, 1,400 oz. gold and 45,000 oz. silver, plus some quantities of sulphur and iron. Cash costs are estimated at US$170 per oz. gold-equivalent.

Global-Pacific has secured rights to explore various prospects in the country, including areas where “Carlin-type” gold deposits are being sought. The junior is also evaluating other properties in China.

Earlier this summer, Global-Pacific signed a letter agreement with Southwestern Gold (SWG-T) to form a joint-venture arrangement in China.

The agreement gives Southwestern the option to acquire 70% of Global’s interest in an exploration concession held by Global, or in those to be acquired during the next five years. In turn, Global will have the option to acquire a 30% interest in any exploration concessions acquired by Southwestern over the next five years.

The companies plan to open a joint exploration office in Beijing, and initiate field work as soon as possible.

A number of Global’s properties are gold prospects, including Long Gai in Shichuan province. A large gold-in-soil anomaly measuring 4 by 2 km is the main target.

The PG project covers 40 sq. km and contains two known gold zones and numerous geochemical anomalies. Global has a 70% interest in the SSH project, about 450 km west of Tongling. The project area is underlain by a laterite gold resource partially drilled off and estimated to contain 7.5 million tonnes averaging 2.4 grams gold. The XMP project is underlain by limestone-hosted fracture and stockwork-controlled gold mineralization. This target is currently being worked by local miners.