ASIA — Princess Resources renews drill campaign in China

Having raised $4.5 million in a private financing, Princess Resources (PRL-V) has renewed a drill program at the Da Fang gold-silver property in China’s Hunan province. The program is expected to total 22,000 metres.

The Da Fang property is the most advanced of three comprising the Xinxiang project, a joint venture between Princess and state-owned mining firm Hunun Xinxiang. Princess can earn a 51% interest in the 96-sq.-km project by spending US$2 million on exploration and development, plus an additional 2% for each subsequent expenditure of US$1 million, up to a maximum of 75%.

Since mid-1997, Princess has focused on Da Fang, where it has drilled 56 reverse-circulation holes totalling 5,431 metres.

Reported gold values from Princess’ drilling have varied from 0.28 gram gold per tonne over 2 metres to 33.87 grams gold, plus 1,073 grams silver, over 1 metre. Princess states that the mineralized zones, which are typically near surface, average 40 to 50 metres in width.

The best results came from hole PRC-7, which ran 2.52 grams gold per tonne over 98 metres (from 72 metres downhole). However, nearly 60% of the mineralization is contained within several discontinuous intervals within that zone that combine for just 29 metres.

Similarly, the company reports a near-surface intersection of 45 metres (from 59 metres) averaging 2.27 grams in hole 12. But closer scrutiny reveals that 62% of the weighted average is contained in only 16 metres.

When results from five other 1-metre intervals farther downhole are considered, it is found that 78% of the zone’s weighted average is contained in less than half of its reported width.

More recent drill results were reported in a similar manner. Last December, hole 24 was reported to have hit 86 metres (from 14 metres) averaging 2.53 grams gold and 58 grams silver. Closer inspection reveals that 37% of the gold and 39% of the silver is actually contained in four 1-metre intervals within an 18-metre sub-zone (from 19 metres) that accounts for 70% of the gold and 61% of the silver in the hole.

Princess is attempting to confirm and expand upon 11,000 metres of diamond drilling previously done by Hunan Xinxiang. That drilling was focused on lead-zinc mineralization, so only 332 samples were taken for gold analysis.

Princess says Hunan Xinxiang’s data shows Da Fang to hold an inferred resource of 48.9 million tonnes averaging 2.2 grams gold and 104.3 grams silver. Within that resource, 7.6 million tonnes grading 2.3 grams gold and 100.9 grams silver are deemed an indicated resource.

Princess used the sectional method to calculate the resources, applying a cutoff grade of 0.2 gram gold. Gold grades and tonnage estimations were determined by interpolating drill data into 10-cubic-metre blocks on 25-metre plan sections. A 15-metre search radius from each data point was used for the indicated resource and 60 metres for the inferred resource.

The resources are contained in two deposits dubbed Mao Er Ling and Na Shui Xin. Both are characterized by hills rising 200 metres in height, with granite porphyries forming the hill crests. Mineralization is hosted by those intrusives and by adjacent dolomites and siltstones.

Both deposits have been exposed by local small-scale mining activities over 1.7 sq. km. According to Princess, these workings reveal highly developed, but erratically zoned, laterite and saprolite within 50 and 100 metres of surface. A strong north-northeasterly trending set of faults parallels bedding and separates Permian-aged dolomites from Carboniferous-aged siltstones and dolomites.

On the financial front, Princess lost $1.26 million (or 1 cents per share) in the six months ended April 30. This compares with a net loss of $785,166 (1 cents per share) in the corresponding period of 1997.

In May, Princess raised $4.5 million by issuing a convertible debenture to Dublin-based Arcon International Resources (a company listed on the London and Dublin stock exchanges). As part of that deal, US$1.5 million was loaned back to Arcon; it must be repaid after Aug. 31, pending the fulfillment by Princess of certain conditions.

Arcon can convert all or part of the debenture into shares by Oct. 30, at 15 cents per share. That portion which is not converted is payable by Jan. 31, 1999, plus 14% accrued interest.

Arcon also received 41.4 million share purchase warrants. Each warrant is exercisable into one Princess share at 15 cents in the first year and 17 cents per share in the second, but the amount of warrants that can be exercised is dependent on the number of shares converted from the debenture.

Upon conversion of the entire debenture and all the warrants, Arcon would hold 49% of Princess’ shares.