Vancouver — In its bid to transform itself into a market-oriented economy, China has become the world’s largest recipient of foreign direct investment, and good chunk of it is earmarked for mineral exploration.
The country recently joined the World Trade Organization and, this year alone, is expected to receive US$53 billion in foreign direct investment (about 10% of the world’s share). Moreover, China’s economy has been growing at a steady 7% per year.
After westernizing its regulatory and land tenure systems, China began opening its doors to foreign mining companies. Since a private financing system has yet to be established to help fund exploration, foreign mining companies with long purse strings and good contacts are seizing opportunities to acquire advanced mineral projects.
One of the largest Sino-foreign co-operative exploration projects is held by
Pacific Minerals is exploring for precious and base metal deposits in China and is currently earning a 96.5% interest in the 217 Gold project, 70% in the JBS platinum-palladium project, and 90% in the Dandong gold project. Also, at the Yunnan Copper project, two separate co-operative joint-venture companies have been formed; Pacific Minerals is earning a 75% interest in one, and 70% in the other.
Ivanhoe Mines holds a right of first refusal to acquire up to 80% of Pacific Minerals’ interest in any new project picked up by the latter anywhere in China (excluding Anhui province).
To date, Ivanhoe has exercised this right on the Yunnan Copper properties, and the Dandong property. The agreement stipulates that initially Ivanhoe can earn a half-stake in the joint-venture company created for each project by equally sharing the first US$1 million in expenses. Ivanhoe can acquire an additional 10% of Pacific Minerals’ interest by completing a feasibility study. On successful completion of the feasibility study, Ivanhoe can acquire a further 20% of Pacific Minerals’ interest by arranging the funding necessary to take the project to production.
Similar agreements cover the 217 Gold project and the JBS platinum-palladium project. In the former, Ivanhoe can earn a 60% interest by completing a production feasibility study. Once vested, its interest will be reduced and converted to a 36.5% carried interest. Once the feasibility study is completed, Ivanhoe can increase its stake to 76.5% by arranging financing to take the property into production. Pacific Minerals will then have a 20% carried interest. Once the second option is exercised, Pacific Minerals’ stake will be reduced to a 20% carried interest.
At the JBS project, when US$1 million of Ivanhoe’s private placement has been spent on the property, Ivanhoe can acquire half of Pacific Minerals’ interest by completing a production feasibility study. Once this is completed, Ivanhoe can acquire an additional 15% by arranging financing to take the property into production.
In addition to these agreements, Ivanhoe owns 38.4% of the issued and outstanding shares of Pacific Minerals, or 42.2% on a fully diluted basis.
Pacific Minerals recently released drill results from the 217 gold project in Inner Mongolia. The 36-sq.-km project is accessible from Baotou, a large industrial city, via a series of paved and gravel roads. Ivanhoe Mines’ large new copper-gold discovery at Turquoise Hill, in southern Mongolia, is about 160 km north of the 217 Gold project.
Drilling has focused on the main Northeast Gold zone, which measures 1.6 km long and up to 200 metres wide. This zone is part of a much larger mineralized package of rocks that has been traced for more than 4 km. Twenty diamond core holes, totalling 4,300 metres, have been drilled. Results indicate mineralization is continuous over 800 metres of tested strike length, is 100 metres wide, and extends downdip for at least 280 metres. Mineralization remains open both along strike and downdip. Highlights are as follows:
q Hole 11 cut 117.75 metes averaging 0.91 gram gold per tonne, starting at a down-hole depth of 8.65 metres; this included a 32.9-metre section that averaged 1.3 grams gold.
q Hole 29 intersected 104.3 metres averaging 0.84 gram gold starting at 156.2 metres down-hole; this included a 15.6-metre section of 1.3 grams gold.
q Hole 14 cut 172.13 metres averaging 0.88 gram gold starting at 158.1 metres down-hole; this included a 11.57-metre section of 1.55 grams gold.
q Hole 25 cut 103.4 metres averaging 0.91 gram gold starting at 123.6 metres down-hole; this included an 11.6-metre section grading 1.52 grams gold.
q Hole 17 cut 106 metres averaging 0.95 gram gold starting at 126.18 metres down-hole; this included a 9.3-metre interval that assayed 1.41 grams gold.
q Hole 23 cut 41.3 metres averaging 1.4 grams gold starting at 83.7 metres down-hole; this included a 12.65-metre section of 2.4 grams gold.
q Hole 19 cut 72.1 metres averaging 1.01 grams gold starting at 58.6 metres down-hole; this included a 7.4-metre section that assayed 2.92 grams gold.
Preliminary metallurgical tests performed by SGS Lakefield Research in Ontario on both sulphide and oxide samples indicate the gold can be recovered economically.
Cyanidation-leaching tests on sulphide samples yielded a gold recovery of 97.7%. A similar gold recovery, 97.2%, was achieved with a combined process of gravity separation and cyanidation at similar grind size of 70 mm, in which 58.8% of the gold can be recovered by gravity methods. Direct cyanide leaching on the oxide sample achieved a gold recovery of 87.7%.
Meanwhile, at the JBS platinum-palladium deposit in Yunnan province, 20 underground drill holes spanning 954.25 metres have been drilled to assess continuity and grade. The JBS consists of two zones, the Northern and the Southern, which are bisected by a river. Mineralization has a combined strike length of 3.4 km and a width that varies from 200 to 600 metres. The deposit is hosted in disseminated magmatic sulphides in transitional layers of an ultramafic sill. The Northern section of the deposit hosts the K1 and K2 zones, which are the subject of current drilling. Highlights of recent drill results in the PD1339 adit are as follows:
q Hole 2-1 cut 9.48 metres averaging 1.28 grams platinum, 2.42 grams palladium and 0.11 gram gold per tonne, plus 0.29% copper, 0.13% nickel and 0.25% cobalt; this included a 1-metre section grading 8.05 grams platinum, 14.3 grams palladium, 1.15% copper, 0.41% nickel, 0.03% cobalt and 1 gram gold.
q Hole 4-1 cut 7.94 metres averaging 1.88 grams platinum, 2.63 grams palladium, 0.18% copper, 0.26% nickel, 0.02% cobalt and 0.25 gram gold; this included a 2.63-metre section that averaged 4.67 grams platinum, 6.55 grams palladium, 0.46% copper, 0.44% nickel, 0.02% cobalt and 0.67 gram gold.
q Hole 25-2 cut 7.59 metres averaging 1.85 grams platinum, 2.8 grams palladium, 0.19% copper, 0.28% nickel, 0.02% cobalt and 0.25 gram gold; this included a 4.59-metre section that averaged 2.65 grams platinum, 3.61 grams palladium, 0.23% copper, 0.3% nickel, 0.02% cobalt and 0.31 gram gold.
q Hole 82-1 cut 6.25 metres averaging 2.42 grams platinum, 3.59 grams palladium, 0.25% copper, 0.27% nickel, 0.02% cobalt and 0.32 gram gold; this included a 2.4-metre interval that assayed 4 grams platinum, 5.94 grams palladium, 0.4% copper, 0.36% nickel, 0.02% cobalt and 0.49 gram gold.
q Hole 82-2 cut three intervals, the best of which averaged 4.79 grams platinum, 7.18 grams palladium, 0.5% copper, 0.45% nickel, 0.02% cobalt and 0.62 gram gold over 4.03 metres.
Pacific Minerals and Ivanhoe are also active at the 790-sq.-km Dandong Gold project, in the QCZ gold-silver polymetallic district of the northeastern province of Liaoning.
WDG prospect
Of particular interest to the partners is the WDG prospect, which is immediately east of two producing gold mines and one silver mine. Near the property boundary, the operator of one of these mines intersected a 40.3-metre interval averaging 14.6 gram
s gold per tonne in hole 36-5, which included a 27.4-metre section of 19.87 grams gold and 21.8 grams silver. About 400 metres farther east, on the WDG prospect, a shear zone returned 20.47 grams gold and 26.4 grams silver over an interval of 9.5 metres.
Pacific Minerals and Ivanhoe are also involved in a joint venture with Chinese authorities to earn interests in two exploration projects that span 4,500 sq. km in both Yunnan and Guizhou provinces.
The partners have targeted extensive native copper and silver deposits that also host platinum group metals. Mineralization occurs within a continental flood basalt terrain that extends over an area 200 km long by 80 km wide. Disseminated native copper mineralization averaging 2-10% has been identified. The Yunnan copper project, as it is known, is similar to the Keweenaw copper belt in Michigan, which was one of the largest suppliers of copper for more than a century. Records show that the area has cranked out 11 billion lbs.
Shares in the junior traded in the $2.50 range for most of the past year, but late in 2002, high gold values from sampling tunnels at the Boka project lifted the shares to a high of $19.20; they have since settled at around $13.
Boka
Driving the share price are Boka’s size potential and geological similarity to other major gold deposits, such as Muruntau, in the Kyzyl Kum Desert of Uzbekistan, which contains an estimated 140 million oz.
Initial drilling is focused on the Boka 1 North area, and the first hole, B02-01, intersected the mineralized horizon from 31 to 251 metres down-hole.
Hole B02-02, collared 226 metres to the north, intersected mineralization characterized by heavy stockwork at 67.05 metres down-hole and was mineralized to the bottom of the hole, which was terminated at 270 metres owing to recovery problems. Visible gold, as well as electrum, were identified in the core. Hole B03-02A was set up to twin hole B02-02 and intersected the same mineralized zone at 56.8 metres. Visible gold was observed at 60.55 metres and electrum was identified in several intervals within the drill section.
The first drill samples from Boka are being analyzed by ALS Chemex in Vancouver, B.C. The results will be released in the coming weeks.
Three rigs are currently spinning on the property, drilling holes 2A, 4 and 5, and a second set of drill core samples is being prepared for shipment to ALS Chemex.
Southwestern Resources acquired the property, situated in Yunnan province, in September 2002 after completing stream-sediment and chip sampling over 800 sq. km. The program outlined a 15-km anomaly in the drainage containing the Boka 1 through 7 gold zones. In the previous year, artisanal miners, attracted to the stratabound mineralized horizon, dug more than 130 tunnels into the mountainside. But it was subsequent exploration by Southwestern that led to the discovery of four more gold zones, all of which occur in a 25-km-long structure and are confined to a specific stratigraphic horizon.
Tunnels
Most promising is the Boka 1 zone, where two sets of tunnels, dubbed North and South, have been excavated along a gold zone extending for 1.4 km along strike. The zone is exposed vertically for 150 metres along a west-facing slope. Tunneling, which varies from 20 to 200 metres in length, has shown that the gold mineralization continues downdip for at least 200 metres and is open in all directions.
To date, 134 tunnels have been surveyed, and a total of 675 tunnel panel samples are being analyzed at the Langfang Institute, 60 km from Beijing.
Gold mineralization is hosted by Middle Proterozoic-aged carbonaceous shales and calcareous siltstones. The favourable stratigraphy was subsequently subjected to thrust-faulting, resulting in a ductile-brittle shear zone occurring in the horizon. Gabbros then intruded the regional package of sedimentary rocks. The target horizon is characterized by extensive multi-phase breccia and shearing, accompanied by quartz-carbonate and sulphide replacement. The zone is exposed along the western face of a north-trending ridge and is parallel to regional north-south rift structures. The gold grades, as well as the structural complexity of the Boka system (which may create continuity problems, owing to post-mineral faulting and folding), will only be determined by extensive drilling.
Southwestern Resources has elected to assay all Boka samples, including drill core samples, by screen fire assaying, and although no metallurgical work has been reported, electron microscope work suggests 90% of the gold is in the form of electrum.
Southwestern is earning a 90% interest in 171.3 sq. km under application from China Yunnan Province Nuclear Industry Team 209 in return for spending US$4 million over four years and paying US$1.7 million in cash and shares in the fourth year.
Another junior in China’s mineral exploration sector is
Caodi is in the Qinling gold belt, which hosts more than 26 million oz. in 18 gold mines. Most of these are in the western part of the belt, known as the Sichuan-Gansu-Shaanxi gold triangle.
The Caodi property spans 45 sq. km, which were acquired following a regional regional stream-sediment and soil survey that defined 52 gold geochemical anomalies.
Previous exploration by the Sichuan Bureau of Metallurgical Exploration on one of these anomalies, dubbed No. 13, identified 35 gold showings. Of these, 14 were explored via trenching, aditting and drilling. A total of 3,468 metres of aditting and 1,426 metres of diamond drilling identified an oxide resource of 10.3 million tonnes averaging 2.57 grams gold per tonne. The resource is proven and probable, and remains open downdip in oxide ores. Hole ZK-3101, the deepest, cut oxide ore at a depth of 340 metres.
Highlights of gold intercepts from trenches include:
q 5.55 grams gold over 16.9 metres;
q 4.42 grams gold over 27.54 metres;
q 12.29 grams gold over 3.94 metres; and
q 2.74 grams gold over 17.36 metres.
Highlights of gold intercepts in the adits include:
q 3.68 grams gold over 24.69 metres;
q 5.34 grams gold over 8.92 metres;
q 1.7 grams gold over 39.88 metres; and
q 6.8 grams gold over 9.2 metres.
The Sichuan Bureau of Metallurgical Exploration has been operating a small-scale, 5,000-ton, test heap leach on the project since 1997, and the gold recovery rate is about 85%.
Minco believes that the Caodi gold project can be quickly brought in production as a low-cost open-pit heap-leach operation. Once due diligence has been completed, Minco will drill the deposit in order to expand the gold resources and test other showings in the licence area.
In late December, Minco inked a deal with the Inner Mongolia Bureau of Non-Ferrous Metals and Exploration to acquire a 75% interest in the BYC project, in Inner Mongolia. In return for the interest, Minco must spend $2.4 million on exploration over four years.
The BYC property hosts a 12-km-long system of structurally controlled shear-hosted mineralization. Gold has been identified in four zones along an intrusive-sediment contact.
The junior recently completed its first round of due diligence on the property. Check sampling confirmed the Chinese assay data on 100 surface exposures of gold mineralization. Significant results included:
q 71 grams gold over 9 metres in trench CK3-1;
q 4.2 grams gold over 6 metres in trench CK3-2;
q 15.4 grams gold over 4 metres in trench TC179; and
q 13 grams gold over 2 metres in trench CK121.
Minco’s 500-sq.-km Gobi project is also in Inner Mongolia, about 300 km. north of the city of Yinchuan. In 1999, Minco Mining formed a licensed Sino-Foreign joint-venture company with the Exploration Institute of Land and Resources of Inner Mongolia (EILR). Minco can ea
rn a 75% interest in the joint-venture company by spending US$2.5 million on exploration over four years. EILR holds the remaining 25%.
The Gobi project hosts a 70-km-long anomalous gold belt consisting of 11 regional anomalies that were originally discovered in 1995 during reconnaissance geochemical sampling. Eight exploration licences were established to cover these anomalies.
In 1997, EILR discovered the Zhulazhaga deposit as a result of follow-up work on one of these gold anomalies. The deposit is a classic reduced gold skarn system and has been mined as a small-scale heap-leach operation since 1998. To date, 145,900 tonnes of oxidized ore averaging 2.6 grams per tonne gold have been mined. Reserves are pegged at 1 million oz. gold with an average grade of 2.53 grams per tonne. The mine area is excluded from the Minco-EILR joint-venture agreement.
Parallel zone
In 2000, the joint venture found a parallel zone of gold mineralization 1 km south of the Zhulazhaga deposit. Trenching returned an average grade of 5.72 grams gold over six metres. Further exploration the following year expanded the mineralized zone. Sampling from a 20-metre-deep pit returned values of 14.79 grams gold, 1 gram silver and 1.25% copper over 9 metres.
Last year, a 10-hole drill program expanded mineralization northeast and southwest from the discovery pit. Highlights include 2.93 grams gold over 7 metres in hole G-2, which was collared 50 metres southwest of the pit, and 2.45 grams gold over 4.2 metres in hole G-7, which was collared 400 metres southwest of the pit. Minco’s first phase of drilling extended the gold mineralization in the discovery pit by 400 metres along a sediment-hosted horizon of mineralization. The zone remains open in both directions. A second-phase, 2,000-metre program will begin once weather permits. Minco’s objective is to define a bulk-tonnage oxide deposit that can be mined as a low-cost open-pit operation.
Reconnaissance exploration on the remaining seven licences of the Gobi project identified three new target areas: Zhonggashun, Bayanxibie and Shaolataohai.
Baiyanxibie licence
Last July at the Bayanxibie licence, Minco identified a gold zone that measured 150 by 2 metres in calcareous siltstone and shales. The Baiyanxibie licence lies directly north of the main project area at Zhulazhaga. Minco states that both areas are similar geologically and covered by the same regional geochemical gold anomaly.
Late last year,
There are two producing, high-grade base metal mines on the property, both of which are owned and operated by BNMC. The Xiaotieshan mine is producing 1,000 tonnes per day from reserves of 10.7 million tonnes averaging 1.1% copper, 3.3% lead, 5.1% zinc, 2.1 grams gold and 100 grams silver, whereas the Zheyaoshan mine produces 3,500 tonnes per day from reserves of 80 million tonnes grading 1.13% copper.
The principal exploration target is the downdip and eastern extension of the 10,300 shoot, which is part of the main Xiaotieshan mine.
The principal exploration target remains the downdip and eastern extension of the 10,300 shoot in the main Xiaotieshan mine.
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