Naneco eyes Chinese prospect

Naneco Minerals (NNE-A) can acquire a 70% interest in a lead-zinc-silver mine in northern China if its takeover of a private Canadian firm proceeds as planned.

The company is set to acquire British Columbia-based Vina Mineral Resources, which secured in August a joint venture with Hulunbeir Nonferrous Metals, a Chinese firm, to develop the Jiawula zinc-lead-silver-copper deposit in Inner Mongolia, China.

Chinese geologists have explored the property extensively over the last 30 years, drilling more than 97,000 metres. The propertys most advance target is the No. 2 vein, which Chinese geologists calculated to contain 4.9 million tonnes grading 3.4% lead, 5.8% zinc, 0.4% copper and 130 grams silver per tonne. Those data have recently been re-evaluated by Watts, Griffis & McOuat (WGM). The consulting firm pegged resources there, to a depth of 300 metres, at 2.8 million tonnes grading 3% lead, 4.8% zinc, 0.3% copper and 114 grams silver per tonne.

The vein has been intersected to a depth of 700 metres, and WGM concludes that the Chinese estimate is likely realistic, and advises that a feasibility study be undertaken to determine how much of that resource could be reclassified as a reserve.

A feasibility study is currently being conducted by a Chinese firm in order to gain government approval of the joint venture.

Naneco president Archie Nesbitt said he hopes to increase resources at Jiawula and that the company will conduct 10,000 metres of angle drilling at the No. 2 vein as part of its due diligence. The company is seeking to outline at least 20 million tonnes of mineralization amenable to either open-pit or bulk mining methods. The mill on the 700-sq.-km joint venture has a capacity of 200 tonnes per day, but is not currently operational.

The mill was over-built and has the capacity for as much as 1,000 tonnes per day without too much modification. We could get the mill up and running by the middle of next year at anywhere between 250 and 500 tonnes per day, he says.

Placing the mill back into production would cost US$24 million. The company would then receive 75% of the payout until payback in achieved, at which point it would receive 70%.

As part of its takeover agreement with Vina, Naneco will pay US$200,000 and issue 2 million shares within 10 days of receiving both a feasibility study, which is being prepared by Shenyang Nonferrous Metals Design Institute, and government approval of the joint-venture contract.

Naneco will conduct its own prefeasibility study of the project, with a bankable feasibility study to follow in the next 18 months. Upon receipt of a positive feasibility study, Naneco will issue to Vina an additional 4 million shares. Naneco has 13.8 million shares outstanding, though that figure will rise to 19 million upon closure of the deal.

Jiawula is situated 20 km from the Mongolian border, and lies in a window of Jurassic-aged volcanic and sedimentary rocks. Previous exploration there identified a vein system with as many as 30 individual structures. The system is more than 1,500 metres long and could be associated with a nearby granitic intrusion. Previous drilling has been near-vertical and much of the mineralization occurs as steeply dipping veins varying in width from 2 to 14 metres. Many of those veins are not exposed at surface.

Exploration at Jiawula began in 1960 when a Chinese mapping crew identified the areas mineral potential. The Jiawula deposit was defined by trenching and drilling in 1978. By 1990, more than 360 holes had been sunk, and two small declines were dug into the deposit.

The primary ore minerals are galena, sphalerite, chalcopyrite, pyrite and pyrrhotite. Disseminated silver is associated with galena, sphalerite and chalcopyrite.