Afcan eyes Chinese gold (January 13, 2003)

Montreal-based Afcan Mining (AFK-V) is acquiring an 85% interest in the Tanjianshan gold project in the northwestern Chinese province of Qinghai. The vendor is Australian-based Sino Gold.

Afcan will pay US$5.6 million in stages until the end of 2003. The purchase price includes 4.6 million Afcan shares priced at C20 apiece plus 2.3 million warrants. A warrant is exercisable over two years for one share at C31. Afcan already paid US$25,000 on signing of a letter of intent in October 2002.

In the end, Sino will have a 16.6% stake in Afcan, replacing Semafo (SMF-T), which currently has about 10%, as the company’s major shareholder. Should Sino exercise all its warrants, its stake would climb to 25%.

Afcan has agreed to arrange financing and begin construction of a US$18-million mine by the end of 2003. The company expects it will need C$1.6 million to meet its obligations in 2003.

Regulators have yet to approve the deal, though it is expected to close in March.

The 350-sq.-km Tanjianshan project is home to an inferred resource of 3.3 million tonnes averaging 6 grams gold per tonne, or 645,000 contained ounces of gold. This year, Afcan intends to carry out work aimed at converting the inferred resources into indicated resources.

The operation centres on the Jinlonggou and Qinlonggou gold deposits. Open-pit and underground mining is currently producing 8,000 oz. gold annually.

A 2002 feasibility study indicates total production of about 70,000 oz. gold over a mine life of six years.

The remaining 15% of Tanjianshan is held by The First Brigade for Geology and Mineral Exploration of Qinghai Province and Dachaidan Gold Mine. The latter produces 1,400 oz. gold per month.

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