COAL, URANIUM & OIL SANDS — Minco boosts potential of Chinese polymetallic project

As in real estate, a good location adds value to a mineral property. And had the White Silver polymetallic project been situated in Canada’s Abibiti greenstone belt, rather than in Gansu, a province in north-central China, partners Minco Mining & Metals (MMM-T) and Teck (TEK-T) would have an easier time convincing the investment community of its economic significance.

“It’s a classic volcanogenic massive sulphide (VMS) target of the type seen in in Canada’s Abibiti camp,” says Fred Daley, Teck’s vice-president of exploration. “You could take any geologist from the Noranda camp and he’d feel right at home.”

Recent work at the project is aimed at defining a new zone of mineralization directly below the Xiaotieshan base metal mine, currently being operated by Baiyin Nonferrous Metals, a sizable Chinese producer. Xiaotieshan has a proven reserve of 10.7 million tonnes grading 1.1% copper, 3.3% lead and 5.1% zinc, plus 2.1 grams gold and 100 grams silver per tonne, and is producing at the rate of 750 tonnes per day.

Minco’s short-term goals at White Silver Mountain are to define at least 10 million tonnes of additional base and precious metals reserves below the Xiaotieshan mine and to find new VMS targets on the property.

The company hopes to generate early cash flow by placing reserves into production as quickly as possible, and then develop new reserves from other prospective zones within the 100-sq.-km licence. “There is enormous exploration potential in the licence area,” Daley adds. “And that potential has barely been scratched.”

Minco President Ken Cai concedes that China has developed a reputation as a difficult place to work but insists that progress can be made by having a good local partner who understands the system and the culture. He says recent reforms, such as the creation of a mining super-ministry, have meant less red tape for foreign companies operating in China. Even so, he cautions it is important to structure deals so that foreign companies have operating control, as this makes it easier to obtain necessary permits and business licences. “Recent events [involving other foreign companies] have shown that it is difficult, if not impossible, to work on an 50-50 joint-venture basis.”

Minco is earning an 80% interest in the non-producing areas of the 110-sq.-km White Silver Mountain project and is acting as operator. Baiyin holds the balance. To vest its interest, Minco is required to spend US$4.8 million on exploration over six years. Teck, in turn, can earn 70% of Minco’s interest in the project and become operator by assuming all costs of subsequent work after the first phase of drilling, leaving Minco with a 24% carried interest to production.

Cominco (CLT-T) can exercise a back-in right at any time prior to the prefeasibility stage by paying Teck and Minco one-and-a-half times the total project costs, up to the date of the back-in. If that occurs, ownership will be 20% Cominco, 19% Minco, 41% Teck and 20% Baiyin, and Cominco would be required to pay its pro rata share of feasibility and development costs.

Minco and Teck are about to resume drilling at White Mountain pending the arrival of drills required to test deeper targets. The modern rigs will also ensure greater productivity than has been typical in the past, when local rigs were used.

The latest results from the program include a 29.9-metre intersection (from 411.8 to 441.7 metres) grading 1.29% copper, 3.94% lead, 7.65% zinc, 1.62 grams gold and 78.74 grams silver. This intersection from Hole 5 includes a higher-grade, 4.9-metre interval grading 2.77% copper, 15.52% lead, 25.19% zinc, 2.74 grams gold and 206.73 grams silver. Minco notes that these results demonstrate much higher grades and greater widths than in previous drill holes (T.N.M., March 15/99).

Minco plans to drill roughly 8,000 metres in a second-phase program to test the continuity of the deposit along strike, to the east and west.