EXPLORATION ROUNDUP — Zen and the art of Chinese gold exploration — Canadian juniors learn the ropes in China

Despite the long and winding road between finding a mining property and receiving state approval for exploration and development, especially in foreign jurisdictions, junior companies know that perseverence pays dividends. This is especially so in China, where several Canadian companies are gradually making headway in their efforts to establish joint ventures.

“Patience is the biggest virtue; there’s no doubt about that,” says Horst Gudemann, business manager for Asia Minerals (AMP-A). “Things have been improving, particularly in the last half-year, but the bureaucratic process remains quite tedious.”

Asia Minerals is still awaiting final approval (expected last September) to expand the Yingezhuang gold mine in Shandong province. The project is a partnership involving Zhaoyuan Gold, one of China’s largest gold mining companies.

The delay has not prevented the Vancouver-based junior from proceeding with plans to become the first foreign gold miner in Chinese history. Asia, held 41% by Royal Oak Mines (RYO-T), recently sent a project manager to Yingezhuang and expects to complete feasibility drilling by February.

Robert Ritchie, who managed the development of several major mines in northern Ontario, will oversee the expansion of Yingezhuang’s annual gold production to 90,000 from 15,000 oz., and its daily processing capacity to 2,500 from 500 tonnes of ore.

The project lies in the heart of the Shandong gold camp, which is considered an underexplored analogue of the prolific Timmins gold camp in Ontario.

Mineralization occurs in a 3-km-long alteration zone in granitic host rocks, and gold occurs in its native state and as electrum in quartz veinlets and disseminations.

About 125 east of the gold mine, Asia Minerals is engaged in a joint venture with the Shandong Geo-International Co. to explore an 800-sq.-km land package in the Muping-Rushan gold belt. The company is currently selecting targets from a large database of gold showings and regional geochemical anomalies.

Target selection is also under way on the 600-sq.-km land package in the South Qilian Mountains in northwest China, where Asia is investigating fresh evidence of gold mineralization in a band of Paleozoic volcanic-sedimentary rocks.

And in Xinjiang province, where the gold belts that host such giant deposits as the Kumtor in Kyrgystan cross the border into China, Asia is hoping to be awarded a major concession.

Vying for ground in this area is Minco Mining & Metals (MMM-V), which believes the geological terrain could very well host a multi-million-ounce gold deposit. Teck (TEK-T) and Cominco (CLT-T) have the option of earning interests ranging from 50% to 71% in the non-Chinese interests of Minco’s projects.

Also waiting in the wings is China Clipper Gold Mines (CXX-A). With an encouraging technical review from Kilborn Engineering in hand, the junior is also awaiting state approval to upgrade two gold mines, the Tongguan and Nancha.

Kilborn says the mines could begin producing at a combined rate of 86,000 oz.

gold per year within 15 months, following approval from the Ministry of Foreign Trade and Economic Co-operation. The cost of upgrading and construction is estimated at $18 million, with an estimated payback period of 18-24 months.

Clipper expects to spend an additional $10-12 million to increase gold reserves.

Tongguan agreement

At Tongguan, which sits along the Little Qinling gold belt, Clipper has a memorandum of understanding with the Tongguan Cty. government to upgrade the smelter to 50 from 20 tonnes per day, and expects to upgrade two other mills in the area to a daily total of 800 tonnes.

At the 300,000-oz. Nancha mine, 100 km northwest of the Korean border, Clipper plans to increase mill capacity to 600 tonnes per day, construct a bioleaching plant and increase reserves, all of which are required for the junior to earn a 75% interest.

Meanwhile, in Anhui province, Global-Pacific Minerals (GPJ-V) has signed a 25-year leasing agreement to develop the Qian Chang gold-copper-iron skarn deposit.

Global can earn a 97.5% interest in the deposit by making an annual payment of US$42,000, which will increase by 10% each year after capital recovery.

Qian Chang contains drill-indicated, probable reserves of 3.2 million tonnes grading 2.08 grams gold and 4.5 grams silver per tonne, plus 0.78% copper, 45.8% iron and 0.017% cobalt. Global-Pacific is considering building a 1,000-tonne-per-day mill at a capital cost of US$6.8 million to produce 5.1 million lb. copper, 21,000 oz. gold, 45,000 oz. silver, 64,700 lb. cobalt and 229,000 tonnes of iron concentrate.

At this rate, Global-Pacific estimates annual revenue of more than US$19 million, a pretax annual operating profit of US$8 million, and a payback period of less than one year.

An agreement between Zen International Resources and Cryptic Ventures (CYV-V), a company controlled by Catherine McLeod of Arequipa fame, may add yet another junior to China’s gold exploration play.

Cryptic can acquire 25% of Zen, which has negotiated preliminary agreements on five projects in China, by paying US$3 million and by issuing 1.8 million shares to the shareholders of Zen. Cryptic can then subscribe for an additional 24% by paying US$15 million toward project development expenses, and has the option of eventually taking over Zen.