GobiMin upgrades Yellow Mountain

Vancouver As it continues to sink shafts at its Yellow Mountain property about 100 km southeast of Hami city in northwestern China, junior mining and exploration company GobiMin (GMN-V) has doubled its indicated resource there.

A June 2007 resource estimate pegged the indicated resource at 12 million tonnes grading 0.44% nickel, 0.29% copper and 0.026% cobalt. But with 17,000 metres of drilling in 2007 the company has bumped the tonnage up to 22 million grading 0.45% nickel, 0.30% copper and 0.03% cobalt. That translates into increases of 96% contained nickel, 101% contained copper and 100% contained cobalt.

Yellow Mountain is GobiMin’s most advanced development stage project and compliments the company’s two other underground nickel-copper mines in the area, the Yellow Mountain East mine and the Xiangshan mine.

In 2007 the company sold 1,480 tonnes nickel and 733 tonnes copper from the mines.

GobiMin’s CFO James Xiang says the Yellow Mountain project is slated for a 2011 startup. He says so far the company has developed power and water infrastructure for the project with the cooperation of the Chinese government and sunk about 150 metres of a planned 1,000-metre main shaft. Ventilation and safety shafts are about a third of the way to completion.

GobiMin won’t send ore to its existing mill 40 kilometres away, Xiang says, as it already operates close to full capacity. Instead Xiang says the company will realize a savings of about US$3 per tonne on transportation costs by building a new 4,000 tonne per day mill. He estimates capital costs for the project of US$ 120 million.

Last year GobiMin’s revenues almost doubled on increased production and sales from its two operating mines. These soared 97% to US$38.5 million.

But in January this year production was shut down for 20 days when vicious windstorms shut down all public transit in the region.

With 90% of employees commuting to its mines from nearby towns and villages, few could make it to work. The result, a dismal first quarter ending March 31, 2008 with revenues coming in at US$540,000 as compared to US$4.6 million the year before.

But Xiang says the company is back on track. He says employees used the shutdown as vacation and now work longer stints at the mine.

“We will exceed it,” he says of 2007 production numbers. Second quarter results are due Friday.

At the moment Xiang also says GobiMin is entertaining several potential offtake partners in the region. Although most of the concentrate from its Yellow Mountain East and Xiangshan mines goes to state-owned Jinchuan’s smelters, potential concentrate from a Yellow Mountain mine will not necessarily follow the same route.

“There’s competition in the region,” Xiang says.

Belmont Holdings Group holds about 44% of GobiMin’s shares and Jinchuan holds about 11%.

GobiMin has a fifty-two week trading range between $4.04 and 90 on the Venture board and has proposed an IPO in China to raise capital for Yellow Mountain.

As of June 3, 2008 GobiMin had purchased about 500,000 of its own common shares as part of its plan to regain about 5% of its 73 million outstanding.