Jinshan Gold Mines sells Dadiangou deposit to Chinese

Jinshan Gold Mines (JIN-T) has agreed to sell its Dadiangou gold project in China’s Gansu province to Gansu Zhongjin Gold Mining Company, a subsidiary of Zhongjin Gold Corp.

Zhongjin Gold is listed on the Shanghai Stock Exchange and is affiliated with China National Gold Group, t he largest gold producer in China. China National Gold is 100% owned by the State Council’s Assets Supervision and Administration Commission.

Dadiangou will be sold for 88 million renminbi ($13.1 million) and Jinshan is entitled to a 53% share of the proceeds, or $7 million. Its joint-venture partner, the Nuclear Industry Northwest Economic and Technology Co, will receive the remainder.

The gold project is at the advanced exploration stage on a 14.91 sq km licensed area of the province in Western China.

Jinshan and its joint-venture partner had identified an indicated resource of 20 million tonnes grading 0.87 gram gold per tonne for 544,910 oz. of contained gold. Added to that is an inferred resource of 16.6 million tonnes grading 0.96 gram gold per tonne for 497,950 oz. contained gold, all at a 0.4 gram per tonne cut-off.

According to Jinhsan, the project’s tonnage fell below its threshold and did not mesh with its strategy.

News of the sale sent Jinshan’s share price down 5.1% or 32¢ per share to close at $5.94. (Over the last year the gold producer has traded in a range of 63¢ -$6.60 per share.)

Jinshan produces gold in Inner Mongolia at its CSH gold mine, which began producing gold in July 2007. From startup to the end of December 2009, the mine produced a total of 161,625 oz. gold.

In March a new National Instrument 43-101 compliant reserve and resource estimate for the CSH gold mine demonstrated total proven and probable reserves at the end of Dec. 2009 of 3.43 million oz. gold (including 433,000 mined out ounces), up from 2.26 million oz. in March 2008.

The proven and probable reserves now stand at about 138 million tonnes at an average grade of 0.67 gram gold per tonne.

The project’s updated measured and indicated resource, using a 0.3 gram gold per tonne cutoff grade, stands at 243 million tonnes averaging 0.64 gram gold per tonne for 4.88 million oz. contained gold (after two and a half years of mining).

A new mine plan envisages a mine life extending from 2018 to 2023 with four more years of leaching after that.