Oriental Minerals Leads the Way in Korea

SITE VISIT

Sangdong, South Korea — At its peak, 30,000 people lived in Sangdong, South Korea, home of the former world-class tungsten-molybdenum mine.

Many of the 500 people who still live here, in what has become a ghost village, are retired miners who didn’t want to leave the hilly terrain, located three-and-a-half hours southeast of Seoul, a modern and booming city of 17 million.

Vancouver’s Oriental Minerals (OTL-V, OMNLF-O) has decided to breathe some life back into Sangdong and the company hasn’t wasted any time doing it.

Oriental made a deal with the vendor of the Sangdong mine property for 220 mining concessions on Oct. 9, 2006.

“And one week later, we had a drill rig here in action,” says vice-president of exploration Chris Sennitt, an Australian based in Seoul.

Sangdong closed in 1992, and at that time, the mine’s total reserve according to Korea Resources Corp. (KORES) was 18.8 million tons grading 0.5% WO3. Korea Tungsten Mining Corp., the company that operated the mine, also reported a prospective ore reserve of 16.3 million tons grading 0.4% MoS2.

Tungsten mineralization was first detected in 1916, during the Japanese occupation of Korea (1910-1945). Many small underground operations were run over the next three decades by a number of different companies, though the main Sangdong deposit wasn’t discovered until 1939. In 1952, Korea Tungsten Mining took control of operations, which closed 40 years later due to low metals prices. Production data is only accounted for up until 1987, at which time the tally was 74,911 tonnes of tungsten.

A dilapidated mill and thousands of kilometres of tunnelling remain, but Oriental is not interested in the old facilities.

The company’s goal is to build a conventional truck-and-shovel open-pit mining operation that would target a 150-metre-thick skarn package overlain by limestone.

“It will be a quarry, not a mine,” Sennitt clarifies. “People can visualize a limestone quarry. They associate mining with smaller high-grade things, but also with the Japanese occupation. There are great connotations with that — forced slave labour in mines — so we think calling it a quarry is just better.”

A core sample processing facility, core storage and processing, and an exploration office have already been set up.

The tungsten and molybdenum are found in Cambrian-age Myobong slate, altered to a black skarn.

The skarn is evident in the creek that leads through the shantytown that is Sangdong village. On the way to the Sangdong property is a concrete batching plant, a common sight in the area.

Below the skarn is Jangsan quartzite and above is Pungchon limestone, which the company will have to deal with before mining begins.

“We’ve obviously got a fair bit of overburden, but nothing in South Korea is wasted,” Sennitt says.

Oriental is looking into selling the limestone to companies that need it for cement or gravel.

“It’s possible we could sell it at cost,” Sennitt says. “Or make concrete batching on site.”

Most mining in the past was focused on the main vein, which extends for more than 1.3 km along strike and 1.5 km down-dip and is between 6 and 8 metres thick.

Exploration

Oriental has budgeted US$6 million for exploration this year at Sangdong, where major drilling began in March. There are four Korean diamond drill rigs and one Australian diamond drill on-site, with a track-mounted Australian dual-purpose reverse-circulation (RC) diamond rig on the way.

Oriental has released results for its first three drill holes — part of the 7-hole first-phase program.

Hole SD-01 was designed to test the 165-metre skarn package above and below the 6-metre main vein. Highlights from the first hole include 6 metres grading 0.09% WO3 and 0.14% molybdenum, 6 metres grading 0.27% WO3 and 0.02% molybdenum and 10 metres grading 0.14% WO3.

The best molybdenum grades below the skarn include sections from 5 to 11 metres long grading between 0.15% and 0.18% molybdenum.

Holes SD-02 and SD-05 were abandoned after hitting old workings from the hangingwall vein at depths of 202 and 20 metres, respectively. Results from the completed portion have not been released. The company plans to re-drill the holes once the dual diamond-RC rig arrives.

The best intersection from hole SD-03 was 4 metres grading 0.41% WO3. The hole confirmed the continuity of mineralization with a 141-metre interval averaging 0.1% WO3 and 0.02% molybdenum sulphide, starting 15 metres below surface.

Oriental is awaiting results from hole SD-04 (225 metres depth) and F202 SD-06 (300 metres depth), which both intersected skarn with tungsten-molybdenum mineralization from surface to well over 100 metres depth, followed by Jangsan quartzite with traces of wolframite-molybdenite mineralization to the end of the holes.

The second phase of exploration will include pattern drilling on 100 by 100-metre spacing of 70 holes comprising 5,500 metres of diamond core and 15,500 metres of RC drilling. The drilling should be completed by October.

The company hopes to have a National Instrument 43-101 compliant inferred resource calculated by November.

Oriental plans to complete a scoping study by February 2008, skipping a prefeasibility study and going straight to the bankable feasibility, to be finished by November 2008.

Oriental has identified two facilities in South Korea that process tungsten concentrate. Both are accessible by rail from Taebek, a city of 70,000 located 25 km east of Sangdong. One is owned by POSCO, 130 km southeast of Sangdong and the other, owned by Taeguteck, is 130 km south of Sangdong.

The exploration team consists of about 15 people, which includes foreigners and Koreans.

Korean experience

Sennitt was approached by Oriental because he had five years of experience in the country working for Indochina Goldfields in the 1990s. Oriental needed help making a deal with the title holder of the Sangdong property.

Once Sennitt was on board, he contacted Kim Wanjoong, known as Mr. Kim, now general manager of Oriental in South Korea, whom he had worked with at Indo-China.

Having a Korean person on the team has been the key to Oriental’s success so far.

“The relationship with Mr. Kim is absolutely, bloody vital,” Sennitt says. “We wouldn’t have done this without that relationship.”

Sangdong, as well as some of Oriental’s other properties, which include uranium, gold and silver concessions, were on Sennitt’s mind even before Oriental existed.

“When I left South Korea in 1998, I put together a database — Oriental owns it now — knowing I’d like to come back under the right circumstances,” he says.

When Oriental first made contact with Sennitt a few years ago, the company did not have much money, but its financial situation was much more promising when he was approached again last August.

Sennitt says the state of affairs with the South Korean government is also promising; the government has classified Sangdong as a national project.

“Indications are that we have considerable support at all levels of government,” Sennitt says. “We have designated-company status in an economic zone for mining, and that’s been given to us by Sangdong people in the village — so they are supportive and are pushing the project for us upwards to the next political level.”

The next level, which is the county level, will involve formal information sessions for the community.

That doesn’t mean there aren’t any humps for Oriental to get over before reaching the mining stage.

Some of those are literal humps — in the form of graves located on the property. Korean graves are small, circular mounds of earth, usually covered with grass. There are several family plots located on the property that will need to be moved before the company can begin excavating the overburden where the open pit and waste dump will be.

“It’s not a big issue,” Sennitt say
s. “You can see the construction that goes on in South Korea — it happens all the time.”

Several cabbage farmers own the surface rights to the land and will need to be bought out as well, Sennitt says.

“There are eight cabbage patch farmers,” he says. “We’re still establishing who owns what.”

Oriental is focusing most of its attention on Sangdong right now, but the company has five other properties in South Korea.

The junior has picked up some uranium properties — Oriental is currently reviewing airborne geophysical and geological data for the Donjeum property, near Sangdong, which consists of four mining concessions measuring 11 sq. km.

The Ogchon uranium property, in central Korea, consists of 144 mining concessions over nearly 400 sq. km. The property has turned up 16 radiometric anomalies, and 85 rock-chip samples collected from 12 of the 16 anomalies returned results up to 0.175% U3O8.

The company is reviewing the historical data and the regional geological and geophysical database before deciding on a more detailed exploration program.

Acquiring Ogchon was a lucky move for Oriental.

“We knew it was a uranium-bearing belt, but we didn’t know there were any drill holes,” Sennitt says. “We had no idea there were five drilled deposits.”

Mr. Kim has stumbled upon old KORES information from three of the deposits, with two more to find.

“We are gradually acquiring it,” Sennitt says. “It’s hidden away. You’ve got to know where to find it.”

Uranium policy

The policy on uranium exploration and mining in South Korea is a little vague, says Sennitt — not just because it’s never been done by a foreign company, but because little has been done at all.

In August 2004, the government admitted that a few scientists had briefly flirted with the idea of nuclear weapons in 2000 when they enriched small amounts of uranium. This violated South Korea’s non-proliferation treaty with the International Atomic Energy Agency.

South Korea imports 97% of its uranium, which is used to generate about 40% of the electricity consumed in the country.

Even with the recent spike in uranium prices, Oriental’s interest in Ogchon took the government by surprise.

“National pride is at stake here,” Sennitt says, implying that the government expected a domestic company would be the first to mine uranium in Korea. “If we’d just pegged the property for gold, we’d have no problem.”

Sennitt says the policy will be up to the discretion of the mining minister as the project goes forward.

“That’s why we are taking a very cautious path as to how and what we are going to do,” Sennitt says.

The Chongyang mine, west of the Ogchon property, produced tungsten until 1977. Oriental is drilling to test its potential for open-pit mining.

Oriental has two gold properties. The Muguk gold mine was at one time South Korea’s largest. A 1989 historical resource by KORES put the resource at 1.4 million tonnes grading 13.5 grams gold per tonne and 72.8 grams silver. There are also 14 potential gold deposits within a 100-km trucking distance of the mine.

The Gasado project, on an island off the southwest coast, has a historical resource of 143,000 tonnes grading 5.98 grams gold per tonne and 434 grams silver. Oriental owns the property, with the vendor retaining a 2% net smelter return royalty.

As the projects progress, Oriental may spin out its properties into different companies according to mineral, but for now, the company will work on proving and building its resources.

Sennitt says he’s not worried about a possible takeover as Oriental’s projects advance.