Red Dragon looks for new zinc projects

As it plays the waiting game for permits, Red Dragon Resources (DRA-V) is making plans to expand its zinc portfolio in southwest China by signing a letter of intent with a private Chinese company for some neighbouring properties in the Weixi district.

The company has signed the letter with AP Energy Investments to buy, explore and develop several zinc properties, some of which are located about 25 km southeast of Red Dragons Baoming and Shanchuan zinc projects.

AP Energy has purchased Baimaji Mining, which owns a mining lease, but the company is still in discussions with several property owners to purchase and consolidate the surrounding mining leases and exploration concessions for a total area of 15 sq. km.

Red Dragon shares were down in Toronto about 5% today to 75 on a volume of 227,000.

The properties are about 100 km north of the Lanping mine, which is the largest zinc mine in the country. The mine produces about 100,000 tonnes of zinc per year.

The area is known to host lead-zinc mineralization over an 8-km strike length, and is mined by small-scale artisinal miners.

Grab samples taken from outcrops and adits on the AP Energy properties graded up to 27.6% zinc with an average of 6-10% zinc.

Red Dragon will have a 9-month due diligence period to evaluate the potential of the project. If the company decides to continue after that it has the option to earn up to 60% by funding further exploration or a feasibility study costing 1.5 times AP Energys total investment in the property. The amount spent during the due diligence period will count towards the total needed to earn 60%.

Meanwhile, Red Dragon has been unable to start drilling at the Baoming project because drill permits have taken longer than expected from the Chinese federal government. The company must wait until the delineation of a proposed nature reserve is complete before the drill permits will be awarded.

I am confident that we will eventually receive the permit even though, although the permitting process has taken longer than expected, said Alvin Jackson, Red Dragon chair and CEO.

Just in case, Red Dragon is considering moving the drill and crew to the Baimaji project to get started on due diligence drilling.

Until it gets the permit, the company will continue with low cost exploration programs on both the Baoming and Shanchuan projects to define new drill targets.