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Mar 2006 - Newest Goldfield

The World’s Newest Goldfield

In August 2002, the US Geological Survey’s open file report drew a number of parallels between the Carlin Trend of Nevada and the sedimentary rock-hosted gold mineralisation of China’s Golden Triangle (based on southern Guizhou, northwestern Guangxi and eastern Yunnan), and prophetically stated that “it is likely that many Carlin-type Au districts in China, when fully developed could have resource potential comparable to the multi-1000t (of gold) resources in northern Nevada”.

Only 3 years’ later, in August 2005, Qianxinan (the southwestern prefecture of the Guizhou Province) was proclaimed the Gold Prefecture of China because it contains so many new and potential gold mines such as Zijin’s Shuiyindong, Sino Gold’s Jinfeng (Lannigou), Golden China’s Nibao, and other known deposits such as Yata, Getang, Zimudang etc, as shown in Figure 1a.

However, although the potential mines have significant upside potential, just like the Carlin gold mineralisation, the gold ore is arsenic rich or refractory and the fresh sulphide ore requires an additional extraction technique such as bacterial oxidation or roasting to liberate the gold. The ability to construct new roasters has been legislated against in China, and hence bacterial or biox-type techniques with an environmentally acceptable waste product are preferred.

Zijin is currently China’s largest producer of gold at 450,000ozpa from about 6 gold mines. Its Shuiyindong gold mine produces about 70,000oz to 100,000ozpa from a resource of about 1.8moz (55t) at an average grade of 11g/t, and treats the refractory ore using an undisclosed (as far as is publicly available) method. We are currently unable to identify whether it produces a concentrate and then trucks / rails the cons.

Although Zijin does have a relationship with Gold Fields (in that GFI are a shareholder in Zijin) there has been no mention that we have seen of GFI’s Biox technique being used at Shuiyindong.

The progress at Sino Gold’s Jinfeng (previously called Lannigou) is well known and well disclosed in the quartlerly updates by SGX. Completion of construction is still scheduled for mid June with production in mid-September 2006, then ramping up to the initial rated capacity of 200,000ozpa, before being expanded further to 300,000ozpa. Jinfeng would then be the largest operating gold mine in China.

Sino Gold’s Jinfeng is using Gold Fields’ BIOX® technology from which recoveries are expected to be about 85% to 88%. In Figure 1, SGX’s resource is quoted as 100t, or 3.2moz at grades ~5.7g/t, however, there have been deeper extensions, more splay mineralisation, and greater continuity in Rongban (within the current pit, immediately north and adjacent to Lannigou). Jinfeng has the potential to exceed a 5moz resource over its life (156t of gold) and produce at higher rates than 300,000ozpa, and possibly higher grades too.

We (ERA) know little about the deposits of Yata, Getang or Zimudang, or who currently owns and has mined or intends to mine them.

However, we recently (November 2005) visited Golden China Resource Corporation’s Nibao project near Louxia on which an initial inferred resource of about 450,000oz (at ~2.5g/t) was recently reported on 22 February 2006. Golden China stated in the release that they expect to revise the resource upwards in May 2006 and that they were “increasingly confident of the prospects for a small-scale viable gold mine” on the property. Golden China is in the process of merging / taking over Michelago Gold Limited and expects to be listed on the ASX and TSX.

Golden China intends to produce a concentrate at Nibao and transport it to Michelago’s Bactech operation at BioGold on the Jiaodong Peninsular in Shandong Province. Ultimately Michelago/Golden China aim to have a Bactech operation, possibly in Guizhou, to process the refractory ores of other producers.

The Golden Triangle area is vast and exploration is being undertaken by a number of companies, including Oxiana in Yunnan and other companies in the Provinces of Yunnan and Guangxi as listed in Paul Burton’s November 2005 World Gold Special Report on China “Beyond the Wall : Foreign Involvement in China’s Gold Mining Industry” .

There are other possibilities within SGX’s exploration in the Jinfeng region too, such as further south along the dome on which Lannigou lies, and as the mineralisation becomes increasingly understood, further discoveries could occur, similar to the formation of the world class Carlin District of Nevada.

Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, (an independent research company) who is an Authorised Representative with Taylor Collison Ltd, and with his associates, holds interests in some of the stocks mentioned in this article. The opinions expressed in this article should not be taken as investment advice, but are based on observations by the author. The author does not warrant the accuracy or completeness of any information and is not liable for any loss or damage suffered through any reliance on its contents.

Figure 1. The World’s Newest Goldfield, Qianxinan Prefecture in Guizhou Province, ChinaGDNmar06-A

  • Written by: Keith Goode
  • Wednesday, 01 March 2006