27 Jul 2009 07:00
China Goldmines plc
("China Goldmines" (CGM) or the "Company")
(AIM: CGM)
CHINA GOLDMINES GUANZHUANG GOLD PROJECT QUARTERLY UPDATE
For the three months ended June 2009
Highlights
| • | Grade has improved by 88% from last quarter's average grade of 5.3 g/t to an average milling grade of 10 g/t for the June quarter. | |
| • | 14,555 tonne of ore mined, and 3,677 oz gold was produced during the quarter. | |
| • | Cash position at the end of the Quarter: USD6.0m plus USD1.3m in inventories and USD1.0m in bonds and security deposits. | |
| • | A total of 1,695 ounces of gold was sold during the June quarter at an average price of USD919/oz with CGM in net receipt of USD1.45m. Gold sales included 267.85 (DMT) tonnes of gold concentrate at 100 g/t and 25.8 kg of doré bars from gravity concentration. | |
| • | Development of Highway-40 is on track, having already linked Xiao Chong Zi ("XCZ"), Bao Mu Yuan ("BMY"), Shen Jia Ya ("SJY") and De Sheng ("DS") mines, and is progressing as planned towards Zhen Jia Shan ("ZJS") mine | |
| • | As announced on 18th May 2009, theft of high-grade gold at the Xiang Lu ("XL") mine following forced entry. By way of update: | |
| - | Police made significant arrests with 7 in detention awaiting trial; | |
| - | Security review conducted by CGM - highly trained overseas security force guarding all areas and CCTV implementation and planning underway; and | |
| - | Mining scaled back to 250T/day production to ensure immediate secure extraction, thereby effecting our annual production target. | |
| • | To enhance the security and safety of its operations, the Company will go owner-operator by the end of 2009. | |
| • | Central shaft and processing plant development in preparation stage. | |
| • | Re-opening of the eastern mines during H2 2009 following establishment of secure mining in that area. | |
Commenting today Frank Vanspeybroeck (CEO), of China Goldmines said: "The success of mining significant levels of high grade gold during the quarter was marred by a large scale robbery. While a significant number of arrests have been made and the regional government is working with us in order to ensure increased security in the area we have taken immediate steps to counter the threat of further theft and mining disruption from the mine from this point forward. A highly trained overseas security team now monitors all operations. CGM has scaled down the active mining area to ensure increased security coverage by temporarily closing access to the high grade ore bodies. Underground drilling program shall continue in order to prioritise mining areas once the various declines have been made secure. CGM will now proceed with its centralised planning approval to limit access to our gold mining operations by using one central shaft. This central shaft is the entrance to the underground highway -45, (25% complete), which will enable all areas of the gold mine to be reached and mined efficiently and securely. "
Quarterly update for the three months ended June 2009
1. Mine feasibility study and establishing secure production
In order to develop a centralised hoisting and processing facilities for long term and sustainable development of the Guan Zhuang project, a mine feasibility study program was initiated in June and has been progressing well. With the expiry date of the existing underground mining contract on 30th July 2009, the Company is finalising the implementation of an owner-operator model to take effect within the next quarter. With the re-structuring of mine site operations, it is estimated that approximately 90 miners from the current mining contractor will be employed by HWM to undertake mining and development in the newly merged mine (SJY, BMY, XCZ and DS) in the western side of the Guan Zhuang gold project.
The Company is preparing the necessary reports and designs for its central project to be approved by the County Government and to obtain the construction permits for its central shaft, processing plant, tailings dam, power upgrade and the transfer of land title to the Company.
2. Security
Following the forced entry and theft announced on 18th May, the Company's central operating strategy now provides for all underground mining to be directed towards a central shaft via Highway -40 and central milling facility. Thereby enabling the Company to better secure its service operations in a small central area and minimising confrontation with local communities and attacks on the Company's operations over a strike length of 5km.
In the meantime the Company is strengthening its western security force and implementing closed circuit monitoring systems.
A highly trained overseas security team has now been assembled to monitor high risk operations. CGM has also scaled back the active mining area to ensure increased security coverage and is in the process of restricting access from pre-existing adits.
3. Financial
A total of 1,695 ounces of gold was sold during the period at an average price of USD 919/oz with CGM in receipt of USD1.45m. Gold sales included 267.85 (DMT) tonnes of gold concentrate at 100 g/t and 25.8 kg of doré bars from gravity concentration.
Inventory 30 June:
| Ore: | 2,271T @ 12g/t=924 Oz | |
| Concentrate: | 693 Oz |
The company will continue its cost-saving and security measures through downsizing the work force by terminating the contracts of 120 surface employees in a staged manner during the next quarter and becoming mine owner-operator.
4. Mine Summary Update
Highway -40 (350m sub-surface haulage drive) Development of Highway -40 broke through to DS mine from SJY side on 23rd June as planned, a significant milestone in the Company's plan to merge the western four mines. The ore body identified in the first cross cut along the Highway -40 was confirmed to be over 70m long in strike by the second cross cut along the Highway-40. Assay results gave a grade of 6~7.8g/t for a thickness of approximately 1m.
Merge of western side four mines
SJY, BMY and XCZ mines merged in April after the BMY underground contract expired. The merged mine has been capable of producing approximately 200~220t/day of ore. A 73m rise linking between XCZ level 1 and BMY level 1 at late May provided a quick path for XCZ ore to be transferred to BMY processing plant via underground drives and declines. The link also provides a short pass for SJY level 2 ore to be sent to BMY processing plant via BMY level 1 drive and decline 1. A total of 7 stopes were active during the quarter.
SJY deep level
SJY decline 5 reached to its designed depth of 491m at -280RL. Level drive development is underway to define the extension of ore body which is being mined in 3A and 3B stopes at present.
DS mine development
DS mine finished a cross cut access to the Highway-40 and joined with SJY mine during the quarter. Development for accessing the extension of the major ore body has seen the fringe of the ore body. Highway-40 development towards ZJS on the east side of DS mine started in June and is progressing well.
ZJS-JF exploration and development
ZJS underground diamond drilling was completed in the 1st cuddy with results currently under review. Development of Highway-40 from JF to JZW will commence once the Company has assumed control of all mining operations.
XL mine development and exploration
XL mine identified a few areas with grade of over 10g/t on level 1, level 2 and decline 3. The very high grade ore body exposed by the development of decline 3 was explored further through an ore drive on the top section of the ore body and a rise within the ore body. The ultimate boundary of the ore body remains unknown. It is planned to extend the decline 3 to Highway-40 level and return to the ore body to undertake further resource definition in the September quarter.
June Quarter Mining Summary
| A | Total Wagons | Total Ore (t) |
| Apr-09 | 5,669 | 4,251 |
| May-09 | 5,993 | 4495 |
| Jun-09 | 7,746 | 5,809 |
| Total | 19,408 | 14,555 |
5. Ore processing Update
With the merging of the western side four mines, ore required to feed the BMY and DS processing plants can now be more easily distributed underground via the Highway-40 between SJY and DS mine. DS ore can be easily delivered to BMY processing plant and SJY-BMY ore can be delivered to DS processing plant if needed.
BMY tailings dam height increase
The BMY tailings dam was designed by the Chang Sha Chemical Industry Institute in 2008. With the gradual increase of the tailings level in the BMY dam, it is necessary to increase the height of the dam wall. HWM has scheduled to start this project in the September quarter to lift the dam wall height by approximately 6m for the first stage. Negotiation with a number of candidate contractors for constructing the dam wall is in progress.
June Quarter Milling Activity Results:-
| BMY PLANT | Tonnes | Grade (g/t) | Tails (g/t) | Recovery % | Concentrate | Gravity | Total Ounces | ||
| Grade (g/t) | Tonnes | Au (g) | Au (g) | ||||||
| Apr-09 | 3150.00 | 12.22 | 0.64 | 94.70 | 172.00 | 147.00 | 25303.20 | 11166.61 | 1172.60 |
| May-09 | 2657.41 | 13.79 | 0.45 | 96.70 | 179.75 | 168.75 | 30332.70 | 5108.52 | 1139.60 |
| Jun-09 | 3313.80 | 8.39 | 0.30 | 96.40 | 131.72 | 183.35 | 24150.86 | 2675.34 | 862.60 |
| DS PLANT | Tonnes | Grade (g/t) | Tails (g/t) | Recovery % | Concentrate | Gravity | Total Ounces | ||
| Grade (g/t) | Tonnes | Au (g) | Au (g) | ||||||
| Apr-09 | 937.48 | 4.75 | 0.55 | 88.38 | 95.50 | 25.50 | 2437.80 | 1498.40 | 126.50 |
| May-09 | 1022.89 | 7.63 | 0.52 | 93.24 | 133.65 | 37.45 | 5004.60 | 2275.00 | 234.00 |
| Jun-09 | 882.93 | 5.28 | 0.29 | 94.40 | 112.61 | 27.81 | 3131.60 | 1266.75 | 141.40 |
Total June Quarter Milling Results:-
| Production Total for three plants | |||||
| Tonnes | Grade (g/t) | Concentrate Au (g) | Gravity Au (g) | Total Oz | |
| Apr-09 | 4087.00 | 10.50 | 27741.00 | 12665.00 | 1299.00 |
| May-09 | 3679.00 | 12.00 | 35337.00 | 7383.00 | 1374.00 |
| Jun-09 | 4196.00 | 7.74 | 27282.00 | 3942.00 | 1004.00 |
| Total | 11962.00 | 10.00 | 90360.00 | 23990.00 | 3677.00 |
6. Compliance
| • | During the quarter there were no health and safety concerns nor any environmental issues. | |
| • | The Company to 30 June 2009 is compliant with its annual checks relating to: | |
| - | Registration for Social Insurance | |
| - | Certificate of Approval for Establishment | |
| - | Business Licence | |
| - | Organisation Code Certificate | |
| - | Taxation Registration Certificate - National Taxation | |
| - | Taxation Registration Certificate - Regional Taxation | |
| - | Financial Registration for Enterprises with Foreign Investment | |
| - | Registration for Foreign Exchange | |
| - | Registration for Foreign Debts | |
| • | Exploration Licence (EL) - Compliance The Company is currently in progress with the renewal of its Exploration Licence. The local government Huai Hua Land and Resources Bureau appointed a team of advisors to examine our exploration and geological work for the previous two years. It is anticipated that the government advisors will complete their statutory assessment mid August '09. Our JV Company, Hunan Westralian Mining Co., Ltd, ("HWM") has commission our JV Partner, Brigade 407, to prepare and submit the necessary renewal documents to the local government by September 2009, this being all part of standard procedure in renewing our Exploration Licence. | |
| • | Mining Licence (ML) - Compliance The Company has commissioned Brigade 407 to complete and submit the necessary regulatory reports associated with Geological, Mine Development and Environmental matters in order for HWM to renew its Mining Licence by January 2010. | |
Outlook
As previously announced, China Goldmines has commenced exploring all possible options to assist it with improved security and to fund the Company's central development program.
The Company intends to execute its "Centralisation Plan" over the coming 12 month period and will proceed with its planning and feasibility approval study towards a central concept in order to secure gold production targeted at a scale of 100,000 oz's pa over the longer term.
The Company will proceed to downsize its current levels of operation and continue production on a smaller scale in order to secure the operating environment. In this context the Company's revised production target for calendar year 2009 is anticipated to be in the range 15,000oz to 20,000oz, depending in part on the Company's ability to securely mine its high grade ore.
-ENDS-
For further information contact:
| China Goldmines plc | |
| Frank Vanspeybroeck (CEO) | +86 731 489 0755 |
| Marinko Vidovich (CFO) | +61 8 6216 5200 |
| Brewin Dolphin Ltd (Nomad) | |
| Alex Dewar (Nominated Adviser) Threadneedle Communications Laurence Read/ Beth Harris | +44 (0)131 529 0276 +44 (0)20 7653 9855 |
Notes to Editors
China Goldmines plc is a UK mining company listed on AIM on 7 February 2006 as a gold resources company focussed on the discovery and development of gold projects in Hunan Province, China.
CGM's Gold Project is known as the Guanzhuang Gold Project. Based on an Independent Geological Report, the project has an estimated inferred resource of 1.8m ounces within the top 325m from the surface and over a strike distance of 1.5km. The resources have been identified from CGM's 100% owned/controlled Shen Jia Ya Prospect, which is within the Guanzhuang Gold Project.
The Shen Jia Ya Prospect consists of eight gold mines that have now been converted into a single mining licence. The Company plans to consolidate all eight individual mines. That consolidation may result in a mining operation with a long life producing 100,000 oz Au/pa, beginning in the near future. At the same time as mining the existing eight mines, China Goldmines will continue to investigate the potential of the project area that remains under-explored.