4 Nov 2008 07:00
China Goldmines plc
("China Goldmines" (CGM) or the "Company")
(AIM:CGM)
CHINA GOLDMINES GUANZHUANG GOLD PROJECT QUARTERLY UPDATE
SEPTEMBER 2008 (3Q08)
Highlights
| 1 | Three processing plants are now in operation. They have a total capacity of 350 tonnes per day (tpd). By March 2009, the three plants will be upgraded to 570 tpd. |
| 2 | Production for the 3Q08 was 7,552 tonnes at 4 g/t (average). CGM is estimated to produce a total of 5,000 - 6,000 ounces of gold by 31 December 2008. Although average grades for the quarter have been running below budget, we are continuing to observe evidence of high grades from drilling and underground sampling results (up to 91 grams Au per tonne). |
| 3 | Drilling during the 3Q08 was on target with 5,000 metres. |
| 4 | CGM's production target has been set at 20,000 - 25,000 oz of gold to be produced during the year ending 31 December 2009. |
| 5 | A consolidated mining licence (incorporating all eight mining licences) has been issued to our Chinese JV Company Hunan Westralian Mining Co. Ltd. |
| 6 | Our cash position remains strong with USD 17.3m in the bank as of 30 September 2008. The Board will review all capital and operating costs in light of the current economic and currency climate in order to monitor and maintain our strong cash position. |
| 7 | The Board has decided not to bring forward and fast track the "Central Decline Project", but rather to remain on course with the original development plan scheduled to start in mid-2009. |
| 8 | Our emphasis on safety has resulted in an excellent safety record for the 3Q08. |
COMMENTARY
1. Processing Plants
CGM has successfully commissioned three gold processing plants:-
| 1.1 | The Bao Mu Yuan (BMY) Processing Plant was upgraded during 3Q08 from 50 tpd to 200 tpd. It was commissioned on the 4th August 2008, meeting our objective stated in the 2Q08 project update. |
| Designs for the new Bao Mu Yuan tailing dam have been approved by the Chinese authorities and construction will start in 4Q08. | |
| 1.2 | The De Sheng Processing Plant (DS) was refurbished to 50 tpd and is now in operation following the commissioning of the 2.5 km tailings line to the Bao Mu Yuan tailing dam. |
| CGM has begun upgrading the processing plant to increase from 50 tpd to 100 tpd and it is expected to be in full operation by 31 December 2008. | |
| 1.3 | The Xiao Chong Zi (XCZ) Processing Plant. CGM has installed a 100 tpd mill, which will be upgraded to 350 tpd by the end of 1Q09. |
| Summary of Processing Plants: "Maximum Operating Capacity" |
| |||||||||||||||||||
| The three processing plants have a total 650 tpd mill capability; they have all been scheduled to run continuously using three shifts per day to provide a maximum 570 tpd operating capacity. |
2. Production and Drilling Results
Summary of production to date:-
| CONCENTRATE | |||||||
| HEAD | CONCENTRATE | GRADE | GRAVITY | TAILS | Recovery | ||
| TONNES | GRADE | TONNES | (grams/tonne) | GOLD(g) | g/t | % | |
| 2Q 08 | 5,172 | 2.82 | 110 | 100 | 2,216 | 0.27 | 90% |
| 3Q 08 | 7,552 | 4 | 290 | 85 | 3,715 | 0.27 | 93% |
| Total | 12,724 | 3.5 | 400 | 90 | 5,841 | 0.27 | 92% |
Based on production results to date for the three quarters ending September 2008, CGM will produce 5,000 to 6,000 ounces for the year ending 31 December 2008.
We revised our 2008 gold production figures for a number of reasons, including:
| * | a Board decision to add stringent underground mining safety procedures; |
| * | the slower-than-expected ramp-up due to delays in underground mine refurbishment; |
| * | the lower than expected grades in the upper remnant zones; |
| * | the harshest winter in living memory; |
| * | frequent power cut-offs and outages; and |
| * | the suspension of visas and explosives during the Olympics. |
As a result, we will produce 5,000 to 6,000 ounces of gold for the year ending 31 December 2008. CGM expect that once refurbishment is completed and the plants have been upgraded to 570 tpd (with higher grades indicated in deeper zones of mines), there will be a higher output of 20,000 to 25,000 ounces for the year ending 31 December 2009.
The Company remains confident that productivity levels will increase in the coming quarters and the set target levels will be achieved.
During the year, the Company's health and safety policy was a major priority, both in implementing Western procedures and in the ongoing audit and training. This has resulted in an excellent health and safety record to date.
Drilling Results
The company drilled 5,000m in the 3Q08, using six surface diamond-drill rigs.
Our subcontractor, Ausino Drilling Services, commenced a 9,000m underground drilling programme in September for grade control and we gained further confidence in our gold resources.
Drilling and underground sampling results:
Sampling results > 6 g/t
| Sample-ID | App. Length | True Length | Au Grade | Mine |
| (M) | (M) | (g/t) | ||
| 1750 | Rock-chip Sampling | 24.44 | BMY | |
| 1734 | 1 | 1 | 19.02 | BMY |
| 1736 | 0.7 | 0.7 | 18.48 | BMY |
| 1721 | Rock-chip Sampling | 15.59 | BMY | |
| 1395 | Rock-chip Sampling | 12.77 | BMY | |
| 2958 | 1.2 | 0.9 | 12.47 | BMY |
| 1895 | 1.7 | 1.3 | 11.51 | BMY |
| 3116 | Rock-chip Sampling | 9.85 | BMY | |
| 1397 | Rock-chip Sampling | 9.41 | BMY | |
| 1798 | 1.2 | 0.9 | 9.33 | BMY |
| 1374 | 1 | 0.4 | 7.49 | BMY |
| 1729 | 1 | 1 | 7.07 | BMY |
| 1816 | 1.5 | 0.6 | 6.85 | BMY |
| 1335 | 1 | 0.83 | 6.72 | BMY |
| 3071 | 1.3 | 1.15 | 6.35 | BMY |
| 3116 | 1 | 0.9 | 9.85 | BMY |
| 3091 | 0.5 | 0.4 | 91.05 | BMY |
| 3154 | 1 | 1 | 10.7 | BMY |
| 3202 | 1 | 1 | 30.76 | BMY |
| 3200 | 1.2 | 1.14 | 6.8 | BMY |
| 3208 | 1.1 | 0.9 | 8.7 | BMY |
| 3213 | 0.9 | 0.7 | 10.2 | BMY |
| 3215 | 1.6 | 1.4 | 6.98 | BMY |
| 3232 | 1 | 0.93 | 7.55 | BMY |
| 3236 | 1 | 0.9 | 8.92 | BMY |
| 3237 | 1.6 | 0.7 | 8.1 | BMY |
| 3295 | 0.8 | 0.8 | 18 | BMY |
| 3296 | 1.15 | 1.15 | 41.48 | BMY |
| 5020 | 0.8 | 0.8 | 19.01 | BMY |
| 5025 | 0.6 | 0.6 | 13.06 | BMY |
| 5267 | 0.8 | 0.8 | 25.35 | BMY |
| 5400 | 0.6 | 0.4 | 21.5 | BMY |
| 5446 | 1 | 0.55 | 7.03 | BMY |
| 5449 | 0.85 | 0.85 | 14.51 | BMY |
| 5453 | 0.25 | 0.25 | 6.59 | BMY |
| 5455 | 1 | 0.95 | 14.38 | BMY |
| 5458 | 1.1 | 1 | 9.82 | BMY |
| 5462 | Rock-chip Sampling | 8.47 | BMY | |
| 1863 | 1 | 1 | 8.3 | XCZ |
| 1840 | Rock-chip Sampling | 7.9 | XCZ | |
| 1853 | 0.8 | 7.56 | XCZ | |
| 1862 | 1 | 1 | 6.28 | XCZ |
| 1857 | 1 | 1 | 6.02 | XCZ |
| 3163 | 1.5 | 1.5 | 6.23 | XCZ |
| 3335 | 0.2 | 0.2 | 37.35 | XCZ |
| 3415 | 1 | 0.9 | 31.12 | XCZ |
| 3424 | 0.8 | 0.75 | 7.81 | XCZ |
| 3425 | 0.9 | 0.85 | 7.88 | XCZ |
| 3434 | 0.4 | 0.4 | 8.41 | XCZ |
| 5469 | Rock-chip Sampling | 13.29 | XCZ | |
| 5005 | Rock-chip Sampling | 8.02 | SJY | |
| 5014 | 0.75 | 0.7 | 12.21 | SJY |
| 5015 | 1.8 | 1.8 | 11.62 | SJY |
| 5282 |
|
| 7.68 | SJY |
| 5297 | 1 | 0.85 | 8.6 | SJY |
| 5079 | 1.4 | 1.3 | 6.35 | SJY |
| 5304 | 1.35 | 1.3 | 10.78 | SJY |
| 5305 | Rock-chip Sampling | 11.97 | SJY | |
| 5327 | 1.8 | 1.7 | 11.18 | SJY |
| 5328 | 1.7 | 1.45 | 17.94 | SJY |
| 5350 | 0.7 | 0.6 | 26.26 | SJY |
| 5357 | 0.5 | 0.5 | 6.85 | SJY |
| 5361 | 0.47 | 0.47 | 17.49 | SJY |
| 5366 | 0.5 | 0.5 | 6.88 | SJY |
| 5367 | 1 | 1 | 7.12 | SJY |
| 5468 | 0.4 | 0.4 | 71.63 | SJY |
| 5471 | 0.5 | 0.4 | 16.23 | SJY |
| 5476 | 0.48 | 0.41 | 23.17 | SJY |
| 1802 | 1015 | 1.02 | 24.09 | DS |
| 3072 | 0.9 | 0.9 | 12.5 | DS |
| 3080 | 1.1 | 0.9 | 12.1 | DS |
| 1803 | 0.8 | 0.58 | 9.02 | DS |
| 3082 | 1 | 0.85 | 5.62 | DS |
| 3072 | 0.9 | 0.9 | 12.5 | DS |
| 3080 | 1.1 | 0.9 | 12.1 | DS |
| 5037 | Rock-chip Sampling | 6.95 | DS | |
| 5048 | 1.2 | 1.1 | 6.37 | DS |
| 5049 | 0.95 | 0.95 | 6.98 | DS |
| 5318 | 1.2 | 1.1 | 22.57 | DS |
| 5378 | 1.5 | 1.5 | 6.55 | DS |
| 5380 | 0.8 | 0.8 | 7.66 | DS |
| 5381 | 0.5 | 0.5 | 11.66 | DS |
| U005 | 1.5 | 1.5 | 7.7 | DS |
| U013 | 0.8 | 0.8 | 8.22 | DS |
| 3210 | Rock-chip Sampling | 12.43 | ZJS | |
| 3282 | 0.35 | 0.35 | 13.73 | ZJS |
| 3284 | Rock-chip Sampling | 7.22 | ZJS | |
| 3336 | Rock-chip Sampling | 30.06 | ZJS | |
| 3338 | Rock-chip Sampling | 18.38 | ZJS | |
| 3344 | 1 | 1 | 6.21 | ZJS |
| 3397 | 0.85 | 0.8 | 6.94 | ZJS |
| 5201 | 0.8 | 0.75 | 11.43 | ZJS |
| 5204 | 0.8 | 0.7 | 10.85 | ZJS |
| 5207 | 0.9 | 0.9 | 13.5 | ZJS |
| 5228 | 1 | 1 | 7.01 | ZJS |
| 5031 | Rock-chip Sampling | 32.99 | ZJS | |
| 5040 | 1 | 0.8 | 7.09 | ZJS |
| 3488 | 0.7 | 0.7 | 8.18 | ZJS |
| 3490 | 1.3 | 1.3 | 36.22 | ZJS |
| 3491 | 1 | 1 | 7.58 | ZJS |
| 5419 | 0.7 | 0.7 | 6.31 | ZJS |
| 5432 | 1.1 | 1.1 | 6.12 | ZJS |
| 3150 | 1 | 0.7 | 9.01 | XL |
Drill Results
| Drill hole | Beijing Grid East (m) | Beijing Grid North (m) | Beijing Grid RL (m) | From (m) | To (m) | Grade (g/t) |
| SJDD0002 | 37501333.21 | 3160298.113 | 224.01 | 149.65 | 151.62 | 2.48 |
| SJDD0002 | 37501333.21 | 3160298.113 | 224.01 | 182.59 | 183.09 | 19.5 |
| SJDD0002 | 37501333.21 | 3160298.113 | 224.01 | 196.99 | 197.69 | 2.93 |
| SJDD0003 | 37501333.21 | 3160298.113 | 224.01 | 210.75 | 211.58 | 10.5 |
| SJDD0004 | 37501333.21 | 3160298.113 | 224.01 | 250 | 251 | 3.86 |
| SJDD0004 | 37501333.21 | 3160298.113 | 224.01 | 293.6 | 295 | 3.09 |
| SJDD0004 | 37501333.21 | 3160298.113 | 224.01 | 298.35 | 299 | 2.9 |
| SJDD0004 | 37501333.21 | 3160298.113 | 224.01 | 306.75 | 307.15 | 7.97 |
| SJDD0004 | 37501333.21 | 3160298.113 | 224.01 | 309.5 | 310 | 2.42 |
| SJDD0004 | 37501333.21 | 3160298.113 | 224.01 | 310 | 311 | 2.95 |
| SJDD0004 | 37501333.21 | 3160298.113 | 224.01 | 324.8 | 326 | 11.4 |
| SJDD0012 | 37501554.91 | 3160289.262 | 357.881 | 115 | 116 | 7.33 |
| SJDD0015 | 37500722.12 | 3160042.842 | 222.463 | 290 | 291.1 | 1.73 |
| SJDD0016 | 37500816.04 | 3160127.248 | 226.927 | 227.6 | 228.3 | 7.57 |
| SJDD0022 | 37501519.38 | 3160340.12 | 353.581 | 267.46 | 268.16 | 2.83 |
| SJDD0022 | 37501519.38 | 3160340.12 | 353.581 | 492 | 493 | 2.95 |
| SJDD0022 | 37501519.38 | 3160340.12 | 353.581 | 493 | 494 | 2.59 |
| SJDD0026 | 37498084.88 | 3159178.284 | 257.42 | 290 | 291.1 | 1.73 |
| SJDD0037 | 37501178.96 | 3160304.125 | 265.745 | 430.05 | 431 | 7.11 |
| SJDD0037 | 37501178.96 | 3160304.125 | 265.745 | 431 | 432 | 5.75 |
| SJDD0037 | 37501178.96 | 3160304.125 | 265.745 | 432 | 433 | 5.64 |
| SJUG00001 | 37497853 | 3159018 | -110.744 | 71.5 | 72.3 | 2.88 |
| SJUG00001 | 37497853 | 3159018 | -110.744 | 72.3 | 73.5 | 2.88 |
3. Mine Updates
The Company is confident of reaching the target set of 20,000 to 25,000 ounces for the year ending 31 December 2009 year.
A summary of the progress 3Q08 of all mines is as follows:-
| * | Shen Jia Ya Mine (SJY) |
| The connection with Bao Mu Yuan (BMY) mine was achieved in 3Q08. This will enable the haulage of gold ore and waste between the two mines and the establishment of a ventilation circuit. | |
| Active stopes: No. 070 (500t @ 6 g/t) No. 050 (2,000t @ 4 g/t). | |
| Indentified stopes for development total 19,000t @ 4.5 g/t. | |
| * | Bao Mu Yuan Mine (BMY) |
| The connection with Shen Jia Ya (SJY) mine was achieved in 3Q08. | |
| Active stopes: No. 100 (2,200t @ 3 g/t) No. 075 (1,500t @ 4.5 g/t) No. 905 (1,000t @ 3.5 g/t) No. 850 (5,000t @ 4.5 g/t) | |
| Identified stopes for development total 5,000t @ 4.5 g/t | |
| * | De Sheng Mine (DS) |
| CGM finished a new 150m decline from the surface winch at the processing plant to level 1 of the De Sheng Mine. | |
| Active stopes : No. 600 (800t @ 3.5 g/t) No. 700 (800t @ 7.9 g/t) No. 605 (1,000t @ 4 g/t) No. 650 (2,000t @ 6 g/t) No. 660 (5,800t @ 3 g/t) | |
| Identified stopes for development total 13,000t @ 7 g/t and 52,000t @ 4.5 g/t. | |
| * | Zheng Jia Shan Mine (ZJS) |
| Connection with Jiu Fa mine was achieved in 3Q08. Refurbishment of the ventilation and communication systems is in progress. | |
| Active stopes: No. 925 (500t @ 5 g/t) No. 950 (500t @ 5 g/t) | |
| Identified stopes for development total 29,000t @ 4 g/t. | |
| * | Jiu Fa Mine (JF) |
| Connection to Zheng Jia Shan mine was achieved. Refurbishment is ongoing with the replacement of several winches to increase haulage capacity and to establish ventilation to the lower portion of the mine. | |
| During 3Q08, no active or identified stopes. | |
| * | Jin Zhu Wan Mine (JZW) |
| Work continues to connect Jiu Fa (JF) mine. We estimate that the task will be completed by the end of August 2009, including the refurbishment associated with haulage, ventilation and ground services. | |
| Identified stopes 40,000t @ 4 g/t and 45,000t @ 5 g/t. | |
| * | Xiang Lu Mine (XL) |
| The Company finished the haulage tunnel from XL through an adjacent hill to a road with more favourable access for large road trucks. This will facilitate the transport of ore to our processing plants. | |
| Refurbishment XL is ongoing and ore mining is anticipated in 4Q08. | |
| Identified stopes for development are estimated at a total of 25,000t @ 3 g/t and 40,000t @ 6 g/t. | |
| * | Xiao Chong Zi (XCZ) |
| Refurbishment was completed at the end of 3Q08 when the Company achieved the breakthrough to Shen Jia Ya mine (SJY). This will improve haulage productivity in the coming quarter. |
Note: Identified stopes are based on geological interpretation from underground sampling and drilling and are classified as inferred resources.
4. Single Consolidated Mining Licence in CGM's Name
On 18 August 2008, CGM received Mining Licence No. 4300000820405. The licence incorporates all eight operating gold mines into one licence that is now registered in the name of our China JV Company "Hunan Westralian Mining Co. Ltd". This mining licence covers one registered mining area of 6.24 km2 with a depth of -230 metres (approximately 550m vertical depth from surface). In November 2007, the purchase of the mining licence was concluded and CGM now has 100% control of all eight individual producing gold mines in the Shen Jia Ya Prospect, together with all mining permits and licences. The new licence gives us production rights not just on the original eight ML's but also for the territory surrounding the mines.
5. CGM Cash Position
CGM actively monitors and reviews all aspects of planned capital expenditure and operating costs associated with our Chinese operations in view of external macro conditions.
CGM's cash position on 30 September 2008 was USD17.3m. We have an additional USD1.7m in cash equivalent assets such as gold stock and security bonds, taking our cash reserves to USD19m at the end of 3Q08.
As a result of prudent cash management of expenditure, CGM remains on track with its budgeted cash position.
In light of the unstable financial climate associated with capital markets, currency movements (GBP to USD) and the gold price, the Board will continue to adopt a prudent approach to expenditure for the foreseeable future.
6. Central Decline Project
As announced on 31 July 2008, the Company has entered into a contract with Hunan Tunnel Engineering General Corporation to construct a central decline and a 4km underground haulage system.
Update on the project:-
| * | Land and Acquisition |
| The Company has successfully acquired its central site location in Zheng Jia Shan for RMB 1,156,231 (USD170,000) from the local villagers for the land right usage. | |
| * | Contractor |
| In view of the current economic climate and the projected ramp-up of gold production for the 2009 year, the Board has decided to revert to the original date of mid-2009 for the commencement of the central decline project. |
7. Human Resources and Safety
| * | The Company has 476 full-time staff and 600 contractors working on the Guanzhuang Gold Project. |
| * | CGM has an excellent safety record and the Company is proud that no time has been lost through injury in 3Q08. This has been achieved through extensive training and safety development programs. |
| China Goldmines plc | |
| Frank Vanspeybroeck (CEO) | +86 731 518 8200 |
| Alex Worrall (Director/Company Secretary) | +44 207 788 7621 |
| Marinko Vidovich (CFO) | +61 8 6216 5200 |
| Guanzhuang Site Office | +86 745 463 9900 |
| Brewin Dolphin Ltd (Nomad) | |
| Alex Dewar / Sandy Fraser (Nominated Adviser) | +44 131 529 0276 |
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 will result in a mining operation with a long life producing 150,000 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.
The information in this report was derived from data compiled by Hunan Westralian Mining Co., Ltd, China and reported by John Warner B. App. Sc. (App. Geol), MAIG, MGAA. John Warner is the Group Geology Manager to the Company. He has the required experience of the style of mineralisation and types of deposit under consideration and of the activity he is undertaking so that he is qualified as a Competent Person as defined by the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.' John Warner consents to the inclusion in the report of matters based on his information in the form and context in which it appears and has reviewed the contents of this announcement.