RNS Number:4675K
China Goldmines PLC
21 December 2007
21 December 2007
China Goldmines plc
("China Goldmines" or the "Company")
Preliminary results for the year to 30 June 2007
China Goldmines plc (AIM: CGM), the gold resources company focussed on the
discovery and development of gold projects in the Hunan Province of China,
announces its preliminary results for the year ended 30 June 2007.
Highlights
* Net current assets for the Group at year end were US$2,137,000.
* Losses for the year were (US$1,965,779) being (US8.38cents) per share.
* In April 2007, through its subsidiary Hunan Westralian Mining Co., Ltd,
China Goldmines entered into an agreement with the Peoples Government of
Yuanling County to transfer 100% of the 8 existing gold mines at the
Shenjiaya Prospect to Hunan Westralian Mining Co., Ltd for �12 million.
Post-period Highlights
* On 7 November 2007 all eight producing gold mines in the Shenjiaya
Prospect were successfully transferred into the Company's possession and
control.
* In October 2007 shareholders approved the placing of 25million ordinary
shares at 120pence per share to raise �30million (approx US$60m).
Operational Highlights
* China Goldmines has undertaken its exploration and pre-feasibility strategy
by mapping, sampled underground mine exposures and drilled mineralised
structures.
* The Company has commenced the consolidation and development of the 8 gold
mines to become an immediate gold producer for the coming year.
* 6800 metres of surface diamond drilling delivers mineralisation and
alteration in 15 of the 18 drilled holes. Significant results:
ZK 4501 0.70m @ 9.64 g/t Au
ZK 03 0.75m @ 68.75 g/t Au
2m @ 48.45 g/t Au
ZK 601 2.3m @ 15.45 g/t Au
ZK 1001 1.45m @ 17.86 g/t Au
* High-grade underground samples show results of between 13 g/t Au and 130
g/t Au, and a second phase of mill feed sampling (Run of Mine Ore) for the
current producing mines showed results from 0.5 g/t Au to 77 g/t Au.
* In July 2007 the Company received the independent geological report by AI
Maynard & Associates estimating a JORC Code compliant inferred resource estimate
of approximately 5.1 million tonnes at 11 g/t containing 57,000 kg of gold
equivalent to 1.83m oz for the Company's Shenjiaya project. This estimate only
covers less than 20% of the strike length limited to 300m depth from surface and
therefore their report states that the Guanzhuang Project has reasonable
potential for a further four to six times the current resource still to be
identified.
Frank Vanspeybroeck, CEO of China Goldmines, said:
"We are making good progress at Shenjiaya, which is an endorsement of our
revised development strategy to increase performance and output. We continue to
work towards our first gold pour from our new project in the new year."
The Chairman's Statement and full financial statements follow.
For additional information please contact:
China Goldmines plc
Frank Vanspeybroeck (CEO) Mobile: +61 41 116 6276
Alec Worrall +44 207 788 7621
Marinko Vidovich (CFO) Mobile: +61 41 997 4744
Changsha Office +86 731 515 8211
Perth Operations Office +61 8 9488 8830
Brewin Dolphin Limited +44 141 221 7733
(Nominated Adviser)
Alan Stewart (Corporate Finance)
Greig Aitken (Research)
Parkgreen Communications +44 20 7851 7480
Justine Howarth
Erica Nelson
Notes to Editors
China Goldmines plc listed on AIM on the 7 February 2006 as a gold resources
company focussed on the discovery and development of gold projects in the Hunan
Province of China.
The Company is preparing a feasibility study on its Guanzhuang Gold Project,
where a resource of 1.8million ounces within the top 325m from surface and over
a strike distance of 1.5km has been by our Joint Venture Partner, Brigade 407 of
the Hunan Region Bureau of Geology and Mineral Resources Exploration and
Development. The Company's target is to further increase this resource by a
factor of 4 to 6 times with a continuing exploration program.
The Shenjiaya Prospect consists of eight gold mines which the Company plans to
consolidate with the aim of having a long life mining production of 150,000 oz
Au/pa 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.
Chairman's Statement
The Past Year
The financial year ended June 2007 was a significant year for China Goldmines
plc.
The 7th of February 2007 marked the first anniversary of our listing on the AIM
Market of the London Stock Exchange. During the 2007 financial year a major
milestone has been achieved whereby we secured the agreement with the Yuanling
County to transfer 100% control and ownership to China Goldmines of the 8
existing gold mines in the Guanzhuang Gold Project. This was a major achievement
that within our first year, all 8 miners had signed the transfer of their mining
licence, the mining rights, mine development infrastructure, and capital fixed
assets. The Government of Yuanling County agreed as part of the Supplementary
Agreement that it guaranteed that the mining licences would be transferred with
all valid permits and licences to meet the requirement of land use, mining,
environmental protection approval and other statutory requirements.
Our long term vision is to make China Goldmines a dominant mining house in
southern central China. In the shorter term our main objective is to develop the
current Guanzhuang Gold Project
China Goldmines PLC has made substantial progress during the year with the
exploration, evaluation and purchase of 8 goldmines forming the Guanzhuang Gold
Project after successfully raising further capital in October this year.
The findings of the independent Geological report demonstrated the potential for
establishing a longer term underground mining operation which could provide gold
production of 25000 oz per annum increasing to potentially 150000 oz per annum.
The management team headed by the Company's CEO, Mr Frank Vanspeybroeck, who
resides in Hunan China, have been working diligently with a professional team of
experts all based in China.
During the year the Company increased its staff to 227 fulltime employees of
which 205 are locally based in China. The company continues to endorse western
health, safety and environmental policies and is working closely with the local
communities and government to ensure that these standards are implemented and
maintained.
The Company's next milestone will be commencing the transition from explorer to
producer. This will provide cash flow for the company to undertake the necessary
development work to consolidate and expand the 8 gold mines and to achieve its
objective to become a gold producer in the region.
Acknowledgements
Whilst the past year has been a consolidation point for the Company, there was a
significant amount of effort and energy put in by all staff, management and
consultants. I would therefore like first to thank all the staff of China
Goldmines for their dedicated efforts and contributions towards the considerable
progress made by the Company and secondly, I would like to acknowledge the input
and effort of my fellow board members for their effort, support and team work in
getting many of the key milestones finalised. Finally I would like to thank our
shareholders for their continuing interest and support in China Goldmines Plc.
Clive Donner
Chairman
21 December 2007
Operations Overview
1. Project Overview
1.1 Guanzhuang Gold Project
The Guanzhuang Gold Project is located in the Guanzhuang mineral field of Hunan
Province, China (Fig 1). The project currently covers approximately 38.5km2
centred some 9km to the east of the operating Woxi Gold Mine that has attributed
gold resource of almost 50t (1.61 Moz) along with antimony and tungsten credits.
Exploration is currently focussed on the Shenjiaya and Xiaotaoyuan Prospects.
Mining within the southern CGM project area is currently confined to the
Shenjiaya Prospect, which is a significant mineralised structure held under
fragmented ownership by artisanal miners. The Xiaotaoyuan Prospect is located
5km north of Shenjiaya within the northern portion of the project area (Fig 2).
The Guanzhuang Project is serviced by the sealed Highway 319 that traverses the
project tenements. Grid power parallels Highway 319 and water is readily
available from numerous large streams and rivers within the immediate area. The
topography is characterised by low mountain ranges, typically between 200m and
800m above sea-level, the highest elevation is 850m. The climate is a temperate
maritime to continental regime, with an average winter temperature maximum of
4.6degreesC and an average summer temperature maximum of 28degreesC. The region
is relatively sparsely populated, principally comprising numerous subsistence
farming communities.
1.2 Tenure
The Guanzhuang Project comprises two Exploration Licences with EL4300000730183
(Shenjiaya) in the process of being increased in size and 8 Mining Licences. The
licences collectively cover an area of approximately 38.5km(2) as shown in Table
1.
Table 1: Guanzhuang Project Tenement Schedule
Tenement Number Tenement Holder Area
(km2)
EL 4300000730183 Brigade 407 20.74
(Transfer Agreement to HWM approved)
EL 4300000730078 Sinochem 14.14
(Transfer Agreement to HWM approved)
ML 4300000720389 HWM Co., Ltd. 0.44
ML 4300000720393 HWM Co., Ltd. 0.19
ML 4300000720385 HWM Co., Ltd. 0.32
ML 4300000720387 HWM Co., Ltd. 0.28
ML 4300000720386 HWM Co., Ltd. 0.12
ML 4300000720388 HWM Co., Ltd. 0.24
ML 4300000720392 HWM Co., Ltd. 0.95
ML 4300000720391 HWM Co., Ltd. 1.12
2. Corporate Review
Following initial exploration the board of Hunan Westralian Mining Co., Ltd, a
wholly owned subsidiary of CGM, (the Joint Venture Company), decided to develop
the project as described in the Joint Venture contract and on 23 July 2006
Brigade 407 and China Chemical agreed to transfer the Exploration Licences to
the Joint Venture Company. When the Joint Venture Company decides to mine inside
the Exploration Licences, Brigade 407 and China Chemical can contribute
expenditure on a pro-rata basis to retain their 20% interest, elect not to
contribute towards expenditure and thereby dilute to a minimum 10% interest or
sell their 20% ownership to the Joint Venture Company with CGM retaining the
first right of refusal, subject to agreement on price.
When the Joint Venture Company decided to proceed and mine the 8 mining licence
areas an agreement was entered into with the People's Government of the Yuanling
County on the 10 April 2007 to acquire a 100% interest in the 8 mining licences.
Any mining by the Joint Venture Company in the area covered by this agreement is
for the benefit of Westralian Resources Pty Ltd directly rather than the Joint
Venture Company. On the 26 June 2007, the Company finalised and executed all 8
transfer agreements with each individual miner owner and subsequently took
possession of the 8 gold mines on 1 November 2007.
2.1 Management/Administrative Upgrade
The Company has placed all key operational management positions; geological,
engineering, mine processing, development and administration with western mining
specialists (contracted for services rendered in China).
The Company has secured new corporate leased premises to cater for the growth in
corporate staff in our Changsha office located now at the South
Jiasheng-Aomeicheng Building, 262 West Laodong Road, Changsha (city centre).
The Company has secured a new operation site office to cater for future growth
in Guanzhuang by leasing an office block which will house all geological, mining
engineers, mine operators and administration staff. The office site is
strategically positioned whereby it is in Guanzhuang Township and only minutes
away from the mine sites.
The Company has negotiated the lease on the two hotels adjoining the office
block which will accommodate all mine operation staff. The hotel serves as a
practical and economical solution that logistically improves operation
efficiency.
In the coming year the Company plans to:-
- Upgrade IT hardware and bandwidth to cater for growth and meet western
standards;
- Install specialised western mining software applications;
- Adopt western style mine communication systems;
- Improve the co-ordination of all data and information between the 8 gold mines
to our site office and Changsha office.
3. Exploration Review
During the period China Goldmines plc continued its exploration program
including the commencement of surface diamond drilling, survey and underground
channel sampling of all accessible underground mine workings, monitoring the
grade of " Run of Mine " mill feed from the current production mines and
reconnaissance surface geological mapping to validate portions of previous
geological mapping.
Drilling
During the period 1 July 2006 to 30 June 2007, the Company completed over 6800
metres with 18 drill holes, mineralisation/alteration was intersected in 15 of
the drill holes.
Trenching
Completed 25 costeans from 1 July 2006 to 30 June 2007, intersected alteration
in all the trenches with the alteration zones being wide and continuous. The
results will be used to assist in the follow up drilling programme in the coming
year.
Surface Mapping
Total surface mapping of the Shenjiaya prospect to date is 22km2 usually at a
large scale 1000 or 5000. The surface rock chip samples assay demonstrate the
prospective nature of the project area. A number of surface chip samples have
indicated a possible new mineralised zone a kilometre to the south of the
Shenjiaya mineralisation to be tested in the coming year.
Underground Sampling
The 8 gold mines have continued to be mapped by Brigade 407, resulting in a
total of 1100 metres of mapped underground workings with 12200 metres of
completed surveys. The mapping has generally been carried on large scale (1:500,
1:1000 and occasionally 1:100 ) which will be supplemented in the future with
smaller scale mapping (1:50), more suited for understanding the structural
complexity of the geology.
Additional underground channel sampling of the quartz veins in the lower levels
of the Shenjiaya, Zhengjiashan, Baomuyuan, Jinzhuwan and Xianglu has been
undertaken. All samples are now assayed by the acid digest AA finish
methodology, by the accredited Hunan Institute of Mineral Resources Laboratory
located in Changsha. These values continue to support and confirm previous high
gold values from underground sampling conducted at Shenjiaya and Zhengjiashan by
Brigade 407. Significant assay values for Shenjiaya, Baomuyuan, Xiaochongzi,
Zhengjiashan and Xianglu are tabulated below.
Shenjiaya Baomuyuan Xiaochongzi Underground Assays at 355m below Surface
Grade Sample
(g/t Au) Width ( m )
10.8 2.16
11.8 2.35
40.8 1.9
Zhengjiashan Underground Assays at 355m below Surface
Assay Sample
(g/t Au) Width ( m )
13.1 1.7
Xianglu Underground Assays at 355m below Surface
Assay Sample
(g/t Au) Width ( m )
29.3 1.37
20.7 1.33
Jinzhuwan Underground Assays at 355m below Surface
Assay Sample
(g/t Au) Width ( m )
62.0 1.6
28.3 0.90
38.8 0.75
108.0 0.80
130.0 0.70
70.0 0.60
ROM Sampling
A second phase surface of mill feed sampling, Run of Mine Ore (ROM), for the
current producing mines were also completed. There was no change to the program
methodology, the collection of a daily bulk composite sample obtained by the
collection of two standard shovel loads of minus 5mm diameter sized material
from each ore wagon. The composite sample was then reduced by conventional cone
and quarter method to produce a 2 kg sample for assay. Assays were done at the
Woxi Mine laboratory, by the fire assay method. They show a wide range of
values. Examination of the sampled material shows that there is a dilution
factor, i.e. the presence of wall rock material is a function of blasting, thus
causing some of the lower grade values. Furthermore none of these mining
operations practice grade control procedures.
The results of this second phase of sampling are below.
Mine Sample Period No. of Dates Sample Ave Grade
Samples Sampled Range g/t Au
Shenjiaya Stage 2 (29 days) 29 16/4/06 to 31/04/06 0.5-29.8 5.02
Baomuyuan Stage 2 (23 days) 23 17/4/06 to 8/05/06 0.5-77.0 10.11
Zhengjiashan Stage 2 (28 days) 28 20/4/06 to 8/05/06 0.5-20.5 8.77
Independent Geological Report (IGR)
The following information is extracted from the Independent Geological Report.
This summary is not complete and reliance cannot be placed upon this executive
summary in isolation of the full report which is available in the Company's
website: www.chinagoldmines.com.
Background
A subsidiary of CGM, Westralian Resources Pty Ltd, has signed a Cooperative
Joint Venture Contract ('JV') with Brigade 407 of the Hunan Brigade of Geology
and Minerals Resources, Exploration and Development ('Brigade 407') to explore
the Guanzhuang Gold Project in the Guanzhuang Mineral Field, Hunan Province,
China. The approximately 38.5km2 project area comprises two granted Exploration
Licences, seven granted Mining Licences and one Mining Licence for which an
extension is being sought. The JV grants CGM the right to earn an 80% interest
in all licences via exploration expenditure of US$0.9M over a period of three
years from 3rd August, 2005. On 23rd July, 2006, Brigade 407 and China Chemical
(owner of the Xiaotaoyuan Prospect) have agreed to transfer the Exploration
Licences to the Joint Venture Company. When the Joint Venture Company decided to
mine the project area, an agreement was entered into on 10th April, 2007 with
the People's Government of the Yuanling County to acquire a 100% interest in the
eight mining licences. Any mining by the JV Company in the area covered by this
agreement is for the benefit of Westralian Resources Pty Ltd directly rather
than the JV Company. On the 26th June 2007, the Company finalised and executed
all eight transfer agreements subject to the successful raising of funds with
each individual miner.
Geological Setting
The regional geological setting is dominated by a suture zone between two
regional geological plates that 'collided' during a Mesozoic-Cainozoic tectonic
event. The suture zone is marked by an ENE trending shear zone associated with a
major regional gravity lineament, referred to as the Xing'an -Taihang- Wuling
Gravity Gradient Belt. This gravity lineament is interpreted to reflect a
significant, deep discontinuity within the earth's crust.
The principal commercial mineral deposit within the region is the Xiangxi (Woxi)
gold mine that is 9km to the west of the project area. The deposit is reported
to have been mined for 120 years and comprises shear-hosted
gold-tungsten-antimony mineralisation preferentially hosted by clastic
sedimentary units. Production reports indicate that the Woxi gold mine has an
average grade of 7g/t Au. Existing development is over 1,000m below surface and
the structure is interpreted to extend to at least 2,000m below surface. The
2006 annual production is reported to be approximately 96,400oz Au from 420,000t
of ore. Mineralisation is hosted by a series of reverse faults where the
structures intersect fold hinges and the host rocks including red calcareous
slate. Individual mineralised shoots range between 30-320m in width, 180-1180m
in length, and contain veins that average 2m in thickness. Mineralised shoots
are localised within the axis of folds and have strike lengths that are
controlled by the occurrence of cross folds.
The Guanzhuang mineral field is located along a major regional suture zone. CGM
has secured agreement to explore and mine almost the entire aerial extent of a
major flexure along this structure, including several major sub-parallel
features. Al Maynard and Associates considers that the structural architecture
represented by this flexure zone is highly prospective for the localisation of
gold mineralisation. The area is also serviced by sound infrastructure,
including a major highway, grid power and water, and a substantial work force of
skilled underground miners and associated support industries are locally
available.
The project is centred on a regional NNE trending shear zone hosting variable
but high tenor gold mineralisation, associated with brittle-ductile deformation
and quartz veining over intervals between 2-40m in thickness. The Guanzhuang
Project consists of two defined prospect areas being the Shenjiaya and the
Xiaotaoyuan prospects. The major focus of CGM is the Shenjiaya Prospect that is
partially exposed and exploited by eight small operations. Production varies
between 25-100tpd of ore per operation in places utilising cut-and-fill hand
stoping hauled from single incline shaft systems. Ore is processed through a
jaw crusher and ball mill and gold recovered using a gravity/amalgam table.
Some 70% of gold is reportedly recovered via the gravity/amalgam separation and
the remaining 30% via flotation to a sulphide concentrate. The concentrate is
on-sold for cyanide treatment. No cyanide extraction is currently used on site;
however, total gold recoveries are reported to exceed 80%. Available records for
the Shenjiaya Prospect indicate that production in 2006 averaged 8 g/t Au for
10,000oz.
Results of Exploration Work
Between 2000 and 2006, the Brigade and CGM mapped, underground sampled and
drilled mineralised structures associated with the Shenjiaya Prospect. Two
dominant shear-veins, continuous for over 9.5km and a number of smaller
sub-parallel shear-veins are associated with the majority of mineralisation
within a structural zone up to 200m wide. Mineralisation varies in grade and
thickness along the structure, occurring as shoots and panels within a zone of
alteration accompanied by lower gold values. A new potential parallel structure
within the Guanzhuang Gold Project some 1000m to the south of the Shenjiaya
Prospect has been located during exploration.
On Section 26 drill hole ZK2601 and to its east another three drill holes
intersected up to 23.35m at 9.0g/t Au 330m below the surface, establishing that
the geological structure demonstrates strong continuity both along strike and
with depth. The four drill holes ZK03, ZK00601, ZK01001 and ZK04501 some 300m
east of the last underground workings recorded high-grade, thick ore body
intersections. ZK03 includes an apparent thickness of 55.31m with 5.2g/t Au that
includes 14.18m at 9.4g/t Au, 4.58m at 4.6g/t Au, 2.23m at 20.6g/t Au and 2.36m
at 4.4g/t Au (Fig 12). ZK00601 includes 16.18m at 2.0g/t Au from 250.25m and
4.15m at 9.8g/t Au from 282.25m. ZK01001 also intersected two zones with 2.11m
at 10.4g/t Au from 337.40m and 11.57m at 7.9g/t Au from 357.01m. Full details of
all holes and intersections are presented in Table 3. Underground sampling on
Section -9, (Fig 15) located approximately 200m west of Section -7 (Fig 14),
includes up to 2.2m at 71.1g/t Au.
Development drives have been excavated on a number of sections up to 4km
northeast from the Shenjiaya mine. Underground channel sampling on Section 10
returned 3.05m averaging 3.8g/t Au at 50m depth, and 2m at 123g/t Au and 0.30m
at 157g/t Au from 150m depth, where two lodes are separated by approximately 10m
of sheared material.
Based on the above work, Brigade 407 and CGM geologists have outlined 29 shoots
within which average gold grades are reported to exceed 13g/t Au, with
individual grades up to 157g/t Au, developed over vein thicknesses ranging from
0.76m to over 10m. The new Chinese Ore Resource Classification System
estimation, which is promulgated by the Land & Resources Bureau of the People's
Republic of China in 1999, uses a three-dimensional matrix based on economic,
feasibility, and geological degree of confidence. The resultant classification,
categorised by a three number code of the form "123" is also allocated either "
resource" or "reserve" status, is in accordance with the United Nations
Framework Classification which was proposed for international use (Document E/
2004/37-E/ECE/1416). A modified version of the results of this estimation
exercise has removed any ore blocks based on less than three points of
information to better represent western world estimation techniques. In addition
JORC compliant estimates have been completed.
Table 2. Summary range of total resource estimates
Method Resource Tonnes Au (g/ Au Au (Moz)
(Mt) t) (tonnes)
Prospect Type
Shenjiaya* China 1999 Inferred 5.47 10.8 59.4 1.91
Shenjiaya* JORC Inferred 5.50 11.0 59.0 1.89
Version
Shenjiaya* Modified Inferred 4.94 11.3 55.7 1.79
1999
*Without deduction of mined material of 4T at 6.0g/t Au containing 2T Au
Based on the Chinese 1999 system, the JORC compliant Inferred Mineral Resources
is estimated to contain approximately 5.1Mt at 11.0g/t Au containing 57 tonnes
of gold, equivalent to 1.83Moz.
Considering that the estimation only covers less than 20% of strike length
limited to 300m depth from surface and only considers the E-W structures, with
no contribution for the gaps between the mines and no cross or parallel vein
structure considerations AM&A considers that the Guanzhuang Project has
reasonable potential for a further 4 to 6 times the current resource still to be
identified. The possible economic viability of such new resources is currently
unknown.
The simple metallurgy, utilising gravity separation of native gold and cyanide
treatment of a gold-sulphide concentrate, provides for low capital investment,
processing costs and environmental risk. CGM's objective of establishing staged
underground mining and processing operations producing in the order of between
25,000 - 150,000oz of gold per annum is potentially achievable.
The full report is available on the Company's website: www.chinagoldmines.com
Geological Program for 2007/2008
Mineralisation remains open at depth and drilling will be aimed at extending the
resource further along strike, down plunge and locating new mineralised zones.
China Goldmines remains very confident that as further work is carried out in
this under explored area; significant discoveries will provide benefits for
shareholders and employees for many years to come. The future program is best
summarised below.
A vigorous exploration campaign:
- to better define low grade surface soil anomalies and
- higher grade depth extensions
- Infill drilling
Underground exploration development
Continuous mapping
Trenching programs will be supplemented by:
- Surface sampling and follow up drilling programs
- Mobile Metal Ion (MMI) soil sampling programs
Structural and mineralisation review programs will enhance targeting selection
criteria
Surface drilling program:
Two Large (up to 1000m) capacity Surface Diamond Drill Rigs
- Resource definition, mineralization extensions
One Small (up to 100m) capacity Surface Diamond Drill Rig
- Regional exploration, Blue Sky Prospecting, Exploration, sterilization
Underground Drilling programs
Two small (up to 150m) capacity Diamond Drill Rigs and one medium (up to 500m)
capacity Diamond Drill Rig for:
Review of Operations No. of Rigs Allocation Total Annual Metres*
Drill Rig
Surface - Large 2 Resource definition 9000
Surface - Small Portable 1 Regional exploration (Blue sky) 3000
Underground - Small 2 Infill and grade control drilling 6500
Underground - Medium 1 Infill and grade control drilling 2500
* Drilling meterage is conservative until drilling practices can be improved and
optimized.
4. Metallurgical Review
The Company commissioned AMMTEC Laboratories, Western Australia to metallurgical
test ore from the existing operating mines in CGM's Guanzhuang gold Project in
Hunan, China. Three samples, weighing approximately 40kg of composites of Run of
the Mine Ore samples taken from operating mines over a 21 day campaign, were
sent to AMMTEC Laboratories, for initial comminution flotation and cyanidation
test work.
AMMTEC's report confirms the excellent recovery characteristics of the ore which
have been observed at the existing processing plants. The following points were
noted:
- Rougher / cleaner froth flotation (as practiced by the existing mines) gave
recoveries of better than 90% into a concentrate with a mass of less that 3% of
the feed.
- The ore is free milling and cyanidation recoveries of over 90% can be
achieved.
- The ore contains coarse gold particles which will be amenable to gravity
recovery (most of the gold recovery on the existing plants is by gravity).
- Comminution tests indicated that the ore is moderately hard and moderately
abrasive (as would be expected from its quartzitic nature).
The average SG of the ore was 2.73, which is in line with expectations.
Test work and results to date gives us further strong encouragement for the
economic potential of this exciting gold project. Further test work will be
undertaken as we move to develop these mines and commission a processing plant.
5. Geotechnical Review
The Company engaged Keogh Geotechnical Consulting Group from Australia for an
assessment of the ground conditions and recommendation for the ground support
regime and mining methods. The initial assessment confirms that ore bodies
(lodes) are hosted within shear zones that are characterized by the presence of
quartz vein/s and strong silicification and sericitisation of the adjacent
sedimentary rocks. Ground condition within the ore bodies ranges from fair to
good. The shales and siltstone that form the country rocks of the deposits are
appraised to range from fair to good quality rock.
The report outlines the general ground support methodology that will be required
for the surface portals, rehabilitation of the declines and development drives,
ore access and production drives, as well as review of the suitable mining
methods to be used in the future:
- Cut and fill mining method
- Long hole open stoping
- Bench stoping
- Shrinkage stoping
- Combination of mining methods including cemented backfill using waste rock
and tailings
6. Hydrological Review
A Hydrological Report by Huaihua Municipal Resources Exploration Institute on
the Shenjiaya mining area indicated that the water-bearing rock groups in the
mining area have poor porosity. Groundwater exists in superficial weathering
zone and structural fracture zone, where fractures take place frequently. In
addition, as a result of the sharply-dissected topography, groundwater
discharges freely, which makes it easy to dewater the deposit. The minimum base
level of erosion at mining site is 170 meters. Water filling source for the
deposit is mainly atmospheric rainfall when ore bodies above the base level are
exploited. While below the base level, apart from rainfall, surface water
becomes more important, especially at interlayer fracture zones dissected by
surface water.
7. Engineering Review and Development Outlook
The Company now will undertake a three-stage development programme on top of its
exploration programme.
Stage 1: Consolidation and Refurbishment (2007-2010)
In the first stage of development, the Company plans to:
- Upgrade and modernise the underground conditions, equipment and practices at
each of the mines.
- Increase the underground workforce from 300 to over 750 by the start of 2010.
- Increase the underground development from approximately 120 meters per month
to over 3,000 meters per month by 2009.
- Construct a smelt-house with mercury retorting capable of handling all of the
amalgam produced by the existing processing plants, and a smelting furnace to
produce bars of Dore metal. In addition, the Directors propose to construct an
analytical laboratory that will initially have the capacity to support all
geological sampling work as well as daily samples for, the existing plants and
the smelt-house.
Stage 2: Infrastructure Development (2010)
In the second stage of development, the Company plans to:
- Improve the load and haul practices through mechanisation.
- Make further enhancements to communications and ventilation.
- Introduce more modern drilling equipment to increase productivity.
- Construct a processing plant linked underground to all eight of the gold
mines. It is the Directors' expectation that they may require additional finance
(which may be equity or debt) to complete the construction of the processing
plant.
Stage 3: Mechanised Mining (2011 onwards)
In the final phase of development, the Company plans to:
- Move to mechanised mining at the same time as continuing the level
exploration along the strike length of the ore body and continued vertical
development to explore and prepare deeper mining blocks.
- Construct a vertical haulage shaft and locomotive haulage to underground
crusher and loading stations.
The consolidation of the gold mines over the course of 4 years is targeted to
achieve approximately 100,000 oz produced per year.
Consolidated Balance Sheet
As at As at
30 June 2007 30 June 2006
US$ US$
Non-current assets
Intangible assets 2,229,976 587,551
Property, plant and equipment 240,264 108,583
Investments 143,641 -
-------- --------
2,613,881 696,134
-------- --------
Current assets
Trade and other receivables 180,650 182,754
Cash and cash equivalents 2,594,152 6,197,074
-------- --------
2,774,802 6,379,828
-------- --------
Total Assets 5,388,683 7,075,962
-------- --------
Current Liabilities
Trade and other payables (637,605) (339,093)
-------- --------
Total Liabilities (637,605) (339,093)
-------- --------
Net assets 4,751,078 6,736,869
-------- --------
Equity
Share capital 390,151 390,151
Share premium account 6,725,683 6,725,683
Foreign exchange reserve (2,952) 17,060
Other reserves 61,344 61,344
Retained earnings (2,871,203) (662,040)
-------- --------
Equity attributable to equity holders of the parent 4,303,023 6,532,198
Minority interest 448,055 204,671
-------- --------
Total equity 4,751,078 6,736,869
Consolidated Cash Flow Statement
Year ended Year ended
30 June 2007 30 June 2006
US$ US$
Net cash from operating activities 4 (2,330,530) (865,677)
-------- --------
Investing activities
Interest received 181,969 97,859
Purchase of intangible assets (1,661,454) -
Acquisition of subsidiary - (186,123)
Purchases of property, plant and equipment (192,902) (33,989)
Purchases of equity investments (143,641) -
-------- --------
Net cash used in investing activities (1,816,028) (122,253)
-------- --------
Financing activities
Proceeds on issue of shares - 6,920,610
-------- --------
Net cash from financing activities - 6,920,610
-------- --------
Net (decrease)/increase in cash and cash (4,146,558) 5,932,680
equivalents
Cash and cash equivalents at beginning of year 6,197,074 46,000
Movement in foreign exchange rate 543,636 218,394
-------- --------
Cash and cash equivalents at end of year 2,594,152 6,197,074
-------- --------
Income Statement
Year ended Year ended
30 June 2007 30 June 2006
US$ US$
Continuing operations
Salaries and employee benefits (619,758) (199,589)
Office expenses and professional fees (1,063,710) (391,716)
Consulting expenses (634,132) (194,342)
Travel and accommodation expenses (325,371) (119,255)
Other expenses (68,425) (70,026)
-------- --------
Operating loss (2,711,396) (974,928)
-------- --------
Other gains and losses 563,648 201,334
Finance income - bank interest 181,969 97,859
received
-------- --------
Loss before tax (1,965,779) (675,735)
Tax - -
-------- --------
Loss for the year (1,965,779) (675,735)
-------- --------
Attributable to:
Equity holders of the parent (1,889,163) (657,448)
Minority interest (76,616) (18,287)
-------- --------
(1,965,779) (675,735)
-------- --------
Earnings per share 2007 2006
US cents US cents
Basic and diluted 3 (8.38) (3.99)
Consolidated Statement of Recognised Income & Expenditure
Year ended Year ended
30 June 2007 30 June 2006
US$ US$
Loss for the year (1,965,779) (675,735)
Exchange differences on translation of foreign operations (20,012) 17,060
-------- --------
Total recognised income and expense for the year (1,985,791) (658,675)
-------- --------
Attributable to:
Equity holders of the parent (1,909,175) (640,388)
Minority interests (76,616) (18,287)
-------- --------
(1,985,791) (658,675)
-------- --------
Notes to the Financial Statements
1. General information
These financial statements are presented in US dollars because that is the
currency of the primary economic environment in which the group operates.
2. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs). The financial statements have also been
prepared in accordance with IFRSs adopted for use in the European Union and
therefore comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost basis except
for the revaluation of financial instruments.
3. Loss per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings
Year Ended Year Ended
30 June 2007 30 June 2006
US$ US$
Earnings for the purposes of basic and diluted earnings (1,889,163) (657,448)
per share being net profit attributable to equity holders
of the parent
Number of shares
Weighted average number of ordinary shares for the 22,549,995 11,835,882
purposes of basic and diluted earnings per share
Earnings per share
Year Ended Year Ended
30 June 2007 30 June 2006
US cents US cents
(Loss) Earnings per share (8.38) (3.99)
4. Notes to the cash flow statement
Year Ended Year Ended
30 June 2007 30 June 2006
US$ US$
Loss for the year (2,711,396) (974,928)
Adjustments for:
Depreciation of property, plant and equipment 61,221 9,806
Amortisation of intangibles 19,029 -
-------- --------
Operating cash flows before movements in (2,631,146) (965,122)
working capital
(Increase)/Decrease in receivables 2,104 (166,517)
Decrease in payables 298,512 265,962
-------- --------
Net cash from operating activities (2,330,530) (865,677)
-------- --------
5. Report and Financial Statements
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. It is based on the audited
statutory accounts for both years, upon which the auditors have issued
unqualified audit opinions. The accounts for the year to 30 June 2007 will be
mailed to shareholders shortly and will be available from the registered office
at Sandgate House, 102 Quayside, Newcastle Upon Tyne, NE1 3DX.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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