Quarterly Update
May 06 2009 - 3:12AM
UK Regulatory
TIDMCGM
RNS Number : 7497R
China Goldmines PLC
06 May 2009
China Goldmines plc
("China Goldmines" (CGM) or the "Company")
(AIM: CGM)
CHINA GOLDMINES GUANZHUANG GOLD PROJECT QUARTERLY UPDATE
For the three months ended March 2009
Highlights
* Cash position at the end of the Quarter: USD7.3m, total cash reserves USD9.3m
including cash equivalents
* A total of 560 ounces of gold was sold during the period at an average price
of USD915/oz with CGM in receipt of USD474,000. Gold sales included 157 (DMT)
tonnes of gold concentrate at 75 g/t and 5.5 kg of doré bars from gravity
concentration.
* Ore containing 2,399oz gold was mined, and ore containing 1,417 oz gold was
milled during the period.
* High grade ore body discovered in Xiang Lu mine. Development of the 25 degree
decline almost perpendicularly entered into an ore body 5m thick with an average
grade of 160.8 g/t
* Six of the eight gold mines are in operation while the two are in development
* Highway -40 on target to link four mines 350 meters below surface within the
next quarter
* The Company has paid 2m RMB (USD0.3m) compensation via the Yuanling County
Government to the villagers for land rights of our immediate operations
* Yuanling County Government presents safety award for no deaths or injuries
during 2008
* Processing capacity already at 2010 target of 11,900tpm. Further capacity will
be brought on line to meet the Company's gold production target of 150,000oz per
annum by the end of 2011. Gekko system bought and available for shipment and
planned commissioning in conjunction with further investment in processing
plants.
* Operational and strategic review being undertaken in order to maximise mining
and security efficiencies in the short term and deliver the longer term mine
development strategy.
Commenting today Frank Vanspeybroeck (CEO), of China Goldmines said: "At the end
of last year we announced an optimisation programme which included scaling back
exploration drilling to only underground work which would directly benefit
near-term extraction.
In line with this approach our focus in the current quarter has been to optimise
mining operations including the acquisition of surface rights and the
prioritisation of high grade gold mineralisations for extraction in H2. We have
been very pleased to identify a completely new significant mineralisation which
can be mined over the coming year. With our existing gold targets, new high
grade gold mineralisations and permanent surface rights from the villagers to us
over all the projects we should be ideally placed to pursue significant gold
production over the coming year. Our prime concern at this moment is enhancing
the security of mined ore ahead of a ramp-up in operations. We are beginning to
experience instances of gold theft and are looking at a series of measures and
options in order to deal with this matter in order to return maximum shareholder
value from gold production through 2009. These measures may include
arrangements with third parties to improve the security of mined ore."
Quarterly update for the three months ended March 2009
Financial and production (Full table below)
A total of 560 ounces of gold was sold during the period at an average price of
USD915/oz with CGM in receipt of USD474,000. Gold sales included 157 (DMT)
tonnes of gold concentrate at 75 g/t and 5.5 kg of doré bars from gravity
concentration.
Ore containing 2,399oz gold was mined, and ore containing 1,417 oz gold was
milled during the period.
As expected survey work undertaken in partnership with the regional Yuanling
County Government and Guanzhuang town government delayed operations as did
celebrations surrounding the Chinese New Year during the quarter. While the mine
only ran at 70% of current capacity the delay did result in the successful
negotiation of land compensation with the villagers.
With the project delivering high grade production and being able to progress
synergies between all the projects now full surface rights have been granted,
CGM is in a prime position to start significantly expanding production. With
this in mind the senior directors of CGM are undertaking a full operational
review due to current issues regarding the security of the Company's gold
assets.
Security
China Goldmines has already taken steps to address this matter and Q2 2009 will
see the Company assume far greater control of its mining operations from current
local contractors. CGM has taken the opportunity to review the most efficient
way of generating funds and value for shareholders from the current gold price.
With this in mind China Goldmines is in discussion with local government
agencies/business and also with Companies/Partners who have experience in
operating mines in China. All guards have also been subject to reviews and China
Goldmines senior managers are directly supervising all high sensitivity areas.
Key Western Managers reside on-site during mining shifts as added security. As
part of the operational review China Goldmines is also assessing the
cost-benefit of installing close security cameras at key areas within the mine.
Progress of Land Acquisition
Previously the Company leased the land from the local villagers, having paid the
villagers for the right to use the land for tailing dams and our future central
decline site (entrance portal). In this quarter the Company paid compensation of
2m RMB (USD 0.3m) to the villagers to acquire the land rights to all the land
previously leased from the villagers (this is a compulsory process under the
provincial government law for permanent use). The Company is now undertaking a
study to prepare "land use plan" for the provincial government in order to
proceed with the title transfer associated to the land required under current
operations.
The provincial government will, upon completion of the "land use plan",
calculate the capital cost that CGM will need to pay in order to obtain good
title.
High grade mineralization identified - Xiang Lu (XL) Mine, Decline 3
As part of an exercise to cut expenditure during the year only underground
drilling directly connected with identifying zones for immediate mining will be
conducted. Underground development carried out during the quarter to the
extension of XL decline 3 has recently discovered a high grade ore body. A 25
degree decline almost perpendicularly entered into an ore body of 5m thick, at
an average grade of 160.8 g/t
Channel sampling along the grade line of the decline (1m above the floor, across
the thickness of the ore body) gave the following grades:
+--------------------------+------------+---------------+---------------------------+
| Channel sample length | Grade | Accumulated |Grade for the accumulated |
| across the ore body | (g/t) |thickness (m) | thickness (g/t) |
| thickness (m) | | | |
+--------------------------+------------+---------------+---------------------------+
| 0.6 | 916.74 | First 0.6m | 916.74 |
+--------------------------+------------+---------------+---------------------------+
| 1.3 | 123.68 | First 1.9m | 374.1 |
+--------------------------+------------+---------------+---------------------------+
| 0.5 | 46.06 | First 2.4m | 305.8 |
+--------------------------+------------+---------------+---------------------------+
| 1.2 | 4.28 | First 3.6m | 205.3 |
+--------------------------+------------+---------------+---------------------------+
| 1 | 0.57 | First 4.6m | 160.8 |
+--------------------------+------------+---------------+---------------------------+
Additional Mine Summary Update
In addition to identifying important new high grade zones within the primary six
gold mines, work on Highway -40 progressed at great speed. Originally all eight
mines were operated from their individual entrances at surface with each project
having its own individual mine portal. The Company's strategy is to progress a
subsurface, central "Highway" 350 meters below surface. Highway -40 will bring
significant synergies in terms of large scale, modern gold extraction. During
the quarter 3 mines were linked and a cross cut between the SJY and DS mines
confirming the continuity of the ore body between them. During the next quarter
it is expected that four mines shall be linked and it is expected that increased
extraction benefits shall be seen.
The Mining Department along with Geology, Survey, Maintenance and
Safety-Environment Departments relocated their office to Zhen Jia Shan mine on
24th February 2009. All work forces are also required to reside permanently on
site during shifts for security reasons and in order to conduct comprehensive
safety training.
Shen Jia Ya (SJY) Mine. Development of Highway -40 from SJY to DS mine is
progressing well and breakthrough is expected in two months. An extension of ore
body between SJY and DS mines was identified by a cross cut from Highway -40.
Assay results gave a grade of 10.7g/t for a thickness of 0.6m. Active stopes at
level 3 with 13,000t@14.5g/t and level 4 with 10,800@9.8g/t. Decline 5
development is advancing well with a winch installed ahead of schedule.
Bao Mu Yuan (BMY) Mine
Stoping activities have progressed well this quarter with a 24 hour production
peak of 180t achieved. Two stopes remain active to extract 6,500t@4.7g/t. A plan
to link BMY level 1 with SJY level 1 is proposed in preparation for sending ore
to the BMY processing plant from areas between SJY and DS.
Xia Chong Zi (XCZ) Mine
Two stopes are active at level 1 to extract 18,000t@6.3g/t.
De Sheng (DS) Mine
Development of Highway -40 from DS to SJY started during this quarter. Four
areas with easily accessible ore that can be stoped have been identified. On
level 1, a high grade patch ore with 5,400t@27g/t requires further geotechnical
assessment. On level 1A and 2, 7,300t and 10,950t@12g/t, respectively, are ready
to be mined. The low grade stope above level 1 with 9,100t@3.1g/t has been put
on hold.
Zhen Jia Shan (ZJS) Mine
New ROM pad was established in ZJS.Three active stoping areas are
21,000t@6.6g/t, 6,500t@6.6g/t and 25,000t@6.6g/t on level 1, 1A and level 2,
respectively. A new decline below level 2 to prepare for extracting ore below
level 2 is designed and scheduled to be developed shortly.
Jiu Fa (JF) Mine
Refurbishment of Decline 4 was completed. Extension of this decline to Highway
-40 is progressing well. Weak ground condition was encountered at the current
decline face, which will delay the breakthrough to JZW for 1 to 2 months.
Jin Zhu Wan (JZW) Mine
Survey pick-up of the decline 2 to decline 5 was completed. The bottom section
of the decline (4 & 5) is deliberately flooded to restrict illegal access to the
mine.
March Quarter Mining Summary
+--------+------+------+------+------+------+----+---------+-------+-------+-------+-------+
| A | BMY | XCZ | SJY | DS | ZJS |XL | Total |Total |Grade |Gram | Au |
| | | | | | | | | | | | (Oz) |
+--------+------+------+------+------+------+----+---------+-------+-------+-------+-------+
| | | | | | | | Wagons | Ore |(g/t) | Au | |
| | | | | | | | | (t) | | (g) | |
+--------+------+------+------+------+------+----+---------+-------+-------+-------+-------+
|Jan-09 |1290 |1170 | 700 | 269 |1989 |14 | 5432 | 4074 | 6 |24444 | 786 |
+--------+------+------+------+------+------+----+---------+-------+-------+-------+-------+
|Feb-09 |1718 | 223 | 36 | 147 |1422 | 0 | 3546 | 2659 | 6 |15954 | 513 |
+--------+------+------+------+------+------+----+---------+-------+-------+-------+-------+
|Mar-09 |4193 |2095 | 795 | 137 |1907 | 0 | 9127 | 6845 | 5 |34225 | 1100 |
+--------+------+------+------+------+------+----+---------+-------+-------+-------+-------+
| | | | | | | | Total: |13578 | 5.5 |74623 | 2399 |
+--------+------+------+------+------+------+----+---------+-------+-------+-------+-------+
March Quarter Milling Activity Results:-
+-----------+----------+---------+---------+----------+-----------+----------+---------+---------+
| BMY | Tonnes | Grade | Tails |Recovery | Concentrate |Gravity |
| PLANT | | (g/t) | (g/t) | % | | |
+ + + + + +--------------------------------+---------+
| | | | | | Grade | Tonnes | Au (g) | Au (g) |
| | | | | | (g/t) | | | |
+-----------+----------+---------+---------+----------+-----------+----------+---------+---------+
| Jan-09 | 987.35 | 5.22 | 0.25 | 95.21 | 113.07 | 35.01 |3958.48 | 948.65 |
+-----------+----------+---------+---------+----------+-----------+----------+---------+---------+
| Feb-09 | 1041.72 | 5.91 | 0.26 | 95.60 | 100.84 | 48.34 |4874.30 |1011.43 |
+-----------+----------+---------+---------+----------+-----------+----------+---------+---------+
| Mar-09 | 2566 | 5.83 | 0.35 | 94.29 | 115.8 | 102.25 | 11841 | 2220 |
+-----------+----------+---------+---------+----------+-----------+----------+---------+---------+
+----------+---------+----------+---------+----------+----------+---------+----------+---------+
| XCZ | Tonnes | Grade | Tails |Recovery | Concentrate |Gravity |
| PLANT | | (g/t) | (g/t) | % | | |
+ + + + + +-------------------------------+---------+
| | | | | | Grade | Tonnes | Au (g) | Au (g) |
| | | | | | (g/t) | | | |
+----------+---------+----------+---------+----------+----------+---------+----------+---------+
| Jan-09 | 825.30 | 8.04 | 0.40 | 95.03 | 125.56 | 37.21 | 4671.83 |1633.47 |
+----------+---------+----------+---------+----------+----------+---------+----------+---------+
| Feb-09 | 176.76 | 4.96 | 0.44 | 91.12 | 122.11 | 4.45 | 543.42 | 255.55 |
+----------+---------+----------+---------+----------+----------+---------+----------+---------+
| Mar-09 |2515.83 | 4.02 | 0.32 | 92.33 | 132 | 53.35 | 7057 | 2251 |
+----------+---------+----------+---------+----------+----------+---------+----------+---------+
+-----------+---------+---------+---------+----------+-----------+---------+---------+---------+
| DS | Tonnes | Grade | Tails |Recovery | Concentrate |Gravity |
| PLANT | | (g/t) | (g/t) | % | | |
+ + + + + +-------------------------------+---------+
| | | | | | Grade | Tonnes | Au (g) | Au (g) |
| | | | | | (g/t) | | | |
+-----------+---------+---------+---------+----------+-----------+---------+---------+---------+
| Jan-09 | 370.58 | 4.09 | 0.22 | 94.58 | 58.55 | 16.94 | 991.75 | 442.40 |
+-----------+---------+---------+---------+----------+-----------+---------+---------+---------+
| Feb-09 | 71.60 | 2.74 | 0.16 | 94.15 | 57.04 | 1.94 | 110.64 | 74.09 |
+-----------+---------+---------+---------+----------+-----------+---------+---------+---------+
| Mar-09 | 357 | 3.67 | 0.33 | 91.13 | 86 | 9.88 | 789.51 | 403 |
+-----------+---------+---------+---------+----------+-----------+---------+---------+---------+
Total March Quarter Milling Results:-
+-------------+--------------+---------------+---------------+---------------+---------------+
| | Production Total for three plants |
+ +------------------------------------------------------------------------------+
| | Tonnes | Grade (g/t) | Concentrate | Gravity Au | Total Oz |
| | | | Au (g) | (g) | |
+-------------+-------------+--------------+---------------+---------------+---------------+
| Jan-09 | 2183 | 6.10 | 9622.06 | 3024.52 | 406 |
+-------------+--------------+---------------+---------------+---------------+---------------+
| Feb-09 | 1290 | 5.91 | 5528.36 | 1341.07 | 220 |
+-------------+--------------+---------------+---------------+---------------+---------------+
| Mar-09 | 5438 | 4.86 | 19748 | 4874 | 791 |
+-------------+--------------+---------------+---------------+---------------+---------------+
| | | | | Total: | 1417 |
+-------------+--------------+---------------+---------------+---------------+---------------+
Human Resources and Safety
CGM has an excellent safety record for underground mining/processing in China,
and the Company is proud that no time has been lost through injury during the
March quarter. This has been achieved through extensive training and safety
development programs. The Yuanling County Government awarded the company with
the 2008 Safe Mining Award for its excellent mining safety record.
Outlook
With new high grade mineralisation identified from this quarter's underground
development it is expected that a higher average grade of gold will be extracted
over the second quarter of the year. Land rights issues have been resolved
which allow full access across the whole surface above the eight CGM mines and
the Company can now aggressively pursue operational synergies across the
projects. Optimisation work with regards to milling, for example, the Gekko
system and operational procedures will continue but of most benefit to
production for the rest of 2009 will be the establishment of Highway 40. Four of
the eight mines are on target to be linked during the second quarter by Highway
40.
Q1 2009 saw a number of key objectives met with regards to the successful
expansion of the projects. The second quarter is about capitalising on the work
done and enhancing recovery and grade.
Whilst China Goldmines is in process of expanding production and has
demonstrated increasing geological endowment from its projects, it is
experiencing increasing operational disturbances resulting from the cultural
issues associated with managing the mines and interaction with the local
population. In addition, security of its mine sites, ore transport operation and
processing facilities has become increasingly difficult to manage since
high-grade ore has been encountered. As stated above, the Board is undertaking a
review of its mining operations and mine security and is considering
alternatives for enhancing the operational management of its mining activities.
The options under consideration include arrangements with third parties to
improve the security of mined ore. The review is also examining alternative
strategies for expediting the Company's capital investment programme in order to
deliver maximum value to shareholders. In particular the Company is assessing
the business case to accelerate the construction of a centralised processing
plant linked to the minesites by Highway -40.
-ENDS-
For further information contact:
+-----------------------------------------+-----------------------------------------+
| China Goldmines plc | |
+-----------------------------------------+-----------------------------------------+
| Frank Vanspeybroeck (CEO) | +86 731 489 0755 |
+-----------------------------------------+-----------------------------------------+
| Alex Worrall (Director/Company | +44 207 788 7621 |
| Secretary) | |
+-----------------------------------------+-----------------------------------------+
| Marinko Vidovich (CFO) | +61 8 6216 5200 |
| | |
+-----------------------------------------+-----------------------------------------+
| Brewin Dolphin Ltd (Nomad) | |
+-----------------------------------------+-----------------------------------------+
| Alex Dewar | +44 (0)131 529 0276 |
+-----------------------------------------+-----------------------------------------+
| (Nominated Adviser) | |
| | |
+-----------------------------------------+-----------------------------------------+
| Threadneedle Communications | +44 (0)20 7653 9855 |
+-----------------------------------------+-----------------------------------------+
| Laurence Read/ Beth Harris | |
+-----------------------------------------+-----------------------------------------+
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 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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