Jinshan begins pilot mining program at 217 property
2004-10-04 09:52 ET - News Release
Also News Release (C-IVN) Ivanhoe Mines Ltd
Mr. Jay Chmelauskas reports
PILOT MINING PROGRAM UNDERWAY AT JINSHAN'S 217 GOLD PROPERTY IN NORTHERN CHINA
Pilot-scale mining is under way at Jinshan Gold Mines Inc.'s 217 gold project (Chang Shan Hao) in Inner Mongolia, China. The pilot project consists of a small open pit and an underground tunnel to provide bulk-tonnage samples of the mineralization to better establish grade and metallurgical recoveries. The pilot project is a major step in advancing scoping/feasibility studies and permitting toward full-scale mining. The pilot program is designed to test a targeted, commercial production rate of 100,000 ounces per year. Such a rate would make the 217 project the third largest producing gold mine in China.
A 1,000-tonne-per-day crusher and conveyor system has been installed. Two 50,000-tonne heap-leach pads, carbon columns and solution ponds have been constructed to enable heap leaching on run-of-mine (ROM) ore and single-stage crushed ore. Jinshan also has commenced an environmental impact assessment base-line study, initiated mine permitting and is continuing metallurgical testing.
"We have built strong relations with the local county and provincial governments that have shown their full support for this project," said Jay Chmelauskas, president of Jinshan Gold Mines. "We are in a jurisdiction that supports mining and understands the benefits that the project will provide to the local economy. All the basic engineering requirements, such as power and water, appear readily available and there is good access to the site. If we are successful in developing the 217 project into a 100,000-ounce-per-year gold mine, it will establish Jinshan as one of the top-tier gold mining companies in China and further support our growth and business development activities."
In addition to providing the necessary engineering parameters for production scale-up, the pilot project has demonstrated Jinshan's ability to source local engineering staff and capital equipment. The project also has given Jinshan better insight into the use of Chinese contract-mining equipment and Chinese operating costs. Most of the materials for the project have been sourced from the city of Baotou, approximately a three-hour drive from the project -- mostly along a new, paved highway. Baotou is a major manufacturing centre in northern China; local industry includes an assembly plant for large Terex haul trucks used in mining.
Jinshan has earned a 55-per-cent interest in the 217 project from its Chinese joint venture partner and has the right to acquire a further 41.5 per cent, which would increase its total interest to 96.5 per cent, through scheduled payments totalling $2.75-million (U.S.). Jinshan and Ivanhoe Mines Ltd. share a 50:50 joint venture in the project. Photos of the pilot mining operation can be viewed on the company's web site: www.jinshanmines.com.
Scoping studies
Jinshan is advancing engineering on its 217 project to determine the flow sheet and capital required for optimal mine economics. Preliminary engineering studies have been carried out by international engineering consultants, with reporting and review by Independent Engineers (Australia) Pty. Ltd. (IEA). The scoping work to date has incorporated engineering design and cost estimates prepared by NERIN, a Chinese Class A design institute, to realize Chinese operating and capital costs.
The current metal-recovery process assumes heap leaching with three-stage crushing and carbon absorption/elution. Column testing for heap leachability by Lakefield Laboratories, of Canada, showed encouraging results, with oxide gold recoveries of 83.5 per cent and sulphide recoveries of 72.7 per cent for 0.25-inch-size material. Mineralogical examination of gold particles in samples submitted for metallurgical test work at SGS Lakefield indicated that gold mainly occurs as liberated and/or free grains. The testwork also indicated a significant nugget effect that has implications for grade determination and metallurgical recoveries. The bulk-sampling, pilot-mining program will evaluate this nugget effect. In addition, large-diameter column testing will be carried out to establish optimal crush sizes for heap-leach recovery.
The pilot-mining program also is designed to test ROM economics. Under the ROM mine scenario, the mine could be put into production in a short period of time with low capital requirements. Historical, small-scale mining on the property has been carried out by ROM mining. A 50,000-tonne ROM pad and a 50,000-tonne, single-stage crush pad are being loaded to test this low-capital option. Other alternatives, such as the addition of a gravity circuit, also are being tested to improve overall recoveries. Large-scale column testing will be performed in Baotou on representative bulk oxide and sulphide samples.
Management's current estimate for completion of key stages of the engineering process:
bulk mining from oxides (open pit) -- mid-October, 2004;
bulk mining from sulphides (underground) -- mid-December, 2004;
bulk scale column testing (oxides/sulphides) -- second quarter, 2005;
revised resource model -- second quarter, 2005;
engineering scoping/feasibility study -- second quarter, 2005;
contract mining tenders -- second quarter, 2005;
ROM/single-stage 50,000-tonne leach pad recovery results -- third quarter, 2005;
ROM engineering study and production decision -- third quarter, 2005; and
mining lease approval -- third quarter, 2005.
Permitting
The exploration permit for the property was extended this year until June, 2006. The next step toward mine production permitting will be the filing of an application for a mining lease. Jinshan has begun the necessary engineering and environmental assessments required for a mining lease. An environmental impact assessment (EIA) and an environmental and social impact assessment (ESIA) are being conducted by Environmental Resource Management Ltd. (ERM China), in partnership with the Inner Mongolian Environmental Science Academy. ERM is an internationally recognized consulting engineering firm, which has an office in Shanghai. Jinshan believes that a mining permit could be obtained by the third quarter of 2005.
Summary of the current status of the permitting process for Jinshan's 217 project
Permit/licence Authority Status
Exploration Ministry of Issued
licence Land and
Resources
Geological Ministry of Required
hazards Land and
Resources
Water and Water Commenced
soil Conservation
conservation Bureau
Environmental Environmental Commenced
impact Protection
assessment Bureau
Environmental International Commenced
and social
impact
assessment
Safety Safety Bureau Required
assessment
Resource Ministry of Commenced
verification Land and
Resources
Project Development Required
development and Reform
approval Commission
Land use rights Ministry of Required
Land and
Resources
Mining lease Ministry of Follows
Land and other
Resources approvals
Drilling program and resources
Widespread gold mineralization has been encountered at the 217 project within a broad, intense, westerly striking, steeply dipping shear structure with true widths of up to 150 metres. The anomalous gold values are associated with fine pyrite-pyrrhotite stringers and sulphide-quartz veinlets, and lenses within the shear structure. Bulk-tonnage potential exists for oxide and underlying sulphide mineralization, with the depth of oxidation being relatively sharp and fairly constant at a vertical depth of 50 metres. The deposit contains two zones of mineralization: a large, low-grade resource in the Northeast zone and a higher-grade resource in the Southwest zone. An independent resource estimate was prepared according to standards in National Instrument 43-101 by Westervelt Engineering Ltd., under the direction of Ralph Westervelt, PEng, an independent qualified person. Westervelt estimated a measured and indicated in-pit resource in the Northeast zone of 29 million tonnes grading 0.95 gram per tonne (g/t) gold and an inferred resource of seven million tonnes grading 0.98 g/t gold. The Southwest zone shows an in-pit inferred resource of 15 million tonnes grading 1.25 g/t gold. Measured and indicated resources are that part of a mineral resource for which quantity and grade can be estimated with a level of confidence sufficient to allow the application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. Inferred resources do not have the same degree of verification.
Grades in the Southwest zone are approximately 30 per cent higher than in the Northeast zone and, therefore, a potential Southwest starter pit is envisioned.
A 6,600-metre drilling program was completed earlier this year, bringing the total metres drilled on site to 20,488 metres. Approximately 3,300 metres were drilled in the Southwest zone, which remains open and is undergoing geological interpretation. Results from the 6,600-metre drill program will be used to update the February, 2004, resource estimate.
Quality assurance/quality control (QA/QC)
An atomic absorption assay lab has been operating at the 217 project site for approximately two months, providing rapid data for in-pit grade control. Internal QA/QC procedures are in place. Results to date indicate that the lab is running acceptably and improvements are being made as necessary. Control samples used to monitor lab performance include: blanks, standards, field duplicates, repeat samples and duplicate assays. For the pilot project, control samples will be sent to the new SGS laboratory in Nanning and one other nationally certified lab in China. The SGS lab will use AA and fire assay methods and will be ISO 9000 certified. All samples from the 6,600-metre diamond drill program have been sent to ALS Chemex Laboratories in Vancouver, B.C., Canada for fire assay.
Michael Page, Jinshan Gold Mines' vice-president exploration, a qualified person as defined by National Instrument 43-101, supervised the preparation of the information in this release.
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