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China Gold International Announces Pre-Feasibility Study for Expansion of the Jiama Project with IRR of 53.7% and Project Update

October 25, 2012

VANCOUVER, Oct. 25, 2012 /PRNewswire/ – China Gold International Resources Co.
Ltd. (TSX: CGG, HK: 2099) (the “Company”) is pleased to announce the
results of an updated NI 43-101 compliant, Independent Pre-Feasibility
Study for the Phase II Expansion of its Jiama Copper-Polymetallic Mine,
(the “Project”) in Tibet Autonomous Region, China. The Pre-Feasibility
Study was completed by Minarco-MineConsult (MMC), part of the Runge
Limited Group of Companies, in conjunction with independent consulting
engineers and management.

(All amounts in US dollars unless otherwise stated)

Highlights

        --  Copper (Cu) Measured and Indicated Mineral Resources increased
            to 10.2 billion pounds of metal at 0.44% Cu;
        --  Copper Proved and Probable Mineral Reserves Increased to 6.2
            billion pounds of metal at 0.77% Cu;
        --  Production from open-pit and underground operations is expected
            to produce 6.3 million tonnes and 6 million tonnes (Mt) of
            run-of-mine ("ROM") ore per annum respectively;
        --  Ramp up to an annual processing capacity of 12.3 Mt of ROM ore,
            over a 31 year period, producing approximately:
      o 176 million pounds of copper per annum
      o 35 thousand ounces of gold (Au) per annum
      o 2.7 million ounces of silver (Ag) per annum
      o 2.3 thousand tonnes of molybdenum (Mo) per annum
        --  Estimated capital expenditures of $705 million;
        --  After-tax Net Present Value (NPV) of $1.2 billion with a
            discount rate of 9% at metal price assumptions of: $2.90/lb Cu,
            $18/lb Mo, $1,380/oz Au, $16.5/oz Ag
        --  After-tax Internal Rate of Return (IRR) of 53.7% and payback
            period of 4.5 years
        --  Pre-tax NPV of $1.5 billion with IRR of 60.4%;
        --  Life of Mine (LOM) projected average cash cost $1.76/lb Cu
            equivalent, or $1.52/lb Cu with other metals credited;
        --  Average annual net cash flow of $120 million for 31 year LOM;
        --  Contribution of Cu, Mo, Au and Ag to gross revenues are 75%,
            11%, 7% and 6% respectively.  Lead (Pb) and Zinc (Zn)
            contributes less than 1% of overall revenue; and
        --  Undiscounted, cumulative net cash flow, is approximately $3.8
            billion

Dr. Xin Song, CEO of the Company, commented, “With a potential increase
in the processing capacity from 6,000 to 40,000 tonnes per day (tpd),
along with a longer mine life of close to 31 years, we are very pleased
with the future outlook of the operation. Highlights of the study show
a payback period of less than 5 years, an internal rate of return of
53.7% and an after-tax NPV of approximately $1.2 billion, indicating
solid economics and strong annual net cash flow of $120 million over
the mine life.  During 2012, we continued to increase our reserve and
resource base, and we work to achieve the expansion of this strategic
asset.”

Overview

The Jiama Project is a large scale polymetallic (Cu, Mo, Au, Ag, Pb, Zn)
deposit located about 60 kilometers east of Lhasa City along the
Sichuan-Tibet Highway within the Gangdise Copper Metallogeny Belt in
Central Tibet, China.

The Company plans to expand the Project from its current processing
capacity of 6,000 to 40,000 tpd of ore through the expansion of current
open-pit operations and the development of new open-pit and underground
mining operations. The Phase II Expansion will include four open pits,
one underground, and a new floatation plant with a processing capacity
of 34,000 tpd of ore.  The total Project processing capacity will be
increased from its current production rate of 1.8 Mt of ore per year to
12.3 Mt of ore per year, producing approximately 176 Mlb of Cu, 2.3 Kt
of Mo, 35 Koz of Au, 2.7 Moz of Ag, per annum over a period of 31
years. LOM average head grade will be 0.77%, 0.03%, 0.22 g/t and 12 g/t
for Cu, Mo, Au and Ag respectively.

Geology

The Project is located in the central-south portion of the
Gangdise-Nianqing Tanggula Terrane. Stratigraphy outcropping in the
Project area is dominated by passive epicontinental clastic-carbonate
rocks. Three types of copper-polymetallic mineralization are observed
within the Project. These include Skarn, Hornfels and porphyry hosted
mineralization. All three styles of mineralization are structurally
controlled with concentrations occurring along shear/structure zones
and mineralization offset by thrust and detachment faults as well as
associated with anticlines and synclines.

Mining

The Phase II Expansion Project will include the addition of four open
pits and one underground mine.

The four open pits are designed to mine all three types of
mineralization, producing approximately 6.3 Mt of ROM ore and removing
about 19 Mt of waste rock per annum with a LOM stripping ratio of
3.01.  The underground mine is designed to mine the high grade portion
of the skarn type mineralization and will produce approximately 6 Mt of
ROM ore per annum.

Processing and Products

The Company plans to expand the Project’s processing capacity from its
current 1.8 Mt of ore per year to 12 Mt of ore per year, producing
approximately 176 Mlb of Cu, 2.3 Kt of Mo, 35 Koz of Au, 2.7 Moz of Ag,
per annum over a period of 31 years. The end products include copper,
moly, lead, and zinc concentrates, with other metals as by-products,
which will be sold to smelters within China.

The processing recovery estimates are based on the current processing
test work completed by a number of leading Chinese research institutes
and two years of actual production data. The processing recoveries
estimated for the different rock types are shown in Table 1.


    Table 1: Jiama Copper-Polymetallic Project -Recovery Factors

    Ore (Rock) Type           Product            Element     Recovery (%)

                                                 Cu          88

    Cu-Mo Ore                 Cu Concentrate     Au          45
    (Skarn)
                                                 Ag          65

                              Mo Concentrate     Mo          70

    Cu-Mo Ore                 Cu Concentrate     Cu          84
    (Hornfels & Porphyry)
                              Mo Concentrate     Mo          48

                                                 Cu          88

                              Cu Concentrate     Au          45
    Cu-Pb-Zn Ore
    (Skarn)                                      Ag          60

                              Pb Concentrate     Pb          88

                              Zn Concentrate     Zn          75

Source: MMC Derived based on Testwork Reports

Life of Mine Operating Costs

The LOM average operating costs are listed in Table 2.


    Table 2: Jiama Copper-Polymetallic Project - Life of Mine Operating
    Costs (USD/ t processed)

    Cost Centre                       USD/t waste       USD/t processed

    Overburden Removal                2.60              7.36

    Open Cut Mining                                     2.81

    Underground Mining                                  18.08

    Support                                             1.45

    Processing                                          11.43(Cu/Mo)/13.33
                                                        (Cu/Pb/Zn)

    Admin & Other Overheads                             4.37

    Total Mine Operating                                45.5/47.43
    Costs/t processed

    Metal Selling and Transport                         2.22

    Average royalty per ROM                             4.10
    tonne

    Total Project Operating                             51.82/53.75
    Costs/t processed

Capex and Cash Flow Analysis

Estimated capital expenditures for the Phase II Expansion of the Project
will be approximately $705 million, including, $221 million for new
floatation plant, $355 million for mining, $76 million for engineering,
$28 million for loan interest and $24 million mining camp.

The long term metal prices used for the  Pre-Feasibility Study are
$2.90/lb, $1,380/oz, $16.5/oz and $18/lb for Cu, Au, Ag and Mo
respectively, the long term price for both zinc (Zn) and lead (Pb) is
at $2,000/tonne.

The after-tax net present value (“NPV”) is $1.2 billion with a discount
rate of 9%, giving the capital expenditure payback period of 4.5 years,
LOM average cash cost of Cu equivalent of $1.76/lb, or $1.52/lb Cu with
other metals credited, and the after-tax IRR of 53.7%.  The
undiscounted, cumulative net cash flow is approximately $3.8 billion.
The indicated contribution of Cu, Mo, Au and Ag to gross revenues are
75%, 11%, 7% and 6% respectively.  Zn and Pb account for less than 1%
of overall revenue.

Table 3: Jiama Copper-Polymetallic Project – NPV and IRR Summary

     _______________________________________________________________________
    |Long Term Metal Price      |         |NPV ($ Million)            |     |
    |___________________________|         |___________________________|     |
    |  Cu  |  Mo  |  Au  |  Ag  |         |      |      | @9%  |      |IRR  |
    |($/lb)|($/lb)|($/oz)|($/oz)|         |@0%   |@7%   | Base |  @11%|     |
    |      |      |      |      |         |      |      | Case |      |     |
    |______|______|______|______|_________|______|______|______|______|_____|
    |      |      |      |      |Pre-Tax  |$4,480|$1,820|$1,470|$1,204|60.4%|
    |$2.90 |  $18 |$1,380|$16.50|_________|______|______|______|______|_____|
    |      |      |      |      |After-Tax|$3,841|$1,542|$1,239|$1,010|53.7%|
    |______|______|______|______|_________|______|______|______|______|_____|

Mineral Resources Estimate

A Mineral Resource estimate, dated April 28, 2012, has been
independently completed by MMC in accordance with the CIM Definitions
Standards under NI 43-101. The updated Mineral Resource is based on 22
infill drill holes totaling 10,720m completed in late 2011. These holes
were drilled within the proposed pit locations which enabled detailed
mine planning to be undertaken.  Further drilling has recently been
completed over the South Pit area to upgrade the classification of the
existing Inferred Mineral Resources within the pit areas with sampling
and assaying ongoing.

During the review of the data MMC noted that whilst the mineralisation
occurs all within a single mineralised body, Au and Ag mineralisation
within the orebody had a significantly higher spatial variability than
the other elements. As a result MMC has classified the Au and Ag
resource presented in Table 5 separately; this classification takes into account the proposed large
scale mining techniques where Au and Ag will only be credits to the
overall products from the operations. MMC has assumed that Au and Ag
will not be used as a single cut-off grade for a selected mining block
and will be mined in conjunction with the other elements.

The Mineral Resources are summarized in Tables 4 and 5. The Mineral Resources presented in Table 5 for Au and Ag are inclusive and not in addition to the Mineral
Resources in Table 4 and occur within the same mineralised body.


    Table 4: Jiama Project - Cu, Mo, Pb and Zn Mineral Resources
    Reported at a 0.3 % Cu Equivalent Cut Off Grade*, as of April 28, 2012

    Rock                   Quantity                                Cu      Mo      Pb      Zn
    Type       Class       Mt         Cu %   Mo %    Pb %   Zn %   Metal   Metal   Metal   Metal
                                                                   (kt)    (kt)    (kt)    (kt)

    Skarn      Measured    35.6       0.71   0.048   0.11   0.07   252     17      38      25

               Indicated   293.2      0.73   0.043   0.07   0.06   2,135   127     201     163

               M+I         328.8      0.73   0.044   0.07   0.06   2,388   144     239     187

               Inferred    174        0.6    0.045   0.16   0.08   1,036   79      286     146

    Hornfels   Measured    38.4       0.28   0.035   0.04   0.01   107     14      14      5

               Indicated   626.1      0.31   0.031   0.01   0.01   1,952   196     66      64

               M+I         664.5      0.31   0.032   0.01   0.01   2,059   210     80      69

               Inferred    219        0.29   0.034   0.03   0.01   633     74      72      32

    Porphyry   Measured    2.1        0.22   0.056   0.01   0.01   5       1       0       0

               Indicated   57.7       0.33   0.043   0.01   0.01   188     25      4       6

               M+I         59.8       0.32   0.043   0.01   0.01   193     26      4       6

               Inferred    2.9        0.23   0.099   0.02   0.04   7       3       0       1

    Total      Measured    76         0.48   0.042   0.07   0.04   364     32      52      30

               Indicated   977.1      0.44   0.036   0.03   0.02   4,275   348     271     232

               M+I         1,053.1    0.44   0.036   0.03   0.02   4,640   380     323     262

               Inferred    395.9      0.42   0.039   0.09   0.05   1,676   156     359     179


    Table 5: Jiama Project - Au and Ag Mineral Resources
    Reported at a 0.3% Cu Equivalent Cut Off Grade* (>0.02 Au g/t), as of April
    28, 2012

    Rock         Class         Quantity     Au       Ag        Au        Ag Moz
    Type                       (Mt)         g/t      g/t       Moz

    Skarn        Indicated     256.5        0.31     17.01     2.537     140.290

                 Inferred      117.0        0.39     16.50     1.472     62.077

    Hornfels     Indicated     178.6        0.06     2.52      0.337     14.486

                 Inferred      68.9         0.08     5.06      0.186     11.195

    Porphyry     Indicated     15.7         0.24     8.22      0.121     4.145

                 Inferred      0.4          0.11     10.79     0.001     0.128

    Total        Indicated     450.8        0.21     10.97     2.995     158.921

                 Inferred      186.2        0.28     12.26     1.659     73.400

Note:  Figures reported are rounded which may result in small tabulation
errors.

Cu Equivalent is based on associated component grades, process
recoveries and bank consensus forecast metal pricing as at May 2012
(before tax). The key inputs are outlined in Table 6 below:


    Table 6: Jiama Copper-Polymetallic Project - Copper Equivalence
    Parameters Mineral Reserves

    Process Recoveries     Skarn      Skarn (Cu/Pb/Zn     Hornfels/Porphyry
                                           Ore)

    Copper                 88.00%           88.00%                84.00%

    Molybdenum             70.00%               -                 48.00%

    Gold                   45.00%           45.00%                     

    Silver                 65.00%           60.00%                     

    Lead                                    75.00%                     

    Zinc                                    88.00%                     

    Product Prices                                                     

    Copper USD per lb       2.90              2.90                 2.90

    Molybdenum USD per     15.50                -                  15.50
    lb

    Gold USD per Troy      1,300             1,300
    ounce

    Silver USD per         20.00             20.00
    Troy ounce

    Lead USD per tonne                       2,150                     

    Zinc USD per tonne                       2,100                     

    Copper Equivalence
    Ratio 

    Copper                    1                 1                     1

    Molybdenum             2.5540               -                 1.7513

    Gold                   0.2478           0.2478                     

    Silver                 0.0051           0.0051                     

    Zinc                                    0.2023                     

    Lead                                    0.1884                     

Mineral Reserves Estimate

A Mineral Reserve estimate, dated April 28, 2012, has been independently
completed by MMC in accordance with the CIM Definitions Standards under
NI 43-101.

Table 7 presents the Mineral Reserves estimate for the Project reported at a
0.35% Cu-equivalent cut-off grade for the ore extracted via open cut
methods and 0.5% to 0.65% Cu-equivalent cut-off grade for the ore
extracted via underground methods. The Mineral Reserves is inclusive
of, and not additional to the Mineral Resources in Tables 4 and 5.


    Table 7: Jiama Project Statement of NI 43-101 Mineral Reserve Estimate as of April 28, 2012

                         Grade                                          Metals

    Type       Ore       Cu     Mo      Au     Ag      Pb      Zn       Cu        Mo       Au      Ag        Pb     Zn

               kt        %      %       g/t    g/t     %       %        kt        kt       t       t         kt     kt

    Tongqianshan                                                                                                     

    Proved     -         -      -       -      -       -       -        -         -        -       -         -      -

    Probable   2,632     0.57   0.014   0.15   8.05    -       -        15.0      0.37     0.39    21.2      -      -

    Subtotal   2,632     0.57   0.014   0.15   8.05    -       -        15.0      0.37     0.39    21.2      -      -

    Waste      7,770     -      -       -      -       -       -        -         -        -       -         -      -

    Strip      2.95      -      -       -      -       -       -        -         -        -       -         -      -
    Ratio*

    Niumatang                                                                                                        

    Proved     -         -      -       -      -       -       -        -         -        -       -         -      -

    Probable   15,328    1.24   0.044   0.57   25.77   -       -        189.5     6.74     8.78    394.9     -      -

    Subtotal   15,328    1.24   0.044   0.57   25.77   -       -        189.5     6.74     8.78    394.9     -      -

    Waste      141,919   -      -       -      -       -       -        -         -        -       -         -      -

    Strip      9.26      -      -       -      -       -       -        -         -        -       -         -      -
    Ratio*

    South
    Pit

    Proved     -         -      -       -      -       -       -        -         -        -       -         -      -

    Probable   38,231    0.93   0.021   0.22   20.90   -       -        354.0     8.03     8.53    799.0     -      -

    Subtotal   38,231    0.93   0.021   0.22   20.90   -       -        354.0     8.03     8.53    799.0     -      -

    Waste      233,346   -      -       -      -       -       -        -         -        -       -         -      -

    Strip      6.10      -      -       -      -       -       -        -         -        -       -         -      -
    Ratio*

    Jiaoyan                                                                                                          

    Proved     -         -      -       -      -       -       -        -         -        -       -         -      -

    Probable   146,017   0.42   0.016   0.03   1.11    -       -        611.8     23.36    4.53    161.6     -      -

    Subtotal   146,017   0.42   0.016   0.03   1.11    -       -        611.8     23.36    4.53    161.6     -      -

    Waste      224,620   -      -       -      -       -       -        -         -        -       -         -      -

    Strip      1.54      -      -       -      -       -       -        -         -        -       -         -      -
    Ratio*

    Underground (north)                                                                                              

    Proved     16,241    1.14   0.073   0.38   21.69   0.108   0.058    185.6     11.90    6.15    352.3     17.5   9.5

    Probable   113,158   1.10   0.049   0.42   20.61   0.039   0.033    1,241.9   55.30    47.60   2,332.1   44.5   37.0

    Subtotal   129,399   1.10   0.052   0.42   20.74   0.048   0.036    1,427.5   67.20    53.75   2,684.4   62.0   46.5

    Underground (south)                                                                                              

    Proved     8,673     0.63   0.014   0.29   0.38    0.116   10.855   54.8      1.26     2.48    3.3       10.1   941.5

    Probable   23,190    0.67   0.016   0.09   10.82   0.094   0.125    155.1     3.76     2.05    251.0     21.8   28.9

    Subtotal   31,864    0.66   0.016   0.14   7.98    0.100   3.046    209.9     5.02     4.53    254.3     31.9   970.4

    Total Reserves Open Cut + Underground                                                                            

    Proved     24,914    0.96   0.053   0.35   14.27   0.111   3.817    240.4     13.15    8.63    355.6     27.6   950.9

    Probable   338,556   0.76   0.029   0.21   11.70   0.020   0.019    2,567.3   97.57    71.88   3,959.8   66.4   65.9

    Total      363,470   0.77   0.030   0.22   11.87   0.026   0.280    2,807.7   110.72   80.50   4,315.4   94.0   1,016.9

-Note: Figures reported are rounded which may result in small tabulation
errors

-Information on the Cu Equivalent Cut-off grade calculation are outlined
in the Mineral Resource section of this release.

*Strip ratio units are waste tonne: ore tonne

An NI 43-101 Pre-Feasibility Study Technical Report is being prepared by
MMC to support the Statement of Mineral Resources and Mineral Reserves
and this will be available on SEDAR and on the Company’s website within
the next forty-five days.

Project Update

As of October 7, 2012, the Company has completed a further infill
drilling program to upgrade the resource confidence and help further
optimize the mine design and reserves of the Jiama deposit. The program
consisted of 90 drill holes for a total of 40,496 meters, including: 71
regular in-fill resource drill holes (31,489 m), 13 geo-technical drill
holes (4,835 m), and 6 geo-hydrological holes (4,172 m). Assaying and
geological logging and testing of the core from this program is ongoing
and this information will be included in future updates of the Mineral
Resources and Mineral Reserves.

The Company is currently completing further metallurgical testing of
both skarn and hornfels ores to further optimize the molybdenum and
precious metal recoveries especially in lower grade ores. Further
testing underway in the hornfels mostly located in the Jiaoyan pit
area, will be focused on further refining the Cu-Mo separation.

Based on the above infill drilling and metallurgical program the Company
aims to release an update of the Mineral Resources and Mineral Reserves
in the first half of 2013.

About China Gold International Resources

China Gold International Resources Corp Ltd is based in Vancouver, BC,
Canada and operates both the CSH Gold Mine in Inner Mongolia, and the
Jiama Copper-Polymetallic Mine in Tibet Autonomous Region of China.
CGG’s objective is to continue to build shareholder value by growing
production at its current mining operations, expanding its resource
base, and aggressively acquiring and developing new projects
internationally. The Company is listed on the Toronto Stock Exchange
(TSX: CGG) and the Main Board of the Stock Exchange of Hong Kong
Limited (HKEx: 2099).

QUALIFIED PERSON

An Independent Pre-Feasibility Study Technical Report titled “Jiama
Copper-Polymetallic Project, Metrorkongka County, Tibet Autonomous
Region People’s Republic of China” with an effective date of October
25, 2012 has been prepared by MMC. The report will be available on
SEDAR (www.sedar.com) within 45 days of this release.

Mr. Jeremy Lee Clark, a full time Principal Geologist for MMC, and a
Qualified Person as defined by NI-43-101, has reviewed the data
underlying the Mineral Resource and supervised the estimation of the
Mineral Resource as well as reviewed the entire Pre-Feasibility
Technical Report. Jeremy has approved the technical and scientific
information pertaining to the Jiama Project’s Mineral Resources and
Geology contained in this release.

Mr. Anthony Robert Cameron, a part time Associate Mining Engineer
engaged by MMC, and a Qualified Person as defined by NI-43-101, has
reviewed the data underlying the Mineral Reserve and supervised the
estimation of the Mineral Reserve as well as reviewed the reserve
sections of the Pre-Feasibility Technical Report. Anthony has approved
the technical and scientific information pertaining to the Jiama
Project’s Mineral Reserves, Life of Mine Operating Costs and Capex and
Cashflow Analysis contained in this release.

Mr. Andrew James Haigh Newell, a full time Executive Processing
Consultant Engineer for MMC, and a Qualified Person as defined by
NI-43-101, has reviewed the data underlying the Processing aspects of
the project and sections of the Pre-Feasibility Technical Report.
Andrew has approved the technical and scientific information pertaining
to the Jiama Project’s Processing and Products contained in this
release.

Forward-Looking Statements

Certain information regarding China Gold International Resources
contained herein may constitute forward-looking statements within the
meaning of applicable securities laws. Forward-looking statements may
include estimates, plans, expectations, opinions, forecasts,
projections, guidance or other statements that are not statements of
fact. Although China Gold International Resources believes that the
expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove
to have been correct. China Gold International Resources cautions that
actual performance will be affected by a number of factors, most of
which are beyond its control, and that future events and results may
vary substantially from what China Gold International Resources
currently foresees. Factors that could cause actual results to differ
materially from those in forward-looking statements include market
prices, exploitation and exploration results, continued availability of
capital and financing and general economic, market or business
conditions. The forward-looking statements are expressly qualified in
their entirety by this cautionary statement. The information contained
herein is stated as of the current date and subject to change after
that date.
 

 

 

 

SOURCE China Gold International Resources Corp. Ltd.


Source: PR Newswire