Inter-Citic fast tracks Dachang Gold Project and outlines multi-million ounce potential
Inter-Citic Minerals (TSE:ICI, OTCQX:ICMTF), is a Canadian gold explorer focused on the development of its Dachang Gold Project in the Qinghai Province of China.
On June 30, 2011, Inter-Citic published a new NI 43-101 Technical Report and resource update reporting an estimated Measured and Indicated mineral resource of 1.88 million ounces contained gold (17.2 million tonnes grading 3.41 g/t Au) and an additional estimated Inferred mineral resource of 1.93 million ounces contained gold (21.26 million tonnes grading 2.83 g/t Au) - an increase of more than 400,000 oz Au over the previous 2010 resource estimate.
The Dachang Gold Project covers 279 square kilometres in western China in the mineral-rich but largely unexplored province of Qinghai. Gold mineralization at Dachang begins at surface and is open at depth through mineralized fault structures that extend across the entire property. Drilled to date only to a depth of 150 metres, Dachang is viewed as a low-cost, open-pittable resource. It is one of China's largest undeveloped gold resources and carries excellent exploration potential for near surface gold resources along a 22 kilometre strike line. Inter-Citic controls 83% of the Project, with the balance of 17% held by the Qinghai Geological Survey.
A Scoping Study was completed in 2009 using earlier and smaller resource estimates for a conceptual open pit mine, producing at an annualized rate of 2 million tonnes of ore, feeding a fully integrated floatation, BIOX and Carbon in Leach plant for production of gold doré. The capital cost of the plant in the 2009 study was estimated at US$104 million, and total operating costs utilizing Chinese gold mining contractors were US$404 per ounce. The conceptual pit study was based on the Dachang Main Zone, to extract and process an estimated 17.8 million tonnes at 3 g/t Au, to recover 1.5 million ounces of gold over the life of the mine. The model did not include processing additional resources contained in the Placer Valley area, nor did it consider delving into the resource potential along a substantial strike line.
The Company had previously completed a Scoping Study and Preliminary Economic Assessment (PEA) in 2009 that evaluated gold production of 1.5 million ounces during a mine life of approximately 9 years, from only a small fraction of the resource potential at Dachang. The 2009 Scoping Study assumed an annualized production rate of 165,000 ounces of gold using a spot gold price of US$750 per ounce to produce an Internal Rate of return in excess of 40%. The Net Present Value of the project was estimated in excess of US$198 million, on an after tax basis and utilizing a 5% discount rate, and would payback capital in less than two years. The 2009 Study concluded that the Internal Rate of Return increased to 47%, and Net Present Value exceeded US$241 million on a US$800 per ounce gold price.
The Scoping Study did not contemplate a current spot price of US$1,500 per ounce or the Company adding an additional almost 1,000,000 oz Au to the estimated resource inventory since 2009.
Inter-Citic has also completed and published extensive metallurgical test work in China, Australia and in South Africa, and confirmed that the overall predictable recovery of gold at Dachang in doré form was 87.8%, which was an increase from 85% reported in the earlier PEA. Floatation recovery recorded 94.9%, BIOX and Carbon in Leach recorded 93.4%, and gold room recoveries were at 99.0%. Goldfields (JSE:GFI, NYSE:GFI) confirmed that the Dachang concentrate is ideally suited to the BIOX process, and allied with a Carbon in Leach Circuit would recover between 93.3 to 93.5% of all gold values.
Inter-Citic has identified more than 50 major gold in soil anomalies at Dachang and hundreds of smaller ones across the large property. Most of the drilling and resource has focused on the Dachang Main Zone and nearby Placer Valley Zone. In 2010 the Company began more extensive drilling on new discoveries at Acacia Zone, 861 Zone, DMZ Zone, XP Zone, and NR-1 Zone, which resulted in a 2011 resource update including these new areas.
Gold at Dachang is now known to be related to an extensive series of steeply dipping faults across the full 22 kilometer width of the project. The current priority is on expanding shallow open pit resources and this drilling has only tested a small fraction of these structures. There has been no significant testing any of these mineralized faults below 200 metres anywhere on the property.
While continuing to explore and expand the current resource, the Company is currently fulfilling the requirements for permitting a mine at Dachang, and has retained the leading Chinese mining engineering company China Nerin Engineering to complete a Chinese Standard Feasibility Study and the associated Project Application Report. Nerin has worldwide experience in mine development and construction management, and has developed gold projects utilizing the BIOX process.
Strategic shareholders in Inter-Citic include the Zijin Mining Group (HK:2899, SSE:601899) which acquired a 19.2% equity interest in early 2010 for $18.56 million. Zijin is China's largest gold producer, and third largest copper producer, with a market capitalization of approximately $20 billion. Other investors include the Lee Family of Hong Kong, who control the Henderson Land Group of Companies, capitalized at US$20 billion, and the Ho Family and Associates of Hong Kong and Macao, who own the Tai Fung Bank of Macao, with assets of over US$4 billion.
Inter-Citic has announced a non-brokered private placement financing of up to 11.05 million shares at C$1.90 per share, for total gross proceeds of up to $21 million. The first of two tranches closed on June 28, 2011 for $12.6 million and the remaining $8.4 million is to close on July 8, with the shares being taken up by Chinese investors. The net proceeds of the offering will be used to complete a Chinese compliant Feasibility Study this year, as well as all other advanced engineering studies required under Chinese regulations in order to complete the mine permitting process, as well as continuing regional exploration for further resource expansion, and for general corporate purposes.
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