Central China Goldfields has a small gold project in the north of China but it is the Nimu copper/molybdenum project in Tibet that has the greatest potential.
CCG is earning a 75% interest in Nimu, which is the copper/molybdenum project. It is in a copper rich region of china. CCG has to spend $27m over six years to gain the 75% stake but less than half of that cash is required to be spent in the first four years of the period. So far $4m has been spent. There are six separate licence areas that make up the Nimu interests. Most of them are adjoining licences but two are a few kilometres away from the others.
There are eight main targets on these licences. The focus will be at Guqing on the Gangjiang licence area. So far the results have been positive and drilling has recommenced this summer. The area is unusual in that the amount of copper is similar to the copper equivalent of the molybdenum. Normally these types of discoveries are either copper rich or molybdenum rich. The copper grade of 0.3% is relatively low but the copper equivalent grade of 0.6% is more of an economic level.
There is already a producing copper mine in the area which is next to one of the company’s licence areas. This shows that there is potential for an economic copper mine. There will be plenty of potential Chinese partners if an economic resource is found.
The Dong Mao Huo gold project could be generating cash by the first quarter of next year. CCG is earning an 80% stake by spending $4m over three years. It will take around £500,000 of investment before the mine starts production.
The initial opencast gold mine at Dong Mao Huo should produce 7,000 ounces of gold per year and last for two years at current resource levels. It will generate $125,000 in cash each month for CCG. Some of that cash could go towards completing the earn-out. CCG has discovered richer veins of gold underground and by the time that the opencast area is fully mined CCG will in a position to know whether mining underground will be economic.
CCG sold its stake in the Snow Mountain gold project to its joint venture partner at the beginning of April for £2.7m, equivalent to 2.2p a share. There was a £1m profit on the disposal.
CCG has £3.4m in cash. That will be enough to see Dong Mao Huo through to production and finance further exploration at Nimu. Dong Mao Huo should then generate cash to cover future exploration. Any additional cash needed to finance the development of projects is likely to come from joint ventures or asset sales.
JP Morgan Fleming is the largest shareholder with 8.3%. The directors’ own 9.3% of the company.
There should be news released over the summer about the progress of drilling at Gangjiang.
At 6p a share, the company is valued at £7.78m.
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