2014

China Gold International to increase gold production by 95% by 2014 at CSH mine to 260,000 ounces per year

Mine Expansion Feasibility Study Completed for 60 ktpd

VANCOUVER, Nov. 5, 2012 /PRNewswire/ - China Gold International Resources Corp. Ltd. (TSX: CGG; HKEx: 2099) (the "Company") is pleased to announce the results of a National Instrument 43-101 compliant Technical Report Expansion Feasibility Study for the Chang Shan Hao (CSH) Gold Project, located in Inner Mongolia Autonomous Region, People's Republic of China. This report is prepared following the 2011 drilling campaign. The Expansion Feasibility Study (EFS) supports a 60,000 tonne per day (tpd) expansion plan, under which the open pit reserves at the CSH project stand at over 213 million tonnes of ore containing about 4.08 million ounces of gold.

Highlights

  • Gold production to increase by ~95% in 2014 to 260,000 ounces per annum from the current +133,000 ounces per annum;
  • Open pit reserves: 213 million tonnes averaging 0.59 g/t gold totalling 4.08 million ounces of gold at 0.28 g/t cutoff gold grade;
  • Measured and Indicated Resources: 262 million tonnes, averaging 0.60 g/t gold totalling 5.05 million ounces of gold at 0.28 g/t cutoff gold grade;
  • Ore production to increase from 30,000 tpd to 60,000 tpd by August 2013 (~20 million tonnes per annum thereafter;
  • Life Of Mine (LOM): 11 years;
  • Estimated LOM capital expenditure: US$213 million;
  • Operating cost: US$9.83/tonne ore; or LOM US$713/oz of gold;
  • Undiscounted total LOM cash flow: US$1,253 million;
  • After-Tax Net Present Value (NPV): $642 million at discount rate of 9%;
  • Internal Rate of Return (IRR) on expansion capital: 30.5%

Dr. Xin Song, CEO of the Company, commented, "Compared with the last CSH technical report released in 2010, this new expansion feasibility study presents solid robust economics and strong cashflow for the project. Mineable reserves increased by 61% from 2.53 million ounces to 4.08 million ounces of gold. With mineralization continuing further down depth, we see a bright future for the CSH Operation".

Overview

The CSH gold deposit is a large bulk tonnage low-grade style of gold mineralization hosted within a ductile-brittle shear zone in Proterozoic sediments in the North China Gold Belt along the north margin of China Craton. The CSH gold project is currently operating at a 30,000 tpd capacity, producing over 133,000 ounces of gold per annum. The EFS has demonstrated that additional value can be added to the CSH Project when plant capacity is expanded.

Mineral Resources Estimate

The 2011 drilling campaign added significant tonnages above cutoff at a slightly lower grade, partly due to the confirmation of grades and upgrade in resource classification down-dip and laterally. The CSH deposit in the southwest (SW) area is now well delineated, and still significant potential exists for down-dip extensions to the mineralization. Mineralization at depth in the northeast (NE) has been confirmed, with increases in both tonnages and confidence.

The resources are reported within a "resource pit", which was developed using a US$ 1,800/oz Au price, and a 60% recovery. This resource pit represents what it is reasonable to expect may be recoverable in the near future from CSH.

The mineral resource estimate for the CSH mine reported herein was prepared by independent consultant, Mario Rossi,M.Sc., Min.Eng.,of GeoSystems International Inc. using a "Resource Pit" generated by independent consultant, John Nilsson, M.Sc., P. Eng., of Nilsson Mine Services Ltd. The estimate was completed using MineSight® software using block modeling (12.5 meter by 12.5 meter by 6.0meter block size). Interpolation parameters have been derived based on geostatistical analysis conducted on 2 meter composited drillhole data. Block grades have been estimated using an Indicator-modified Ordinary Kriging (OK) method and the mineral resources have been classified based on proximity to sample data and the continuity of mineralization in accordance with CIM Guidelines and best practices. The CSH resource has been estimated using a total of 108 new diamond drill holes plus all the previous drill holes, variably spaced at 50 to 150 meter intervals and reconciled with the existing mining blast hole assay data.

The resources are reported below the topography corresponding to December 31st, 2011.

Table 1: CSH Project Statement of NI 43-101 Mineral Resources Estimate

All CSH Resources by category below pit surface to December 31st, 2011,
within Resource Pit, 2012 Resource Model.
Cutoff
(g/t)
Measured Indicated Measured+Indicated Inferred
MTonnes Au Grade
(g/t)
MTonnes Au Grade
(g/t)
MTonnes Au Grade
(g/t)
Million
Ounces
Au
MTonnes Au Grade
(g/t)
0.25 95.3 0.61 192.7 0.55 288.0 0.57 5.26 155.7 0.46
0.28 90.4 0.63 172.2 0.58 262.6 0.60 5.05 132.8 0.49
0.30 86.9 0.65 160.2 0.60 247.1 0.62 4.91 118.9 0.52
0.35 78.2 0.68 134.5 0.65 212.8 0.66 4.55 91.5 0.57
0.40 69.9 0.72 113.8 0.71 183.7 0.71 4.20 71.1 0.63
0.45 61.7 0.76 97.0 0.75 158.7 0.76 3.86 56.1 0.69
0.50 53.9 0.80 83.0 0.80 136.9 0.80 3.52 44.8 0.74
0.55 47.2 0.84 71.2 0.85 118.4 0.84 3.21 36.1 0.80
0.60 40.7 0.88 61.0 0.89 101.7 0.89 2.90 29.1 0.85
0.65 34.8 0.93 52.2 0.94 87.0 0.93 2.61 23.5 0.90
0.70 29.5 0.97 44.1 0.99 73.6 0.98 2.32 19.1 0.95
0.75 24.9 1.02 37.3 1.03 62.3 1.03 2.06 15.7 1.00

*Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not fully account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. Even though current mining is going smoothly at CSH with M&I class mineral resources, there is no certainty that inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.

Mining and Mineral Reserves Estimate

The EFS for CSH, which outlines the mine expansion from the current 30,000 tpd to 60,000 tpd capacity, has been prepared by the Changchun Gold Design Institute (CGDI).  In support of this study, a new mine development plan has been completed using the current resource model and an increased long term gold price of US$1380/ounce of gold.  Pit optimization and design was undertaken by CGDI using Micromine software.  The pit limits and reserves were validated by Nilsson Mine Services Ltd. ("NMS"). Mining is carried out by the contractor China Railway 19th Bureau.

Mineable reserves reported using the 2011 year end topographic surface and the same current mining cutoff grade of 0.28 g/t have increased to 213.5 Mt with an average diluted grade of 0.59 g/t Au.  The strip ratio is 3.31 with a total of 707.4 Mt of waste mined.  Total material moved from the pit will be 920.9 Mt.  Mineral reserves are summarized in Table 2.

Table 2: CSH Project Statement of NI 43-101 Mineral Reserves Estimate

Class bcm x 1000 t x 1000 Insitu Au g/t Diluted Au g/t
Proven 32,018.0 89,086.0 0.64 0.62
Probable 44,627.0 124,394.0 0.60 0.58
Total 76,645.0 213,480.0 0.61 0.59

The pit optimization input parameters used by NMS to validate the final design limits are summarized in Table 3.

Table 3: CSH Project Pit Optimization Parameters

Item Units Amount
Ore Production Per Annum t x 1000 20,400
Operating Cost and Fee Estimate    
Mine Waste Contracting RMB/t waste 9.50
Mine Engineering RMB/t ore 0.59
Mine Ore Contracting RMB/t ore 9.50
Mine Ore Subtotal RMB/t ore 10.09
Processing Cost RMB/t ore 15.98
Pad Construction RMB/t ore 2.52
G&A Expense RMB/t ore 4.07
Total Royalties and Compensation RMB/t ore 5.60
Plant, Pad, G&A & Compensation RMB/t ore 28.17
All Onsite Costs Excluding Waste RMB/t ore 38.26
Operating Cost and Fee Estimate    
Mine Waste Contracting $US/t Waste 1.505
Mine Engineering $US/t ore 0.093
Mine Ore Contracting $US/t ore 1.505
Mine Ore Subtotal $US/t ore 1.599
Processing Cost $US/t ore 2.532
Pad Construction $US/t ore 0.399
G&A Expense $US/t ore 0.645
Total Royalties and Compensation $US/t ore 0.887
Plant, Pad, G&A & Compensation $US/t ore 4.463
All Onsite Costs Excluding Waste $US/t ore 6.062
Other Parameters    
Recovery % 65.0%
Gold Price RMB/gram 280.03
Gold Price U.S. $/ounce 1380.00
Refining/off-site costs U.S. $/ounce 4.68
Net Gold Price U.S. $/ounce 1375.32
Net Gold Price U.S. $/gram 44.22
Optimization Cutoff Grade - Fixed Recovery Au g/t 0.155
Optimization Cutoff Grade - Variable Recovery Au g/t 0.175
Exchange RMB/$US 6.3115

Processing and Production Schedule

The plan for expansion at CSH from 30,000 tpd to 60,000 tpd, focuses mainly on duplicating the existing facilities.  Certain areas of the flowsheet design and equipment selections will be modified based on the performance of the existing facilities

The main processes applied to the heap leaching of ore at the CSH mine are consistent with typical heap leach operations and consist of:

  • Mining ore and waste
  • 3 stages of crushing to 80%, -9mm
  • Ore placement on CN leach pad
  • Recovery of pregnant CN solution
  • Carbon -in-column (CIC) Au recovery from solution
  • Stripping and electro-winning
  • Gold smelting to recover doré bar

The expanded mine production schedule is summarized in Table 4.

Table 4: CSH Project Expanded Mine Production Schedule

Period 2012 2013 2014 2015 2016 2017 2018 2019
TOTAL
Ore Production t x 1000 10,217 13,582 20,396 20,433 20,377 20,380 20,378 20,430
Gold Grade g/t 0.501 0.572 0.603 0.518 0.541 0.607 0.633 0.648
Gold Grade g/t 0.501 0.572 0.603 0.518 0.541 0.607 0.633 0.648
Waste t x 1000 51,397 58,129 74,482 78,082 85,200 85,730 84,873 74,107
Total Material t x 1000 61,613.7 71,711.2 94,878.5 98,515.6 105,577.4 106,109.5 105,251.6 94,537.0
Strip Ratio   5.03 4.28 3.65 3.82 4.18 4.21 4.16 3.63
Ounces to Process Ounces 164,532 249,818 395,281 340,338 354,553 397,975 414,639 425,655
Ounces Recoverable Ounces 115,172 174,873 276,697 238,237 248,187 278,583 290,247 297,958
Production from Existing Heap Ounces 56,492 6,837 17,453 9,492 3,318 1,911 - -
Ounces New Production Ounces 91,480 153,871 247,939 235,088 245,290 271,221 285,812 294,478
Ounces Produced Ounces 147,972 160,709 265,393 244,580 248,609 273,132 285,812 294,478

Period 2020 2021 2022 2023 2024 2025 2026 2027 Total
TOTAL
Ore Production t x 1000 20,380 20,453 20,446 6,776 - - - - 214,249.5
Gold Grade g/t 0.604 0.568 0.623 0.731 - - - - 0.592
Gold Grade g/t 0.604 0.568 0.623 0.731 - - - - 0.592
Waste t x 1000 65,957 31,661 8,570 901 - - - - 699,089.1
Total Material t x 1000 86,336.5 52,114.4 29,016.3 7,677.0 - - - - 913,338.6
Strip Ratio   3.24 1.55 0.42 0.13 - - - - 3.26
Ounces to Process Ounces 395,866 373,619 409,363 159,284 - - - - 4,080,924
Ounces Recoverable Ounces 277,107 261,533 286,554 111,499 - - - - 2,856,647
Production from Existing Heap Ounces - - - - - - - - 95,503.8
Ounces New Production Ounces 280,045 265,929 283,072 146,359 35,699 13,086 5,686 1,593 2,856,647
Ounces Produced Ounces 280,045 265,929 283,072 146,359 35,699 13,086 5,686 1,593 2,952,151

Life of Mine Capital

The capital cost for the expansion project was completed by Changchun Gold Design Institute in September 2012. The Expansion Project is planned for completion by August 1, 2013, which will be executed on a significant number of multiple work fronts. The expansion capital and the LOM capital expenditures are summarized in Table 5, which include 20% contingency for the next two year capital expenditures.

Table 5: CSH Project Life of Mine Capital Expenditures

Period   2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Capital US$
(million)
$18.4 $165.9 $0.0 $4.8 $10.5 $0.0 $0.0 $6.2 $0.0 $0.0 $0.0
                         
Period   2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Total
Capital US$
(million)
$0.0 $1.8 $1.8 $1.8 $1.8 $0.0 $0.0 $0.0 $0.0 $0.0 $212.9

Operating Costs

The predicted annual onsite operating costs by major category per tonne processed, excluding royalties, taxes and other fees, are shown in Table 6.

Table 6: CSH Project Operating Costs

Item RMB/tonne ore U.S. $/tonne ore
Mining Ore ¥9.60 $         1.52
Mining Waste ¥32.78 $         5.19
Processing ¥15.16 $         2.40
General Administration ¥4.52 $         0.72
Total ¥62.06 $         9.83

Project Cashflow Summary

The economic analysis of the project is based on the LOM cashflows commencing January 2012 for proven and probable reserves that are included in the expansion plan.  The cashflow model was developed by the authors of the report to compare the economic results of continuing with a 30,000 tpd plan versus a 60,000 tpd expansion plan. The CSH expansion project is expected to generate additional value by accelerating metal production and shortening the LOM from 21 years to 11 years. The gold prices used in the cashflow model are in Table 7 and the undiscounted cashflow is shown in Table 8.

Table 7: Gold Prices used in Cashflow Model

Year 2012 2013 2014 2015 2016 & after
Au  US$/oz 1600 1600 1585 1440 1380

Table 8: CSH Project 60,000 tpd Undiscounted Cashflow

Period   2012 2013 2014 2015 2016 2017 2018 2019 2020
Cashflow US$ x
million
$54.0 ($89.3) $154.0 $94.0 $70.1 $102.3 $108.8 $126.9 $120.6
                     
Period   2021 2022 2023 2024 2025 2026 Total
Cashflow US$ x
million
$152.1 $196.7 $122.3 $32.0 $7.8 $0.2 $1,253.8

Qualified Persons

The following Independent Qualified Persons as defined by National Instrument 43-101 have reviewed and supervised the preparation of the scientific and technical information and verified the data supporting such scientific and technical information contained in this news release.

John Nilsson, P.Eng., of Nilsson Mine Services Ltd., Vancouver, Canada

Mario Rossi, M.Sc., Min. Eng.,of GeoSystems International Inc., Florida, USA

Ken Major, P.Eng., of KWM Consulting Inc., Vancouver, Canada

William McKenzie, P.Eng., of Global Project Management Corporation, Vancouver, Canada

An NI 43-101 Technical Report Expansion Feasibility Study is being prepared by the foregoing Qualified Persons to support the disclosure herein and this will be available on SEDAR and on the Company's website within the next 45 days.

About CSH Mine

The CSH Mine is an open-pit, heap leaching gold mine located in Inner Mongolia, China, approximately 210km northwest of the city of Baotou. Gold production has increased each year since commercial production was reached in 2008. The total commercial gold production was 33,671 ounces in 2008, 83,570 ounces in 2009, 111,000 ounces in 2010 and 133,000 ounces in 2011.

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).

Forward-looking statements

Certain statements made herein, and other statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable securities legislation. Forward-looking information and statements are typically identified by words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "plan", "estimate", "will", "believe" and similar expressions suggesting future outcomes or statements regarding an outlook. All such forward-looking information and statements are based on certain assumptions and analysis made by China Gold International Resources Corp. Ltd.'s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include those described under the heading "Risks and Uncertainties" elsewhere in the Company's MD&A filed at www.SEDAR.com. The reader is cautioned not to place undue reliance on forward-looking information or statements. Except as required by law the Company does not assume the obligation to revise or update these forward looking statements after the date of this document or to revise them to reflect the occurrence of future, unanticipated events.

 

SOURCE China Gold International Resources Corp. Ltd.



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