a chinese elephant at lixian

September 19, 2007

http://www.minesite.com/nc/minews/singlenews/article/dragon-mountain-may-have-encountered-a-chinese-elephant-at-lixian/1.html


Dragon Mountain May Have Encountered A Chinese Elephant at Lixian

Source : Minesite

Dragon Mountain Gold is an old China hand as it has been operating in that country since 2004, but it only listed on the ASX in July of this year. The chairman is Kevin Tomlinson who is a mining analyst at Westwind Partners in London so the company will effectively have a dual listing without going to the expense of joining AIM. Until recently the company’s main focus was on exploring for gold deposits on the Tian Shan gold belt in northwest China, where it still retains a portolio of projects, but its focus now is on the major Lixian gold project in Xinjiang province in central west China where it has a 75 per cent interest. This project contains extensive gold mineralisation outcropping at surface and it has been calculated that US$11 million has been spent on exploration to date. Dragon Mountain’s partner is the Gansu Non-Ferrous Metallurgical Bureau at Lixian in the Long Jin Joint Venture and the Long Ao Joint Venture.

From work done by the Chinese it is clear that the licences secured and transferred to these joint ventures contain a major gold mineralised system.The project hosts significant Chinese classified reserves of 1.76 million ounces with double that in resources, but it should be noted that these figures are not JORC compliant at this stage. Lixian is in an historical gold producing area and is at the drill-out and mineralisation definition stage. A major drilling program commenced in June and re-opening of underground exploration adits continues at the main deposits. In a few weeks time geophysical drilling will take place to determine the ideal position for the plant, according to Kevin Tomlinson, as the Chinese authorities are quite happy for mining to start based on a small reserve as it is known to be part of a major mineralised system.

Carey Smith, an analyst at Delta Securities, the broker responsible for the IPO of Dragon Mountain, visited Lixian before the listing and noted that two of the licences contained within it, Jinshan and Li Ba, were discovered in the 1980’s by the Tianshui Geological Group previously a Chinese state controlled entity which is now run by the province, after conducting stream sediment geochemistry. The TGG began more detailed field exploration consisting of grid based geochemistry and extensive trenching in 1986 and this continued until 2002. Since then a fair amount of artisanal work has been carried out in a fairly organised way using modern mechanised equipment and some of the work has taken place in areas of previously unknown mineralization.

These miners were after the near surface oxide ore which is 10 to 20 metres in thickness and around 30 metres in width. The ore was dumped straight onto plastic liners before leaching with cyanide. Unsurprisingly the local farmers were not happy with this and the authorities sought to put the project in the hands of an established mining company. Interestingly less work has been carried out at Jinshan than Li Ba and this may be the reason it has been given a resource of only 650,000 ozs, as a study of the land indicates that it could be the bigger of the two and Li Ba has a resource of 2,250,000 ozs.

It is early stage for metallurgical testwork and more needs to be known about the ore bodies, but it should be possible to commence cash flow from this oxide ore in quite short order. This will help fund exploration and definition drilling as Dragon Mountain could be sitting on a world class gold field. Yesterday the first assay results from confirmation drilling at the Zhao Gou and Ma Gou deposits on the Li Ba licence were announced and these were encouraging. The drilling confirmed that the gold mineralised zones extend to depth below these deposits and the grades, widths and style of the intersected gold mineralization are consistent with previous exploration results.

Just as important, the grades augur well for the planned conversion of existing resources to a JORC compliant status with intersections of 29 metres at 2.77 g/t and 25 metres at 3.77 g/t at Ma Gou and 13 metres at 2.51 g/t and 134.1 metres at 1.74 g/t at Zhao Gou. These deposits were chosen because they outcrop and the drill programme was aimed at confirming and extending the outcropping mineralisation. The assays confirm that gold mineralisation also occurs on the margins and within previously unsampled porphyry units that pinch and swell within the shear system. Consequently, a relogging exercise is in progress on the historical core to identify mineralization overlooked by previous workers. It may be early days for Dragon Mountain, but things appear to be on the right track.