16/07/2008 - 22:00

Dragon chasing gold in China

16/07/2008 - 22:00

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The days of the gold rush are long gone, but it is a good time to be Dragon Mountain Gold Ltd.

DISCOVERY: Gold explorer Dragon Mountain Gold is closer to developing a substantial gold resource inventory in central China

The days of the gold rush are long gone, but it is a good time to be Dragon Mountain Gold Ltd.

The emerging international gold developer, based in Perth, is one step closer to developing a substantial gold resource inventory at its majority-owned Lixian Gold Project in central China.

DMG recently unveiled a maiden 1.1 million ounce Joint Ore Reserves Committee compliant resource for the Zhao Gou deposit.

The company believes the project could provide decades of work.

With an ounce of gold trading at about $A942 last week, DMG managing director Andrew Richards said the company had reached a significant milestone within 12 months of its ASX listing.

Mr Richards said that the inferred resource, comprising almost 19 million tonnes of gold at an average grade of 1.8g/t Au for 1.1 million ounces, was indicative of a series of 16 known deposits with the potential to be converted to JORC compliant status.

"China has to be one of the most highly prospective gold countries in the world which is so grossly under explored," Mr Richards told WA Business News.

"It's really hard in Australia at the moment to get a good prospect with the size potential we are looking for.

"The number of gold producers has been declining and operating costs are well and truly going up, but that's because the number of available prospects in Australia is declining.

"A company needing a large asset with lower exploration costs has to look beyond Australia."

The Lixian Project, located north-west of the Sichuan Province which was devastated by an earthquake on May 12, is DMG's most advanced project.

It hosts significant JORC code mineral resources and additional Chinese classified resources (non-JORC code compliant) in an historical gold producing area in central China.

Mr Richards said having two codes of compliance presented a significant problem for DMG; the company is prohibited from discussing Chinese classified resources on the ASX and China does not recognise JORC code mineral resources.

"So the marriage and alignment of what standard and regulation to go by is an issue because we can't tell investors over here about all the exciting finds we've got because some aren't JORC compliant, but we can talk about them in China," he said.

DMG employs 200 workers in China, of which 185 are Chinese nationals and 15 employees come from Australia, Hong Kong and Canada.

Three geologists are expatriates from Hong Kong and speak three languages including Chinese, meaning the company has not needed to employ an interpreter.

"These guys are good in their field and have a thorough understanding of our Western-style of drilling," Mr Richards said.

He said while China still worked under a strict hierarchal structure, polarisation of the workforce was emerging with many Chinese taking a Western entrepreneurial outlook to employment. "But the bureaucracy in China for us is the main problem," Mr Richards said.

"There's more scrutiny because we're a foreign company and lodging an application for a licence to mine can be a lengthy process because we are foreign, so there are more departments we need to go through and the reporting can be a very rigorous process."

The Zhao Gou resource was based on data from 76 drill holes with a combination of in-house data and geological interpretation.

It was independently reviewed and modelled by geographical and mining consultants CSA Global, headquartered in Burswood.

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