Subiaco-based Midas Resources Ltd has signed a cooperation agreement with Chinese company Zijin Mining Group which will allow it to take a sizeable stake in the Da Hong Shan copper project in the Xinjiang Province.
Subiaco-based Midas Resources Ltd has signed a cooperation agreement with Chinese company Zijin Mining Group which will allow it to take a sizeable stake in the Da Hong Shan copper project in the Xinjiang Province.
Through its 85 per cent owned Midas Mining China Ltd, Midas can earn up to 50 per cent interest in the project by spending nearly $4 million over four years.
Midas' interest can then be increased to 70 per cent by completing a definitive feasibility study and taking the project to a development decision, subject to Zinjin's right to buy-back to a 60 per cent interest.
The agreement ratifies a memorandum of understanding announced earlier this year and the completion of due diligence by Midas, which identified a number of drill targets ready for an initial work program this year.
Zijin is one of China's largest gold miners, producing around 10 per cent of the country's total gold mine production last year.
Below is the Midas announcement:
Midas Resources Limited ("Midas" or "the Company") (ASX:MDS), through its 85% owned subsidiary Midas Mining China Limited, has finalised a formal cooperation agreement with a subsidiary of one of China's largest resources companies - Zijin Mining Group Co Ltd ("Zijin") (Hong Kong Stock Code: 2899).
The agreement with Zijin Mining Group Northwest Co Ltd ratifies the memorandum of understanding (MoU) announced on 21 January 2008 and the completion of two months Due Diligence by Midas. The agreement allows Midas to explore the highly prospective Da Hong Shan porphyry copper project at the Tian Shan Belt of Xinjiang province of Western China.
The project comprises three contiguous exploration licences with a total area of 302km2. The cooperation agreement sets out in detail the future joint venture relationship between the companies if Midas completes the first stage outlined in the agreement and elects to form the joint venture.
"The signing of the agreement with one of China's largest resource companies is a significant milestone in the growth of Midas Resources and importantly provides significant upside and opportunity for the Company," Midas managing director Geoff Balfe said.
"The Company's due diligence has identified a number of drill targets and plans are well advanced for mobilisation of a diamond drill rig and commencement of an initial work program of diamond drilling, geophysics, and geochemical sampling in 2008."
Further technical information about the program will be released by the Company when appropriate service agreements are finalised with the contractors.
COMMERCIAL TERMS
The cooperation agreement provides for a staged equity earn-in with Midas assuming all technical risk until a decision to mine is reached.
- Stage One: CNY 1.4 million on exploration within the first 12 months of the Cooperation Agreement including 2,000m of diamond drilling after which Midas can either withdraw or proceed to Stage Two.
- Stage Two: Should Midas proceed to Stage Two, a joint venture company will be formed with an initial capital of approximately CNY 35 million consisting of (i) tenements and associated rights contributed by Zijin valued at CNY24.5 million and (ii) CNY 9.1 million in cash from Midas plus the Stage One work contributed by Midas valued at CNY 1.4 million. Midas will then have a deemed 30% equity interest with the right to earn a further 20% interest by spending a further CNY 14.0 million on exploration of the Project over three years. If Midas exercises its right of acquisition of the interest in the joint venture company as described above, Zijin will reduce its holding in the joint venture company to 50%.
- Stage Three: If Midas completes a definitive feasibility study and recommends a mining development it will fully acquire a 70% equity interest. Zijin has the right to Buy-back to a 60% interest under certain terms and conditions as set out in the cooperative agreement.
THE DA HONG SHAN PROJECT
The Da Hong Shan Project is located within the mineral rich Tian Shan Belt (Figure 1). The tenements are located 150km from Hami City in Xinjiang province and are considered to have the potential for hosting a significant porphyry copper deposit.
Two significant porphyry copper deposits are situated 20km to the East along strike of the Da Hong Shan tenements: the Tuwu deposit and the Yandong deposit. Copper mineralisation at Da Hong Shan occurs in an east-west belt of accreted Carboniferous rocks intruded by porphyry stocks, sills and dykes that are the host for disseminated porphyry style copper sulphide mineralisation.
Copper oxide mineralisation outcrops at the Fuxing prospect within the Zijin tenements and this prospect has been the focus of exploration by Zijin. Visible copper oxide mineralisation and alteration has been identified in exploration trenches along an initial 2.5km strike length.
Exploration by Zijin includes extensive trenching, induced polarisation surveys, and the drilling of 13 diamond drill holes which intersected wide zones of low-grade disseminated copper mineralisation. The mineralisation occurs within a highly altered package of mafic and intermediate volcanics associated with several thin felsic porphyry intrusives.
The alteration appears to be consistent with a magmatic hydrothermal alteration system, typical of other porphyry copper deposits in the region.
LOGISITICS AND INFRASTRUCTURE
The Da Hong Shan tenements are easily accessible by bitumen highway 150kms to the south of Hami City, a regional centre in Xin Jiang Province, which is an autonomous region within the P.R. China. While there is no local infrastructure in the immediate vicinity of the project it is expected that future development of other large copper deposits in the area would facilitate the construction of power, water and rail links if a mining development at Da Hong Shan is justified.
The region has an arid desert climate with extremes of summer and winter temperatures. There is an effective ten month working field season and there are no indigenous people living in this area. The provincial government is strongly supportive of mining development.
