Shares in Central China Goldfields (AIM:GGG) jumped over 30% after the company said it had entered into an agreement with a subsidiary of Chinese Government Investment Company, Citic Group. The agreement will see Jiuquan Zhongan Mining Company, a subsidiary of Citic Group, undertake contract mining of Central China Goldfield's Dong Mao Huo Gold Mine. The mine is located about 210 km west of Hohhot, the capital of Nei Menggu, China.
Jiuquan Zhongan Mining will fund and build a 500 tonne per day mining and processing plant, with mining forecast to start by September 2009. Central China Goldfields will receive a fixed income of RMB 1.5 million per annum for the initial oxide mining phase, plus 30% of net profits from the sulphide mining phase. Central China will also receive RMB 0.25 million per annum for six years to recover historical expenditure on the project.
Jeff Malaihollo, MD of Central China Goldfields said the agreement would allow it to focus its efforts on the larger Nimu Copper Project:
The contract will enable Central China Goldfields to quickly put this near surface gold project into production and will enable the company to recover its investment in the project whilst fully participating in the upside of the more important gold sulphide element of the project where the high grade gold pods are to be found.
Dong Mau Huo is the first project which Central China has taken from exploration acquisition to the planned production phase and we believe this demonstrates that the company has the skills and staff necessary to manage the full exploration to production cycle and yet retain its exploration focus.
Central China Goldfields will now focus the bulk of its human and technical resources on to its Nimu copper project situated in Western China. This project like Dong Mao Huo is being developed with the aim of bringing in a major joint venture mining partner at the appropriate time who would fund the projects substantial capital requirements.