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MINING NEWS: Chinese flock to mineral-rich region Investments in Yukon mining companies by Asian enterprises escalate with help of territory’s economic development officials Rose Ragsdale For Mining News
Chinese investors are gradually building inroads into ownership of mining companies operating in Yukon Territory as part of a worldwide push to acquire reliable sources of precious and base minerals.
According to a report released by PricewaterhouseCoopers in March, mining merger and acquisition activity in 2008 is set to top 2007’s record $158.9 billion total as the number and size of deals escalate.
The report also noted the emergence of Chinese and Russian companies as major players in the acquisition hunt. Companies from these two countries accounted for US$32.7 billion in deals last year.
PricewaterhouseCoopers said factors such as a slowing U.S. economy, financial market uncertainties and recessionary fears are taking a near-term toll on the mining market, creating “a bumpier deal-making ride” for mergers and acquisitions, but sustained Asian commodity demand along with the entrance of new players (including major state-owned entities) into the takeover hunt may counter this and further drive the industry consolidation trend.
The trend is apparent in Yukon Territory, but it is also being actively encouraged and supported by the Yukon government.
Bold grab for Wolverine Griffin Mining Ltd., a Bermuda-based mining and investment company with substantial mining interests in China, is the latest to make a grab for rich Yukon mineral deposits.
Griffin and Yukon Zinc Corp. jointly unveiled a plan April 21 in which Griffin will acquire Yukon Zinc’s exceptionally silver-rich Wolverine project in southeastern Yukon along with additional claims in the Finlayson Mining District.
Griffin, through its two Chinese joint ventures has a controlling interest in mining and exploration licenses over 67 square kilometers at Caijiaying in the Hebei Province in China. Within this area Griffin has successfully commissioned the Caijiaying mine and processing facilities, which currently processes some 500,000 metric tons of ore annually to produce a zinc concentrate and a separate lead concentrate containing gold and silver for sale in China. Griffin owns a 60 percent interest in the Caijiaying mine but is entitled to 100 percent of the net cash flow from the operation for the first three years since production began in July 2005.
Griffin had total assets valued at $88.9 million on June 30, 2007, and said it currently retains more than $200 million in cash resources.
Through a complex stock-swap deal, Griffin will control Wolverine, a high grade advanced zinc-silver-copper-gold-lead project that is poised for development. Yukon Zinc completed a bankable feasibility study for Wolverine, built an access road to the project site and obtained many key operating permits in 2007.
However, the junior ran into financing difficulties later in the year and since has sought additional investment to bring the project to production.
“The transaction with Griffin will result in the development of the Wolverine deposit, which is projected to become a very low-cost producer,” said Harlan Meade, president and CEO of Yukon Zinc. “Yukon Zinc’s properties and exploration expertise will complement the development and financial strengths of Griffin and provide an attractive growth outlook for Yukon Zinc and Griffin shareholders.”
Griffin Chairman Mladen Ninkov said the transaction “fulfills the stringent economic and geological and political criteria the company has imposed upon itself. Yukon Zinc will add a high grade, profitable mine to Griffin’s portfolio and add extensive exploration acreage in one of the most exciting base metals regions in the world. The returns for existing Griffin shareholders and our new Griffin shareholders through Yukon Zinc will be very exciting.”
Hunan invests in tungsten Hunan Nonferrous Metals Corp. is also among companies from the Peoples Republic of China that have bought up sizable chunks of ownership in Canadian companies that control significant Yukon mineral properties. Hunan signed an agreement in March to acquire nearly 10 percent of Vancouver, B.C.-based North American Tungsten Corp. Ltd., which operates the Cantung mine in eastern Yukon.
N.A. Tungsten also owns the rights to the Mactung property, widely regarded as one of the world’s largest undeveloped high-grade tungsten skarn deposits. Mactung is located near Cantung and MacMillan Pass on the Yukon-Northwest Territories border.
Hunan will buy about 13.4 million shares and warrant units of N.A. Tungsten in a deal valued at roughly $19.4 million financing and gain a 9.9 per cent equity stake in the Canadian company. The Chinese company also plans to help N.A. Tungsten develop the Mactung project.
N.A. Tungsten CEO Stephen Leahy said the investment by Hunan, a world leader in tungsten mining and processing with market capitalization of about $1.8 billion, validates the strategic nature and value of its Mactung tungsten development project.
North American Tungsten officials have said that the Cantung and Mactung deposits combined may hold roughly 15 percent of the world’s known tungsten supply.
“This investment will help advance the development of Mactung which is due to have a feasibility study completed in calendar Q3-2008,”
Leahy said in a statement Mactung was discovered by Amax in the early 1960s, and saw roughly $26 million spent on exploration, several hundred meters of underground development and engineering studies through the 1970-80s. Tungsten prices collapsed in the early 1980s, causing the miners to abandon their efforts.
The deposit is situated about 160 kilometers, or nearly 100 miles, northwest of the company’s Cantung mine that restarted production in late-2005 when tungsten prices rebounded.
Cantung’s output for fiscal 2007 just exceeded 286,000 metric ton units of tungsten concentrates. Tungsten currently sells for about US$250 per MTU. One MTU is equal to 10 kilograms of contained tungsten per metric ton, or 7.93 kg/t of pure tungsten, and is the standard weight measure used in the industry.
North American Tungsten is now hoping to develop Mactung. In early 2007 the company boosted its estimates using a 0.5 percent cutoff grade for the deposit with an indicated resource of 33 million metric tons grading 0.88 percent contained tungsten plus a further 11.9 million inferred metric tons at 0.78 percent contained tungsten contained within four mineralized zones.
The company also identified higher-grade sections within the resource – reviewing roughly 22.2 million indicated metric tons and 4.6 million inferred metric tons averaging more than 1 percent contained tungsten.
A total of 29 million MTUs of contained tungsten is estimated in the deposits indicated resource with a further 9.2 million contained MTUs projected within inferred resources.
Yukon woos Chinese investors Yukon officials hailed the transaction between Hunan and North American Tungsten as another sign their efforts to attract Chinese investment to the territory’s mining industry is paying off.
Yukon Economic Development Minister Jim Kenyon said he helped broker the deal by bringing Hunan executives to the Yukon last summer to tour the tungsten deposits.
“This is a good example of what we’ve been doing, bringing investment into the Yukon,” Kenyon told reporters in March.
“The Mactung project is the largest undeveloped tungsten project in the world. Hunan happens to control basically the largest production facility in the world. So we’re merging the largest source with the largest producer,” Kenyon said.
Kenyon said new investment capital is critical to growth of Yukon’s economy.
Last fall, Kenyon welcomed another investment delegation from China seeking opportunities in Yukon’s mineral industry.
Coordinated by Yukon Economic Development, the visit enabled representatives from the Shaanxi Nonferrous Metals Holding Group Ltd., the Northwest Mining and Geological Exploration Bureau for Nonferrous Metals, and the Jinduicheng Molybdenum Group Co. Ltd. to tour six Yukon mineral properties and meet with management of 10 Yukon companies.
Shortly after that visit, Yukon-Nevada Gold Corp. entered a joint venture with Northwest Non-Ferrous International Investment Co., an investment arm of Northwest Mining and Geological Exploration Bureau for Nonferrous Metals, which is a major subsidiary of China’s Ministry of Metallurgy, one of the country’s leading exploration and mining agencies.
Yukon-Nevada’s management said the alliance will not only provide investment capital but also access to Northwest Geological’s 6,000 skilled employees, including 800 geologists, engineers and technicians.
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