Majestic Gold
Majestic Gold Corp. (TSX.V: MJS) is a gold exploration and development company with an impressive portfolio of projects in well known gold belts throughout China. The company focuses on projects at or near the development stage, where the potential for low-cost production can provide a greater return on investment. Majestic's current property interests are located within China's most prolific areas of gold discovery and production. These include the highly prospective Tian Shan Gold Belt in the West, hosting numerous world class gold deposits, and within the Jiadong Peninsula of the eastern Shandong Province, an area accountable for 25% of China's annual gold production and 20% of its total gold resource. Led by an experienced management and exploration team, Majestic will quickly and efficiently confirm and expand on existing historical gold resources to maximize shareholder value.
Majestic Gold - getting serious in China
Majestic Gold is a Canadian gold exploration company with assets in prolific Shandong (Song Jiaguo, Muping and Fushan properties) and Xinjiang Provinces (Sawayaerdun). These two provinces account for approximately 30% and 20% of Chinese gold production respectively. Majestic Gold has completed NI 43-101 resource calculations on two of its projects this year and has commenced work programs to upgrade and expand on the results.
Majestic Gold’s flagship project, the Song Jiaguo licence, covers an area of 4.1 square kilometres and is one of 13 licenses encompassing 76 square kilometres held in a joint venture (60% MJS) with Muping Mining. The property lies on the western edge of the Muping-Fushan Gold Belt, which hosts 20% of the known gold deposits on the Jiaodong Peninsula. Gold production from the entire peninsula accounts for over 25% of China's annual gold production (some 1 million oz/yr). Gold deposits in the belt are commonly controlled spatially by fault zones. To the south of the property, the open pit Pengjiakuang gold deposit (>650,000 oz) occurs in the same structural environment within Cretaceous Laiyiang conglomerates which underlie the Song Jiaguo property.
The Song Jiagou estimate reported an inferred resource of 60-68 million tonnes grading 0.36-0.40 g/t for a total resource of 770,000-790,000 oz (0.1 g/t cut off). Included in the estimate are 13.2-14.4 million tonnes grading 0.77-0.97 g/t for a gold resource of 356,000-414,000 oz (using 0.5 g/t cut off).
The data used to calculate this estimate contained gaps that resulted in a decrease of both tonnes and grade. Majestic Gold plans to infill drill these gaps with a 5,000 metre drill programme that will test the near surface and down-dip extension of near-vertical, high-grade mineralised fault zones. It will also establish the alteration envelopes around the mineralized structures’ ability to host bulk mineable gold mineralisation. The programme so far has confirmed gold mineralization across widths of 500 metres, along strike for over 550 metres and to depths of almost 600 metres. Majestic plans to conduct a new resource estimate in late 2006/2007 and to fast-track Song Jiagou to a production decision.
Meanwhile, development efforts continue at the Sawayaerdun gold project in the Xinjiang Province as well. The property is located in the prolific Tian Shan Gold Belt which hosts numerous world class gold deposits including Muruntau (140 million oz Au) and Kumtor (13.9 million oz Au). Gold deposits in this belt are commonly structurally controlled, occurring along fault/shear zones within metamorphosed sedimentary rock.
Sawayaerdun is being developed in a joint venture with the Xinjiang Bureau of Geology and Mineral Resources (XBGMR). Under the terms of the agreement, Majestic has a 90% earn in position in exchange for assuming 100% of the exploration and development costs.
Previous work by the Chinese identified over 22 gold zones in the region. Four large zones were identified which can be traced for a combine 11.5 kilometres on surface. These structurally controlled gold zones are very similar in nature to those that occur at Kumtor and Muruntau. Majestic Gold has completed a 43-101 compliant resource estimate on Zone IV going into its 2006 summer drill season with an indicated resource of 638,725 to 667,196 oz Au (0.5 g/t cut off) including 460,000 oz Au at 1.82 g/t Au (1.0 g/t cut off) and inferred 835,778 to 851,941 oz Au (0.5 g/t cut off) including 612,000 oz at 1.71 g/t Au (1.0 g/t cut off). Test results are consistent with historical results and the company plans to conduct work that will upgrade and expand the resource this year.
Majestic Gold’s current resource estimate is based on the 41 holes drilled and assayed so far. The bulk of the Company’s exploration efforts have been on Zone IV, but Zone I also returned encouraging results following the 2005 drill campaign. The summer 2006 drill programme is currently underway and plans calls for up to 3,000 meters of step out and in-fill diamond drilling in Zone IV with some additional drilling in Zones I, II, and XI designed to increase the overall resource. Bulk sampling, metallurgical work and bio leach testing are also planned in the same programme. Majestic Gold has a target of 3 - 5 million ounces and intends to collect enough information to complete an additional resource estimate in early 2007.
Majestic Gold has placed strong emphasis on gold recovery at Sawayaerdun to maximize the economic value of its reserves before making a production decision downstream. The company is working towards 80% recovery target from both oxides and sulphides by implementing an intermediate bio leach on the sulphide portion before final processing.
China is fast emerging as a force to reckon with in the gold industry. According to the latest statistics from the China Gold Association (CGA), combined earnings of Chinese gold companies during 1H2006 have reached 2.47 billion Yuan (308 million U.S. dollars) recording a staggering 53% growth over the same period last year. Total gold output of 106,000 tonnes during 1H2006 represents a 6.33% YoY increase and is in line with the last 10 years at a cumulative average growth rate of 6.5% per annum.
After decades of reforms and many government incentives, the Chinese gold mining sector now emerges as an exciting avenue of investment. These reforms include tax concessions, abolition of price controls and removal of barriers to gold licensing for the manufacture and distribution of gold jewellery. The sector reforms reached a zenith with the establishment of the Shanghai Gold Exchange in 2002. China is currently the world’s fourth largest producer of gold with an annual output of over 200 tonnes.
Not surprisingly, China has been able to attract several exploration companies to its gold sector. Amongst these are prominent industry players such as Rio Tinto, Placer Dome, Anglo Gold Ashanti and Gold Fields. In addition there is a plethora of small to medium size multinational companies actively engaged in gold exploration and production in China.
Benefiting from the continued strength in gold prices, producing companies have largely reached high valuations. However, exploration companies such as Majestic Gold are yet to receive the full benefit. The company has been making considerable progress in its drill programmes and more good news on exploration success is likely to provide further impetus to Majestic Gold.