 Gold
Coup in Shandong China
Shandong Province Produces
26% of China's Gold
Ken Reser
January 17, 2006
A Gold Coup? So what does this editorial title
mean one might ask. Well, as events or milestones achieved often
show us, "Some people make things happen, others act
when they see things happening, and most say what just
happened." For one small Jr. Gold explorer from Canada
something unique just happened. The management of this junior
company with a history of finding & creating mines saw what
was coming in China, had the right connections, took the incentive
and lo and behold in just over a year they transitioned from
earning a 74% interest in 65,000 hectares of mining claims in
Shandong Province in China, to having entered into a letter of
intent to buy an entire modern mining operation, complete with
a 2300 ton p/day mill and floatation facility of some 60K to
65,000 oz of Gold p/yr. That's what I would call a 'Coup'.
In a previous editorial I penned awhile back "Shandong
China, Kingdom of Gold" I mentioned a business philosophy
embraced by Placer Dome with regards to doing business in China.
In that philosophy Placer management opted for the Asian style
of thinking over the ways of the west. First make friends
then do business, which is the opposite of how we north American's
do things. Well this is precisely what Larry Reaugh the President
& CEO of Goldrea Resources Corp has achieved. Subsequent
to an opportune introduction and fast friendship with Mr. Richard
Shao, a Professor of Metallurgy at the University of Bejing,
Larry soon became introduced to the men who head the committee
for the China Rushan Municipality and the current owner/operators
of the Daye Gold Mine in Shandong Province. The deals were soon
being made for a joint venture and earn in for Goldrea on some
very impressive mining ground. (read Bob Moriarty's editorial:
China's
Golden Age). Bob traveled to Shandong with Larry in 2004
and reviewed first hand the entire Daye Mine operation and from
his subsequent editorial we read, he was very impressed with
all he saw and experienced.
Personally before I knew a
great deal about Chinese Gold mines I had often wondered why
China was taking the totally unexpected path of privatizing many
of their Gov't controlled mines in base metals and Gold. The
more time I devoted to studying this phenomenon, the clearer
it became. One of the first things I noted was what is considered
to be a large Gold mine in China may well only produce 30,000
to 70,000 oz of Gold per year. I know many of the Gold experts
I am familiar with have almost to a person followed with great
interest the level of China being in the Gold news these days
and how they are expected to be supplanting a portion of their
governments foreign Fiat Exchange reserves with Gold and even
suspected of doing so on the sly for some time. Then if you take
into account the White Paper and the rapid changes it brought
forth in China's mining regulations as well as the fact China
now allows Gold trading openly and encourages private Gold ownership
among the people, a picture begins to form and take shape. As
was so duly noted by Julian Phillips of the "Gold
Forecaster - Global Watch" in a recent editorial Chinese
Gold & Foreign Reserves to be Used for Nation Building.
Julian posed the question;
'How can China acquire Gold reserves without being visible in
the Gold market and thus driving the price upward?' His answer
was the same conclusion I have drawn over time. Buy the production
of its own Chinese Gold mines. Now if one expands on what
we see happening in China they're not only buying in country
Gold production, but enticing western mining technology and mine
experts into the country to thereby increase Gold production
on a grand scale. (Presently there are a very large number
of Australian, NA and European mining companies operating and
exploring in China, and more on the way). So now we may have
some insight and background into the rationale of China's abrupt
and rapid changes in the Gold mining sector and why companies
such as Goldrea Resources and Mining executives with past successes
are being courted and offered lucrative opportunities and incentives
to expand on, explore, or start up Gold mining ventures in China.
As they say "A bird in the hand is worth two in the bush."
Well, I truly believe Goldrea
has a golden bird in hand at the moment, and have also managed
to negotiate one heck of a sweet deal in the process. Not only
does the agreement and letter of intent allow for over five months
of DD on the mine but they have until October 30th 2006 to negotiate
and conclude the purchase of this multi million dollar mine.
See the Goldrea News Release of Jan. 12th/06. http://www.goldrea.com/releases/06_0112.htm
This new agreement and letter of intent will all follow on the
heels of a previous Goldrea news announcement of a 150,000 ton
bulk test of the first of 3 underground targets already established,
that are scheduled to commence soon.
(News release) http://www.goldrea.com/releases/051221.htm
The second exploratory drill
hole by Goldrea some months ago intersected a widening section
down dip of the current zone being drifted and mined currently
by Rushan Daye from the open pit operation that has been producing
their Gold for a number of years. This section returned an average
of over 8 grams AU p/t over 4 M. (see cross
sectional drawing).
Goldrea management will be
in the unique position of actually proving up the ore on an existing
mine during the due diligence and negotiation time allowance,
and in all probability paying for the mining and milling of the
Gold recovered with the Sericite abundant throughout the ore.
This Sericite recovered is reported to add approximately $45.00
US p/ton to Daye Mine revenues. Daye mine owns 25% of this operation
of Sericite recovery from the Gold ore tailings. There are currently
3 subsidiary companies of the Daye mine operating in the central
mine structure. (information contained in Jan 12th news) It appears
quite clear to me that the costs for Gold production, if not
paid for by Sericite profits alone, will definitely be covered
by the Daye interest in a combination of profits from the 3 subsidiary
companies. The potential for Goldrea Resources to expand on this
mine, find and define higher grade reserves at greater depths
and increase mill capacity is very real, thus bringing the Gold
production to levels well above the average 65,000 oz it has
historically produced. Below is a picture of a small portion
of the entire mine facility taken by Bob Moriarty on his tour
of the Daye mine in 2004.
After reviewing all the information
given by Goldrea in previous news releases and now with an agreement
penned to enter into a "Letter of Intent" to purchase
the Daye Mine and all that the mine entails, it would seem quite
obvious that Goldrea's share value will at some point in the
near future have a numeral in front of the decimal point. What
that number will be, will be market driven, this we do know.
What we also don't know is how high this current Gold Bull will
take the yellow metal. I'm betting on that golden number being
very high and I know "I'd rather be a day early than
a day late" to own my positions in any junior miner
with the potential of going from junior miner to small or mid
cap producer. We all know how rapidly share value can change
with success and the right market conditions. Thanks for reading
here. May we all see prosperity and success in 2006.
Best Regards;
-Ken Reser
 Ph: 403-844-2914
Email: ykgold@telus.net
Goldrea Resources Corp. website (GOR:TSX-V)
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(Editorial Link:) "Shandong
China, Kingdom of Gold"
http://www.321gold.com/editorials/reser/reser040805.html
(A footnote on doing business
in China)
Xinhua News Service Dec. 09/05.
China's Vice-Minister of Commerce
recently stated that 450 of the top 500 companies in the world,
from 202 countries have to date invested a total of $600 Billion
US in China in 2005.
Disclaimer:
I am an independent Investor Relations & Research Consultant,
currently employed by Goldrea Resources Corp. I may own shares
in this company from time to time and hold options of said company.
This editorial is not a recommendation to own or buy shares of
said company as I am not an accredited investment adviser.
321gold Inc
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