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Fuwan Property

(click to enlarge photos)

Project Location

Drill Rig Location

Fuwan Township

Shipping Port Adjacent to Project

Local Power Plant

Location

The Fuwan Silver Project is situated approximately 45 kilometres southwest of Guangzhou City, the capital of Guangdong Province and the fourth largest city in China, with a population of 13 million people. The property is adjacent to Minco Gold Corporation's Changkeng Gold Property.


Deposit
The Fuwan silver deposit falls into the broad category of sediment-hosted epithermal deposits and it is characterized by 8 zones of vein and veinlet mineralization within structural zones which have wide spread zones of silicification. The deposit currently has reserves of 9.118 Mt averaging 189 g/t Ag which will sustain an underground operation of 3,000 tpd for a mine life of 9.2 years. There is excellent potential to expand the reserves by upgrading the current indicated resources of 6,857,000 t averaging 173 g/t Ag for 38,203,000 ounces and the inferred resources of 11,290,00o t tonnes averaging 174 g/t Ag for 63,283,00 ounces of silver (Changkeng property included). Only one third of the 10 km long Fuwan belt as been explored to date with drilling and there is a good exploration potential to find new resources which could also potentially expand the mine life.

Infrastructure - A Miner's Dream

Unlike most mining properties, the Fuwan property is one of the few mineral projects in the world that already has a significant infrastructure in place, which is expected to save the company tens of millions of dollars in development costs.

Transportation is made easy with a four-lane highway that passes by the property and labour is available from the town of Fuwan (pop. 5,000) and nearby Gaoming City (pop. 100,000). Water and telecommunications are readily accessible and a high-voltage power line crosses the property. The adjacent Xijiang River also provides access to the South China Sea, which is the international waterway for shipping.

Easy access to a shipping channel also facilitates the disposal of waste rock and carries with it a significant economic benefit. The Company has been approached by several construction companies from Guangzhou City to purchase the waste material at an estimated price of US$2.50 per tonne to be used for gravel and construction material. This is expected to reduce mining costs significantly.


Ownership

Minco Silver owns 100% of the Fuwan Silver Deposit, subject to a 10% profit sharing agreement with the Guangdong Geological Exploration and Development Cooperation. The Company also holds three additional exploration permits covering more than 200 square kilometres.

Minco Silver successfully incorporated Foshan Minco Mining Co., Ltd. ("Foshan Minco") as the operating company for the Fuwan Silver project. Subsequently, the exploration permits for the project held by Minco Mining (China) were transferred to Foshan Minco. Minco Silver retains 90% ownership in Foshan Minco with the remaining 10% held by Guangdong Geological Exploration and Development Cooperation ("GGEDC") as per the original 10% profit sharing agreement.


 

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Geology and Mineralization

Silver and gold were discovered in the area in early 1990 by systematic follow up of stream sediment and soil geochemical anomalies identified from surveys completed by the Guangdong Provincial government (Regional Geological Survey Team of Guangdong Bureau of Geological Exploration). The 757 Geological Exploration Team conducted trenching and drilling programs between 1993 and 1995 to evaluate the silver mineralization.

Silver mineralization at Fuwan is hosted primarily within a Lower Carboniferous limestone sequence that is unconformably overlain by Upper Triassic siliciclastic rocks. The Carboniferous and Triassic units are folded into an open syncline that has a northeast trending axis. A series of faults oriented sub-parallel to bedding are developed near the unconformity and are considered the main control for the Fuwan silver mineralization and Changkeng gold mineralization. Most of the Fuwan silver mineralization is hosted in the Lower Carboniferous limestone sequence. The total strike length of the mineralization is 2,790 metres and is open to the north, south and southwest. Silver mineralization is characterized by fractured and silificied limestone accompanied by calcite and pyrite with minor galena, sphalerite and barite. Minor amounts of chalcopyrite, arsenopyrite, cinnabar, and fluorite have also been observed in the mineralized zones.

The mineralized zones at the Fuwan Silver Deposit are currently considered primary mineralization and have been divided into two types:
  1. Siliceous (silicified) material: This type of material is grey to dark grey in colour and mainly composed of secondary quartz, illite, argillaceous and carbonaceous material, and pyrite. Fractures and mariolitic cavities were highly developed;
  2. Calcareous-siliceous material (silicified limestone): This type of material is light grey to dark grey in colour and is composed of secondary quartz, residual limestone, calcite, and pyrite. The mineralization occurs in the second-order faults in the footwall limestone of the contact zone.



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Fuwan Silver Belt -- Generalized
Geology Map
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Feasibility Study

Minco Silver released the results of its International Bankable Feasibility Study (IBFS) on September 28, 2009. The report was completed by Wardrop, with portions of the study completed by NERIN, and concluded that the Fuwan Silver Project, based on available information, is technically and economically viable as an underground mining operation.

The Study defines an operation based on underground mining and milling of the ore producing a silver/lead concentrate and a zinc concentrate on site in township of Fuwan, approximately 45km southwest of the provincial capital of Guangzhou, China.

Project Overview

Deposit

The Fuwan silver deposit (the "Deposit") falls into the broad category of sediment-hosted epithermal deposits and is characterized by 8 zones of vein and veinlet mineralization within zones of silicification. Zones 7 and 8 are not included in the reserve estimate. The predominant sulphide minerals are sphalerite and galena with lesser pyrite, as well as rare arsenopyrite, chalcopyrite, and bornite. The deposit is poor in gold (typically <0.2 ppm).

Highlights of Feasibility Study:

Feasibility Study Highlights (Pre-Tax) Feasibility Results
Probable Mineral Reserve 9.118 Mt averaging 189 g/t Ag
Mine Life 9.2 Years
Daily Mine Throughput 3,000 tpd
Mill Recovery (Ag Recovered in both concentrates) 91%
Average Annual Recovered Ag in both concentrates 5.5 M oz
Total Recovered Ag in both concentrates 50.4 M oz
Total Operating Cost/t Ore Milled $34.42/t
Total Cash Cost per Payable oz Ag $5.65/oz
Pre-Production Capital Costs $73.1 M
Silver Price Used for Feasibility Study Economics 13.57/oz Ag
Total Revenue $648.2 M
Total Operating Cost $313.8 M
Total Royalty Payment $24.3 M
Total Operating Cash Flow $310.0 M
Net Present Value Before Tax @ 6% Discount Rate $111.5 M
Net Present Value Before Tax @ 8% Discount Rate $95.3 M
Internal Rate of Return Before Tax 33.2 %
Payback Period of Pre-Production Capital Costs 2.3 years
Construction Period 20 – 24 months

Resource Estimation

P&E completed five resource estimates for the Fuwan silver deposit in November 2005, November 2006, June 2007, December 2007 and May 2008. The May 2008 estimate, which is an update of the December 2007 estimate on the basis of infill drilling, formed the basis of the Study. All resource estimation technical reports were done in compliance with NI 43-101 and CIM standards, most of which were filed on SEDAR. There has been no additional drilling on the deposit area since that time.

Contained Mineral Resources (at a 40g/t Silver cut-off)

Resource Area & Classification
(does not include Changkeng mineralization) 		tonnes
(M t) 		Ag
(g/t) 		Ag
(M oz) 		Au
(g/t) 		Pb
(%) 		Zn
(%)
Fuwan Permit Indicated 13.95 188 84.3 0.17 0.20 0.56
Fuwan Permit Inferred 10.24 171 56.1 0.26 0.26 0.72

Reserve Estimation

The resource estimate provided by P&E classified the resources for the Fuwan Zones 1 to 4 as indicated and inferred. The reserve does not include any resources from the Changkeng property. Only indicated mineral resources as defined in NI 43-101 were used to establish the probable mineral reserves. No reserves were categorized as proven.

Wardrop used a stope recovery factor of 95%, an average mining extraction rate of 97%, and an average 7% internal dilution, 8% external dilution, and 3% fill dilution to estimate the total amount of diluted probable mineral reserves. Ore reserve calculations conservatively assumed dilution to contain no metal.

Operating Costs

The operating cost estimates are based on a process rate of 990,000 t of ore annually or 3,000 tpd of ore.

Mining $18.01/t
Processing $ 9.90/t
Tailings $ 1.13/t
G&A $ 4.78/t
Surface Services $ 0.60/t
Total $34.42/t

Capital Costs

This estimate has been completed partially by NERIN and partially by Wardrop. The majority of the information used in the estimate is based on the quantities and pricing provided by NERIN to Wardrop.

Area Cost
Direct Works 		(US$ x 1,000)
A – Mining (Wardrop)
B – Primary Crushing
C – Crushed Ore Stockpile and Reclaim
D – Secondary and Tertiary Crushing
E – Grinding, Flotation, Dewatering, Reagents & Service
F – Tailings Disposal Facilities
G – Plant Site, Infrastructure & Ancillary Facilities
H – Temporary Services
L – Site/Plant Mobile Equipment
N – Power Lines (Included in G1 – Power Supply) 		21,637
660
305
52
9,140
4,250
8,627
35
1,190
Included in G1
Direct Works Subtotal $45,896
Indirect  
X – Project Indirect
Y1 – Land Acquisition
Y1 – Owner’s Costs
Z – Contingency 		13,330
2,120
5,663
6,051
Indirect Subtotal $27,164
TOTAL PRE-PRODUCTION CAPITAL COSTS (US$) $73,060
Working Capital $8,300
Sustaining Capital $59,900

Sensitivity Analysis

The project economics are sensitive to silver price, Operating costs and Capital expenditures. The sensitivity analysis results are in the table below:

Parameter Economic Indicator Change
-20% -10% Base Case 10% 20%
Silver Price NPV ($M) 33 72 112 151 190
IRR (%) 15 25 33 41 48
Opex NPV ($M) 157 134 112 89 66
IRR (%) 41 37 33 29 24
Capex NPV ($M) 126 119 112 105 97
IRR (%) 42 37 33 30 27

View The Complete News Release in PDF Format:
http://www.mincosilver.ca/i/pdf/2009-09-28_NR.pdf Hydrogeology

Minco Silver released the results of a Hydrogeology Report on December 4th, 2007. Independent engineering firm SRK Consulting was contracted in July 2007 by the Company to provide hydrogeological services to support those being provided by Minco Silver's local consultants, the 757 Exploration Brigade Team.

Based upon the available data, important conclusions from the report include the following:As of the News Release date, 18 hydro-geological test holes have been drilled to test the connectivity of the various structures in place at Fuwan. Pumping tests from open holes have returned varying inflow rates from 0.25m3/day to 1,300m3/day (0.003 L/s to 15 L/s) with varying related drawdowns in each test hole.

As outlined in the recent Preliminary Economic Assessment, completed by SRK, the proposed mining area is located approximately 600 m west of the Xijiang River, and 600 m south of the Changkeng Ditch and is contained within an envelope between sections 43W and 16E. Exploration drilling indicates that mining will proceed in a southwest direction away from the river.

A map outlining the above features is provided below:


Click to Enlarge


View The Complete News Release in PDF Format:
File: http://www.mincosilver.ca/i/pdf/2007-12-04_NR.pdf
 116 KB, approx. 23 seconds at 56.6Kbps

   Metallurgy

Minco Silver released the results of initial metallurgy testing on material representative of the mineralization at the Fuwan silver project on September 17, 2007. The work was carried out by Process Research Associates (PRA) of Vancouver and included options of gravity separation, cyanidation, and flotation. As a basis for the test work, 400 kilograms of representative material of the Fuwan deposit was taken from drill core and pulp rejects from the drill core to form three samples. These included a sample from Zone 1, a sample from Zone 2, and a composite sample prepared from Zone 1 and 2 samples.

Following a series of "open cycle" tests using different grind sizes and a variety of reagents, it was found that a simple flow sheet using conventional flotation and standard reagents provided encouraging recoveries. Subsequent "locked cycle" flotation tests on the composite sample have resulted in overall recoveries for silver from lead and zinc concentrates of 97.9%. In addition, good results were obtained for other contained metals with recoveries of 97.9% for zinc, 94.0% for lead, and 77.4% for gold.

Results of the Locked Cycle Test for the composite sample are as follows:

Composite Sample

Grades

Recoveries

Au
g/t

Ag
g/t

Zn
%

Pb
%

Au
%

Ag
%

Zn
%

Pb
%

Head Grade

 0.20

244.5

1.16

0.28

-

-

-

-

Lead Concentrate

 2.6

9325.1

1.51

7.79

44.7

86.0

3.3

 90.1

Zinc Concentrate

2.18

1,473.60

49.85

0.38

32.7

11.9

94.6

 3.9

Total Recovery

-

-

-

-

77.4

97.9

97.9

94.0


Other results completed by PRA during the metallurgical testing included a determination of the Bond ball-mill index. Based on a closed screen size of 200 microns, this was calculated to be 17.8kWh/tonne. The Fuwan ore is therefore judged to be of average hardness.

View The Complete News Release in PDF Format:
File: http://www.mincosilver.ca/s/NewsReleases.asp?ReportID=208780
 116 KB, approx. 23 seconds at 56.6Kbps

  
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This page was created on Tue Sep 7, 2010 at 6:26:54 AM Pacific Time.