CHINA GOLDCOUP Epilogue:
Ken Reser, Nov 14/06
China: fast & furious but methodical. I'm not quite sure what amount of endless adjectives one could use to describe the scenes I have just witnessed during a short five day trip to Beijing and Rushan City in Shandong Province, China. Modern & busy as a bee hive will just have to do for us simple folk. Having just had the privilege of accompanying Larry Reaugh, Pres/CEO of GOLDREA RESOURCES CORP, to Rushan City in Shandong for the official completion and signing of the purchase agreement Goldrea has held (LOI) for up to 100% ownership of the Daye Mine in Shandong, I'm left a bit speechless (for once). Over those 4 days I had seen so much construction activity, experienced the most incredible hospitality one could wish for (leaving aside the Maltai 55% Alcohol and Sea Cucumbers with Silk Worms at endless celebratory dinners) I also viewed the spectaular beauty of the Forbidden City, and the ultra modern hustle & bustle of Beijing, (I never saw one unwashed or beat-up vehicle in Beijing, almost all being newer cars & high end SUV's). Beijing and even the much smaller Rushan City w/ only 200K people both give you an very good sense of the growth and change coming so rapidly to China. Personally even I, as a very strong advocate & scribe for the growth driven radical changes in Gold & Base Metals demand that China is currently bringing to the world's doorstep, found it hard to comprehend counting & losing count of the hundred's of construction cranes everywhere you look. If you go looking for 'rickshaws' you may be out of luck, as I never saw even one. Although this was a whirlwind trip, it was, compared to Africa or S America still a trip of much greater excitement coupled with an unexpected awakening to the reality of modern China and one I must repeat with more time to spend there.
So now Goldrea has completed the LOI (letter of intent) and both parties have signed and sealed Goldrea's purchase of the +/- 65,000 oz/p/yr Daye Gold Mine in Shandong Province. (news release link) www.goldrea.com/releases/GOR06_1110.pdf
For those reading here today who have followed the past editorials I have written regarding China and in particular Shandong Province (linked @ end of editorial) you will know that Shandong is one of China's most prolific Gold producing areas. (26% of yearly Gold production in China) China in 2004 produced over 212 tons of Gold and 64.5 tons came from Shandong Province alone.
Goldrea with a 70% (final) working interest/ownership in this 1750 t/p/d mine w/ all it's huge modern infrastructure has just entered the elite world of Shandong Gold production & mine revenue as opposed to being a Jr Exploration Co. This is a very big step forward and when one considers that with Goldrea's "Tortuga" agreement we may soon over the months ahead see another one or two (or more) small to mid-cap Gold producers added to the package, I can now see full well that Goldrea Resources is on the road to becoming a 'mid-tier' Gold Miner in China. I do know this is the shared vision of Larry Reaugh and the Tortuga Group, as well as GOR directors and major stakeholders. Nice accomplishment for Goldrea shareholders in only two years in my opinion. I also was fully reminded by principals in the Daye Mine that they all looked forward to having western mining knowledge & expertise bring about increased production and not only from new planned potential open pit operations but more importantly from new as yet untapped "known" Ore zones at depth. This aspect of Goldrea's vision is already fully underway by GOR's people on the ground in China with the "Golden Rose" 300 M "Cemented" 5 compartment shaft into a known Gold-rich zone at that depth. (currently down about 190m and scheduled to bottom in Jan/Feb /07)
Some of the sulfides I saw from the 147 m level even gave me pause as they should kick Au values and that zone is not even part of the reason for the shaft. The Au grades shown by previous drill holes into the known ore zone at the 300 M level "is" the reason. Four meters of 8.25 g/p/t is more than reason enough I'd say. (cross sectional drawing link) www.goldrea.com/fig3.pdf The Daye open pit seemed to be still going strong when we were there and the ore dump at the mine/mill held many 1000's of cu meters of stockpiled ore as well as ore from other mines for toll milling.
One busy place about to get busier I'd say! With over 62,000 hectares of mineral leases immediately surrounding the mine as well as in other nearby local areas, the Rushan Goldrea JV seems bound for much bigger things than the previous historical Daye production of 60 to 65K oz Au p/yr over the last ten years. The Chinese 3rd Brigade Drill Crew has found some very interesting deep ore zones over the years. (as yet not NI 43-101 Compliant as is the case w/ the inferred/known +700,000 oz of AU) The Goldrea Shaft crew by way of honorable mention has China's best safety record in the country.
I was also impressed to see the existing mine management and employees being allowed and wanting to take a 10% interest in the JV with Rushan & Goldrea. Nice incentive, especially when they know fist hand from years of experience what the Gold Dory Bars look like and the money to be made. No fools there or among any others of the people I met that are involved in this venture. They realize full well what sophisticated and modern mine technology & safety measures from the west can mean to improving recovery, and finding and exploiting richer ore-zones at depth. One very strong reason for using the word "Coup" in terms of the deal Goldrea has achieved and structured is the fact that upon the first payment and final legal paperwork (lawyers) being completed shortly, Goldrea will begin receiving it's 70% of all revenues, and thus enable the incremental mine payments to be made from said revenue as well as Goldrea's portion of mine upgrading and exploration expenditures.
I am told that Rushan/Goldrea JV expects to move into the range of producing +/- 75,000 oz p/y over the next 12 to 16 months, possibly even more if some Geologists assumptions are correct. Lots of excitement from all involved with regards to future developments down deep. Even with the exceptionally low costs of diamond drilling in China it will be much less costly to sink shafts and drift the ore zones and drill from from within the drifts in all directions of interest, keeping in mind we're talking about the first known high-grade zone at 300 meters which continue down dip. I believe at present GOR's Geologists have a least two more such shafts on the drawing board. Having viewed the trade volume and miniscule share value increase since Goldrea announced the acquisition & finalization over the weekend past, I can see the markets are still asleep and tax selling is dampening the venture market in particular. For a company with only 47 M shares 'fully diluted' to trade at this ridiculous $0.60 level and owning 70% of a modern operating Gold mine (not to mention the side revenues of the Daye mine & Goldrea's other mineral projects around N America) is like shopping in China w/ US dollars. From my vantage point I can see Goldrea's market capitalization has a long ways to go yet, just on the Shandong venture alone, not to mention further acquisitions. Some investors see deals early, others late or "too" late. I'm of the opinion it is much better to be "too early" even if my capital is tied up for a few months longer. This is one 'New' Gold Miner (GOR-V) with well seasoned and experienced leadership with multiple past successes at the helm, and I fully expect Larry Reaugh to continue with near term future advances & successes for Goldrea and probably at a faster pace than most would expect, as he has already shown us with this his first undertaking in China. I am particularly pleased to own a piece of this company and to have the privilege of R & D consulting for them. Fortune favors the bold, especially those "Investors" who do their due diligence in a timely fashion!
As always, Thanks for reading: Regards; Ken Reser.
Goldrea Resources Corp; Website: www.goldrea.com
Pink Shts- GORAF
Past Editorials on China/Goldrea & Shandong Province Gold:
NOTE: If you wish to receive periodical reports on Gold, Silver & Molybdenum, or companies involved in these aspects of mineral exploration please email me to become a free subscriber. KR
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 a/o 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. KR.
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