Gold Mining Company, Gold Exploration Company, Gold Investment Mining, Gold Mining in China, Gold Production China, Australia

Company Overview

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China Goldmines plc has been established to develop mining prospects in China, with an initial focus on gold.

Through a subsidiary, CGM has secured an exploration and development agreement in China, entering into a Chinese foreign co-operative Joint Venture Contract to form the Hunan Westralian Mining Company Limited ("JVC").

There is a history of gold mining in the two main prospects within the Guanzhuang Project Area. A site visit to the Shenjiaya Prospect found five operational mines, two mines in development and a dormant one. In the Xiaotaoyuan Prospect there is a history of local small scale mining over shear-vein structures.

In 2004, China Goldmines commissioned an independent report from RSG Global to assess the mineral potential of the co-operation area. It concluded:-

"The mineral properties, in which CGM has or is directly or indirectly earning an interest, are considered to be 'Exploration Projects' which are inherently speculative in nature. RSG Global considers, nonetheless, that the projects have been acquired on the basis of sound technical merit.

The properties are also considered to be sufficiently prospective, subject to varying degrees of exploration risk, to warrant further exploration and assessment of their economic potential.

The Guanzhuang project has good potential for realising a significant mining opportunity."

The Chinese Joint Venture Partner, Brigade 407, has produced a resource estimate report revealing a gold resource of 1.2 million ounces to a depth of no more than 325m within the Guanzhuang Project.

On the basis of Brigade 407's report, the RSG Global report and their own experience, CGM Directors believe that the consolidation of the mineral zones in the area could potentially yield more than 1 million ounces of gold.

The Project has several key factors :-

• a high grade ore;
• low capital and operating costs;
• stable ground conditions;
• simple metallurgy;
• exploitation of brown fields or existing mines with potential for production revenues within two years;
• existing infrastructure and low-cost skilled labour pool; and
• the experience of CGM’s Directors and operational management team.

On July 3, 2007, China Goldmines executed the transfer of 180 million RmB (about Ł12 million) for ownership and control of each individual mine. The transfer of licences made CGM a producer within the Project area.

On July 24, 2007, China Goldmines announced the resource estimate on the Guanzhuang Project based on the finding of an Al Maynard and Associates’ independent geological report, the highlights of which were:-

• A JORC Code compliant Inferred Resource estimate of 5.1 million tonnes at 11 g/t gold containing 57,000 kg of gold equivalent to 1.8 million ounces;
• An assessment that indicated that the Guanzhuang Project economic resource could be increased substantially by a factor of 4 to 6 after the implementation of systematic exploration;
• Confirmation that CGM’s objective to establish staged underground mining and processing operations would increase gold production from an estimated 25,000 oz a year to about 150,000 oz was achievable;
• Confirmation in the Metallurgical Report of the excellent recovery characteristics of the ore observed at the eight existing processing plants;
• Simple metallurgy ensures low capital investment, processing costs and environmental risk;
• Sound infrastructure including major highway, grid power and water servicing of the Project Area, as well as a local, skilled workforce of underground miners.

Resources

So far, CGM and Brigade 407 geologists have outlined 29 shoots within which average gold grades are reported to exceed 13 g/t Au, developed over widths ranging from 0.76m to 10m, with individual grades up to 157 g/t Au.

The JORC Code-compliant inferred resource estimate of all veins comprising the Shenjiaya Prospect is:-

Description	Average Width (metres)	Million Tonnes	Average Grade (g/t Au)	Contained Gold (tonnes)
Total In-situ Resource	2.5	5.5	11	59
Mined To Date*	-	0.4	6	2
Remaining Resource	-	5.1	11	57