Caijiaying Project

INTRODUCTION

The Caijiaying Mine is an operating zinc, gold, silver and lead mine, together with a processing plant, camp and supporting facilities, located approximately 250 kilometres by road, north-west of Beijing in Hebei Province in the People’s Republic of China. The Caijiaying Mine is easily accessible by freeway from Beijing. The site has significant water supplies, two 35 thousand volt “kv” power lines connected to the electricity grid, full connectivity to fixed and mobile tele-communications systems and broadband access for internet services. It is 63 kilometres from Chongli, the host city of the 2022 Winter Olympic Games to which a high speed train link from Beijing is being constructed. Climatic conditions are not severe with warm summers and cold, dry winters, enabling Caijiaying to operate for 365 days a year.

Caijiaying Mine Site

DEVELOPMENT

Hebei Hua Ao is a contractual co-operative joint venture company entity established in 1994. Initially, Griffin held 60% of Hebei Hua Ao (through a wholly owned subsidiary) with the remaining 40% held by the Zhangjiakou Guoxin Enterprise Management and Service Center (“Guoxin”), the previously named Zhangjiakou Caijiaying Lead Zinc Mining Company, the shareholders of which remain the Zhangjiakou City People’s Government and the Third Geological Brigade of Hebei Province (the “3rd Brigade”).

The initial term of Hebei Hua Ao was 25 years and was due to expire in 2019. In light of the continuing increase in the resources base and production profile of the Caijiaying Mine, the Company, through its wholly owned subsidiary China Zinc Limited, purchased an additional 28.8% interest in Hebei Hua Ao from Guoxin in 2012. Griffin now holds an 88.8% equity interest in Hebei Hua Ao and Guoxin retains an 11.2% residual interest with a fee for services rendered, resulting in Hebei Hua Ao being in the nature of a subsidiary of the Company with a service contract to Guoxin for accounting purposes. In addition, and as part of this purchase agreement, the term of the Hebei Hua Ao joint venture was extended to October 2037.

In January 2004, a second contractual joint venture company, Hebei Anglo, was formed to hold the mineral rights to the area surrounding the original Hebei Hua Ao licence area and any other areas of interest in Hebei Province. Griffin, through its wholly owned UK subsidiary, Panda Resources Limited, has a 90% interest in Hebei Anglo whilst Guoxin holds 10%. Griffin, through Hebei Hua Ao and Hebei Anglo, has a controlling interest in mining and exploration licences over approximately 21.7 square kilometres at Caijiaying.

Following extensive exploration, resource delineation drilling, a number of scoping studies, a feasibility study, financing and construction, Griffin successfully commissioned the Caijiaying Mine on time and within budget in 2005 with an initial design production throughput rate of 200,000 tonnes of ore per annum.

Numerous upgrades to the Caijiaying Mine and processing facilities have taken place since commissioning. In January 2016, the Company completed a further upgrade of the processing facilities at the Caijiaying Mine and the construction of two new 35kv power lines connected to the main grid enabling a new third primary ball mill to be commissioned. This latest upgrade has taken name plate mill throughput capacity to 1.5 million tonnes of ore per annum.

Underground development continues with the expansion of the existing mining operations at Zone III. Access to the Zone II area to the south of Zone III has been constructed allowing for underground drilling and further exploration work at Zone II. The mining and development of Zone II is subject to the successful granting of a new mining licence over that area.

MINERAL RESOURCE ESTIMATE

In June 2013, a Mineral Resource Estimate for Caijiaying was reported. The continuing success of the exploration programme in conjunction with infill drilling and on-going development, is anticipated to lead to an upgrade of the Mineral Resource Estimate for the Caijiaying Mine in the foreseeable future.

The 2017 Mineral Resource estimate based on the 2013 estimate at a zinc cut-off grade of 1% and, as amended for mining depletion, is summarised below:

Notes:

 Zone II Mineral Resource includes 1.49 million tonnes at 3.09% zinc oxide material.

The Mineral Resource estimate is based on 2,470 underground diamond drill holes and 579 surface drill holes.

The underground drilling was carried out using nominal fan patterns of 20m by 20m, grading to a 40m by 40m pattern at depth. Resource wireframes were interpreted by CSA Global Pty Ltd in consultation with Griffin’s geologists. The resource outlines were based on mineralisation envelopes prepared on cross-sections using a nominal 1% Zn cut-off grade. The Mineral Resource has been depleted using a three-dimensional survey “As Built” wireframe which models all the mined-out voids at they stand at 31st December 2017.

The Caijiaying Mineral Resources are based on resource modelling work completed by CSA Global Pty Ltd in 2013 and reported in accordance with JORC 2012 guidelines.

The information in this report that relates to Mineral Resources is based on information compiled by Mr. Steve Rose, who is a Fellow of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr. Rose is a full-time employee of CSA Global Pty Ltd and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. Mr. Rose consents to the inclusion of such information in this report in the form and context in which it appears.

GEOLOGY

 Mineralisation at Caijiaying is believed to be related to a Jurassic igneous event that affected the 2.3 billion year old metamorphic basement rocks. Base metal and gold mineralisation associated with Jurassic intrusive have replaced favourable horizons in the metamorphic rocks, most notably calcsilicates and marble. Porphyry sills and dykes intruding along faults have then cut across the sequence.

Ongoing exploration in the area surrounding the Caijiaying Mine and within Hebei Hua Ao’s and Hebei Anglo’s tenement boundary continues to confirm the area to be highly prospective, indicating significant potential for further base metal and gold deposits.

 

Click here for enlarged Map of the Caijiaying License Areas.

EXPLORATION

The exploration programme at Caijiaying in 2017 continued to expand existing areas of mineralization providing new targets with the aim of ensuring an ongoing supply of ore. This involved prioritizing targets into the following categories:

  • In-mine areas between or adjacent to known orebodies;
  • Near-mine targets, mainly within reach of underground drilling from existing or planned drives; and
  • Regional targets both within and adjacent to existing licences.

Hebei Hua Ao Mining Area

Extensive ongoing underground diamond drilling continues to target extensions of known deposits and areas adjacent to known deposits. These near mine targets include extensions of known zinc and gold rich lodes within Zone III. In 2017, 241 underground diamond drill holes were drilled for a total of 39,782 metres, utilising three underground electric-hydraulic drill rigs. These results will be incorporated in the next resource update.

In 2017, 26 surface exploration drill holes were completed for 19,742 metres. The holes were drilled to the north of Zone III. This area, named Zone VIII, contains similar rock types and mineralisation styles already seen in Zones II and III. Two holes were also drilled from surface for geotechnical investigation of possible future ventilation shaft locations.

Significant progress was made in the application of litho-geochemical data to provide an indicator of proximity to mineralisation. Further progress was also made with improving the structural model for the deposit, leading to a better understanding of controls on higher grade mineralisation. This will lead to improved stope designs and lower dilution

 

Hebei Anglo Exploration Area 

Exploration in 2017 involved the drilling of two surface holes immediately to the north of the Zone VIII drilling for a total of 1,287 metres. In a similar manner to Zone VIII, the drilling intersected similar rocks and mineralisation styles to that seen in Zones II and III beneath thickening cover sequences. Results will be incorporated into various geological reports before an application is submitted to the Chinese authorities to have a portion of the Hebei Anglo exploration licence retained and upgraded to a higher level.

 

Shitouhulun and Sangongdi

An agreement was signed in December 2016 between Griffin’s wholly owned subsidiary, China Zinc Limited, and the 3rd Brigade for co-operation in exploration at Shitouhulun (30 kilometres South West of the Caijiaying Mine) and Sangongdi (11 kilometres North West of the Caijiaying Mine) having the same geological signatures as the known orebodies at the Caijiaying Mine.

Limited field work was conducted over both these areas in 2017 whilst the necessary permits were lodged with the authorities. Once granted, it is expected that more detailed exploration of both areas will begin in the spring of 2018.

Signing Ceremony for Exploration and development of Shitouhulun and Sangongdi

2018 Exploration

Geochemical analysis is continuing within the Caijiaying Mine to increase the understanding of the nature of the orebody. Regional exploration continues with surface geochemical sampling and analysis to evaluate targets for further consideration and drilling. Further exploration will also be carried out in the Hebei Anglo exploration area.

 

OPERATIONS 

The underground mine and surface processing plant operated safely and consistently setting new records in safety and production performance during 2017.

A significant improvement in safety was achieved in 2017 with the year on year “Lost Time Frequency Rate” reducing from 3.5 down to 1.1 per one million hours. This improvement was also a contributor to the uplift in production performance in both the underground operations and the processing plant.

New Third Main Ball Mill
Caijiaying Processing Plant

In June 2017, the development “Project Final Acceptance” was received from the various government authorities allowing the continuation of both the North and South Declines from the 1175 metre level down to the 1000 metre level. It is expected it will take 18 months to complete the necessary development down to the 1000 metre level. A second portal has been completed which will provide improved ventilation and greater flexibility for ore haulage from underground operations.

New production records for the Caijiaying Mine were established in 2017.

In summary:

  • Ore mined of 920,168 tonnes (2016: 863,077 tonnes);
  • Ore hauled of 980,849 tonnes (2016: 817,506 tonnes);
  • Ore processed of 968,080 tonnes (2016: 874,983 tonnes);
  • Zinc metal in concentrate produced of 43,403 tonnes (2016: 31,948 tonnes);
  • Gold metal in concentrate produced of 20,489 ozs (2016: 12,654 ozs);
  • Silver metal in concentrate produced of 394,117 ozs (2016: 310,611 ozs); and
  • Lead metal in concentrate produced of 1,421 tonnes (2016: 1,439 tonnes).
Construction of New Power Line to Caijiaying Mine

Circuit improvements and de-bottlenecking in the processing plant also resulted in gold recoveries increasing from 58.2% in 2016 to 65.6% in 2017.

The programme to further modernise the mine continues with a second electric Hydraulic development drill (“jumbo”), a mechanised rock bolting machine, and a second remote loader equipped with tele-remotes.  An order has also been placed for a twin boom electric hydraulic jumbo with delivery expected in the middle of 2018. This follows the initial purchase of a single boom jumbo and an electric hydraulic long hole production drill rig in 2016.

A new 20 tonne haulage truck was delivered to the Caijiaying Mine in March 2018. This is the first of a fleet of 20 tonne trucks expected to be delivered to replace the smaller and ageing 10 and 12 tonne fleet. This will allow more tonnes to be hauled from underground with less truck movements, more economically and with greater reliability.

New Sandvik Jumbo
Chinese Single jumbo

Underground development work has of late been primarily focused on developing future stoping horizons between the 1245 metre and 1175 metre level.  In 2017,  2,467 metres of capital development and 4,479 metres of operational development was undertaken. Long hole open stoping continues to be the predominant mining method. The resulting voids are backfilled with cemented hydraulic fill or development waste.

Significant time and capital has been spent on consolidating all staff at the site camp at the Caijiaying Mine. This included the construction of a new modern accommodation block housing 90 staff in 2017. This has allowed all staff previously housed off-site in rental accommodation to be housed on site. In addition a new sewage treatment plant was constructed and commissioned in 2017 to deal with waste effluent from the site accommodation.