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 300 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 37.4 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 ongoing development, is anticipated to lead to an upgrade of the Mineral Resource estimate for the Caijiaying Mine in the future. The 2016 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 mineralization 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 of the mined out voids at they stand at 31st December 2016.

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 2016 continued to expand existing areas of mineralisation, providing new targets with the aim of ensuring an ongoing supply of ore, and an update to the Mineral Resource estimate. This involved prioritising 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 licenses. 

Hebei Hua Ao Mining and Exploration 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, lead and gold rich lodes within Zone III. In 2016, 220 underground diamond drill holes were drilled for a total of 30,779 metres, utilising three underground electric drill rigs. These results will be incorporated in the next resource update.

There was no surface exploration drilling activity during 2016, however, previously reported surface drilling to the north of Zone III shows that the main ore bodies, defined by Zones II and III, extend at least another 300 metres north beneath thickening cover sequences. This recent discovery, named Zone VIII, contains similar rock types and mineralization styles already seen in Zones II and III. Further drilling from the surface at Zone VIII is planned for the 2017 summer drill season.

Three key geological technical studies were undertaken in 2016:

  • On-going geological structural studies to enable an updated 3D geological model and exploration target matrix continued throughout 2016. This work included detailed relogging and multielement geochemistry of selected underground diamond drill holes combined with detailed geological mapping of underground workings across three key cross sections through the Caijiaying Mine.
  • Detailed geochemistry studies aimed to identify hydrothermal breccias that are potentially mineralising plumbing feeders to the Caijiaying ore bodies and to investigate the effectiveness of multi-element geochemistry for lode characterisation and its application for near mine exploration targeting. The geochemistry data accurately maps pathfinder element assemblages, alteration indices and lithology discriminators at the Caijiaying Mine. This, in combination with the geological structural studies, has provided high priority near mine exploration targets that have been successfully targeted throughout 2016 and will continue to be developed and drill tested in 2017.
  • Detailed geochemistry, lode characterisation, and geological studies into the gold bearing lodes at the Caijiaying Mine. The aim of these ongoing studies is to improve the overall understanding of the lithological and structural controls to gold mineralisation to provide potential geochemical vectors that can be used to develop specific gold targets.

 

Hebei Anglo Exploration Area 

During 2016, regional exploration activities included historical data compilation and review, geological mapping and surface geochemical surveys. Regional target generation continued in 2016 with geochemical surveys conducted both within and adjacent to existing licences. The results of these surveys were very encouraging and have resulted in the identification of anomalous areas with geochemical signatures similar to that observed in drill core data from the Caijiaying Mine area. Further sampling and analysis will continue to develop and prioritise targets for future drilling.

 

Shitouhulun and Sangongdi

On 17th March 2016, an agreement was signed between Griffin’s wholly owned subsidiary, China Zinc Limited, and the 3rd Brigade for co-operation in exploration outside the Caijiaying Mine area and regionally throughout Hebei Province. This provides a unique opportunity for the Company to investigate the region’s economic mineral potential and unlock areas of interest within Hebei Province.

Signing Ceremony for Exploration and development of Shitouhulun and Sangongdi

On the 14th December 2016, a further agreement was signed between the same parties specifically identifying two areas of particular interest, Shitouhulun, approximately 30 kilometres south west of the Caijiaying Mine, and Sangongdi, 11 kilometres to the north west of the Caijiaying Mine. Both share the same geological signatures as the known orebodies at the Caijiaying Mine. Exploration of both these areas is expected to begin in the northern hemisphere spring of 2017 with shallow auger drilling.

 

2017 Exploration

Geochemical analysis continues within the Caijiaying Mine to increase the understanding of the complexity of the orebody. Regional exploration continues with surface geochemical sampling and analysis to evaluate targets for further consideration and drilling. Surface diamond drilling is being carried out at Zone VIII which is located to the north and along strike of Zone III. This drilling follows on from that completed in 2015.

OPERATIONS 

Since construction of the mine and processing facilities in 2005, production has increased from an initial throughput of 200,000 tonnes of ore per annum to in excess of 850,000 tonnes of ore per annum. The latest upgrade of the processing facilities has increased processing capacity to 1.5 million tonnes of ore per annum.

During 2016 the underground mine and surface processing plant operated safely and reliably. However, two separate fatal accidents in 2015 resulted in the temporary suspension of underground operations from 12th October 2015 to 20th January 2016. During this period, low grade stockpiled ore was treated and this resulted in a reduced head grade with a commensurate impact on metal production.

New Third Main Ball Mill
Caijiaying Processing Plant

A third new main 750,000 tonne ball mill was commissioned on the 28th January 2016 following the connection of a new 35kv electrical power line to the Caijiaying Mine. As a result, available grinding capacity increased to 1.5 million tonnes of ore per annum. This enabled a record mill throughput to be achieved in 2016, despite zinc metal production being lower than in 2015 due to the mine shutdown and the consequent inability to undertake capital development to prepare ore for extraction. This led to the milling of available low grade ore and the depletion of stopes above the allowable 1260 metre mining level. Zinc production was augmented by increased gold production which was sourced from the recently discovered Yuan Lode which typically produces higher gold grades than found elsewhere in the Caijiaying Mine.

Construction of New Power Line to Caijiaying Mine

In October 2016 a new safety permit was received from the regulatory authorities for a fresh panel of higher grade zinc ore to be accessed between the 1175 metre level and the 1260 metre level. Mining of this panel was able to be commenced immediately as all of the associated declines, pump stations, electrical infrastructure and cross cuts were installed during the process of the granting of the new permit.

In summary, production in 2016 was as follows:

  • 817,506 tonnes of ore were mined, compared to 571,815 tonnes in 2015;
  • 874,983 tonnes of ore were processed, compared to 839,713 tonnes in 2015;
  • 31,948 tonnes of zinc metal in concentrate were produced, compared to 38,560 tonnes in 2015;
  • A record 12,654 ounces of gold in concentrate were produced, compared to 10,363 ounces in 2015;
  • 310,610 ounces of silver in concentrate were produced, compared to 343,575 ounces in 2015; and
  • 1,439 tonnes of lead in concentrate were produced, compared to 1,785 tonnes in 2015.

In light of the continuing increasing production profile, a transition has begun to the use of more modern mining equipment. This has led to the adoption of a programme to introduce more mechanisation in the Caijiaying Mine. To this end, two new remote control load, haul, dump units were acquired to improve ore recovery from stopes and improve operator safety. A new electro hydraulic longhole drill was also ordered in 2016 and was commissioned in the first quarter of 2017. This will replace a number of older compressed air units and improve productivity as well as improving operator safety and comfort. This follows the purchase of an electro hydraulic development drill in 2015.

New Sandvik Jumbo
Chinese Single jumbo

Underground development work was significantly increased from previous years, with 5,506 metres of capital development and 5,165 metres of operational development completed in 2016.

Long hole open stoping continues to be the predominant mining method. The resulting voids are then backfilled with cemented hydraulic fill in the case of primary stopes or development waste in secondary stopes.

CAIJIAYING PLANT UPGRADE