Majestic Gold Celebrates a Decade of Successful Operations in China

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Ten years after first stepping foot in the People’s Republic of China, a Canadian junior exploration company has successfully brought a major gold prospect into production in a joint venture with a private Chinese partner that is setting a new benchmark in cross-cultural cooperation between the two countries.

Ten years after first stepping foot in the People’s Republic of China, a Canadian junior exploration company has successfully brought a major gold prospect into production in a joint venture with a private Chinese partner that is setting a new benchmark in cross-cultural cooperation between the two countries.

In the past 36 months, Majestic Gold Corp., based in Vancouver, has doubled gold production at its Song Jiagou property in the Jiaodong Peninsula in Shandong Province, 1,100 kilometres southeast of the capital Beijing.

Output in 2010, the first year of production, was 4,709 ounces. By 2012 annual production had increased to 18,969 ounces — an increase of 104 per cent.

Song Jiagou is one of few gold mines in China operating without a state partner, and Majestic Gold is believed to be one of very few Canadian-owned junior gold producers established in the country.

A recent tour of the mining operation by Financial Press reveals the enterprise owes its success to hard work and a harmonious relationship between the two cultures.

These sentiments were echoed on the international stage last month when Chinese President Xi Jinping called on the global community to show more openness with the Chinese to facilitate common development. Xi was delivering a keynote speech at the opening ceremony of the Boao Forum for Asia (BFA) Annual Conference 2013.

“Countries should remain open and inclusive so as to create broad space for enhancing common development,” Xi said. “We should turn the diversity of our world and difference among countries into dynamism and driving force for development.”

Majestic’s president and CEO, Rod Husband, welcomes such sentiments and he has been focused on developing a working relationship with the local people and government since coming to China in 2003.

In 2010, Majestic’s operations took a giant step forward when it took on a new local partner, Fan Zhong Kong. “Mr. Kong has done things we would not have been able to do so quickly in Canada,” says Husband. “This includes building a new mill cheaper and probably faster than you could anywhere else in the world. Having a partner like him has really helped us grow by leaps and bounds in the last couple of years.”

The Song Jiagou gold project is located along the northeastern margin of the Jiaolai Basin, about 10 kilometres northeast of the geologically similar and well-documented Pengjiakuang gold deposit.

China is the world’s largest producer of gold and gold production from this region accounts for over 25 per cent of the country’s annual gold production.

Historically, two fortuitous events helped usher in Majestic Gold's unprecedented success in China.

First, in 2003, gold prices began to rise from $250 to nearly $500 by the end of 2004 making gold production much more profitable. Secondly, in 2002 and 2003, China changed its laws regarding foreign mining in China. Previously, foreign companies were not allowed to own the majority interest in mining ventures in China.

“We had the opportunity to go to China in 2003, which was really early for junior resource companies,” says Husband. “As a result, we got to look at some of the best opportunities. At the time we picked two. There was one in the extreme west of China as well as our Song Jiagou mine that we are operating now. In 2009, we sold the other project back to our previous partners, took the money and invested it further into Song Jiagou, which allowed us to grow it by leaps and bounds in terms of the resource size and the development that was done on site.”

Majestic's operations office near the mine is an impressive four-storey building utilised by 175 employees. At the helm is Mr. Kong, a highly influential citizen in the region. Working closely with the team is the recently appointed Chairman of the Board, Mr. Gengshu Miao.

Mr. Miao is a senior economist with long experience in the mining and investment sectors in China. He is currently president of the China Council for International Investment Promotion. His industry experience includes serving as president of China Minmetals Corp., an international metals and mining company with a business scope covering 26 nations and regions with total assets of RMB 242.1 billion. His former appointments also include management positions at Shanghai Metals and Minerals Import and Export Cooperation, the Shanghai Foreign Economic and Trade Commission, and Sinotrans & CSC Holdings Co. Ltd.

“I first became involved with Majestic Gold in 2009, and the most important thing for me at the time was that I knew the property and recognized the opportunity,” he says. “I knew this would become a very big project."

Total gold production for the Song Jiagou property is projected to be 2.32 million ounces at an average of 105,645 ounces per year during a mine life of 22 years.

The biggest short-term challenge facing the property is a lack of grade control, Husband says.
“In the next 12 months we expect to ramp up our grade control through proper training and mining techniques. This will allow our grade to increase to three or four times higher than it is now, and our production numbers will go up to between 80,000 to 100,000 ounces a year on average for the life of mine.”

Husband adds that construction of an assay lab will provide enhanced grade control and the company expects to increase production significantly over the next several months. “We expect the lab to be completed sometime before the end of June,” Husband says. “It will allow us to process the blast holes in a timely enough manner to identify ore from waste ahead of blasting.”

For a junior company to be building this kind of infrastructure is unprecedented by Canadian standards. A 6,000-tonne-per-day mill was commissioned by Majestic in May 2011. Majestic has a real asset with proven resources and a processing plant.

Fan Zhong Kong, operations manager of Song Jiagou, stresses another key asset.

“We have strong support for this project from the local community and local government,” he says. “In 2012, we were recognized by local government for having the best mining operation, fair pricing with local contractors, environmental energy savings and we were awarded best foreign investment company.”

And to what does he credit the company’s success?

“Foreign companies working in China need to understand their local communities and their partners in order to succeed,” he says. “Foreigners should also know that Majestic Gold has a great property and is run by an excellent team of Canadian and Chinese partners.”

Majestic's CEO recognizes that a key challenge to operating in China lies in helping people to understand the concept of working for profit.

Husband says that Mr. Kong’s entrepreneurial acumen has helped convey that concept right down to the people who are doing the physical mining.

Moving forward, he says, “the biggest challenge is to keep everyone focused on the need for pushing the highest grade material possible through the mills.”

About Majestic Gold Corp.

Currently focused solely in China, Majestic Gold Corp. is a Vancouver, BC based company engaged in commercial gold production at the Song Jiagou gold mine in Yantai, China. Additional information on the Company and its projects is available at http://www.sedar.com and on the Company’s website at http://www.majesticgold.net.

Legal Disclaimer/Disclosure: A fee has been paid for the production and distribution of this Report. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this article should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. Financial Press makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the author’s only and are subject to change without notice. Financial Press assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this article and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this article.

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Brad Magnes
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