Andrew Richards – Red Mountain Mining

ONE OFF THE WOOD: Red Mountain Mining chief executive officer Andrew Richards propped up at the front bar of The Roadhouse recently to tell us about the company’s gold adventures in China.

Not too many people may have heard of Red Mountain Mining before you listed on the Boards of the ASX in September this year.

Red Mountain Mining has been around since 2005 and we have spent most of our time focused within China.

Our management is made up of people who all have a lot of experience working in China as well as working in the mining industry.

Our listing was heavily oversubscribed and we attracted a lot of interest from investors in China and Hong Kong.

You are in a unique position, in a way, being an Australian company with an agreement to acquire an operating mine in China – which would target the Chinese market, I assume – and not being an Australian company operating a mine here targeting the same market.

That’s true, and I think it is worth noting that, where there are companies leaving China at present, we’re actually going back into the country.

I guess where we have differentiated ourselves, quite strongly, is that while we have modelled ourselves on the success of others such as Eldorado and Sino Gold, we are also cherry picking the best aspects of what they did.

So we have certain guidelines that we are following. For instance we are not greenfield explorers. We don’t get involved in State-owned assets. We don’t get involved with local bureaus and state-run authorities. We deal with private operators.

What we are looking for is projects that have undeveloped potential to which we can add value.

Simply because we have had experience with near-mine exploration, underground mining, conversion drilling and so on; so we believe we can develop that untapped potential.

So where has that experience led you so far?

We have had a look at around 30 to 40 companies and progressed relations with one particular group, with which we have binding acquisition agreements for two projects.

The main one of these is an agreement to acquire a 51 per cent stake in the Zhongqu project, which is actually an operating mine with cash flow.

The Zhongqu project includes the Xinqu mine which is an underground operation that has historically produced up to 30,000 ounces of gold per annum.

It has a Chinese classified, non-JORC compliant resource and we are targeting an initial additional resource of 400,000 tonnes to 500,000 tonnes grading between seven grams per tonne gold and 9.5 grams per tonne gold.

We are currently trying to validate the mineralisation and its continuity at depth in order to calculate a resource that we are happy with that will give some longevity to the mine.

Then we can exercise the option to complete the acquisition.

Is the approvals process in China simple to navigate?

It can be challenging if you don’t know what you are doing but we have a large pool of experience within the group.

We have also been able to avoid a significant part of that however, because the Zhongqu operation already has a mining licence so we don’t have to go through all the procedures involved in converting a greenfield project from an exploration licence to a mining licence.

This is a process though, that you are familiar with anyway having worked in China for many years previously.

I have been involved with companies working in China since around 2003 and known the people involved with the Zhongqu project for some time. The projects they currently operate are in the same vicinity where I was previously working. Geologically speaking it  is a highly prospective area with numerous small to large gold mines.

There are a number of projects in that gold belt that, with a bit of near mine exploration work and adoption of modern mining methods could be readily upgraded.

So how well are you speaking Chinese these days?

Not as well as I’d like to, but if I do get in any trouble I know how to get to my hotel.

Are you able to show off to your friends back home when you go to Chinese restaurants and order off the menu in Chinese?

No. I can’t read the language, unfortunately. I can survive speaking some but there have been a number of times when I have said something and the expressions on people’s faces have let me know that perhaps my message hasn’t got across as well as I might have hoped it would have.

How will you be processing your ore from Zhongqu?

There is already a first class CIL plant in place at the mine that is only about three years old and is capable of processing 400,000 tonnes per annum while the current production rate from the mine is only around 90,000 tonnes per annum

You’re currently doing some drilling at the project. How are the numbers coming out from that?

Our first round of drilling results has come out really well. Most of the holes that we drilled hit mineralisation and many were significant.

In addition we have also encountered a style of mineralisation that we weren’t anticipating in the hanging wall of the main zone.

So we plan to follow up the first stage drilling results and include drilling that will help us understand the hanging wall mineralisation and its geometry better.  

The main decision point for us will be in April next year; that is whether or not we decide to exercise our option to acquire 51 per cent of the operation.

If you do decide to do that, you will then be 51 per cent owners in an operating gold mine.

That’s correct. Without having to go through the process of completing a BFS we aim to access cash flow from a working mine with estimated current cash costs of between US$350 to US$420 per ounce and the opportunity to expand mine production for the currently underutilised  plant.