Jinshan Gold Mines Inc.

Jinshan Gold Mines Inc.

March 04, 2010 09:20 ET

Jinshan Announces Reserves Increased by 51% and Measured and Indicated Resources Increased to 4.99 Million Ounces at Its CSH 217 Gold Mine, China

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 4, 2010) - Jinshan Gold Mines Inc. (TSX:JIN) is pleased to announce results of a new National Instrument 43-101 compliant reserve and resource estimate at its CSH 217 gold mine in Inner Mongolia, China. Compared to the reserves reported in March 2008, the total proven and probable mineable gold reserves at the CSH 217 mine as of the end of December 2009 have increased to 3.43 million ounces (including 433,000 mined out ounces) from 2.26 million ounces in the March 2008 ITR. This represents a 51% increase over the previous March 2008 ITR. In addition, project Pre-Income Tax Net Present Value (NPV) increased from US$87 million in the March 2008 ITR to US$517 million.

"The 2008 drilling campaign that we enacted after the March 2008 ITR and the 2009 onsite column leach test program has greatly increased our confidence in the CSH 217 project. The total reserves increased over 51% compared with the March 2008 ITR," said Xin Song, Jinshan's new CEO. "The growth of the number of ounces of gold controlled by the Company at CSH will allow the Company to grow organically. With the strong support from our major shareholder China National Gold Group, the Company is well positioned to expand on a healthy growth profile."

Mineral Reserves

An updated mine plan for the CSH Gold Project has been developed by Nilsson Mine Services (NMS) of Vancouver, British Columbia, Canada. This plan has been prepared for heap leaching with a crushing plant throughput rate of 30,000 tonnes per day, with full capacity expected by the end of the first quarter of 2010.

Mineral reserves have been reported for the final pit designs at a positive net value cutoff that corresponds to a gold grade cutoff of approximately 0.3 grams per tonne gold as scheduled in the mine plan. The proven and probable reserves at CSH mine as of December 31, 2009 stand at approximately 138 million tonnes of ore with an average grade of 0.67 g/t gold, representing approximately 3.0 million ounces of contained gold. In the previous March 2008 ITR, the company reported 99 million tonnes of reserves at an average grade of 0.71 g/t gold, consisting of 35 million tonnes of proven reserves averaging 0.74g/t gold and 64 million tonnes of probable reserves averaging 0.69 g/t gold at 0.28 g/t gold cut-off grade. The new reserves are summarized in the table below:

CSH 217 Reserves by category, Northeast and Southwest pits combined December 2009

Classification Cutoff
(M tonnes)
Proven 0.30 83.6 0.70 1,868 58,100
Probable 0.30 55.2 0.64 1,133 35,240
Total 0.30 138.8 0.67 3,001 93,340

Resource Estimate

The new CSH 217 resource estimate was prepared by Mario Rossi, M.Sc., Min.Eng., of Geosystems International Inc. The 2008 drilling campaign added significant tonnages above cutoff and also improved the grade, partly due to the confirmation of grades and upgrade in resource classification down-dip and laterally. The CSH deposit in the Southwest (SW) area is now well delineated, and still significant potential exists for down-dip extensions to the mineralization. Mineralization at depth in the Northeast (NE) has been confirmed, with increases in both tonnages and confidence.

At the end of December 2009, the project's Measured and Indicated Gold Resources, using 0.3 g/t Au cut-off grade, stand at 243 million tonnes averaging 0.64 grams per tonne (g/t) gold. This translates into 4.99 million ounces of gold (inclusive of reserves) in the deposit after two and half years mining. In the previous March 2008 ITR, 183 million tonnes of Measured and Indicated resources average 0.69 g/t gold were reported with the same 0.30 g/t gold cut-off grade. Details of the new resources are summarized in the table below:

Table 2: CSH 217 Resources by category, Northeast and Southwest Zones (inclusive of reserves).

Resources by category below pit surface to December 31st, 2009, CSH 217 Project, 2009 Resource Model
Cutoff (g/t) Measured Indicated Measured+Indicated Inferred
Au Grade(g/t) M
Au Grade(g/t) M
Au Grade(g/t) Million
Au Grade(g/t) Million
0.3 105.8 0.68 137.6 0.61 243.4 0.64 4.993 0.53 0.43 0.007
0.35 96.1 0.71 120.8 0.65 216.9 0.68 4.716 0.35 0.49 0.005
0.4 86.5 0.75 104.1 0.69 190.6 0.72 4.400 0.24 0.54 0.004
0.45 77.2 0.79 89.1 0.74 166.3 0.76 4.068 0.18 0.57 0.003
0.5 68.0 0.83 76.2 0.78 144.2 0.80 3.732 0.12 0.62 0.002
0.55 59.6 0.88 64.9 0.83 124.4 0.85 3.399 0.08 0.68 0.002
0.6 51.9 0.92 54.9 0.87 106.8 0.90 3.073 0.05 0.73 0.001
0.65 44.6 0.97 46.6 0.92 91.2 0.94 2.760 0.03 0.83 0.001
0.7 38.1 1.02 39.6 0.96 77.7 0.99 2.467 0.02 0.88 0.001
0.75 32.3 1.07 33.4 1.00 65.7 1.04 2.188 0.02 0.93 0.000

1. The contained gold represents estimated contained metal in the ground and has not been adjusted for mining or metallurgical recoveries.
2. Resource classifications conform to CIM Standards on Mineral Resources and Reserves referred to in National Instrument 43-101. Mineral Resources that are not Reserves do not have demonstrated economic viability. Measured and Indicated Resources are that part of a mineral resource for which quantity and grade can be estimated with a level of confidence sufficient to allow the application of technical and economic parameters to support mine planning and evaluation of the economic viability of the project. An Inferred Resource is that part of a mineral resource for which quantity and grade can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.

Production Update
Gold production at the CSH 217 mine has totaled 161,625 gold ounces since start up on July 31, 2007 to the end of December 2009. The 30,000 tpd crushing facility at the mine, which commenced start-up operations in August 2009 is currently performing at about 80% of its design capacity. It is expected to reach full 30,000 tpd capacity by end of the first quarter 2010.

Project Economics
According to the new mine plan, the CSH 217 mine life is extended from 2018 to 2023 with four more years of leaching afterwards. Prior to installation of the crushing facility, the CSH mine experienced low and slow gold recoveries for various reasons, among which, the ore in the lower portions of the categorized weathered zones was actually mixed oxide and sulphide ore with low leaching recovery when not crushed. In addition, Run-of-Mine (ROM) ore size has been difficult to control. By the end of 2009, approximately 20 million tonnes of ROM ore were put under leach. The observed recovery from this uncrushed ROM material based on gold poured has been 37.3%. It is estimated that the ultimate recovery rate for the uncrushed ROM ore already on pad will be over 53%. With the new crushers currently ramping up to the design capacity of 30,000 tpd, it is expected that the gold recovery will be greatly improved. According to the column test done by Metcon Research of KDE in 2009, the recovery rate for the crushed ore is a function of the ore grade. The higher the ore grade the higher the recovery rate, which ranges from the lowest of 62.1% in the SW pit to the highest of 80.9% in the NE pit. According to the new mine production plan, approximately 2.35 million ounces of gold will be produced in the next 15 years starting with annual production of approximately 132,000 ounces in 2010, and gradually increasing to over 150,000 ounces in 2014 and then to over 200,000 ounces in 2021.

In the previous technical report released in March 2008, a 600 US dollar per ounce gold price was used to estimate the project economics and the Pre-Income Tax NPV was only US$87 million at 10% discount. In the estimate, the base gold prices for the next 5 years used are $1,032 per ounce, $1,033 per ounce, $955 per ounce, $970 per ounce and $849 per ounce corresponding to the years of 2010, 2011, 2012, 2013 and 2014 respectively. For long-term gold price after 2014, $849 is used as the long-term gold price estimate. Using the new gold prices, the project Pre-Income Tax Net Present Value (NPV) as of the end of December 2009 at a 9% discount rate, stands at US$ 517 million at the exchange rate of one US dollar to 6.83 RMB yuan. Gold prices and recovery rate are still the two most sensitive factors for the project economics.

Exploration and drilling will continue at the CSH 217 gold mine during the 2010 field season within the company's 25 square kilometer licensed area immediately adjoining the mining permit. The first priority for exploration will be to drill several gold anomalies and carry out trenching along the surface strike extension of prospective stratigraphy that was defined by grid rock sampling during the previous field seasons. Deeper drill holes are also planned for the CSH property to explore for higher grades down dip.

Throughput Expansion Update Internal Technical Report and Independent Technical Report
The updated mine plan, resource and reserve estimate on the CSH217 project are based on a report compiled by KD Engineering. Behre Dolbear Asia, Inc. (BDASIA) has been conducting an independent technical review of the CSH217 project, including the recent resource/reserve estimates and metallurgical testing, and a technical report titled "Independent Technical Report on the Chang Shan Hao Gold Mine in Inner Mongolia Autonomous Region, the People's Republic of China" will be filed within 45 days of this release.

Qualified Persons
Mario Rossi, M.Sc., Min.Eng., of Geosystems International Inc. is an Independent Qualified Person as defined by National Instrument 43-101 and is responsible for the CSH 217 resource estimates. Mr. Rossi last visited the CSH 217 site in January 2009. Mr. John W. Nilsson, M. Sc., P. Eng., of Nilsson Mine Services Limited, is an Independent Qualified Person as defined by National Instrument 43-101 and is responsible for the CSH 217 mine design and reserve estimate, and visited the property during the period 19 through 26 September 2009. Mr. Joseph Keane, P. Eng., of KD Engineering (KDE) of Tucson, Arizona is an Independent Qualified Person as defined by National Instrument 43-101 and is responsible for the metallurgical testing and mineral processing portions and is the leading QP for the updated mine plan and reserve estimate. He has visited the CSH mine site several times with the most recent trip in September 2009. Dr. Qingping Deng, Ph.D., CPG., President of Behre Dolbear Asia, Inc. is an Independent Qualified Person as defined by National Instrument 43-101 and is responsible for reviewing the CSH 217 project and preparation of the BDASIA technical report to be filed, who has visited the project several times in 2009 with the most recent trip in late October 2009. The QP's have supervised the preparation of the scientific and technical information in this news release, while the mine site management prepared the production update in this release.

About Jinshan
Jinshan is a mining company whose principal property is the CSH Gold Mine. Jinshan began producing gold at the CSH Gold Mine in July 2007. Jinshan's shares are listed on the TSX under the symbol "JIN".

Please visit our website at: www.jinshanmines.com

Forward Looking Statements
This press release contains forward-looking statements within the meaning of applicable securities laws and regulations including, but not limited to, statements with respect to exploration programs and potential extension of mineralized zones at CSH, the resource and reserve estimates themselves, several of the assumptions contained in the mine plan and project economics, including recovery rates, gold price, operating costs and discount rate calculations; potential property acquisitions and the timing of full production of the crusher. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "planning", "planned", "expects", "looking forward", "does not expect", "continues", "scheduled", "estimates", "forecasts", "intends", "potential", "anticipate", "does not anticipate", or "belief", or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. The above statements are based on the current expectations and beliefs of Jinshan's management and are subject to a number of risks and uncertainties that may cause the actual results to differ materially from those described above.

Forward-looking statements are based on a number of material factors and assumptions, including the result of drilling and exploration activities, results of studies and that contracted parties provide goods and/or services on the agreed timeframes, that equipment necessary for production is available as scheduled and does not incur unforeseen break downs, that gold price forecasts remain materially correct, that no labor shortages or delays are incurred, that plant and equipment function as specified, that no unusual geological or technical problems occur ,that actual recovery is consistent with the results from metallurgical testing, that laboratory and other related services are available and perform as contracted.

Forward-looking statements involve known and unknown risks, future events, conditions, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, projection, forecast, performance or achievements expressed or implied by the forward-looking statements. Such factors include those matters identified as risk factors in Jinshan's Annual Information Form and MD&A, as well as the following: changes in project parameters as plans continue to be refined; future prices of gold; possible variations in grade or recovery rates; failure of equipment or processes to operate as anticipated; the failure of contracted parties to perform; labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of exploration. Although Jinshan has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Jinshan does not assume any obligation to update forward-looking statements, except to the extent required by applicable securities laws.

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