Chapter 15 Exploration and Mining in China by an International Company: Experience from the Caijiaying Operation

Abstract The Caijiaying Zn-Au-Ag-Pb mine is located in northern Hebei Province 85 km north-northeast of Zhangjiakou city on the northern edge of the North China block. It was one of the first base-metal mines started by a foreign company in China since the reform and opening led by Deng Xiaoping in the late 1970s. The deposits were discovered in 1959 as a series of gossans and later exploration by Chinese geologists led to definition of a 62-million-tonne (Mt) resource containing 2.9 Mt of contained zinc metal, as well as by-product Au, Ag, and Pb. The orebodies were originally interpreted as a series of stacked south-dipping veins but early attempts to start mining were frustrated by inconsistent results until mineralization was eventually reinterpreted by overseas geologists as replacements of a carbonate protolith. The replacements were arranged in large, recumbent, west-dipping, and boudinaged folds, complicated by emplacement of late dike swarms and displaced by brittle fractures. The orebodies are now thought to be distal skarn replacements related to an inferred porphyry intrusion. The early history illustrates the consequences of geologic misinterpretation from an operational viewpoint and shows how computer resource estimates can give misleading investment confidence. Early Chinese efforts to commence mining eventually gave way to offering the project for foreign investment as China opened up in the 1990s. Persistent geologic studies by junior Anglo-Australian company Griffin Mining incorporating the revised geologic interpretations enabled a new and higher confidence resource estimate. This, in turn, led to a decision in 2002 to commence feasibility studies for a modest 200,000 tonnes per annum (tpa) underground operation. The proposed mine was mainly designed by Australian consultants but used Chinese equipment. However, initial Western attempts to prepare a mine plan with low enough operating costs to be economic based on the low zinc price prevailing at that time instead led to contracting a Chinese design institute. This delivered an operating cost at one-third of the estimated Australian cost and allowed the project to proceed. Construction of the mine in 2004 to 2005 was one of the most successful aspects of the project. By combining Chinese engineering skills, knowledge of local costs and standards for the process plant construction, together with foreign geologic skills and drilling expertise for developing the mine, the entire operation commenced production on time and within the very low budget cost of US$15 million. Coincidentally, the zinc price had increased substantially from less than US$1,000/t at the start to over $3,500/t so that total costs were repaid within the first year. From commencement, the mine has reinvested proceeds to increase production capacity up to its current throughput of 1 Mtpa with 50% extra capacity, making it one of the larger zinc producers in China. Although conditions in China have changed considerably since the start of mining at Caijiaying, the complex interplay of technical and corporate decisions that led to its success may nevertheless provide useful lessons for elsewhere in China and globally. The unique conditions of excellent low-cost manufacturing and abundant engineering skills combined with excellent geologic potential still exist in China, so it is suggested there may be further opportunities for joint cooperation between foreign and domestic companies.