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AFCAN
Mining is one of only two western or foreign
joint ventures that have mining licenses and will be in production as gold mines in China
by 2006
Mining
Gold Exploration
(AFK-TSX)
Afcan Mining Corporation
Suite 850, 141 Adelaide Street West
Toronto, M5H 3L5 Canada
Ph: +1 416 360 3404 direct
David G. Netherway
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
April 21, 2005
BIO:
David G. Netherway
President and CEO
David is an Australian mining engineer with nearly 30 years of experience. After
university and 3 years experience in Australian underground mines, he worked for Rio Tinto
Consultants in UK and spent 3 years in India with time in Nepal, Oman and Malaysia.
He then went to Africa and spent 15 years mainly in Ghana with Ghana National Manganese
until 1987 then as the General Manager, West Africa for Golden Shamrock Mines Ltd (GSM), a
successful Australian company which built the Iduapriem gold mine in Ghana. GSM merged
with Ashanti Goldfields in 1997 after David had spent 3 years in Guinea developing the
Siguiri Gold mine.
David left Ashanti to set up his own company which in 1998 he sold to Prospex Mining Inc.,
a Canadian junior company of which he then became President. Prospex merged with Semafo
Inc. in 1999 and David became the Chief Operating Officer of Semafo. He then was
responsible for building the Kiniero Gold Mine in Guinea and was involved in building the
Samira Hill Gold Mine in Niger.
In April, 2002, David was appointed as President/CEO of Afcan Mining Corporation which he
proceeded to build into a China focused gold mining company.
He has been involved with the exploration, feasibility and construction of 3 gold mines in
West Africa:
-Iduapriem Gold Mine in Ghana (1992 - GSM)
-Siguiri Gold Mine in Guinea (1997 - GSM then Ashanti)
-Kiniero Gold Mine in Guinea (2002 - Semafo Inc.).
Company Profile:
AFCAN is an emerging gold producer in China and owns 85 % of the TJS Project at
Tanjianshan in Qinghai Province. Construction has commenced. There are an additional 23
anomalies on the licence area of 341 km2 that are being explored. Afcan's growth is
focused on exploration and development of its advanced projects.
CEOCFOinterviews: Mr. Netherway, what was your vision when
you became CEO of AFCAN and how has that played out?
Mr. Netherway: “Our vision was to turn AFCAN from an
exploration company into a mining company. We have almost achieved that vision because we
now have a project that has completed Bankable Feasibility Study and is in the process of
financing and construction of the mining in China.”
CEOCFOinterviews: Will
you tell us about the project and what is still needs to be done?
Mr. Netherway: “Our Project at Tanjianshan in Qinghai Province
is an existing gold mine in the west of China. We have been drilling with 23,000 meters of
drilling over the last two years. We have now produced a Bankable Feasibility Study, which
shows that we have a capital cost of $47.7 million, which includes a $8 million prestrip.
It will produce 150,000 ounces a year at a cash operating cost of $236 an ounce. We have
purchased the SAG mill for the TJS Project and have started the design on the project. We
should be in production by mid next year at that rate. That will put us at one of the
largest gold mines in China. We are one of only two western or foreign joint ventures that
have mining licenses and will be in production as gold mines in China by next year.”
CEOCFOinterviews: Why is
China a good place for gold mining?
Mr. Netherway: “China is a great place to be! China is
the fourth largest gold producer in the world. Australia is the third largest; they are
roughly the same production. Australia produces from eighty mines, China from somewhere
between 1,500 and 3,000 mines. All the mines in China are very small; that is the
opportunity, they never had the capital to grow and they have not used modern exploration
techniques to expand these mines.”
CEOCFOinterviews: Will
you tell us about the infrastructure?
Mr. Netherway: “The infrastructure where we are is
fantastic. Although we are at the bottom of the Gobi dessert at 3,300 meters, we have
water within three kilometers, a railway line within three hours, we have a field road
within twelve kilometers, we have a high-speed internet access through a fiber-optic cable
to the nearest town, which is ninety kilometers away. We have a cell phone tower and a
grid main power fifty kilometers away and a brand new coal fired power station at
thirty-five kilometers away. It is fantastic what the Chinese have done for infrastructure
in these western regions.”
CEOCFOinterviews: What
percentage do you own?
Mr. Netherway: “We currently own 85%. We have two
shareholders; one is the local town, which owns 7.5%, and the other is the geological
survey of the province, which owns the other 7.5%. Once we spend $50 million, we will gain
90% of the project. It is a staged earn-in; when we have spent $35 million dollars, we get
87.5% of the project and at $50 million we get 90%. We have already spent nearly $9
million and we will spend another $47 million on the project. We will easily get the $50
million and therefore 90% of the project by the end of next year.”
CEOCFOinterviews: Having
5% each still keeps them interested in keeping the project running well!
Mr. Netherway: “Absolutely! They are very keen and
supportive. They have helped us and continue to help us get all of our licenses. We are
one of the few; in fact, there are only two gold mining companies in China that actually
have a mining license. We have 99% of the licenses required for this project.”
CEOCFOinterviews: How is
the next year going to develop and what challenges are on the horizon?
Mr. Netherway: “The challenges are funding the
construction, and building the project. For us, building the project is not an issue. The
top three managers in this company have built a number of goldmines in West Africa and
east Africa. We will have a minimum expense and some of those will be Chinese/Canadian,
Chinese/Australian. The challenge of building the projects is not a big risk. We do not
think there is much of a risk in going forward. Even on the exchange rate, I do not think
the Chinese will devalue, they may devalue only slightly, but it will not be dramatic.”
CEOCFOinterviews: How
are you with funding?
Mr. Netherway: “We have announced that we have mandated
Macquarie Bank of Australia to debt finance project, and we are in discussion with them
for this debt financing.”
CEOCFOinterviews: It
seems that with what you have going for you; it should not be a problem!
Mr. Netherway: “That is right! With US$10 million in the
bank right now we have bought the SAG mill from South Africa, which is the largest piece
of equipment and is the only piece that we will import; the rest will be bought in China.
I think we are in good shape to go forward.”
CEOCFOinterviews: Are
there new technologies that can help with building a goldmine?
Mr. Netherway: “Not much! The technology has been around
for a number of years. It has been tried, tested, and proven. We have done a lot of
metallurgical work. We are spending a couple million dollars in Australia on this
metallurgical work. We have refined the technique to get the best recovery of the gold,
but there is nothing new.”
CEOCFOinterviews: Are
you competing with exploration companies and other mining companies, and how do you get
people to take notice?
Mr. Netherway: “We have huge upside on the exploration
as well. Here we are going into production and therefore have our mine producing gold,
money and a company producing revenue. That makes a big difference to an exploration
company that does not have revenue. On the other hand, we are an exploration company and
are continuing exploration. We have a lot of potential immediately. Adjacent to the mines,
are the continuation of the old bodies, and flat-lining structures. We have 23 anomalies
on the licensed areas and we are aggressively exploring those over the year.”
CEOCFOinterviews: As you
prepare for production of a mine, how do you plan for the cyclicality in the gold industry
for the price of gold?
Mr. Netherway: “We will be putting some price protection
in because of the lending of the bank. Otherwise, you take the ride as it comes and hope
that the gold price stays up. We will protect the downside of this project so that
everybody is paid.”
CEOCFOinterviews: In
closing, why should potential investors be interested and what should they know that they
might not realize when they first look at the company?
Mr. Netherway: “AFCAN is one of the leading companies in
China. The Feasibility Study coming out has been signed off by some of the best
consultants in the mining industry and legal firms like Baker and Mackenzie who have gone
through every permit and license. AFCAN has experienced people that have built mines
before and found mines. We are a combination exploration company going into production
with a very experienced team that can make this happen.”
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