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Interview With Continental Minerals on Mining in Tibet

By Erik Dahl
20 Nov 2006

BEIJING (Interfax-China) -- The opening of the Qinghai-Lhasa railroad has spurred economic development in the once isolated province of Tibet and interest in the region's vast mineral potential.

During a recent interview with Interfax, Gerald S. Panneton, the President and CEO of Continental Minerals Corp. [TSXv:KMK] sat down to discuss the company's Xietongmen copper-gold project located 240 kilometers southwest of Lhasa, as well as the obstacles and potential for mining in the relatively untouched region.

INTERFAX: Tibet has vast mineral resources, including China's largest deposits of copper and cadmium. What is the potential for mining in the region and what is the biggest challenge?
PANNETON: The first challenge we have in Tibet, basically, is the infrastructure. As much potential as there is to find a deposit, which may not necessarily be the biggest one, you need infrastructure. If you don't have that infrastructure, I don't think it will be possible in the short term. You can always develop the infrastructure and the best example is the Yulong mine. It didn't have infrastructure and it took a long time before developing the camp in the Yulong area.

Our project wouldn't be facilitated without the infrastructure at Xietongmen.
INTERFAX: Your project has roads and grid electricity. Was this existing infrastructure or put in place to support your project?
PANNETON: All of the infrastructure was put in place by the government over the last five years. Two years ago, there was no road, there was no rail head. They were starting on the power [grid], but all of this was government supported infrastructure. Our project is a two year old discovery, so it was well after the government decided to put in the infrastructure. We did not request for any support.

INTERFAX: How will you overcome the difficulty of working at high altitude?
PANNETON: There are many places which operate at high altitude, for example Chile. Most of the mines in Chile, Peru and Bolivia are all above 4,000 meters and up to 5,000 meters. Mining at high altitude is no problem. The only problem is the productivity is slightly lower because of a lack of oxygen. The cost of operating a mine is a bit higher because of the altitude, again.

INTERFAX: Will you look to employ locals who are already acclimated or bring in a more experienced work force from another province?
PANNETON: The objective is to basically encourage as much local workforce, first because the people there would be interested in working with us and secondly I think it's a lot easier to use a workforce that is already acclimated to the high altitude.

INTERFAX: Will your mine be able to operate year round?
PANNETON: Yes, 12 months a year. It's a very dry climate. It only rains during two months and the precipitation is very low approximately 400 millimeters a year during June, July and August. In tropical areas where it rains a lot it creates problems. Being in a dry environment is very good

INTERFAX: What is your target market?
PANNETON: I think it's going to be for the domestic market because the need for metals in China is so important that they have to import so much that having a product locally for their own market, the best place to ship is within their own market domestically.

INTERFAX: What kind of processing will you do at the mine site and how big of a problem is transportation costs?
PANNETON: Our product will be a concentrate that will be shipped to a smelter facility in Central China. The cost of shipping the concentrate is much lower than shipping across the ocean, so I don't see much problem in terms of cost.

INTERFAX: Do you think mining will act as a driver of infrastructure development in Tibet?
PANNETON: I think the infrastructure put in by the government was a first step to address different aspects of the Tibet economy, not just mining, but it of course opened opportunities to commercial mining. I think it's a combination of commercial trade and knowing that central China doesn't have the resources and they must develop the west. It's a 'Go West' phenomenon but there are many facets to the infrastructure being put in place.

INTERFAX: As infrastructure expands, will there be more interest in the region from mining firms, especially foreign companies?
PANNETON: Yes, there is good potential to develop more projects in the area, as long as you are 100% environmentally friendly. This is a message we received loud and clear.

INTERFAX: What is the regulatory environment like in Tibet? How supportive are they of foreign companies?
PANNETON: Extremely, extremely supportive. We discussed with the local government and the provincial level and we had an extremely good relationship with them by just asking them what they were expecting from us as well as discussing with them the different paths for moving the project forward.

INTERFAX: What is the government expecting from your company?
PANNETON: To be supportive in the community, be environmentally friendly, respect the local culture, and develop sustainability in their economy, and eventually provide jobs at the mine site and opportunities for the people living locally.

INTERFAX: Tibet is a very environmentally fragile area. Are there any special environment regulations?
PANNETON: World Bank standards dictate environmental practice around the world. From my past experience of building mines in different places around the world, I worked for a multinational company for a number of years and I built two mines in the last five years and Xietongmen will be my third project, and you basically just apply World Bank standard environmental practices. This is a work in progress and I cannot comment in much detail because we are doing our baseline studies and all the environmental practice. We are evaluating all the impacts and within our document which we will be providing to the government for our application, we will have all the impact of putting a mine in Tibet as well as all the mitigation that needs to be done in case there are any problems.

In every project in the world, you do a mine there is an impact and there's a mitigation process. But it is also a code of conduct to avoid any problem. The objective is to understand all of the impacts from the beginning to make sure we are well prepared for any problem. Sometimes you don't have any problems. I worked for a multinational for many years and we never had any environmental disasters so it is possible to prepare yourself to have a perfect track record and protect the environment in Tibet.

INTERFAX: Can you talk about your efforts to build community support for the project?
PANNETON: First, we were told by the government, and I'm not sure how far I can go with this because it's a compliment but just to set the record straight, we are being shown as a role-model for exploration and development in China as one of the best Junior Canadian companies.

In terms of what we're doing locally, we first ask what they need and listen to them. Sometimes you go into an area and they don't have water, they don't have medical support, they don't have electricity or they don't have access to something. We're there to provide any support we can.

For example, the main issue is the low rainfall because the evaporation is 1.4 meters versus 0.4 metres rainfall is negative, so we need to find a way to provide enough water to sustain agriculture. We are in the process of working with the Agriculture Society of Tibet to implement sustainable agriculture, diversification of crops, tree planting or tree harvesting, all based on water irrigation from water which will be collected all year round.

Once we first posted our intention to take people from the village to this agriculture school south of Shigatse, we had 60 people from the village request to go. So there is a tremendous commitment by the villagers to work with us to develop the sustainability of their economy locally so that before the mine, while the mine is in operation which could go from between 15 years to more years if we find another deposit, and after if we close, there will already be infrastructure put in place to sustain their own economy.

INTERFAX: In mining circles, there seems to be increasing talk about the importance of building community support. Do you think there is more emphasis on the importance in building community support now than maybe 20 years ago?
PANNETON: I think mining has already been community friendly. I can cite some examples from 20, 30, or 40 years ago. In Canada, as a Canadian, it has always been [community friendly]. I lived in a mining town for about 12 years. The level of support the mining drew from the community, it's all important and it's all good. This is something that as a Canadian we grew up with. It's something that's always been there.

InterFax-China 2006. For more intelligence on Chinese metals and mining, click here or call Alison Crawford in London on +44 (0) 20 7256 3919.

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