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TGR: The country is literally dotted with all kinds of artisanal mines.
NW: They were so focused on making money that they were acting as if they were the smallest of junior mining companies where making money was the sole focus, not doing good work.
TGR: But the potential is there.
NW: Oh, the potential is staggering. A mineral occurrence map of East Asia shows multiple world-class deposits around the borders of China. However, there are very few inside China. Why did China miss out? It has nothing to do with geology. I has to do with the history of the country and how exploration developed. China is fantastically endowed, but very poorly explored.
TGR: But even the Chinese government is not compelled by its geology. Chinese state-owned companies are spending billions to develop resources beyond its borders. Isn't it difficult to argue for further mineral exploration and development in China when the Chinese themselves seem unconvinced?
NW: A huge amount of money is being channeled by the government into exploration teams in China. Some of them are quite competent, but many of them are not. It's basically pouring good money out after mostly bad.
Then the government asks, "Well, why haven't we found all these deposits in China?" But the "experts" they are asking don't know anything about the economic geology of China. They say, "We've spent a huge amount of money looking for these deposits and haven't found them. Therefore, they mustn't be there." That conclusion is wrong. Most of the money is being used in completely ineffective ways.
TGR: What is the environment for juniors wanting to capitalize on that potential?
NW: The geological potential of China is fantastic. But let's not pretend otherwise-it's a difficult place to work for other reasons. When Asia Now went in 10 years ago, China was encouraging foreign companies to come in. A lot of juniors went into China. Some did quite well. Many of them did really badly. Subsequently, conditions have become less and less favorable. The policies change almost on a yearly basis. It's more challenging today than it was 10 years ago.
TGR: What's the best way to get started in China?
NW: The best way to work in China is to joint venture with a good state-owned company. Asia Now chose very good projects and joint ventured with two partners. It's very much like a joint venture in a Western company. Mining law in China is provincial. Having a Chinese partner that can handle government and community relations for you is a major advantage. Many foreign companies don't understand the system, the requirements-they don't have the connections and the relationships that can make things easier. Life is much easier when you have a good local partner.
TGR: Oyu Tolgoi is the mammoth copper-gold porphyry deposit being developed in Mongolia by Rio Tinto (RIO:NYSE; RIO:ASX). You're an expert in porphyry deposits. Do you believe further exploration of those geological systems could yield a similar deposit in China?
NW: There are a lot of porphyry prospects in China, but there's been very little effective exploration on them. The situation is changing because more Chinese have familiarity with porphyry deposits. However, in most cases, if they even recognize a porphyry, they will drill a couple of holes and walk away because they didn't get what they wanted. Porphyry deposits are very big, but that doesn't mean they're easy to find. They can't just drill a couple of holes and say, "Oh well, we've done it." In fact, Asia Now is exploring a porphyry system that had never been recognized in southeastern China, down toward the Vietnam border.
TGR: Is that Habo?
NW: Yes. Asia Now has drilled about 20 holes, but certainly hasn't finished exploring. The potential remains in that area. But why wasn't it found before? There were about 10 centimeters of forest soil and dead leaves hiding it. Until the surface was scraped away, it couldn't be seen. It's not that geologists hadn't looked in that area, they just hadn't seen it. That's true all around the world. It takes very little to hide something.
China has great potential for more porphyry systems. In fact, there have been a lot of porphyry systems found in Tibet because it's a well-exposed area and a well-defined belt. There is a need for people to get back into eastern China where there are numerous known porphyry systems that have never been explored properly.
TGR: Do you think that Habo will ever get to the point where it is a major porphyry system that is mined and is economic?
NW: It's at an important stage now. The work that is being done right now will make or break Habo. So far, no sufficiently wide zones of high-grade mineralization have been found. Many narrow zones have been found, but that doesn't make a porphyry deposit because large volumes are needed to bulk mine.
It's still an open question. We still don't know the answer. We're drilling targets that have the potential to be an economic ore body. Time will tell.
TGR: Is the work being done on Habo changing the way Chinese geologists think about geology in China?