While many Australians enjoyed summer holidays at the beach, a team of exploration geologists was hard at work in minus-40C conditions in the South Gobi Desert of Mongolia for Xanadu Mines.
Their focus and fortitude has paid off – surface rock chip sampling at the Oyut Ulaan copper-gold project has revealed exceptional results including 305.8gpt gold, 171.6gpt gold and 123.2gpt gold, confirming shallow high-grade gold mineralisation in three parallel zones, within 1.5km.
They were discovered using knowledge gained from exploration at the company’s flagship Kharmagtai copper-gold deposit, which lies in the South Gobi about 120km north of the giant Rio Tinto-controlled Oyu Tolgoi copper-gold mine.
Xanadu believes Kharmagtai is currently one of the most promising copper-gold projects in Asia.
Despite industry headwinds over the past 12 months Xanadu has been able to build a significant JORC-compliant mineral resource estimate at Kharmagtai on only a small portion of the large under-explored mining licence.
Kharmagtai has a growing resource of base of 203 million tonnes at 0.34% copper and 0.33gpt gold, or 0.55% copper equivalent, containing 1,500 million pounds of copper and 2.2 million ounces of gold.
Significantly the resource includes a shallow high-grade core of 56Mt at 0.47% copper and 0.59gpt gold (0.85% copper equivalent) and contains 580Mlb of copper and 1.1Moz of gold.
Mongolia-based CEO Dr Andrew Stewart said Xanadu has established an advanced portfolio of high quality projects across Mongolia’s copper belts and the company had all the right ingredients to be successful.
“Ten years ago a significant and strategic footprint in Mongolia was considered a necessity for every global copper company on the back of the Oyu Tolgoi discovery,” he said.
“With the rapid development of the giant Oyu Tolgoi, and along with the Erdenet deposit, Mongolia now has two of the biggest copper mines in the world and importantly, they’re both in production.
“Majors are starting to return to Mongolia because nothing has really changed – the geology is very prospective, it has a stable minerals law, it’s at the bottom of the cost curve and is right next to the biggest copper market in the world in China.”
Xanadu sees Mongolia’s potential as one of the last great copper frontiers
Stewart worked in Mongolia for Ivanhoe Mines, the company that discovered the Oyu Tolgoi deposit, and has been involved in several green fields discoveries throughout Asia for Vale and Oriana before putting together Xanadu’s copper projects in 2010.
“We saw a great opportunity in Mongolia. It is an emerging copper hot spot and is really one of the last great exploration frontiers as it has the right geology, but remains under explored, has a sparse but skilled population and it’s on China’s doorstep – it’s a great place for a junior exploring today,” Stewart said.
The company has started 2016 in a prime position, with spectacular exploration results, cash in the bank and control of its flagship Kharmagtai project.
It struck a deal with TSX-listed Turquoise Hill Resources (TRQ) to reduce the balance of the deferred consideration for Kharmagtai by more than US$1 million.
“The revised agreement with TRQ allows us to achieve the important milestone of full repayment of the deferred consideration at less than budget, allowing us to deploy the this extra capital into exploration drilling at Kharmagtai,” Stewart said.
“Xanadu is now able to enter 2016 with is main asset fully secured and an improved balance sheet.”
Xanadu and its 10% joint venture partner Mongol Metals LLC have acquired 90% of Kharmagtai and under the JV, Xanadu has the right to earn an 85% interest, equivalent to a 76.5% effective interest, by funding deferred acquisition and exploration costs.
Stewart said as only a small portion of Kharmagtai had been explored, it held the potential to host large-scale, high-grade copper-gold mineralisation and potentially shallow high-grade epithermal-style gold mineralisation.
“Kharmagtai is drilling sensationally,” Stewart said.
“Our strategy is to create shareholder value through conversion of our exploration projects in the South Gobi of Mongolia into mineable deposits through discovery of high value copper, gold and gold resources.
“The beauty of it is that both Kharmagtai and Oyut Ulaan are the same geological age as Oyu Tolgoi, and both projects have enormous potential.
“And even though our projects are 200km apart, they are geologically very similar, so what we learn at one we can take to the other.
“Last year, for example, we identified a new style of breccia-hosted copper mineralisation at Kharmagtai, which is characterised by very high-grade copper and was previously considered not mineralised; but persistence and deeper drilling and the discovery of this new mineralisation has changed the scale of project quite significantly.
“We’ve taken these new ideas to Oyut Ulaan and plan to drill some of those holes later this year to test our model.
“An additional benefit to exploring within these porphyry districts are that they often harbour many different styles of mineralisation including high-grade gold and base mental veins that can actually represent standalone discoveries.”
Stewart said porphyry copper deposits typically required time and large capital expenditure to get into production so discovering shallow, high-grade mineralisation within the shadows could often assist in getting a copper behemoth underway.
He said Xanadu was also keeping an eye out to build its Mongolia portfolio.
“Often when majors and mid-tiers get distracted at the bottom of commodity cycles, projects become available and these opportunities are appearing right now – when previously a junior may not have been able to afford them,” Stewart said.
Investors have demonstrated their support for Xanadu with a successful A$8 million share placement snapped up late in 2015.
“We did the raise with quite short notice and it was hugely successful,” Stewart said.
“I put that down to strong support received from new and existing sophisticated and institutional shareholders.”
Xanadu is notching up sensational exploration results
Xanadu is well-funded to continue exploration at its flagship Kharmagtai project and the Oyut Ulaan project.
Stewart said Xanadu was very focussed on finding higher grades and was targeting copper material greater than 1% copper.
He said with the right team, the right focus, the funding and the perfect prospectivity, Xanadu was on track to make a transformational discovery.
“We’ve put together a team of proven explorationists who are experts in the area they’re working in,” Stewart said.
“We have several projects, with excellent gold potential, and we have staff with years of experience in Mongolia.
“The other factor that sets us apart is that we like looking for big deposits.
“With a big mine there is greater scope for success and better economies of scale.”
He said Xanadu was poised to benefit from the forecast increased copper demand and lack of major projects in the pipeline around the world.
“We can’t forecast when it will happen, but when demand turns around it will do so quickly and that’s where Xanadu fits in,” he said.
“We want to be there with the next standout gold-rich copper project in Asia.
“It’s a once-in-a-generation opportunity that we have and we’re looking for that significant discovery at Xanadu.”
Xanadu Mines – at a glance
HEAD OFFICE: Level 12, 680 George St, Sydney NSW 2000
Phone: +61 2 8280 7497
Fax: +61 2 8280 0350
Mark Wheatley, Ganbayar Lkhagvasuren, Hannah Badenach, Darryl Clark, Barry Lavin, Marcus Engelbrecht and Andrew Stewart (CEO, pictured left)
QUOTED SHARES ON ISSUE: 445.3 million
MAJOR SHAREHOLDERS: ACA associated interests (CAAF Ltd and Copper Plate Success Ltd) 26.64%, Noble Resources International Pte Ltd 7.92%, Sakari Energy Trading Pte Ltd 5.53%, Fast Lane Australia Pty Ltd and its associate 5.73%