Acquisition of 90% of Kharmagtai Copper-Gold Project
Kharmagtai is an advanced porphyry copper-gold exploration project with significant mineralisation and substantial exploration potential. The acquisition is a significant milestone in the implementation of Xanadu's Mongolian copper strategy. Kharmagtai complements the Oyut Ulaan and Sharchuluut projects and establishes Xanadu as having one of the most highly prospective copper-gold exploration portfolios in Mongolia.
Mongol Metals will pay initial consideration of US$4.0 million with deferred consideration of US$10.0 million to be paid over 18 months (total consideration of US$14.0 million). Mr Ganbayar Lkhagvasuren, Xanadu's Executive Director and joint venture partner, has committed US$4.0 million to Mongol Metals prior to completion. Xanadu has committed to spending around US$900,000 up to completion (approximately US$700,000 to date including US$250,000 of an initial US$500,000 deposit) to earn a circa 18% interest in Mongol Metals. Xanadu has the right to earn at least 85% of the Mongol Metals joint venture company through funding exploration and acquisition costs. The THR acquisition terms are set out in Appendix 1 in link below.
Xanadu's Managing Director, Mr George Lloyd, said: "Kharmagtai is one of the most advanced, undeveloped copper projects in Mongolia and places Xanadu and Mongol Metals at the forefront of unlocking Mongolia's copper potential. The transaction also demonstrates the strength and value of our strategic partnerships with Mr Ganbayar Lkhagvasuren and the Noble Group following the challenging business conditions of the last 18 months."
A key condition of the transaction is approval by Xanadu's shareholders and a Notice of Meeting will be distributed in due course.
The Kharmagtai project (Figure 2) is located within the South Gobi porphyry copper province which hosts most of the known porphyry deposits in the South Gobi region of Mongolia, including the giant Oyu Tolgoi copper-gold operations (120km south), the Tsagaan Suvarga porphyry copper-molybdenum development (170km east) and Xanadu's Oyut Ulaan porphyry copper-gold exploration project (260km northeast). The project is located within the Omnogovi Province, approximately 420km southeast of Ulaanbaatar and 60km north of the Tavan Tolgoi coal deposit.
The Kharmagtai mining license, MV-17387A, (Figure 3) covers approximately 66km2. It is held by Oyut Ulaan which is 90% owned by THR Oyu Tolgoi Ltd (a wholly owned subsidiary of THR) with the remaining 10% owned by Quincunx Ltd.
GEOLOGY & MINERALISATION
Kharmagtai is an advanced exploration project consisting of multiple co-genetic gold-rich porphyry copper centres (Figure 3) and tourmaline breccia pipes occurring within the Lower Carboniferous Kharmagtai Igneous Complex ("KIC"). Extensive exploration including trenching, diamond drilling and geophysics (as summarised in the JORC Table 1 included in Appendix 4) has to-date identified significant shallow high-grade porphyry copper-gold mineralisation within the Altan Tolgoi, Tsagaan Sudal and Zesen Uul prospects, which are located within a 700m radius of each other.
Altan Tolgoi Prospect:
There are two recognised mineralised zones at Altan Tolgoi approximately 100m apart. The Southern Stockwork is a strongly mineralised stockwork zone with a high-grade gold core which is at least 550m long and up to 600m deep. The stockwork zone widens eastward from a 20 to 70m wide high-grade zone in the west to a 200m wide mediumgrade zone in the east. Mineralisation remains open at depth and along strike to the east.
Drilling includes three holes drilled down the core of the deposit, at 40m spacing along strike, the intercepts from west to east being:
- KHDDH240 - 245m grading 0.75% Cu & 2.48 g/t Au (from 3m);
- KHDDH259 - 203m grading 0.45% Cu & 2.45 g/t Au (from 3m); and
- KHDDH281 - 210m grading 0.63% Cu & 1.61 g/t Au (from 28m).
The Northern Stockwork is centred on quartz-diorite dykes that are 0.5 to 20m wide. These thin dykes and their irregular geometry are typical of the shallower zones of a porphyry system. The near surface expression is 250m long, 150m wide long and at least 350m deep. Grades are generally from 0.3 to 0.5 g/t Au & 0.2 to 0.6% Cu. Better intercepts are up 3 g/t Au & 1% Cu, over widths of 10 to 40m.
Tsagaan Sudal Prospect:
Mineralisation at Tsagaan Sudal occurs as a broad stockwork zone (with grades of 0.3 to 0.4% copper and 0.1 to 0.3 g/t gold) that is at least 850m long, 550m wide and 500m deep, and forms a pipe like geometry. Significant drill intercepts include the following:
- KHDDH301 - 527 m grading 0.32% Cu & 0.34 g/t Au (from 22m); and
- KHDDH324 - 528 m grading 0.36% Cu & 0.22 g/t Au (from 148m).
Zesen Uul Prospect:
At Zesen Uul the stockwork zone forms a sub vertical body of quartz-chalcopyrite-pyrite vein stockwork mineralisation. The stockwork has a small surface expression (200 x 100m) but at depth is defined as a 350m long and 100m wide elongated body that plunges to the southeast. Mineralisation has a well-defined high-grade core (grades 1 to 3% Cu & 2 to 7 g/t Au) with quartz veining tightly focused within the pipe-like stockwork zone. Zones of high-grade mineralisation are characterised by gold (g/t) to copper (%) ratios that typically exceed 2:1. Mineralisation remains open at depth and along strike to the east.
Significant drill intercepts include the following:
- KHDDH006 - 182m grading 0.47% Cu & 0.52 g/t Au (from 108m);
- KHDDH004 - 94m grading 0.65% Cu & 2.06 g/t Au (from 98m); and
- KHDDH021 - 88m grading 0.85% Cu & 1.30 g/t Au (from 50m).
The Tourmaline Breccias do not outcrop, are generally below 200m depth, and are open to the east and at depth. Mineralisation is associated with chalcopyrite in the tourmalinerich matrix. Intercepts are commonly over several hundred metres wide and grades range from 0.3 to 0.6% Cu & 0.4 to 0.8 g/t Au. Younger tourmaline-pyrite breccias post-date the stockwork event. Significant drill intercepts include the following:
- KHDDH283 - 562m @ 0.36% Cu & 0.34g/t Au (from 194m);
- KHDDH263 - 354m @ 0.48% Cu & 0.50g/t Au (from 304m); and
- KHDDH275 - 298m @ 0.45% Cu & 0.58g/t Au (from 358m).
The gold-copper porphyry systems identified at Zesen Uul, Tsagan Sudal and Altan Tolgoi may be connected at depth and therefore cogenetic.
Xanadu has reviewed the historical drilling data and completed a geological model (Figure 4) which has resulted in an initial Exploration Target covering the Altan Tolgoi, Tsagaan Sudal and Zesen Uul prospects. Additional information used to define the Exploration Target included surface mapping, trenching and extensive geophysics.
An Exploration Target of between 250 to 400Mt at an average grade of 0.25 to 0.30% Cu & 0.25 to 0.30 g/t Au has been estimated for the Kharmagtai project. Contained within this target is a higher grade target of 50 to 80Mt at an average grade of 0.4 to 0.5% Cu & 0.6 to 0.8 g/t Au.
The potential quantity and grade of the Exploration Target is conceptual in nature. There has been insufficient exploration to estimate a Mineral Resource under the JORC 2012 code and it is uncertain if further exploration will result in the estimation of a Mineral Resource.
Proposed exploration activities designed to test the validity of the exploration target and increase the current drill density comprises 15,000 to 20,000m of diamond drilling. An increase in drilling density would be likely to improve the current level of understanding of the overall morphology of the mineralisation and may support estimation of a Mineral Resource. The diamond drilling is expected to be staged over an 18 to 24 month period.
A majority of the strongly mineralised porphyry complex lies under unexplored shallow post-mineral sediments. Porphyry mineralisation at Kharmagati is associated with widespread magnetite alteration and all the main prospects are associated with broad magnetic highs (Figure 5). A regional magnetic survey outlines numerous distinct circular magnetic anomalies in the vicinity of the Altan Tolgoi, Tsagaan Sudal and Zesen Uul prospects. The large licence area has only been partially explored and the potential for further discoveries remains high.
CORPORATE & PROJECT FUNDING
Xanadu and Mongol Metals have arranged US$8.0 million of new funds. This secures funding for the initial acquisition consideration and proposed exploration activities for 2014.
Mr Ganbayar has agreed to subscribe for US$4.0 million of equity in Mongol Metals to fund the initial acquisition consideration. Xanadu and the Noble Group have entered a financing agreement for a further US$4.0 million to fund the acquisition and exploration of the Kharmagtai project by way of Xanadu's subscription for shares in Mongol Metals. The key Mongol Metals joint venture and Noble financing terms are set out in Appendices 2 and 3 respectively.
Xanadu is also considering a number of alternatives to fund working capital in relation to the acquisition.
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About Xanadu Mines
Xanadu Mines Ltd is a Mongolian exploration company founded in 2005 and listed on the ASX on 21 December 2010 (ASX:XAM).
Xanadu maintains a dual exploration strategy for base metals (porphyry copper and gold) and coal (coking and thermal), given the unique opportunity presented by Mongolia's world class geological endowment. The country has a vast cache of walk-up drill targets many of which have never before been subjected to modern or advanced high technology exploration.