This article is a sponsored feature from Mining.com.au partner Kincora Copper Limited. It is not financial advice. Talk to a registered financial expert before making investment decisions.
Long known for its significant coal production, the Southern Gobi region of Mongolia is emerging as a critical new source of copper supply, with an influx of majors demonstrating the opportunities on offer.
The region has an endowment of 85 million ounces of gold and 50 million tonnes of copper, which has drawn the likes of Rio Tinto (ASX:RIO), BHP (ASX:BHP), China’s Zijin Mining Group (HKG:2899) and the original Ivanhoe Mines (which became Turquoise Hill and was acquired by Rio Tinto in late 2022).
Between 1997 and 2007, large district-scale exploration in the Southern Gobi accounted for 9% of contained metal discovered globally over that decade. Then, between 2007 and 2012, a lot of majors took positions in the region, with momentum regaining again recently.
Rio Tinto, BHP and Zijin have, in the past two years, either made their foray into the region, or increased their existing investments.
In March last year, Rio Tinto began production from the underground mine at Oyu Tolgoi, which is on track to become the world’s fourth largest copper mine by 2030.
Since 2010, Rio Tinto – in partnership with the Mongolian Government – has invested around $15 billion in the Oyu Tolgoi operation, which is expected to produce around 500,000 tonnes of copper each year between 2028 and 2036, from the open pit and underground.
That is enough copper to make about 6 million electric vehicles each year.
Xanadu Mines (ASX:XAM) is working through a Prefeasibility Study for its flagship Kharmagtai Copper-Gold Project, having recently completed one of the largest porphyry exploration drilling programs in the world, comprising around 54,000m.
In April 2022, Zijin Mining entered a $64 million strategic partnership with Xanadu, investing in both the company and the Kharmagtai Project, which is on track for a final investment decision this year ahead of anticipated first production in 2027.
Last year BHP provided investment under its Xplor program to Asian Battery Minerals (ASX:AZ9), which made a small intrusion-related magmatic nickel-copper-platinum group element discovery at its Oval Project. Asian Battery Minerals recently completed a reverse takeover with Doriemus and raised $6 million at a $23 million pre-money valuation.
Then there is Mongolyn Alt’s (MAK) Tsagaan Suvarga Copper-Molybdenum Project, which is in construction and scheduled to start oxide production in 2025, followed by sulphide production in 2026.
The project, which is included on the Mongolian Government’s list of strategically important deposits, has reserves of 1.5 million tonnes of copper and around 60,000 tonnes of molybdenum.
A new era for Mongolia
Kincora Copper (ASX:KCC) CEO Sam Spring tells Mining.com.au the Southern Gobi district is one of the fastest growing new areas of copper supply globally.
“Last year 60 million tonnes of coal came out of the neighbouring coal district,” he notes.
“So you look at that Southern Gobi region, it’s one of the fastest growing mining and infrastructure regions anywhere in the world right now.”
Copper production in Mongolia is forecast to rise to 800,000 tonnes by 2028, up from 300,000 tonnes last year, marking a substantial 167% increase over five years.
Mongolian Minister of Mining and Heavy Industry Ganbaatar Jambal says the country is currently exporting about 1.4 million tonnes each year of copper concentrate with the potential to ramp up to 2-2.5 million tonnes annually in the future.
“Besides [Oyu Tolgoi], other projects are moving towards mining,” he says in Global Business Reports’ ‘Mongolia Mining 2024’ report.
“Zijin, one of the largest Chinese investors, financed the development of the Kharmagtai Copper and Gold Project, operated by Xanadu Mines, while operations at the Tsagaan Suvarga Mine are progressing according to plan, taking us closer to the goal of becoming the third largest copper producer in the world.”
Now there is potentially a fourth emerging porphyry district in the Southern Gobi Belt. Kincora Copper’s Bronze Fox Project was first discovered by the original Ivanhoe Mines, which deemed it a highly-rated project and retained it with Oyu Tolgoi and Kharmagtai.
The Bronze Fox Project now hosts three large and underexplored porphyry intrusive complexes and a maiden inferred resource of 426,000 tonnes of copper and 437,000 ounces of gold (using the same open pit depth and cut off criteria as the Kharmagtai Project) at a small portion on the margin of just one of these intrusive complexes.
Recent capital-constrained exploration by Kincora has refined a target pipeline of up to 12 porphyry copper and seven epithermal gold targets ranging from greenfield to brownfield resource expansion.
This prompted Kincora to update its exploration target to a further 100-300 million tonnes @ 0.25-0.35% copper equivalent.
Copper boom brings the deals to the table
With highly prospective ground in both New South Wales and Mongolia, the junior explorer, which has a market capitalisation of $10.6 million, has now brought in the firepower necessary to advance the Bronze Fox Project, where plans are in the works to secure a second mining licence and commence a greenfield and brownfield drilling program from next month.
This would provide mining licence coverage and 30-year tenure over the full Bronze Fox Project which Kincora says hosts one of, if not the largest mineralised from surface porphyry complexes in Mongolia.
“For a relatively modest amount of money you could get a second mining licence, consolidate the three intrusions, expand the existing resource, drill a new porphyry target that’s never been drill tested – that we think is relating to the biggest lithocap in the Gobi, and a new downhill porphyry discovery would certainly add a lot of value,” Spring tells Mining.com.au.
“Our pivotal focus has really been towards New South Wales, looking to do deals with funding and technical partners, including the recent AngloGold Ashanti and Fleet Space deals and Earth AI commencing drilling at another project, that hopefully demonstrates the value that we think sits in the portfolio there.
“It’s hard to do district-scale positions in two different jurisdictions justice when you’re the market capitalisation that we are.
“So it’s trying to get that balance right.”
Following talks with several interested parties, Kincora has secured an earn-in partner for the Mongolian assets in line with its strategy of doing deals to unlock the value of its existing project pipeline, a strategy which has bought in potentially $60 million of multi-year partner funding.
Woomera Mining (ASX:WML) is the keen new entrant that has agreed to do the heavy lifting to advance the Bronze Fox Project.
The company can earn an 80% stake in the project by spending up to US$4 million ($6.1 million) over five years, and, importantly for Kincora, it becomes Woomera’s largest shareholder and retains a carry/bullet payment and net smelter royalty model for future exploration and development successes.
Woomera CEO Ralf Kriege says the large existing resource inventory is only a very small part, and on the margin of one of three near-surface and large porphyry systems, which illustrates the substantial scale of the systems and the opportunity.
“Overnight we have transformed Woomera into a key player over one of the most active new exploration and mining frontiers in the world for copper,” he says.
“My recent site visit really emphasised the level of activity taking place in this belt, true district-scale of the cluster of porphyry systems at Bronze Fox and scope for the higher grade core of these systems.”
Woomera has a highly successful team, including Chair Ian Gordon and David Richards, as well as a strong shareholder register, including Tim Goyder.
Road well travelled
Earn-in agreements are a well-trodden path for juniors that allows them to bring in the experience, funding and time necessary to advance one project while freeing them up to focus on their flagship assets.
This also provides Kincora with exposure to the upside of the continued advancement of the Bronze Fox Project.
Once Woomera has earned its 80% stake, it then has the option to acquire the remaining interest for US$10 million in cash and a 1% net smelter royalty. That royalty would provide Kincora with continuous cash flow, once the project is in production, to fund its other exploration projects.
Woomera also has the alternative option of entering a shareholders’ agreement, which would see Kincora free carried through to a final investment decision for a project that has a reserve of at least 1 million gold equivalent ounces.
Kincora would also retain any share price upside that Woomera realises through advancing the Bronze Fox Project, having become its largest shareholder.
For the 2024 field season, a high-impact and value-add program is planned from next month, including a drilling program aimed at confirming a new downhole discovery at the Shuteen North Intrusive Complex.
The complex is interpreted to be associated with and the source for the “massive” Shuteen lithocap.
The lithocap was a key element in the Oyu Tolgoi discovery, but Kincora says Shuteen is much larger, making the Shuteen North Intrusive Complex and porphyry system targets highly anticipated and prospective.
Brownfield drilling is also expected at the Bronze Fox Intrusive Complex, including resource expansion drilling looking to confirm new higher grade zones and stepping out from hole F62, which intersected 929m @ 0.37% copper equivalent including 37m @ 1.01% copper equivalent.
Write to Angela East at Mining.com.au
Images: Rochelle Padua and Kincora Copper
