Xanadu Mines Ltd (ASX: XAM, TSX: XAM) has announced a highly encouraging update regarding its flagship Kharmagtai project in Mongolia.
The company reported that a large-scale global copper-gold exploration target has been upgraded for Kharmagtai Project above and beyond the 2018 Mineral Resource Estimate.
XAM said that the Exploration Target is based on 190 diamond drill and 73 reverse circulation drill holes completed since 2002 at Kharmagtai at five separate porphyry centres with over 77,808 metres of new diamond drilling completed by Xanadu.
The company announced that additional sulphide metallurgical work is in the final stages of completion. Xanadu reported that it has uncovered compelling vectors to a very large-scale system below the surface deposits.
The company said that further drilling is planned to convert mineralisation within the Exploration Target into resources; extend current high-grade mineralisation; and test seven targets outside of the Exploration Target.
XAM said that the independent Valuation for the Kharmagtai Project has been completed.
Kharmagtai project
The Kharmagtai Project is an advanced copper-gold exploration project located in the Omnogovi Province of southern Mongolia and secured under a mining licence.
The Kharmagtai Project consists of a number of separate sulphide deposits, Stockwork Hill, White Hill, and Copper Hill; and two new deposits, Golden Eagle, and Zaraa, recently identified by Xanadu.
Mineral Resource and/ or Exploration Target estimates have been prepared for all of these deposits, which are classified as Indicated and Inferred in accordance with the guidelines of the JORC Code.
Significant increase in exploration targets
The company reported that an exploration target has been developed for the Kharmagtai lease with the aim of highlighting the large-scale copper-gold potential of the project.
XAM said that five targets have been reviewed across the lease ranging from extensions to existing resources at Stockwork Hill, White Hill and Copper Hill to the recently discovered Zaraa and Golden Eagle deposits.
The company reported that two styles of exploration target have been defined. XAM said that the Exploration Target is based on 190 diamond drill and 73 reverse circulation drill holes completed since 2002 at Kharmagtai at five separate porphyry centres with over 77,808 metres of new diamond drilling completed by Xanadu.
Table 1 below shows the exploration targets as a range define based on drill results and extensions of the 2018 Mineral Resource Upgrade only; while Table 2 shows exploration targets as a range where corroborating geophysical and geological data at Zaraa highlight potential extensions to that target.
SRK conducts independent valuation
The company announced that an independent valuation of the Kharmagtai Property was conducted by SRK Consulting (Australasia) Pty Ltd (SRK) in accordance to the VALMIN Code (2015).
The objective of SRK’s report was to demonstrate the difference between the current company market valuation and a conservative and independent expert valuation of one of the projects within Xanadu’s portfolio.
The valuation summary from SRK is noted below.
SRK said that based on its review of the values implied by the various valuation methodologies, it considers the market would pay in the range between US$108.0 M and US$233.6 M, with a preferred value of US$173.6 M for a 100% interest in the Kharmagtai Project, as at the Valuation Date.
After considering Xanadu’s effective and beneficial 76.5% interest, SRK considers Xanadu’s interest in the Kharmagtai Project would range between US$82.6 M and US$178.7 M, with a preferred value of US$132.8.0 M.
Drill program for converting to Inferred mineral resources
The company announced that a geophysical and drill program has been designed and costed to convert the Exploration Targets into inferred Mineral Resources and discover the hypothesised very large-scale copper gold porphyry system beneath the existing resources.
The first phase of exploration would consist of a tenement wide seismic survey conducted in parallel with a similar spaced deep seeing magnetotellurics (MT) program.
Seismic would be used to define the fault architecture of the entire mining lease to ensure the drill targeting is as accurate as possible.
A magnetotellurics program would be conducted to identify large zones of sulphide mineralisation located beneath the structures highlighted by the seismic survey.
The company said that this program has been costed at between $300 to $600K depending on the geophysical contractor used and would form the basis of the drill targeting for the Oyu Tolgoi sized system at Kharmagtai.
XAM said that drill holes have been planned for Stockwork Hill, Copper Hill, Zaraa and elsewhere within the tenement to convert the above exploration target into an inferred mineral resources.
Management comments
Xanadu’s Managing Director & Chief Executive Officer, Andrew Stewart, said: “We have always had a strong belief in the large-scale copper-gold potential of Kharmagtai. This Global Exploration Target outlines the areas we are aiming to convert to resources in the near to mid-term.
Additionally, our geologists have highlighted a series of compelling geochemical and geophysical vectors which suggest mineralisaiton within this Exploration Target is just the tip of a much larger porphyry system.
We know these systems exist in Mongolia as the giant Oyu Tolgoi is currently being mined some 120km to the south of Kharmagtai and we believe that Kharmagtai is a similar type of system.
Additionally, we are in the final stages of completing metallurgical work for the three existing sulphide deposits, which is aimed at increasing the already good recovery assumptions made in the 2018 mineral resource upgrade. Finally, an independent valuation of the Kharmagtai project has been completed by independent consultants, SRK.
We commissioned this valuation to highlight to the market the disparity between the company’s current perceived value and the Kharmagtai project’s potential value.
Our long running objective is to develop Mongolia’s next large-scale copper gold deposit. Our current strategy of seeking high-return options via an oxide gold project is focused on providing the capital needed to advance that larger scale copper and gold project”.
