Xanadu Mines reports major boost to resource estimate at Kharmagtai copper-gold project

Exploration company Xanadu Mines (ASX: XAM) has reported a major increase to the open cut mineral resource estimate at its Kharmagtai copper-gold project in Mongolia’s rich South Gobi province, to 598 million tonnes containing 1.9mt copper and 4.3 million ounces gold (2.6mt copper equivalent).

The new estimate – which incorporates results from the company’s fourth porphyry discovery at the Zaraa prospect within the Kharmagtai lease – reflects a 400% increase in contained copper and a 249% increase in gold compared to the maiden estimate in 2015, but at the same 0.3% copper cut-off grade.

It includes results from diamond core and reverse circulation drilling activities carried out since 2015 as well as an infill drilling program completed this year, totalling 8725 metres over 27 holes.

Chief executive officer Dr Andrew Stewart said the new estimate demonstrates the Kharmagtai mineralisation is “robust and continuous” with over 22% of the resource now placed in the indicated category.

“The substantial increase in the revised resource combined with higher confidence from [our] recent resource drilling is expected to have strong positive impact on the life of mine at Kharmagtai,” he said.

“We are committed to maximising the development potential of this deposit in the shortest possible timeframe.”

Geological modelling

The “more realistic and accurate” new mineral resource estimate was calculated using hard boundaries defined by a high-quality 3D geological model designed for the project from Xanadu’s improved understanding of intrusive units and structures controlling Kharmagtai’s mineralisation.

The 3D model was based on the complete relogging of more than 110 kilometres of diamond drilling conducted within the resource district over the past 30 years and helped standardise the geology across the deposit.

“This model forms a robust framework for the mineral resource update [and] allows predictions on extensions to the deposits to be identified and drilled,” Dr Stewart said.

“Our additional drilling activities, advanced exploration and new evaluation programs such as relogging of historical core, geophysical reviews and geochemistry studies since 2015 have delivered a superior understanding of Kharmagtai’s geometry and [given us] greater confidence in the geological and grade continuity.”

High-grade scoping study

The Kharmagtai project is located within a richly-endowed porphyry copper province which hosts most of the known porphyry deposits in the South Gobi region of Mongolia.

Xanadu is now focused on taking Kharmagtai to the next stage with a scoping study based on a small-scale, high-grade open pit “starter project” to demonstrate greater project economics and viability.

The starter project has a current resource of 54mt at 0.86% copper equivalent and a 0.6% cut-off, 61% of which is in the indicated category by tonnage.

The optimal marginal cut-off for resources is under review as part of the study, with consideration of maintaining the figure at 0.6% copper equivalent.

The study will also factor in new discoveries at Zaraa and White Hill West to the project’s global resource base and provide a platform for the company to consider and explore potential mining scenarios.

One possibility is the development of an underground drive from the bottom of the Kharmagtai open pit directly to the high-grade core at Zaraa which contains material grading more than 2% copper equivalent.

The scoping study is slated for completion by year end.

Zaraa discovery

Xanadu discovered the blind Zaraa porphyry copper-gold centre during an aggressive drilling program in April across the underexplored Kharmagtai lease.

It is believed to validate the company’s exploration model for geological features controlling the district’s high-grade copper-gold mineralisation, and reflects the accumulation of new and in-depth geological insights gained from nearly two decades of regional exploration.

With five recent drill holes featuring close to 1km of continuous copper-gold mineralisation, Zaraa has so far supported Xanadu’s definition of a fourth large-scale porphyry deposit located only 2km from currently defined resources, and will be investigated for its open pit and underground potential.

The other porphyry deposits are Sandstorm, Zephyr and Golden Eagle.

Another maiden resource estimate

Dr Stewart believes Xanadu has “cracked the geological code” for additional exploration success in the Kharmagtai region.

He said the company is planning to announce a maiden mineral resource estimate at Zaraa in early 2019.

“We are now in the privileged position of controlling a large exploration district [in Mongolia] with outstanding potential – I am highly optimistic that we will continue to grow the resource base at Kharmagtai where the existing resource remains open both along strike and at depth,” he said.

“The addition of Zaraa to our global resource base should have a positive impact on overall scale and grade – we are now thinking about how big the mineral endowment could be at Kharmagtai and what future production it could sustain.”

Dr Stewart said the ability to go from discovery to maiden resource estimate in under nine months at Zaraa validates the exploration methodology being used by Xanadu and highlights the speed at which projects can be advanced in Mongolia.

In the meantime, numerous additional shallow drill targets across the Kharmagtai lease will be advanced before year end with mapping and drilling, with the aim of discovering new porphyry centres to add to Khamargtai’s resource base.

Toronto listing

This month, Xanadu Mines commenced trading on the Toronto Stock Exchange in addition to its ASX listing.

The company said the dual listing will provide for broader market awareness of the Khamargtai copper-gold project and “help build an understanding of its potential” amongst North American investors.

At midday, shares in Xanadu Mines were trading 9.09% higher at $0.120.