Copper Saturation.12-month Share Price Target Of $0.29
New drilling at ’ () Kharmagtai copper-gold project in Mongolia have demonstrated increased scope in a highly prospective area.
The latest intersection has returned 484 metres grading 0.57% copper and 0.32 grams per tonne gold from 186 metres, including 158.4 metres grading 0.8% copper and 0.24g/t gold from 342 metres.
The results add further confidence to the geological model and extend the project’s high-grade material at depth and along strike.
Kharmagtai is located within the South Gobi porphyry copper province of Mongolia, about 420 kilometres south-southwest of Ulaanbaatar and is one of the most advanced porphyry projects in Asia.
Kharmagtai’s high-grade area is known as a tourmaline breccia and is believed to have transformed a potentially mid-scale project into one of the most prospective copper-gold projects in Asia.
Tourmaline breccia deposits are a major host of copper mineralisation, and comprise some of the world’s largest, most endowed porphyry copper deposits.
It is becoming apparent that the metal content of the tourmaline breccia mineralisation is much higher than those of surrounding porphyry stockwork deposits, elevating it as a priority drill target in the district.
Drilling, however, has been paused to allow results from trenching to be finalised, a review of all results to date and an update of the geological model.
This will allow for the prioritisation of drill targets within the area’s 5 kilometre-long corridor – and elsewhere within the project – prior to deciding on the next development steps.
Steady march of development
The latest drilling builds on recent trenching results at Kharmagtai, which demonstrated even high copper and gold grades than the project’s important Tsagaan Sudal area.
The trenches designed to test resource extensions at the site returned copper-gold mineralisation of 122 metres grading 0.49% copper and 0.75g/t gold. This compares with grades of 0.29% copper and 0.23g/t gold in the previously announced mineral resource at Tsagaan Sudal.
In March, Xanadu announced a maiden resource at the project of 2013 million tonnes containing 1.5 billion pounds of copper and 2.2 million ounces of gold.
Development progress since this milestone has also included high-grade drill hits in the Kharmagtai tourmaline breccia in June and intersection of mineralisation at several prospects at the Oyut Ulaan project in May.
Exploration at Oyut Ulaan (420 kilometres southeast of Ulaanbaatar) has defined broad zones of strong quartz stockwork veining and associated high-grade gold mineralisation (typically around 0.5 to more than 5g/t gold and 0.3 to 1.5% copper).
The geology, strength of alteration and style of mineralisation also suggest that the mineralisation will extend at depth.
Improving confidence
Advancements made across Xanadu’s portfolio this year have translated into significant strides for the company’s share price. Xanadu stock was trading at aroundA$0.075 at the beginning of September before the latest exploration work at Kharmagtai helped spark a sharp climb to $0.13.
Also in mid-September, the company received an unchanged Buy recommendation but a new 12-month share price target of $0.29 from Sydney-based broker Bell Potter Securities.
The broker's target is 52.6% higher than its previous valuation of $0.19.
The upgrade is due to revised commodity price and foreign exchange forecasts as well as the recent positive exploration results from Kharmagtai.
As of the end of June, the company held $4.1 million in cash and cash equivalents.
Analysis
The new assay results at Kharmagtai continue to demonstrate the quality of the project and reaffirm confidence in the potential of the local mineral system to host a large-scale, high-grade copper-gold deposit.
Kharmagtai’s maiden resource covers only 30% of the prospective area.
Kharmagtai is also attractive given the context of reducing copper output and reduced copper stockpiles at terminal markets. As a result, the short-term oversupply which has negatively impacted copper prices in recent months has been forecast to give way to more favourable supply-demand fundamentals.
Value adding at Oyut Ulaan not only builds the business case for the Xanadu portfolio but continued to support the view that the South Gobi region of Mongolia is on track to become an important copper hub.
This area sparked investor interest in the country with the 2001 discovery of the giant Oyu Tolgoi mine which holds 2.7 million tonnes of recoverable copper.
Kharmagtai’s patchwork of mineralised styles and high-grade centres closely reflects the geological style of Oyu Tolgoi.