RE:Recent press release
The drilling reported was primarily within the Lift 2 HNE footprint, with few surprises. The drills encountered significant mineralization at greater depth than the proposed Lift 2 extraction level. There is some additional weakening mineralization on the East flank of Lift 2 that should add some resource tonnage. The grades in the core of HNE are as would be expected, very good.
The deeper intersections are great - for the long term of OT and Mongolia, but because they would only be mined in a potential Lift 3 scenario they are so far deferred in time the discount value to today probably makes them negligible in ETG's valuation compared to other factors like higher metals prices and potential significant northern extension of Lift 2 beyond the currently defined resource footprint.
To beat the dead horse, in 2006 ETG reported drill intersection copper/gold mineralization in lower grades in a series of holes at 1300mN which was speculated to be a continuation of the same ore body that has only been defined as far as 625mN ... dipping in a NE direction. Potentially doubling or more the size and resources in a possible Lift 2 mine design if it runs on further North.
After 2006 there has been limited drilling N of 625mN beyond a boundary fault that truncates HNE - the question is, is the displacement by faulting of the potential continuation of the ore body significant, or is there possible close continuity North? ETG has always represented HNE as "open" to the North. TRQ for a number of years merely said the boundary fault truncated the ore body. In 2007 or so speaking to Greg Crowe he told me that the granite rocks that overlay the ore body N at 1300 meters, and the depth of the deposit, made it very difficult for the drillers to hit targets accurately at the depths concerned that far North. At the time Rio Tinto said they would in time probe North from underground. These drill results are not part of any attempt to prove or disprove the North extension of HNE or so that northward probing - which might add significant value to ETG.
While deep resource additions may not impact ETG's NPV, they are encouraging in regard to additional capex and potential mill expansion, and potential acceleration of the mining timetable at higher production levels, if Rio Tinto comes to believe they have many decades of future higher-grade production at OT. The grades are much higher than the Heruga average grades, suggesting Heruga development might be further deferred as a decision-point in mine development at OT. Or, I guess, increasing the potential for a sale/severance of Heruga. Nobody really knows what the limits on production might be at OT, particularly with regard to water availability and whether it would cap otherwise available production expansions. It is all pretty far downstream.
There were also included drill results of anomalous mineralization (non-economic) at two other JV targets, which are illustrating not any new discovery, but how highly prospective all the JV and ETG ground is - it remains an open exploration play over a large land package in elephant country.
The main chain of OT deposits discovered to date were not easily discovered or drilled - they are generally deep and it took many holes to make a discovery hole. A shallow, high grade drill result is the most positive news ETG could receive - 30% of a shallow mineral body that was economically more advantageous than Lift 2 to mine would cut into the production schedule and completely explode ETG's valuation. Pipe dreams. In 2002-2004 ETG was drilling to the East of OT at a target then called the X-Grid - gold dominant and shallow. The additional exploration recommended at that time was superseded by the Earn-In Agreement and never proceeded. Discovery of a shallow high grade ore body on the JV ground is "the" Cinderella Story ending for ETG. Like I say, dreams.
All that being said the core of HNE is one of if not the world's best copper deposit in grade and tonnage coming on stream as an economical block cave.
Summary - marginal improved resource calculations for Lift 2 HNE from a modest Eastern expansion of the panel footprints. Interesting results from elsewhere on the JV, no notable discovery. With regard to the more immediate and continuing uncertainty concerning the Northern extension of HNE Lift 2, these drill results have little bearing at all that I could see. All good, nothing bad.
cg