Vancouver – The main deposit alone made Xietongmen a solid copper-gold project. Now Continental Minerals (KMK-V) has more than doubled the property’s resource count with a new deposit just 2.5 km away.
Continental started drilling the Newtongmen deposit in 2006. With 16,000 metres of drilling in 35 holes now complete, the company has delineated a elongate, northwest-trending, near-surface deposit some 850 metres long, 450 metres wide, and as much as 700 metres deep.
Using a 0.2% copper cut-off grade, the new estimate pegs Newtongmen’s indicated resources at 388.9 million tonnes grading 0.32% copper, 0.18 gram gold per tonne, and 0.87 gram silver per tonne. Inferred resources add 264.8 million tonnes grading 0.29% copper, 0.07 gram gold, and 0.12 gram silver.
Combined, Newtongmen’s indicated and inferred resources contain 4.4 million oz. gold, 2.9 billion lbs. copper, and 11.9 million oz. silver. Mineralization starts essentially at surface and most holes showed higher grade intervals near surface, with grade diminishing at depth.
Just 2.5 km to the southeast is the main Xietongmen deposit, which is home to 219.8 million measured and indicated tonnes grading 0.43% copper, 0.61 gram gold, and 3.87 grams silver.
“The company is currently focused on engineering and permitting for the immediate development of the Xietongmen deposit, and the Newtongmen deposit represents another near-term opportunity that would dramatically extend mine life,” said Continental’s president and CEO David Copeland.
A feasibility study on Xietongmen in 2007 found that a 40,000 tonne-per-day operation could profitably produce 116 million lbs. copper, 190,000 oz. gold, and 1.73 million oz. silver per year over a 14-year mine life. The study used a copper price of US$1.50 per lb., a gold price of US$500 per oz., and a silver price of US$8.50 per oz. To build a mine at Xietongmen would employ 2,500 people, during a construction phase expected to take almost two years. During operations, the work force would be roughly 460 people.
Over the last year Continental has focused on preparing the eight reports covering all aspects of its development plans at Xietongmen that were required to apply for a mining licence. The application has now been submitted.
While the licence application works its way through the government, Continental is conducting a review and update of its capital and operating cost estimates for the project. The supplier and construction markets have changed significantly since the Xietongmen feasibility study in late 2007 – the company hopes to reduce the estimated construction timeline and costs. Those costs came in at US$476.2 million in the 2007 report.
Even if costs come down, Continental will need assistance finding the funds to build a mine. To that end, in August Continental engaged Standard Bank and the Industrial and Commercial Bank of China as underwriters and lead arrangers for the Xietongmen project finance debt facility. The banks will not be starting from scratch – in 2007 Continental signed a deal with Jinchuan Group of China. Jinchuan is to contribute 30% of the required capital financing in the form of debt or equity and assist in arranging up to 60% of the required capital financing for the development of a mine in the form of debt. As part of that deal Jinchuan invested in Continental, buying 10 million shares and 8 million warrants in a financing. The original financing put $18 million in Continental’s coffers; Jinchuan then exercised all of its warrants in late 2007 to add another $18 million. The deal also included a life-of-mine concentrate off-take agreement.
The Xietongmen property sits 240 km west of the city of Lhasa in the Tibet autonomous region of the People’s Republic of China. The property covers more than 120 sq. km and still hosts many exploration targets
And one of the targets has already yielded some promising results. At Langtongmen, a copper-gold zone mid-way between the main Xietongmen deposit and Newtongmen, drills hit mineralized intercepts such as 135 metres grading 0.28% copper and 0.31 gram gold and 131 metres averaging 0.28% copper and 0.22 grams gold. Continental says Langtongmen is a high priority exploration target.
On news of the Newtongmen resource estimate Continental’s share price gained 11¢ to close at $1.14. The company has a 52-week trading range of 30¢ to $1.30 and has 129 million shares outstanding, 138 million fully diluted. Continental must be at least slightly concerned its large resource holdings and reasonable share price could make it an attractive takeover target as the board recently approved a shareholder rights plan.