VANCOUVER — The main deposit alone made Xietongmen a solid copper-gold project. Now Continental Minerals (KMK-V, KMKCF-O) 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 Tibet in 2006. With 16,000 metres of drilling in 35 holes now complete, the company has delineated an elongate, northwest-trending, near-surface deposit some 850 metres long, 450 metres wide, and up to 700 metres deep.
Using a 0.2% copper cutoff grade, the new estimate pegs Newtong- men’s indicated resources at 388.9 million tonnes grading 0.32% copper, 0.18 gram gold per tonne and 0.87 gram silver. 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 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 president and CEO David Copeland in a statement.
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. A mine at Xietongmen would employ 2,500 people, during a construction phase expected to take almost two years. During operations, the workforce 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, which came in at US$476.2 million in the feasibility.
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 a 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. 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 offtake agreement.
The Xietongmen property sits 240 km west of the city of Lhasa in the Tibet autonomous region of China. The property covers more than 120 sq. km and hosts other exploration targets.
And one of the targets has already yielded some promising results. At Langtongmen, a copper-gold zone midway 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 gram gold. Continental says Langtongmen is a high-priority 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¢-$1.30 and 129 million shares outstanding. Continental’s board recently approved a shareholders’ rights plan, in case its large resource holdings and reasonable share price make it a takeover target.