The Asia Miner

SEP-OCT 2014

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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18 | ASIA Miner | September/October 2014 RECENT drilling for Xanadu Mines has confrmed the presence of a potentially signifcant new mineralized tourmaline breccia system to the east of the high-grade Altan Tolgoi system. The work is being carried out on the Kharmagtai porphyry copper-gold project in which Xanadu and joint venture partner Mongol Metals are acquiring a 90% interest from Turquoise Hill Resources. Kharmagtai is in the under-explored South Gobi porphyry copper province which hosts the world-class Oyu Tolgoi copper-gold oper- ation, Tsagaan Suvarga porphyry copper-molybdenum development and Xanadu's Oyut Ulaan copper-gold exploration project. Under the JV terms Xanadu has the right to earn an 85% interest in Mongol Met- als, or the equivalent of a 76.5% effective project interest, by funding acquisition and exploration costs. Two recently completed holes have intersected copper-gold min- eralization. The most recent intersected 665.7 metres @ 0.37% copper and 0.28 grams/tonne gold from surface including 312 me- tres @ 0.49% copper and 0.40 grams/tonne gold from 274 me- tres. High-grade intersections include 36 metres from 372 metres @ 0.82% copper and 0.45 grams/tonne gold, 30 metres from 448 metres @ 0.62% copper and 0.62 grams/tonne gold, and 66 metres from 510 metres @ 0.47% copper and 0.70 grams/tonne gold. The tourmaline breccias signifcantly contribute to mineralization and therefore represent a signifcant new exploration target. Mineralization intersected comprises narrow zones of variably brecciated tourmaline breccia separated by chlorite-epidote-sericite altered quartz monzodio- rite porphyry which indicated that mineralization is proximal to the core of the breccia system. The higher grade zones discovered in the previous hole, 242.7 me- tres from 358.3 metres @ 0.55% copper and 0.75 grams/tonne gold, will help located the centre of the system through continued exploration drilling. This new tourmaline breccia east of Altan Tolgoi forms part of a much larger east-trending tourmaline breccia body which lies under shallow cover. Xanadu says the total extent may be related to a large geophys- ical anomaly extending up to 3.5km to the east. A new hole has been collared a further 120 metres to the east of the most recent hole and about 170 metres east of the previous hole. As at mid-August it was at a depth of 670 metres and had intersected strong visible copper sulphides from 140 metres. Another hole has been collared 50 metres to the west of the pre- vious hole and the purpose is to test the continuity of high-grade mineralization between Altan Tolgoi and the newly discovered tour- maline breccia system at East Altan Tolgoi. In mid-August it was at a depth of 650 metres and had intersected visible copper sulphides from 150 metres. The prospect remains open to the west, east and at depth. MONGOLIA'S Ministry of Economic Development has announced a tender for Prophecy Power Generation's Chandgana Power Plant proj- ect and the Baganuur to Underkhan to Choibalsan Overhead Trans- mission Lines project. The company is a subsidiary of Prophecy Coal, which has prepared the project's technical and fnancial proposals for submission to the Ministry. Following submission, the Ministry will be responsible to conclude the concession agreement and coordinate the approval and signing of the power purchase agreement, tariff agreement and other material agree- ments necessary to implement the power plant project. Prophecy is also continuing to actively consider project fnancing options which include either debt, equity or a combination thereof in addition to joint ventures with international power project developers. Earlier this year Prophecy fled a revised NI43-101 compliant technical report and preliminary economic assessment on its Chandgana Tal coal mines, which are expected to feed the plant. The PEA examines the eco- nomics of coal production from the licences and excludes the Chandgana Khavtgai exploration licence. Prophecy's subsidiary Chandgana Coal in- tends to mine the coal and supply it to the proposed 600MW mine-mouth power plant. The two Chandgana Tal licences contain an estimated 124 million tonnes of coal resources all in the measured category. The average in-place coal gross calorifc value is 3306 kcal/kg. After a short ramp-up period, annual mine production will be 3.5 million tonnes throughout the 30 year life of the mine, in order to meet the demands of the power plant. The mine will be an open pit operation and is 2km from the proposed power plant site. The fnancial evaluation indicates that the project is potentially econom- ically viable given the coal price assumption of US$17.70 per tonne sold at the mine gate directly to the power plant. Therefore, the coal project is expected to provide stable return throughout the life of mine. Meanwhile, since resuming operations at its Ulaan Ovoo project, Proph- ecy management primarily works towards improving practices in the ar- eas of safety, cost containment and coal quality improvement. With these mandates and since near-surface oxidized coal was removed in 2011 and 2012, Prophecy has consistently mined higher grade thermal coal with GCV greater than 5000 kcal/kg. With consistent, effective and effcient mining practices, management ex- pects that approximately 90% of the coal mined will have GCV greater than 5000 kcal/kg in 2014. As such the company is transitioning to supplying to a market for coal of GCV greater than 5000 kcal/kg which realizes premium pricing, both in the domestic and neighbouring Russian markets. Inquiries regarding coal purchases from the state Republic of Buryatia in Russia continue and discussions with local and national governments relat- ing to re-opening the Zeltura border crossing to facilitate exports to Russia also continue. Xanadu reveals new Altan Tolgoi system Transporting coal from Prophecy's Ulaan Ovoo mine to market in eastern Russia. Chandgana power project advances

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