Continental gets positive feasibility for Xietongmen (August 27, 2007)

Vancouver — Continental Minerals (KMK-V, KMKCF-O) now holds a positive feasibility study for its Xietongmen copper-gold deposit in the Tibet Autonomous Region of southwestern China.

The study foresees an open-pit mining scenario on proven and probable reserves of 182.1 million tonnes of 0.45% copper, 0.62 gram gold per tonne and 4.03 grams silver per tonne at the deposit. A waste-to-ore strip ratio of 1.64 is modelled in the plan.

Metal prices of US$1.50 per lb. for copper, US$500 per oz. for gold and US$8.50 per oz. for silver were used in the engineering study.

Operations would process 40,000 tonnes per day (annual throughput of 13.2 million tonnes), producing 116 million lbs. (52,600 tonnes) copper, 190,000 oz. gold and 1.73 million oz. silver annually over a 14-year mine life.

Capital costs to build the mine are US$476.2 million with payback projected in 5.2 years. Xietongmen will have a 16.5% internal rate of return and a US$231.7-million net present value based on a 7.5% discount.

Using a standard mill processing circuit with flotation recovery, the operation is expected to produce a 25% copper concentrate. Recoveries from the upper, supergene portion of the orebody (about 11% of the deposit) are projected at 88.4% for copper, 65.1% for gold and 75.8% for the silver. The hypogene ore shows recoveries of 92.1% for copper, 59.7% for gold and 77.6% for silver.

About eight months of preproduction will be required at Xietongmen in a 3-stage pit development plan, each lasting 3-5 years.

Once permitting is completed, construction is expected take about 24 months, employing a workforce of 2,500. When Xietongmen reaches production, the project would employ about 460 people.

The government has approved a 250-km rail line extension from the regional capital of Lhasa to the nearby city of Rikaze (Shigatse), which will bring a rail hub within about 50 km of the project. Concentrates will be transported to the Jinchuan refinery at Jinchang, in Gansu province, for treatment.

In early 2007, Continental aligned itself with the major Chinese smelting group Jinchuan, entering an agreement to provide both equity and capital financing, a concentrate offtake facility and assistance in other mine building support at Xietongmen.

Jinchuan subsequently purchased 10 million units in Continental at $1.80 apiece.

The Xietongmen deposit is situated just on the north side of the Indian and Asian continental plate suture zone in south-central Tibet. It occurs in a southeast-northwest corridor of porphyry-style copper-gold mineralization occurring as disseminations and quartz stockworks within an intermediate volcaniclastic rock suite adjacent to a diorite porphyry intrusive. A 4-km-long zone of potassic, silicic and sericitic alteration marks the area.

The deposit has been delineated by 200 vertical holes (about 47,000 metres) drilled by Continental on 50-metre centres covering an area of about 1,200 metres northwest-southeast and 600 metres northeast-southwest. The mineralized zone is as thick as 300 metres in sections, averaging about 180 metres.

Exploration has identified at least two other large mineralized occurrences on the land package.

“We believe there is potential to extend the mine life,” said Continental president and CEO Gerald Panneton in a release. “Additional targets on this prospective property are currently being drilled with seven rigs, including the recently discovered Newtongmen deposit.”

As an “autonomous region” within China, Tibet is entitled to retain the production royalties from Xietongmen. Royalties of 4% of the gold revenue and 2% of the copper revenue are applicable.

As part of permitting, the company is moving to complete its environmental and social impact assessments by the end of 2007.

Shares of Continental dipped a dime on the news to trade at around $1.40, giving the company a $169-million market capitalization based on its 120.8 million shares outstanding. The stock has a 52-week trading range of $1.31-$2.35.