Halifax-based junior Erdene Gold (ERD-V) has formed a strategic alliance with Erdenet Mining Corp. (EMC), Mongolia’s largest mining company, and operator of the Erdenet copper-molybdenum mine.
The deal will see the two team up to explore for new porphyry-style copper deposits or extensions to mineralization targeted by EMC’s current mining operations at Erdenet. Work has already begun immediately west of the mine.
The pair will jointly fund an initial wave of exploration and diamond drilling, and will share all data relating to Erdene’s licenses surrounding the Erdenet mine. Erdene has further agreed to exclusive talks aimed at establishing an exploration and development agreement on its properties adjacent to the mine. The financial details of the agreement were not provided.
“Erdenet is an existing mining, producing and marketing company, and the leader in Mongolian open pit copper-molybdenum mining,” said Erdene’s CEO Peter Akerley in a prepared statement. “They bring the expertise and the facilities to quickly develop any new discoveries on our adjoining properties.”
Erdene’s 166-sq.-km Erdenet – Ihk Tal project surrounds the Erdenet mine to the east, west and north. The licenses lie as close as 300 metres to Erdenet’s current open-pit operation. Erdenet is Central Asia second largest porphyry copper deposit, and one of the world’s largest producing copper mines.
The alliance is initially focusing on a 30-sq.-km area immediately west of Erdenet’s open pit. Nearly 70-line-km of induced polarization (IP) geophysical surveying over a 7-km-by-3-km area has identified near-surface coincident IP chargeability and resistivity anomalies, around 1.5 km long by 0.5 km wide. The anomalies lie along an east-west trending area containing anomalous surface geochemistry values. The area also contains IP dipole-dipole chargeability and resistivity anomalies, which indicate that the surface geophysical signatures extend at depth.
Nine rock samples from the area returned copper values between 0.08% and 1.03%, molybdenum values up to 0.02%, and gold values up to 0.15 gram gold per tonne. The partners believe the results suggest the presence of a buried, mineralized porphyry system.
Drilling of the first four coincident geochemical and geophysical anomalies will begin in the coming weeks.
The Mongolian government owns 51% of Erdenet Mining; the Russian government holds the balance. The joint venture owns the Erdenet mine, situated 220 km northwest of Mongolia’s capital of Ulaanbaatar. The mine began producing in 1978, and churns out 450,000 to 480,000 tonnes of copper concentrate (running 27% copper) and more than 2,800 tonnes of molybdenum concentrate (50% molybdenum) annually.
Uranium alliance
The latest deal follows a similar one inked in early April that will see Erdene team with International Uranium (IUC-T) to stake additional ground prospective for uranium mineralization in Mongolia over three years. IUC will also subscribe to 1 million shares of Erdene at a price of $1 apiece.
IUC is also granted an option to acquire a 65% interest in some of Erdene’s Mongolian uranium assets by spending $6 million over 4 years. Erdene will act as operator during the first year of the agreement. Initial drill testing will target previously identified radiometric and geochemical targets.
Combined, the two companies will control more than 13,000 sq. km in Mongolia’s central sedimentary basins, which play host to significant uranium resources. The Cretaceous-age sediments are derived from weathered crystalline basement rocks that typically grade around 0.05%-to-0.5% U3O8. The relatively thin tabular bodies generally occur at depths of less than 150 metres. Pilot plant testing has confirmed that the material is amenable to in situ leaching (ISL) techniques.
Erdene’s land package contains several uranium occurrences, radiometric anomalies, and favourable geology for sediment-hosted near-surface uranium deposits.
Erdene ended 2004 with a loss of $4.4 million (or 19 per share), compared with a year-earlier loss of $629,091 (14 per share). The 2004 result includes $3.4 million in exploration expenses in Mongolia.
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