QGX confirms coking coal at Baruun Naran (August 03, 2005)

Metallurgical testing has confirmed the presence of thick seams of coking coal on QGX‘s (QGX-T) Baruun Naran project in the Gobi desert, 500 km south of the Mongolian capital of Ulaanbaatar.

Earlier this spring, QGX twinned three of 21 holes sunk by Russian explorers in the 1980s and 1990s. The three Russian holes elected for twinning encountered the thickest and most shallow-dipping coal, with each yielding at least one seam exceeding 20 metres (apparent thickness) of net coal. In all, 15 of the 21 Russian holes cut coal.

QGX’s three holes correlated well with the Russian intercepts, with holes 1C and 2C returning clean coal seams measuring estimated true thicknesses of 14.5 metres and 17.3 metres; hole 3C cut multiple seams, including an additional 21.8 metres (apparent thickness) of net coal below the bottom of the corresponding Russian hole.

The coal cut in holes 1C and 2C is rated as high volatile A bituminous. Washability tests indicate cumulative coal recoveries of 71.9% and 86.9%, respectively. Ash and sulphur content in hole 2C approach the upper limits for metallurgical coal; the coal in hole 1C slightly exceeds these limits, but QGX believes that selective mining may help reduce the amount of the deleterious components. Phosphorous values for the coal were favourably low. The coal also generates heat contents exceeding 15,000 BTU/lb.

Spot prices for coking coal in neighbouring China currently run around US$95 per tonne (free-on-board).

Meanwhile, two coal seams tested in hole 3C are classified as lower-grade thermal coal owing to excessively high ash content as a result of in-seam partings and zones of impure coal. Laboratory tests were unable to improve the ash content values. Still, QGX again says that selective mining of the top seam may allow for the inclusion of fewer impurities making it a viable source of metallurgical coal.

As it stands, the material’s high volatile B bituminous rank, low sulphur content and ash content make it suitable to supply China’s thermal coal market where spot prices run around US$50 per tonne.

In July, drilling by QGX turned up 35 coal seams at Baruun Naran; in all, the eight holes yielded an estimated net true thickness of 195 metres worth of coal in multiple seams (T.N.M., July 25-31).

QGX currently has two drill rigs running on the eastern end of the coal valley, and has moved a second drill on to the property, with another two scheduled to arrive in August. The company is also bringing in a third backhoe to help with district-scale exploration. Geophysical surveying to test for coal seams and structural features beneath up to 10 metres of cover is also ongoing.

Coal deposits at Baruun Naran occur within a northeast-southwest striking basin of Permian sedimentary rocks. The coal is contained in 12 shallow seams, with the four thickest seams each measuring at least 10 metres in width.

The project is situated 22 km along trend, and within the same belt of Permian sedimentary rocks, of the Tavan Tolgoi coal deposit. Ivanhoe Mines (IVN-T) and Japan’s Mitsui & Co. (MITSY-Q) share an interest in that deposit, which is currently up for tender. Tavan Tolgoi is home to 16 coal seams ranging from 2 to 72 metres in thickness; a government estimate pegs reserves at 5 billion tonnes.

QGX acquired a 100% interest in the Baruun Naran licence in 2002.

The news sent shares in QGX 16, more than 5%, higher to $3 in brisk trading in Toronto on August 3.