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Gold And Copper in Tibet

[WTN-L World Tibet Network News. Published by The Canada Tibet Committee. Issue ID: 2006/04/17; April 17th, 2006.]

Rhona O'Connell
Mineweb, South Africa

LONDON (Mineweb.com) -- Continental Minerals (TSE-X listed; ticker KMK, market capitalisation approximately US$70 million and with roughly US$7 million cash on hand) was showcased by Hunter Dickinson to the Association of Mining Analysts in London last week. Continental Minerals has a 50% shareholding in Highland Mining (which wholly owns the Xietongmen property in Tibet) and is taking its stake to 60% this month. This is a porphyry copper-gold deposit.

Continental Minerals' President and CEO is Gerald Panneton, who previously spent a number of years with Placer Dome, Lac Minerals and then 12 years with Barrick Gold. Continental was formed in early 2003 and acquired the property Xietongmen in January 2005. Drilling commenced in April of that year and put down 62 drill holes (21,000 metres), each of which has hit mineralisation. There are currently seven drill rigs in operation on the property, which is due on stream in 2010.

The company vested at 50% of Highland Mining in December after the expenditure of US$7 million and has an option to move to 60% via an additional US$3 million. This is more or less complete. The property is held through the 100%-held Tibet Tian Tuan Minerals Exploration Ltd., which has the necessary business licences that the Chinese government requires to permit operation within China.

The property will be mined by open-pit. Overburden is less than 10 metres, on a resource of 135 million tonnes (measured and inferred) at 0.50% copper and 0.73 g/t of gold. Continental expects to reach a resource of 200 million tonnes by the end of June, to support 40,000tpd for 250,000 ounces of gold and 70,000 tonnes of copper per year over a 15-year mine life. The infrastructure is good, with hydro-power, a paved road and electricity all the way to the project, and smelters in central and eastern China are easily accessible by the railway, which lies 250m from the property. The Baiyin smelter, for example is operating at 100,000 tonne of copper per annum; national copper refining capacity is 2.1 million tonnes, and this is expected to increase to 2.96 million tonnes per annum. There is no vegetation and a very low local population, while rainfall is also extremely low and concentrated in July and August.

The property covers approximately 12 square kilometres, of which only half a square kilometre has been drilled to date. Soil geochemistry has been completed and aero-magnetic surveys are underway. Drilling to date has been on a 50m-grid spacing. Drill results to date have shown a consistent, homogeneous deposit, with no internal dilution; the higher-grade supergene zone is running at an estimated 1.7% copper equivalent. The deposit is open in all directions, but is limited by an adjacent granite ridge; it is open as to approximately 100m to the north west and 200m to the south-east.

Approximately 75% of the resource is measured and it should be possible to bring this into reserve by the start of 2007. The measured resource currently amounts to 1.15 billion pounds of copper (520,000 tonnes) and 2.49 million ounces of gold at a 0.5% copper cut-off grade. This is off 106.3 million tonnes at 0.49% copper and 0.73 g/t gold. Inferred resources amount to 28.8 million tonnes at 0.42% copper and 0.59 g/t gold, giving 273 million lb of copper and 550,000 ounces of gold. It should be pointed out, though, that there are, as yet, no assay results, but these results put Xietongmen in the same order of Koksai in Kazakhstan or Sulphurets in Canada. Based on $1.10/lb copper and $400 gold the rock is worth $22/tonne. Copper recoveries are 85-90% and gold recovery is approximately 70%, so the Net Smelter Return value amounts to approximately $18/tonne. Independent analysis has suggested that at these metal prices, the NPV at a 10% discount rate is $323 million; at 20%, it would be $119 million, with an internal rate of return of 35%, assuming $350 million of capital expenditure. The overall in situ value of the deposit currently stands at approximately $2.2 billion, based on the estimated resource of 135 million tonnes.

The preliminary pit design calls for a strip ratio of 2:1 and metallurgical test work suggests copper flotation, and possibly also some gravity separation for some of the gold recovery.

The objectives for this year are to complete the mine design and produce a feasibility study by early 2007, and move to a bankable study later in the year. The drill programme this year calls for 40,000 metres of which 22,000m is for deposit expansion, 8,000m in engineering and 10,000 metres in property-wide exploration. Drilling should be complete in May of this year. The goal is to achieve the necessary exploitation licence in 2007. This requires a Chinese feasibility study and environmental study; the company is accordingly advancing both a 43-101 study and the Chinese study simultaneously, thus "doing the work once, and the report twice". The Licence application is scheduled for the second quarter of 2007, at which point detailed engineering and project financing is to be put in pace and the mine should be in production by 2010.

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