Tim Treadgold: Winu a winner for Rio but is it as good as Xanadu’s Kharmagtai?
“Mine’s bigger than yours” is a childish taunt that has no place in mineral exploration, but it is a boast which someone will make soon by comparing the headline-making copper discovery of Rio Tinto in WA with a less well-known discovery by Xanadu Mines in Mongolia.
Winu, the Rio Tinto project in the remote Paterson Range of WA’s north-west, has been fascinating explorers and speculators for months, largely because official news has been skimpy, to say the least.
Kharmagtai has barely rated a mention despite Xanadu reporting the day after Rio Tinto’s Winu statement a set of results which might have come from the same hole, as a few numbers demonstrate.
The first assay in Rio Tinto’s report was a 104-metre zone with grades of 0.8% copper, 0.28 grams of gold per tonne and 4.35g/t of silver.
Xanadu’s best result reported just 24 hours later was a 102m zone assaying 1% copper and 1.67g/t of gold from a depth of 572m.
If grade alone was the test Xanadu wins with higher copper and gold readings, but in mining depth is a key because it costs a lot to dig a hole, and that’s when Rio Tinto can claim a better result, with the bonus of reasonable silver grades.
Judged independently and it is hard to separate the two, though the depth issue probably provides Rio Tinto with a points win.
Lifting the lid on Winu opened an interesting chapter in Australia’s hunt for new copper projects but it’s also true to say that Rio Tinto needs much more information before it can start mine planning.
Some of the reported results from Winu were certainly impressive for their thickness, if not their grade, though in mining there can be a trade-off called “metal per vertical metre” and any truly big discovery can be economic if there’s enough ore, even at a modest grade.
Winu looks to be a case of containing “a lot of copper, a lot of gold and a lot of silver” to quote Rio Tinto chief executive, Jean-Sebastien Jacques, who dodged being specific on tonnes and ounces because no-one is quite knows how much there is.
Jacques real problem is that he can’t say much more than “lots and lots” because mineral exploration comments are governed by the rules of the Joint Ore Reserves Committee, or JORC for short, and someone will be weighing every word in a Rio Tinto announcement or an executive comment.
More drilling is the clue to understanding Winu, and perhaps a broad-brush resource calculation might be possible later this year. But even when that comes it will only signal the start of the project planning phase because Rio Tinto’s discovery is located in a corner of Australia where not much has happened for the past 1000 years.
Perhaps the last million years.
Winu is 130km north of Newcrest’s Telfer goldmine and 350km south-east of Port Hedland in a region long known as the Paterson Range, but recently upgraded to Paterson Province.
Whatever the name there are no settlements of significance in a stark region which abuts its more ominously-named neighbour, the Great Sandy Desert – for remoteness, say no more.
Location in mine development is important because of its bearing on the economics of a discovery, starting with the capital cost, which will be inflated by Australia’s classic problem, the tyranny of distance.
In other words, Rio Tinto might have a world-class copper and gold tiger by the tail but it will be many years before any copper is trucked to Port Hedland for export to Asia.
Speaking of Asia, that’s when Xanadu can play its trump card; location. There are two location-factors which boost the significant of Kharmagtai.
Firstly, it is about 250km from the Mongolian border with China, the world’s biggest market for copper.
Secondly, it is about 150km from the giant Oyu Tolgoi copper and gold mine of Rio Tinto.
It’s an awfully big step to suggest that Rio Tinto might have its eye on Kharmagtai given the management issues at Oyu Tolgoi, including a delay to an expansion plan caused by underground technical problems.
But it is extremely interesting that Xanadu, a mining minnow with a stock-market value of around $100 million, is playing in the same Mongolian backyard as the $100 billion Rio Tinto.
Mongolia, like the Paterson Range, has its location challenges, though they are mainly governmental rather than geographic and while developing a mine deep in a desert is not easy, neither is developing one in a region with a government that routinely changes the rules – and yes, it happens in Mongolia just as it happens in Queensland (ask Adani Coal!).
Boiled down what investors currently have in front of them are two copper/gold discoveries that have world-class stamped on them, with more drilling needed to elevate the status of what’s been found from prospect to project.
A direct comparison of the assay results reported so far is not valid because there are so many variables, ranging from grades to depth to location to metal mix.
But when a casual observer starts assessing Xanadu’s discovery, they should start with a February 18 report which noted a 713m intersection of porphyry-style mineralisation with a 100m zone in that hole showing visible bornite (or peacock ore) rich in copper and gold – but with assays pending.
The first of those assays come through last week (February 28) when Xanadu announced the 102m sector of 1% copper and 1.67g/t of gold – located with a broad section of 352m assaying 0.41% copper and 0.58g/t of gold.
Richer zones were also encountered, including 10m at 2.24% copper and 5.28g/t gold, but it’s the big picture which matters because the rich stuff is deeper – with that 10m section starting at 658m.
Rio Tinto also has richer zones in its broad assays, including 71m of 1.02% copper (plus 0.49g/t of gold and 5.14g/t of silver starting at a temptingly shallow 71m.
In a sense, it’s pointless comparing Winu and Kharmagtai but right now there are two exciting copper/gold discoveries in the starting blocks of a discovery drag race – and there’s nothing more interesting in mineral exploration than that.