minesite article

Helping me to "keep the faith" in MGO


Marengo Mining Closes In On The Completion Of A Feasibility Study At Yandera
By Ryan Jackson

Since exploration kicked off at the Yandera property in Papua New Guinea back in 1965, many of the majors have done work there. And for the past seven years Marengo Mining, which is dual-listed on the TSX and ASX, has been building upon historical exploration work and is now close to completing a full feasibility study.


Camp at Yandera
Ahead of that the team at Marengo have served up a stellar resource update which has upgraded much of the inferred resource at Yandera to the measured category while simultaneously increasing the grade.



All of which goes towards increasing the certainty that the resource at Yandera will support at least a 20 year mine life. “Every drill hole that we put in that intersects copper adds to that inventory,” says Les Emery, managing director of Marengo. “We see the 20 years as being the start of a long life operation.”



But what exactly is it that Marengo’s got? “The Yandera project is principally a copper project, a copper porphyry system”, says Les. “It also has a large inventory of molybdenum and carries by-products of gold, silver, and rhenium. We came to Papua New Guinea looking for a project that was potentially world class in a mining friendly jurisdiction.” With the resource now ringing in at more than six billion pounds of copper, Les has certainly found the world class deposit he was looking for.



The latest resource upgrade acted as a precursor to a subsequent C$20 million raising, which completed on 11th July. It’s not easy to raise money in these markets, but Marengo’s got some pretty powerful backers these days, and it’s becoming increasingly confident that it’s sitting on an extremely attractive resource.



Following on from 40,000 metres of diamond drilling, the company was finally able to put out a resource update in May. Dean Richardson, vice president of investor relations, explains the significance of the new numbers: “Probably the key factor for us was seeing a large amount of the inferred resource moved into the measured category. We’ve also seen an increase in grade since the previous resource update so we’ve underpinned our 20 year mine life.”



Following the latest round of drilling, the measured and indicated resource now stands 486 million tonnes of material grading 0.37% copper for 3.96 billion pounds of contained copper. Additionally, there is an inferred resource of 347 million tonnes of material grading 0.31% copper for 2.37 billion pounds of contained copper. There’s also measured and indicated resources of 1.1 million ounces of gold and 140 million pounds of molybdenum. On that basis it’s expected that 85 per cent of the revenue stream will come from copper, with the rest derived from gold and molybdenum.



But can a small company like Marengo really get a project of this size up and running? “I think we can”, says Les, “with the aid of our strategic partner, the Papua New Guinea government, and the equity markets, particularly in North America who are very much in sync with our thoughts.”



What’s more, back in 2010 the company signed a groundbreaking deal with China Nonferrous (NFC), one of the largest state-owned construction and engineering groups in China. Les explains: “In our situation, we were looking for a position where we could maintain control of the asset while having someone provide finance for the US$1.8 to US$2 billion project as well as construction expertise. The deal we struck is the first of its kind to be done in China. It means they take no equity interest in the project, they take no equity interest in the company at this point, they will provide us with a fixed price contract to construct the project, and they will also provide us with finance through the Chinese banking system.”



In return NFC gets a supply and construction contract as well as copper and molybdenum concentrate once the project is in production. “It’s a win-win and we’re very pleased about the agreement”, says Les.



With the resource update now in hand, the data needed for the coming feasibility study is starting to fall into place. Of particular interest now is the metallurgical testing. “We’re getting excellent recovery with over 90% of the copper”, says Dean, “and the copper concentrate is quite high grade so we are very pleased”.



So how long will it take before first production? “We’d like to say tomorrow but there is a process”, says Les. “We’ve been on this project for seven years and in the world of base metals a decade to develop a mine is pretty common. We’re probably looking at about the same for the Yandera project. We’ll have our final feasibility complete within the next few months, we expect to have an engineering and construction contract in place with our Chinese partner around the end of the year, and we’ll be filing for environmental and mining permits - all going well, we expect this project to come on stream in 2016.”



In the meantime, the project still offers plenty of exploration upside. “It’s over 100 kilometres long and we’ve spent seven years drilling out the central porphyry”, says Les. “We have not stepped out beyond that, though. There are other targets that have been looked at by the majors. It’s not underexplored but unexplored except for the five per cent that has been drilled extensively.” In addition to targets identified by previous owners, a few holes have been drilled to depth below the relatively shallow resource area and they have demonstrated that the system hosting mineralization extends far to depth. Continuous copper and molybdenum mineralization has been intersected almost a kilometre down. “It’s a very well drilled deposit but it’s still open, it’s a deposit you can drill forever”, says Les