Awesome result there at Kharmagtai, on a project which has been...

Awesome result there at Kharmagtai, on a project which has been flying under the radar of punters.

I've been waiting for the first news of this drilling, as there appeared a good chance of further mineralised intercepts under cover. The deposit was discovered at surface, but surface extensions are blind. So faith is needed in geophysics (principally, IP) and interpretation of extensions to known mineralisation intercepted by drilling.

So now that mineralisation has been confirmed further to the north and open along strike and at depth; the upside is the news of high-grade copper with gold over broad down-hole intervals. So there is lot of cream here amid a very solid 400m copper porphyry intersect, that should add meaningfully to the resource. The character and extent of high grade zones enhance the dynamics for feasibility of bulk tonnage porphyry style mineralisation. It also further opens up the option of underground block caving, where cut-off grade needs to be around 0.5% CuEq (like Cadia and Oyu Tolgoi).

I'll just add that the intrusive events giving rise to Kharmagtai are Andean style (continental collision / subduction), as opposed to Oyu Tolgoi (island arc), with metals accumulated in stockwork veinlets, disseminations, veins and breccia, that are likely related to structure (faults) as fluid pathways. IMO, unravelling the sequence of intrusive pulses and the structure, guided by geophysics and drilling, is a pathway to efficient success. The potential concelaed under cover at Kharmagtai is Andean scale.

So these high grade intercepts looks to be significantly better than any previous with ~ 50m @ 2.3% and ~ 30m @ 3% within a 400m package running consistently good mine-able grade. Bell Potter recently put a value of 19c on XAM just based on old numbers, with an upside to 52c on continued positive results. They will probably at the very least affirm that high target to their clients after today. XAM also have two other solid porphyry projects in Mongolia with residual and untapped value.

Mongolia has a new President who is very busy fixing all the problems from the previous administration. The country is suitable for mining (like the Aussie outback), and is getting addicted to it. They are just working out how to extract the most satisfying high from it. Red tape has very recently been resolved at Rio's Oyu Tolgoi and development on the underground is ramping-up there there right now. Aside from Turquoise Hill (Rio), markets have not yet been repricing the fundamentally improved sovereign risk situation for many of the Mongolian players.

Once XAM start talking a couple of hundred million tons at at Kharmagtai at 0.8% or so, in line with the exploration target, then they may look like prey to the predators, if they don't already. Copper porphyries make up the bulk of all copper mined, nearly all by the majors. Good ones are worth serious money. At Bell Potter's 52c estimate, XAM is still valued under $200m fully diluted. The register is tightly held but I think this rerate will continue.

Good luck to XAM, Mongolia and punters.