Exploration in the Southern Gobi copper belt has been cyclical but has occurred in two major waves. Initially these were largely state-sponsored geological survey style exploration from the 1960s’ that generated regional data sets including mineral occurrences.
Early exploration by western companies during the ten-year period from 1996-2006 and saw the commercial discovery of the Oyu Tolgoi deposits. Significant regional exploration continued until through 2009 and included the JV between Ivanhoe and BHP Billiton (which included the Falcon survey). Ivanhoe Mines (“Ivanhoe”, now Turquoise Hill Resources “TRQ”), under Robert Friedland’s leadership, was responsible for the major of the exploration during this secondary phase, when its land inventory was at a point 126,626 km2, about the same size as Japan or Italy, and at the time was the largest landholding in the mining industry.
Exploration has been impacted by the Mongolian legislative environment and global commodity cycles, and after 2011 being mainly focused on specific prospects, largely driven by junior exploration companies and various private groups with some private advancements by various majors across the wider belt. Extensive exploration and geological data were collected during this period, and understanding of the regional geology and controls on mineralization were significantly advanced. These included an understanding of the local geology of the Oyu Tolgoi porphyry systems, as well as other copper occurrences such as Tsagaan Suvarga, Kharmagtai and Bronze Fox, amongst others.
The then Ivanhoe released the majority of its extensive regional landholding following windfall tax (announced May’06) and during extended negotiations with the Mongolian Government to form the Oyu Tolgoi Investment Agreement for the open pit development (secured Oct’09). The repeal of the Mongolian copper and gold windfall profits tax only occurred in Aug’09 (effective January 1, 2011) with reform to the Mongolian Minerals Law in July 2014 leading to the repeal of the 5-year moratorium for issuing new exploration licenses (since mid’2010) only in January 2015.
Kincora Copper was formed in mid Jul’11 following the closure of the transaction between Origo Partners and a TSXV listed “shell” company called Brazilian Diamond Ltd, raising C$12.1m via a private placement and “reversing” the Bronze Fox license (15000X) into what then became known as Kincora.
The Bronze Fox license was originally part of the original Ivanhoe Bronze Fox project, which in 2005 was designated as one of four, alongside Oyu Tolgoi, Kharmagtai and Nariin Sukhait, high priority targets for large scale porphyry and skarn copper mineralization amongst its 126,626 km2 land holding held in the wider Gobi region.
The license was a highly rated and large scale exploration target with mineralization identified over 40km2 of a 223.2 km2 total area and featuring numerous target zones of copper, gold, chrome and molybdenum and extensive copper mineralization from surface with unknown potential at depth and across the majority of its land package (only ~10% of the license has been explored in meaningful detail). Previous drilling included 72 holes for over 12,000 metres confirming continuous mineralization on a 9km strike, predominately at the Kincora named “West Kasulu” target (Ivanhoe named “Bronze Fox” target, with East Fox on the eastern section of the intrusive), a large low grade copper-gold feature from surface to depth (generally returning between 0.4% and 0.9% copper equivalent).
In 2012, Kincora acquired Golden Grouse LLC, a Forbes & Manhattan controlled company, to consolidate the rest of the original “Ivanhoe” Bronze Fox project (which hosted the Ivanhoe known “West Fox” and “Tourmaline Hills” prospects), including the Western license and extension of the West Kasulu target. The consolidated license portfolio now included the Bronze Fox Intrusive Complex and Tourmaline Hills Intrusive Complex, almost tripling Kincora’s footprint from 223.2km2 to 622km2.
Shortly after completing the Golden Grouse transaction, having only completed one-field seasons’ exploration, the licenses Kincora acquired were revoked by the Government of Mongolia as part of the 106-exploration dispute (a court case involving former government employees which the license holders were not party to). This resulted in a $6.95 million impairment from the Company’s balance sheet in 2013, and after leading the industries lobby efforts to resolve the 106-license dispute, in March 2015 these licenses returned to Kincora as new with tenure of up to 12 years.
The two-year dispute significantly impeded Kincora’s exploration efforts, corporate discussions and strategy over this period, particularly with the West Kasulu target within the Bronze Fox Intrusive Complex spreading across both the Eastern and Western licenses. For only one field season, in 2012, was Kincora not impeded with its exploration efforts in the Bronze Fox district, which resulted in the most favorable exploration results to date in the region at the West Kasulu prospect. Exploration on the Bronze Fox and Western license border returned over 800 metres at over 0.40% copper equivalent, including 37 meters at over 1% copper equivalent. Furthermore, 9 of the 15 holes drilled in 2012 at the Tourmaline Hills gold prospect in the Western license have returned intervals of at least 1g/t Au, up to 7.7g/t Au and with up to 75g/t Ag locally in the mineralization zone, often with elevated copper values. Active artisanal mining during the summer is common at the Tourmaline Hill and Southwest prospects, and various Bronze Age pits/workings evidenced at the former in the Western license. Approximately a third of all holes previously drilled at Bronze Fox across both the eastern and western licenses have returned intervals of at least 1g/t gold.
In 2013, when only having undisputed access to the 15000X, Kincora had 14 confidentially agreements in place with most industry groups active in the copper sector, which resulted in a period of exclusivity in 2014.
Feedback from industry groups at the time was that there were three major sovereign risk impediments:
1. the dispute with the Government for the development of the underground at Oyu Tolgoi;
2. our Golden Grouse licenses having been revoked as part of the 106 license dispute; and,
3. uncertainty relating to the minerals law, with no new exploration licenses having been issued since 2010 due to a moratorium.
All these items were in time resolved, with these Mongolia specific impediments overshadowed by the downturn in the global commodity cycle, which saw the last of the long standing groups such as Anglo American and Teck Resources close their Mongolia regional offices in Dec’15.
In 1Q’16, Kincora secured a new exploration license from the direct application system operated by the Mongolian government, named Ulaan Khudag (Red Well), associated with a known outcropping copper-gold porphyry system, located as close as 15 km along the mineralized trend from the Rio Tinto controlled, Oyu Tolgoi project. An identified contact zone continues to the eastern and western sections of the license, the margin just to the east returning a previous 2% copper and 0.25g/t gold sample with anomalous values also to the west.
In May’16, Kincora announced it has reached agreement regarding Ibex Land Mongolia LLC and Ibex Mongolia LLC (“IBEX”), entities indirectly controlled by High Power Exploration Inc. (“HPX”), which resulted in Kincora more than tripling its landholding in the Southern Gobi copper belt, totaling over 1,500km2. This transaction was closed in Nov’16.
Background to the IBEX transaction
· IBEX’s portfolio is focused on porphyry targets to the east and south of Kincora’s existing licenses with the consolidated landholding now being the dominant position in the Oyu Tolgoi-Tsagaan Suvarga (Devonian) copper belt.
· A large and high quality regional geophysical and surface geochemical dataset supporting various style targets: i. Devonian porphyries; ii. “Traditional” gold rich copper porphyries; and, iii. epithermal and Carlin-style gold deposits.
· Consolidates a regional portfolio in an underexplored but potentially world-class gold rich copper province analogous to exploring the majority of the Northern Chile copper belt from the 1970’s.
· Strengthened team with discovery experience and complementary skill sets for exploration through to project development internationally and in Mongolia.
· Fully winterized camp, fleet, permitted landing strip, IT and exploration equipment.
· Kincora issued to HPV 5,895,000 common shares and 2,947,500 warrants a exercise price of $0.54 (equal to 1.8 times the price per security of the July 28th, 2016, private placement of Kincora) and a term of 24 months. There is no cash consideration relating to the IBEX transaction.
· It is intended that these Kincora securities will ultimately be held by the shareholders of HPV, the largest of whom are HPX Techco Inc. (“HPX Techco”) as to 65.78%, a subsidiary of High Power Exploration Inc., a private company, and GoviEx Uranium Inc., a TSX venture exchange listed company, as to 21.64%.
· HPV will have certain rights to maintain their ownership percentages by participating in further capital raisings and, at a threshold of share ownership, have the right to a board seat.
· A Relationship Agreement with HPX Techco was executed which provides Kincora conditional access to HPX’s suite of geophysical technologies.
Recommencement of Rio Tinto and Turquoise Hill Resources’, Oyu Tolgoi Stage 2 underground development, approved in 2016, coupled with recent legislative and Government change, and improving commodity prices, is refocusing where other Tier 1 assets may lie in this region and highlight Mongolia as a favorable jurisdiction to other copper frontiers.
Last updated February 6th, 2017