Chinalco Yunnan Copper Resources

Deeper underground

Chinalco Yunnan Copper Resources is venturing deeper at a site historically mined for uranium to uncover copper and gold previously overlooked

Timing can be very important in mining, and Chinalco Yunnan Copper Resources Limited’s (ASX: CYU) Mary Kathleen Joint Venture Project with Goldsearch Limited (ASX: GSE) is testimony to that. The Australian developers’ Elaine copper-gold prospect at Mount Isa, North Queensland, sits just 6km south of the historical Mary Kathleen uranium mine, operated between 1958-63 and then again from 1976-82.

Mary Kathleen Uranium Limited (MKU) was looking at the Elaine site in the 1980s as another potential uranium source to feed into its processing plant. The company drilled and, in addition to defining the uranium resource, found a copper deposit. However, as CYU exploration manager Richard Hatcher explains, at that point MKU could do nothing with it.

“Back in the 80s, you could only explore for the mineral specified on your tenement, and [MKU] was only allowed to explore for uranium,” he says. “Fortunately, the geologists had the good sense to write down the copper minerals finding, so when we read through the old logs we noticed there was a significant zone of sulphide mineralisation. We went back and redrilled that hole and 27 million tonnes later, we have a copper resource there.”

Something old, something new

CYU approached this pre-explored prospect with a new approach, using the American EH4 electromagnetic imaging technique – never before used in Queensland – to search deeper than ever before. “Mount Isa has only been explored to 250-300m depth before, so no one really knows what’s going on underneath,” says Hatcher. “We’re coming across deeper copper in the area than previously explored, and our latest resource for the Elaine copper-gold deposit is testimony to that. The copper we found there was a 27.1Mt resource.”

CYU finished drilling metallurgical hole MKED036 at the end of 2012, to a depth of 896.98m. The assay results to 506m came through showing 22m at 1.24% copper and 0.10g/t gold from 232m at 1% copper cut off. The intercept was within a zone of 49m at 0.80% copper and 0.06g/t gold from 231m at 0.25% copper cut off, contained in a broader mineralised zone of 167m at 0.50% copper and 0.05g/t gold.

In addition to copper and gold, CYU discovered rare earth and verified the 80,000t uranium oxide resource previously discovered by MKU. At the time CYU verified it, the explorer could do nothing with it due to the Queensland government’s uranium mining ban.

That changed at the end of last year, when the ban was lifted. Again, CYU’s timing proved impeccable and, while focusing primarily on copper and gold, the company will now begin looking into mining uranium and rare earths as well.

Mining on brownfield land

Mining a brownfield land can certainly speed up certain elements of a project; in the case of the Elaine prospect, however, the site’s history served more as a warning. “We tried not to recreate the mistakes that the previous explorers made,” says Hatcher.

“Sometimes it was difficult. The biggest challenge was the condition of the ground. We’re looking at a deposit mostly made up of garnet, so it’s very abrasive and selecting the right drill bit and cutting material for the matrices has been quite difficult. We could go through 13 drill bits in one 400m hole, which is a lot.

“Fortunately, our drilling company DEPCO managed to work on that and, going forward, we should be able to use what we’ve learnt to make exploring the potential satellite deposits around Elaine a lot quicker, easier and cheaper.”

CYU has five satellite targets to add to the Elaine resource and if these are substantial, the company will consider building a central processing plant for it all.

There is still around two years’ worth of metallurgical drilling programs and feasibility tests to do at Elaine before CYU will decide whether to develop it or not, but the project is making good progress. “We’ve only been drilling for 18 months and we’ve already defined a reasonable resource,” says Hatcher.

Nearby the Mary Kathleen Joint Venture Project (70% CYU, 30% Goldsearch) lays the Mount Frosty copper project, a joint venture with Xstrata Copper, and the Cloncurry North joint venture, with Yunnan Copper Mineral Resources Exploration and Development Co Ltd (ASX:YEX). “Between us, we’ve pretty much locked up that area,” Hatcher remarks.

Big plans for Chile

Far from stopping there, CYU has also staked its claim to several prospects in Chile, which it calls “the world’s best copper ground”. The developer is looking at much larger-scale deposits here, comprising igneous porphyry rock in the range of 500 million to more than 1 billion tonnes.

Its joint venture partners are large as well. At the Candelabro, Caramasa and Palmani projects in North Chile it is working with Rio Tinto. Further down the country, at the Humito project, CYU owns 100% of the tenements after acquiring  some internal tenements from Xstrata. Diamond drilling on all four of these projects is scheduled for completion this year. At Sulfatos, its fifth and final project in Chile, CYU will do a feasibility study for Codelco – the largest copper producing company in the world. Hatcher says his favourite projects among these are the Sulfatos and Humito projects, where “there’s potential for two large porphyries”.

“We’re running a geophysical program at Sulfatos first, then we’re going to piggyback a geophysical program at Humito following onto that,” he adds. “Those projects are already underway. We’ll be looking to drill at Humito within the first quarter, following the results of the 3D geophysical IP program.”

Confidence in its assets

CYU’s confidence in its many projects is matched by the strength of its balance sheet. “We’re looking very comfortable,” says Hatcher. “We raised AU$6.7 million at the end of last year and now we’re following on from the drill programs with just less than $6 million in the bank.

“We’re probably looking at going back to the market in around 18 months’ time, if we’re not in production somewhere along the way. But we’re exploration funded for the next two to three years.”

For its financial backing, CYU has its strategic investors to thank. Hatcher says the support of Chinalco and the Yunnan Copper Industry (YCI), which holds 42% of CYU, is a major advantage. “We’ve got the support of a great backer who has a very long-term outlook on things; in the GFC and the Europe crisis, while other companies were running scared and looking for money, we felt we didn’t need to worry,” says Hatcher. “Chinalco/YCI has a great outlook in utilising new techniques in old terrains.”

Hatcher is also confident that the copper market will turn around this year, slowly but surely. “Copper’s looking really good at the moment – the price has been rising over the last couple of weeks and there’s some favourable long-term forecasts coming out as well,” he adds. “Copper looks like it might be a very good metal to keep an eye on.”

Equally – considering its high level of confidence for the year ahead – keeping an eye on CYU might be a good idea as well.

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