XTR JORC

 

To be clear and upfront. I don’t like the direction the company has gone in the last six months. There has been very little communication. News is infrequent and poorly presented. Xtract is run like a fiefdom. Is it an exploration company? Is it an investment company? Is it a producer?

I’ve been very clear that set quarterly market updates, change in nomad, better more independent BOD etc etc would make a world of difference to the company, but I will park that for now.

This is mainly about the JORC and the controversy around it.

The market hoped for 600m at 0.3 copper. It would have accepted 500m at .3 imo. In the end it got 500m at .2 (there or thereabouts). So, the share price dropped.

Now, I am going to park whether the JORC was still good or not. IMO we simply don’t know and that is part of the problem. We don’t have the information we need. We don’t know about Ascot. We don’t know what parameters the economic study will get or come up with. We don’t know whether more drilling we be needed. On a wider point, we don’t know the success of Manica, the impact of the lower gold price. We don’t know how much revenue we will get this year. Simply the market knows nothing. The market isn’t convinced that Colin Bird can meet deadlines and so the share price has suffered.

 

Hands up if you remember the diagram that was on most of the RNS’s at the start of the phase 1 drilling, the one with the green section and the dip? What was it showing?

If you said Anglo American’s (AA) JORC, then well done!

A JORC is a very specific thing. It is created to defined standards, based on the knowledge of some independent expert, which in turn is based on the geology. If you’re producing a JORC on a geological formation that acts in a very predictable way, you need less drilling than if you’re following mineralisation which widens and then narrows all the time.

Second question. What does the modeller do, the one who XTR employed?

If you said he creates a model of the resource, then well done!

There is a defined process for exploration. You do lots of drilling. You then input the drilling results (assays) into the software, and it comes up with a model of where the resource exists. You normally tell it to ignore grades below a certain cut off. You can extrapolate as well using certain parameters to fill in gaps that might exist in your drilling. This data is then given to the independent expert who uses it to create the JORC. Not all of the data will be used in the JORC. Not all the resource will be in the JORC.

Now let’s move on to the next point, the economic model. The economic model is independent, it is based on the resource model. “Open pit modelling was carried out using the currently defined JORC (2012) compliant Inferred Resource of 71Mt @ 0.44% Cu and 0.064 g/t Au at a cut-off of 0.3% Cu, as well as additional unclassified resources at the Racecourse prospect”

taken from the XTR RNS 26-07-21. 

In this statement XTR is clear that the model was made based on the resource model, which in turn is the JORC of 71Mt and xxxMt which is the unclassified resources. Just to make it completely clear the unclassified resource is the resource model which was of insufficient information to be included in the JORC.

Now an economic model, is just the start of the road that leads to a legally recognised PFS (pre-feasibility study). Unlike the economic model, only JORC resources can be included in a PFS.

Now, lets jump around again. I know that Steve has done quite a bit of research into the JORC that has just been released. I want to make it completely clear ALL research is good and valuable. At the very least it should make you think and check your own research. The day you just ignore research you don’t like, is the day that you treat AIM investing like a casino. I have not been reading the forums as much as I would like, due to very limited free time, so I am sorry if these points have been made.

The table above is taken from Steve’s research.

By and large, I don’t have too many issues with the figures and maths. A bit here and there, but I don’t think comparing like this is particularly helpful. I do think the research is good. One of the problems with Xtract is communication. Steve is going from the figures that have been provided (apart from comparison). If we take what has been presented in RNS’s they are pretty accurate.

The original JORC was 71Mt @ 0.44% Cu and 0.064 g/t Au at a cut-off of 0.3% Cu. The tonnage above is the original JORC plus the resource that wasn’t drilled enough to get into the JORC, but was included in the resource model.

The new JORC figure is JUST the JORC figure, it doesn’t include any of the resource model which was not drilled enough in phase 2 to make it into the JORC. As the original JORC and model shows, this could be substantial.

If we take the 0.15% cut off example above, we get the following.

Original Pre phase 2.

JORC 71Mt + 91Mt of none JORC resource model = 162Mt

New post phase 2.

JORC 335mt * but to compare like for like, we to need to add all of the none JORC resource model which we simply don’t know yet.

To recap, if we imagine the picture that I mentioned at the start of the green AA JORC, the new picture has nearly 8 times the amount of rock. Yes, some of that was resource that we knew about, but knowing about it doesn’t mean much if we can’t actually report against it. Simply people don’t pay for the resource model, they pay for the JORC as that it official and independent.

So what did the phase 2 drilling prove.

Drilling out a porphyry so that it counts as an independent resource that can be official reported in an RNS takes time and money. Xtract managed to convert probably most of AA’s resource model into official reportable tonnage.

As well as the above, XTR added about 50% to the tonnage and copper *roughly.

XTR almost certainly drilled quite a bit that was added to the resource model, but hasn’t made it to the JORC (maybe another 100-200m tonnes at .2 – conservatively…maybe as much as 200-300m).

It has added a second resource (Ascot) JORC Tonnage and Grade unknown.

In total with the JORC tonnage at Racecourse, the unJORC tonnage at Racecourse, the future JORC tonnage at Ascot and the unJORC tonnage at Ascot we are probably around 1 billion tonnes.

As we have drilled and discovered that Racecourse is more complicated than originally thought (for example it is made up of multiple porphyry waves, each with different mineralisation characteristics) we have undoubted taken what was a simple porphyry JORC and turned it into a more granular picture which will be worth more. i.e more drill results are probably needed for the XTR JORC per 100sq metre than the AA one.

If we finish with the biggest unknown, the economic viability.

The initial economic study was incredibly simplistic – probably one of the most simplistic I’ve ever seen. It is very rare that a company just digs a massive hole and processes it. I can easily see a real mine design having 3 or 4 separate stages (or mines). The first stage will need to produce an IRR of 20% minimum – for it to be economically desirable. This means that revenue will be front loaded. It will a much smaller, focused open pit. It will likely have a modular copper processing facility (i.e bolt on aspects to increase TPA). As yet I don’t know whether the finished design would be better to just concentrate on copper or include copper and gold.

The capex is highly uncertain. Copper-gold project in BC interior has $795 million capex - MINING.COM has a capex of $795m, but for Xtract it could be anywhere from $500m to $1.5bn.

The opex is also highly uncertain.

If Ascot has a better, higher grade core, then maybe Ascot will be the initial stage 1 mine on the bushranger license. Which pays off the initial capex at say an IRR of 25%. A company can then mine the high grade core at Racecourse with very little capex and an IRR approaching 50%, before deciding whether to mine the lower grade sections of Ascot and Racecourse.

To conclude my opinions.

The JORC has slightly missed the market expectations. It is not and never was a tier 1 project.

The Phase 1 and 2 drilling by Xtract at Bushranger has created more tonnage and more copper, particularly if we compare like for like JORC or JORC plus resource model.

I mainly agree with Steve's research, but the JORC+Resource model v just JORC is fatally floored IMO.

We don’t know yet whether it will be economically viable, however I think it should be.

Xtract isn’t helping itself with the way its run and sets expectations to the market. I make no predictions wrt the share price.

Xtract's Racecourse – Ascot - ?????

 

A quick blog, I’ve not done one for ages and I tend to do them when the market misunderstands – which I think has happened here.

Firstly, the Results.

23 We knew it ended up in the NW due to the fault – These holes were completely discounted.

29 Not much here, but its due to the sub-duction fault IMO.

33 Mega gold (100-120m depth)

44 The only disappointing hole, but probably due to the sub-duction fault.

 

Updated Diagram.

Seen many times before. We have the Dog fault to the NW of Racecourse, to the SE we have a sub-duction fault. These two faults pretty much define the size of Racecourse. Which is massive.(The zones are not perfectly drawn, and are more for illustrative purposes.)

The location of the sub-duction fault is not certain, so I’ve given an area, with the grey line being where I think it might be. These faults occur when two rock types meet and one goes under the other. Both tend to bow downwards. I first mentioned this fault back in March kind of time from memory. In my opinion, it will mean that Racecourse takes a sharp dive down at it’s SE extent. Ascot will take a sharp climb up at it’s NW extent. Given this, the area between the two deposits will NOT give much mineralisation.

Icebergshares: Xtract Ascot – Another Porphyry – Another 2 million Tonnes?

This isn’t something new, I’ve been banging on and on about the fact that I think Ascot extends to the South. In the above previous blog from December, you can see 33 plotted. The Xtract geo’s described the mineralisation at the bottom of the hole (which hasn’t really materialised), they completely missed the gold near the top. The True depth of the gold looks to be around 100-120m this is massively shallow and is probably a good indication, along with the Ascot assays, that they sit to the east of the sub-duction fault. I said back in the December blog that 33 went through a third porphyry, this might still be right given the porphyry mineralisation at depth. The gold higher up could well indicate a further system. It looks like a gold centric release system from the subduction fault, at 15g/t we are looking at seriously commercial gold, particularly at that depth. As it moves SE it will get shallower and conversely deeper as it moves NW. Xtract MUST put together a plan here, maybe 10 holes between depths of 150-120m in a grid pattern. All shallow, all relatively cheap to define this gold system. 2m doesn’t sound big, but to hit it at random like this indicates it might well be considerably bigger. This is a stunning gold find.

Hole 44 is disappointing as it indicates the geo’s didn’t have a good handle on things. I am hoping that 45-50 has given them the information they need.

So, to recap: The results were pretty much as expected. Xtract still has the massive Racecourse site. It still has Ascot, which was always going to extend south. Now it has also added the very heavy gold find with 33 – which must be a different system. We can knock on the head the idea that Racecourse and Ascot join (always unlikely).

To buy sub 5p was very pleasant thanks to the Market, we still have everything we had prior the RNS, including the income from Africa, IP, JORC etc.

Xtract Ascot – Another Porphyry – Another 2 million Tonnes?

 

Xtract Ascot – Another Porphyry – Another 2 million Tonnes?

 

Until now I wasn’t a big fan of Ascot, I would drive by it a few times a year with my kids on the way to Legoland. Why talk about Ascot? Well, Xtract has a license called Bushranger, within that license is a deposit called Racecourse. We’ve always used the generic term Bushranger to describe the resource, as that is the license it’s situated in. Now we will have to differentiate a little as a second, completely separate deposit has been identified called Ascot.

Ascot is situated about 1.5 km SE from the SE tip of Bushranger, in what was preciously known as the SE anomaly.

The above diagram is the latest drill map from Xtract. Racecourse is clearly labelled, to the SE  (bottom right hand corner) we have drill holes 25,31,33 and 35 that are looking for, and have found, a second porphyry -Ascot.

The idea of a second porphyry at Bushranger is not unexpected. In the summer, Xtract commissioned a wide-ranging Geophysics sweep of the license. A number of large targets were identified, notably a large target which was termed the SE Anomaly. In my blogs this year, I talked about this back in Sept and tried to plot where and what the intrusions might look like.

The reds and browns indicated the anomaly charts, the Yellow areas (by me), represented possible intrusion locations.

Given the lack of information back then, I think the general locations stack up pretty well.

Moving on to the geology. These types of porphyry often swarm, they are essentially escape routes for magma pressure, one is used, it blocks off, then another one forms. The subduction arc leads to a larger dominate chamber, which then blows out when the pressure gets too high. In the case of Northparkes, which I’ve referred to several times, you end up with a set of vertical chimney structures that release upwards, some bigger, some smaller. Bushranger is slightly different in that the escape routes seemed to have followed more horizontal weaknesses on their way to the surface. The main physical characteristic is that they have more porphyry closer to the surface. From a geophysical point of view, it means they probably retreated at a lower temperature, with less pressure. This is important. Bushranger is very unique in the Lachlan Fold, it appears to be the most copper centric deposit. I am only musing, but the particular horizontal nature of the intrusions might be the reason. Anyway, the key point is that more of these escape porphyries were always likely and they were always likely to be very similar in geological nature to Racecourse.

One last quick point. Porphyries tend to be unloaded with regards to mineralisation. However, when they are loaded such as Racecourse, it’s a roll of the dice as to what they will contain. If we assume that the more horizontal nature makes it more likely to be copper centric, then we can explain it with a roll of the two dice.

1-2 weakly loaded copper mineralisation.

2-6 moderately loaded copper mineralisation.

7-8 strongly loaded copper mineralisation.

9-10 moderately loaded copper with weak commercial gold.

11-12 moderately loaded copper with moderate commercial gold.

 

 

I’ve knocked up the above diagram, it comes with all kinds of caveats. The largest is that this is just the first drill into that location, so there is simply not enough data to give any kind of detailed analyst of the intrusion. Secondly, I don’t have the detailed geological data from the drill (neither do the XTR geologists tbh). However, despite these caveats, we can make some basic assumptions.

The diagram is a cross section of Hole 35, which goes west and Hole 33, which goes east, both from the same pad. Hole 35 encounted stronger mineralisation in two sections, with a middle section of lower mineralisation. We know that mineralisation sits mainly in a zone of alteration adjacent to the intrusion. We can guess, probably pretty accurately, how this will look as it will be very similar to Racecourse. Guessing grades is much more problematical. The photo’s of the cores suggest that 1% or higher is likely, my thoughts are that these are probably the better cores, so it’s unlikely that 1% is representative, a typical Bushranger value of .3% to .6% appears to be more likely.

Hole 33 is intriguing with its mineralisation at the bottom of the hole. Mineralisation doesn’t just appear, if its connected to Ascot, then it means that Ascot extends massively, 300-500m from the east of the intrusion. If not, then it would indicate a third porphyry, which is very possible.

We know from Racecourse that it dips deeper to the NW (deep towards the source of the intrusion) and shallower as it extends SE. If we assume that Ascot also does this, then 33, 35 might well have been drilled to find a deeper intrusion at that point. It also means that as we drill further to the south of Hole 35, the mineralisation is both shallower, bigger and more intense.

Xtract Bushranger Copper Exploration Update

 

Another quick update. I’ve been suffering from Covid for about 10 days, although thankfully I am on the mend. There has been some important news on XTR this Friday, so it’s pushed me to write this. As usual the Market is continuing to fail to understand quite what Xtract has with Bushranger.

There are two stories with Xtract’s exploration in Australia, as I am sure those that have read these blogs before know!

The first is the exploration of the preliminary pit, which is centred around the existing JORC.

The second is the expansion exploration.

I would like to draw attention to Northparkes. In my first blog on XTR I gave a brief overview of Northparkes and its similarities to Bushranger. In it’s 2020 presentational overview it described itself as having a primary commodity of copper, in a porphyry deposit type. 80% of it’s revenue comes from copper. It’s 2019 Cash cost is $1.15lb Cu. It’s a mixture of block and open pit.

The porphyry tends to sit upright and extends 200-300m (about 100m from the main intrusion in each direction).

Northparkes was brought by CMOC from Rio Tinto for $820m back in 2013 when copper was about $3.3lb (currently $4.4lb), I believe. This would be about $1090m adjusting for today’s copper price.

Northparkes has 483mt at an average of .55%Cu, the Majority of this in two intrusions (310mt).

Back to Bushranger and the first purpose; the exploration of the open pit.

Length:

We know that our porphyry it not upright and it’s lying on its side at a dip of between 40-60 with Hole 1 delivering a length of 920m @ 0.3% Cu. Hole 1 was drilled approx. 300m to the NW of Hole 13, which was reported today and adds a certain 300m onto the length of the mineralisation, giving 1220m. Hole 1 mineralisation also didn’t start straight away from the hole (it was 100m in). We also know that the end of Hole 1 went under and to the west of the main mineralisation, as Holes 8, 9 and 10 hit most of their mineralisation to the east of the Hole 1 intersect.

So, to conclude Hole 13 has added approx. 300m to the length of the deposit, Holes 14,16 and 24 could extend this further.

Width:

We know that Hole 9 has intersected 448m of Cu. Other drills would support 200m to the SE end. Middle 450m (i.e hole 9) 300-400m approx. NW end.

Holes 17 and 18 could increase the width to approximately 500-600m in places.

The final thing to consider when looked at the size of Bushranger is that Hole 10 is approximately 500m SE of Hole 23. Hole 14 is approximately 1000m SE from Hole 10. To extend this further hole 25 is approximately 700m SE of Hole 14. Hole 25 is firmly in the new unexplored Target zone.

Simply put, Bushranger now makes even the largest Northparkes porphyry look small, currently without any further expansion we are probably bigger than the Northparkes two largest porphyry systems added together, so around 400-500Mt, with the extensions from 17, 18, 23, 16 all looking like they will extend this even more, we are looking to be in the 600-750Mt at around a .35% so between 2.1mt and 2.6mt of Copper. This is of course a very preliminary figure and there is much I don’t know.

 

Holes 14 and 25 bring us to the second story; expansion exploration. This is exploration outside of the open pit and existing JORC.

As I’ve said before anomaly maps only really tell us where geology changes. It can pin-point intrusions, simply because of the unique type of geology that intrusions are generally made up from, quartz-feldspar-pyrite etc often iron rich and so conduct well. What they can’t tell is whether the intrusion contains copper and gold as this is determined by the speed, pressure, temperature of the internal creation of the intrusion along with the type and make-up of the fluid.

We know that geophysics indicates that intrusion like expansions might exist to the SE in two distinct zones.

Thankfully we have Holes 14 and 25 to help us determine whether they are your basic none mineralised intrusions or something more akin to Bushranger with copper and or gold.

As you can see Hole 25 is approximately 700m SE of Hole 14, or 1.7km SE from Hole 10.

Hole 14 was drilled to 822m, is should have entered the edge of the new porphyry. I am doubtful it will have really got into any of the mineralisation or good alteration though, my guess would be that the better mineralisation is on the east side of the anomaly. That said XTR have described Hole 14 as hitting sulphides, which is most likely chalcopyrite, which would probably mean low grade copper .1 to .2%. This might not sound very exciting, however it would indicate a ‘loaded intrusion’ with the right material and conditions for mineralisation.

Hole 25, which is currently being drilled, should cut across the crown of the porphyry. It will give XTR an incredible amount of geological information, not least whether the intrusion is on it’s side like Bushranger, where and what the make up of the quartz shell is, alteration banding and hopefully where any mineralisation is likely to be.

This SE intrusion WILL be different to Bushranger, it will be older and probably have been affected by different waves of fluid migration. If we refer back to Northparkes, in a similar sized area, some of their intrusions are gold heavy, some copper heavy, some a real mixture. The similarity ends with size, as the SE intrusion is similar in size to ALL of Northparkes put together.

Hole 25 still isn’t the be all and end all of the SE porphyry, my best guess is that high grade massive alteration is probably 500-1000m south of Hole 25. Mineralisation in Holes 14 or 25 would indicate another massive system.

Conclusions.

Hole 13 was very much, wrongly ignored by the Market, it extended the above cut off mineralisation by about 300m to the SE, still all shallow, still in the open pit. It is exactly what Xtract needs to ensure it produces a JORC above 2MT of Copper.

Holes 17, 18, 20, 22 and 23 are all massive holes trying to expand the footprint of the JORC.

Holes 16 is important as it extends the mineralisation further SE by another 100-150m and should show good continuity to Hole 13.

The visuals and description of Hole 25 will be my favourite of the next 10 days, I love the first hole in a porphyry crown.

Xtract Bushranger Hole 8 184m@.51CuEq

 

Well, we have our first assays from Xtract’s second drill phase at Bushranger. The first phase was a frantic five drills (1-6 with one partially abandoned). This second phase has built upon that, with Xtract now on holes 20 and 21.

The first phase at Xtract was all about discovering the existence of Bushranger. Yes, I know we already knew it was there as Anglo already had a smallish JORC, however the extent of the intrusion and the porphyry was uncertain, both down dip and in width. Phase 1 was a finger in the air estimate of the size of the container.

With this in mind, phase 2 is about the content of the container. Phase 1 showed that the container was potentially considerably bigger than Anglo had drilled. Grades from phase 1 were on the lower side, but still economical. The Market was a little disappointed with phase 1, incorrectly IMO. Phase 1 needed Xtract to drill into the unknown to find the limits of the system, by this definition the grades will be on the low side.

As a starting point Xtract developed an open pit using the existing JORC figures from Anglo, which showed that an open pit of the resource was pretty much breakeven at current copper prices. Xtract also commissioned some Geo work, to examine the anomaly, using deep targeted anomaly maps with drill results from holes 1-6, Xtract was able to develop a new model. A model that would add considerable tonnage to the open pit, swinging it into a positive NPV of $1bn+ at lower copper prices.

Xtract therefore has two aims from the second phase of drilling, the first is to try and meet the 2m tonnes of copper target to trigger the Anglo American buy back (which looks almost certain), the second to produce the concept of a viable, commercial mine therefore also trigger the Anglo American buy back. If Anglo didn’t want to buy the project back on commercial turns, then the economics of the project in such a low-risk country as Australia would make it a near certainty as to be brought by somebody else.

Phase 2 drilling is all about achieving these aims by targeted drilling using the new geo model.

To achieve its objective, the assay results from phase 2, must be above the cut-off of 0.15% Cu.

Now let’s turn to Hole 8. Hole 8 was the shortest hole drilled in phase 2. It was drilled across the intrusion (its western side), at a shallow angle. The company described hole 8, when it was drilled, as having 120m of moderate to strong mineralisation. The expectation of the hole in terms of phase 2 was to expand the shallower grades near the intrusion centre, that the new model said should exist. Validation of the phase 2 model could be achieved. My personal expectation is that copper grades of .3 to .4 Cu over 120m would be considered a success, gold would be minimal with maybe .1 or .2 in small intersections of 1 to 3 metres.

The assays of Hole 8 have now been received and made public by Xtract they were…

BRDD-21-008 184m @ 0.51% CuEq from 204m including 46m @ 0.72% CuEq from 252m, including 8m @ 1.41% CuEq from 290m

An intercept of 12m @ 0.6 g/t Au.

These results are more than 50% above expectation. Importantly it shows that the model is probably a little bit conservative, the model will show expansion areas, which will add more copper and gold than originally thought at the start of phase 2. The use of the new model has produced the best hole results that any company has ever produced from Bushranger, this includes Anglo American. Xtract has also drilled more metres than any other company at Bushranger – this means that Xtract has a better understanding of the project, its nature and its worth.

The model is not static, every hole and every assay will be fed into the model, helping the geologists to maximise their understanding.

So, does Hole 8 change anything? Yes.

As I mentioned it will change the model. With higher copper grades, it will have a massive advantage for the open pit. Importantly in my opinion, it allows for the possibility of a multi-stage open pit. Xtract is starting to develop a higher-grade core within a 400mx400mx250m depth pit.

Xtract has yet to produce a JORC for any of the holes it has drilled, considering it has drilled more than any other company (All of it high quality diamond drilling measuring 22 holes currently) a JORC when it is produced will be considerable. Every hole will add value whether its new and so will add tonnage, or partially existing material, in which case it will convert from inferred to indicated. The better the grades the more the JORC will contain. The creation of a JORC is NOT expensive, or even particularly time consuming as long as a detailed model is kept and upgraded with each drill result.

The final reason that Hole 8 has changed anything is the existence of gold. For the first time, Xtract has found commercially attractive levels of gold (12m 0.6g). Drilling by Anglo American found small intercepts, but phase 1 drilling by Xtract didn’t. In his interview yesterday, Colin Bird Xtract Chairman said that the gold was an imprint of a previous event, I think he said that the gold came later. I disagree with this and would hesitate to say maybe he mis-heard his geologist. Back in a blog in January I wrote. “To complicate matters, geology doesn’t just happen and then stop; so, you will often have two or more incursions of hydrothermal alteration. This provides a mixture of stockwork. For example, the older -primary- incursion with associated stockwork, tends to be gold heavy in this region, later incursions are normally more copper-centric, which is supported by local geology studies.”

This is important. Phase 1 drilling concentrated entirely on extensions to the north and west of the intrusion. This is closer to the main fault. Geology would dictate that the closer to the fault you are the later the event. A lack of gold to the north and west and increased gold to the south and east would support an earlier hydrothermal event (gold centric), then a much larger later event which removed the gold where it occurred and was predominantly copper. Such geological event timing happened at both Boda and Northparkes, where the gold came first and then the copper later. The increased copper at Bushranger is then explained because the sub-ductive arc it’s on is a later arc (see previous blog).

Finally, the unexplored new deposits to the SE:

Drill 8 assays also help here. If we take the hypothesis, that the further away from the fault to the SE you go the better the grades (both copper and gold). Then this bodes well for the newly discovered potential intrusions which have only been lightly touched by a single drill so far.

 

 

In the map above I’ve marked off the intrusions in yellow. The two intrusions in the pit area are the known intrusions, with strong west alteration and weaker eastern alteration. The three yellow areas are the three major intrusions that I’ve estimated make up the newly discovered resources in the IP mapping. All of the intrusions will face SE to NW and commonly occur in a swarm and to the side of the strongest IP anomaly (remember the alteration is to the side of the intrusion and commonly has the greatest IP signature). I hope, I really hope that Xtract put drills across these areas for test purposes. Because they are further away and earlier, they should have better grades particularly gold grades.

So, to conclude the hole 8 assays are important. They have reinforced much of what we want from Bushranger and the open pit. They have hinted at what might lie to the SE and proved the concepts of the current geological model. For those of us that have invested in Xtract since Bushranger’s first drill, this is immensely encouraging. The Market still might not understand yet, but sooner or later it will.

 

Xtract Resources Phase 2 at Bushranger Copper Project

 The drilling phase of the first section of Phase 2 is almost over. Xtract have today released, (finally) a map of the drill locations giving us the chance to assess the initial success of the visuals and what we can expect from the assays.

I've included a table, which I keep, as I think it helps to give a more rounded view of the holes and what to expect from the assays.

As you can see some holes, such as Hole 7, include huge sections of Massive Sulphides (700-800m). Many of the holes have materially expanded the resource in all directions.

A completely new section to the east has been intersected on several occasions.

Hole 14 is a real unknown as it hit over 600m of mineralisation in a completely new porphyry target, possibly a sheared twin zone.

There will be many AIM companies bragging about hitting 500m or more of VMS (massive sulphides), It looks like we got there first with far more to spare.

Over the coming 6-8 weeks, Xtract will get regular assay results which we can directly feed into expansions of the current JORC. All of which will add considerable copper and tonnage to the open pit model, increasing the NPV and lower costs considerably.

Key aspects to look out for from the assays will be the copper grades outside the good-strong zones, the open pit requires 0.15 CUEQ. The shallowness of the copper grades. The grading in the newly discovered zones. Any copper-gold in hole 14 will be exceptional for Xtract as this only touched the very outside of the entirely new, potentially larger, porphyry zone.

#XTR – Xtract's Bushranger’s - First Class Exploration and Model

 #XTR – Xtract's Bushranger’s - First Class Exploration and Model

Xtract have released their initial findings from the open pit study, this has been backed up by a 30 min presentation from Vox Markets.

The study published today has used the existing JORC which was created before XTR took ownership of the licenses. It’s impossible to over-estimate the importance of the information given in the presentation. But it does require an understanding and an ability to see just how profitable the project might be.

At first glance the report gives a number of loss-making scenario’s given various variables of NPV, Cut Off, Copper Price and Mill capacity.

There is a single positive scenario with the following variables. NPV8, Cut Off .15%, Copper Price $5 lb and Mill capacity of 20M pounds a year. This gives an NPV8 figure of A$267m, with a LOM (length of mine) of 9 years.

At first glance the figures look bad. We have a breakeven copper price, at an NPV8 (8% discount rate)  of around $4.65 lb. Wow, there is no way I would invest in such a company, might well be the initial response.

However as with most AIM companies, if its shiny and cheap; it’s often fools gold. If it’s presented professionally, warts and all; it’s probably worth looking at in more depth.

So lets have a quick initial look at the variables.

NPV 8 is this reasonable? Yes is the simple answer. It represents the cost of capital. In a higher interest rate world pre 2010 NPV’s of 10% or even 12% were used. Nowadays NPV’s as low as 5% are routinely used by mining companies, although this is a little low in my opinion. An NPV of 8% is probably about right and has been used by the world’s major mining companies in the past 12 months.

Mill Rate: The Mill rate or process rate, is simply dictated by how much processing power the project will have. The higher the mill rate, the higher the initial capex, and the shorter it takes to process the material. It’s a simple economic balancing act.

Cut Off: People might think that a .15% copper cut off is bad because its so low. It’s certainly true that a low grade mine is rarer as it requires much higher tonnage. However, a low grade mine is a massive benefit. With a low economic cut off, it would indicate that any future exploration only needs to be above .15% to add to the profitability of the project. If additional exploration finds grades of .3%, then the extra tonnage would contain a huge amount of extra profit.

Copper Price: The current copper price is $4.6 lb (taken at 27/07/21). The copper price has risen considerably over the last 12 months, rising from $3 lb in just the last 12 months. So for bushranger to remain profitable we need the copper price to stay at this price for the next 9 years. To generate a positive net return we need the price to be above this level. Again, on the face of it, this seems like a tall order.

IRR: Connected to all the variables above is the IRR (internal rate of rate). The report doesn’t mention what the IRR is, however, it can be estimated given the figures quotes. Given a price of $5 lb the IRR is around 20% (it would take 5 years to get the money back you put in to build it). Personal I would never invest in a project with an IRR as low as 20%. I don’t think it would ever get built. If the breakeven copper price can be dropped to $3.6 lb and the copper price stays at $5, then the IRR jumps massively to 50% with an increased NPV to around A$1.3bn.

 

If the above figures were used in a fully explored PFS, I can honestly say I would run a marathon to escape investing in such a company. But and it’s a big BUT, this isn’t a finished project. It’s a starting point. It is very, very, rare for a company to produce preliminary figures like this before exploration. Companies don’t do it because the figures will certainly be bad. There is also not normally enough information to allow any meaningful study to take place. If you dig deeper into the figures, we can see that if you raise the tonnage in the mined area, increase the LOM, find mineralisation as far above .15% as possible you end up with, a lower break even copper price, increased NPV and higher IRR. You end up with a project which is incredibly desirable and highly profitable. It is for this reason that XTR brought the project and have already performed its initial phase 1 drill campaign at the start of the year, none of this has been included in the study.

So, let’s examine the proposed pit.

(Image taken from the VoxMarkets presentation)

The Pit design is approx. 600m deep, it encompasses nearly all of the existing JORC. It covers two small grazing areas and a few square km’s of planted, commercial woodland. The mineralisation is modelled, dipping from the SE to the NW from surface to pit depth at 600m.

(image taken from the VOXMarkets presentation)

The picture above shows the existing holes in blue, which have been used to create the JORC and so the basis of the existing model. The red dots represent the new drills from the just started second phase drill campaign. There is plenty of scope to add additional mineralisation,  particularly to the north and NW (which will be drilled). As an aside we can see that the first two drill pads, each have two holes, so they will have drilled very quickly.

(Taken from the VoxMarkets presentation)

The IP survey, when superimposed over the open pit, reinforces the extensions to the north and north-west. As well as this there looks to be a potential high grade intrusion branch to the east – the area in the red box, which has been missed by existing drilling, which will be drilled to hopefully provide further mineralisation within the open pit.

The phase 1 drilling has already added considerable mineralisation with a  .2% cut off, above the modelled .15%. Phase 2 drilling will add much more. All of the mineralisation will be free, as the material will need to be extracted regardless as it lies within the open pit design, it will directly increase the NPV and bring the copper breakeven price down. It is therefore a reasonable conclusion that the added material, higher grade mineralisation and further refining of the design and capex requirements will bring the copper price break even down to around $3.6 lb, with an NPV of 1.3bn with copper prices at between $4.6 and $5.

This alone would be a fantastic achievement, creating a profitable and desirable mine, however, the expectation is that considerably more mineralisation exists outside the open pit design.

As the above side view of the open pit shows, there is considerable mineralisation outside the open pit, for initial capex and operational reasons. Once the pit has been built and with the processing equipment still in place. There are expansion possibilities with easy and limited underground mining, adding a potential NPV of around A$1bn to a further post open pit phase.

The largest expansion comes from the areas to the SE of the open pit, the model output above shows the a potential new mineralisation area by looking at the recent IP mapping. It represents a 100-150% increase to the already modelled open pit. If this does represent mineralisation above a .15% cut off, then it would mean a further 9-14 years for the LOM and a potential A$1.5bn to 2.5bn NPV. With the mineralisation being near surface and the processing capability in place the profit margin would be substantial and the copper break even cost as low as $2 lb.

The red dots show that XTR will be putting some exploratory holes into this potential new resource area over this current drill campaign.

 

Conclusions: XTR have been brave showing warts and all for their starting position. It has shown where the exploration gains need to come from to add the most value. It determines the potential for the project. It allows the company to maximise its exploration drilling so that, each and every drill has a demonstrable impact on the NPV and profitability of the project and license area.

If you’ve been following my blogs, you will see that I’ve never really had any doubt with regards to the potential of the project. The figures below are mostly mine based on my understandings and information received. I hope they show the potential of the project. Majors will really like the ability to mine here for 30+ years. They will like the simplicity of the project, its location and low risk theme. If XTR can get the break even copper price down, which as has been shown is likely, they will be interested. As an XTR share investor I can look forward to every drill knowing it will add significant value.

 

			Copper breakeven price US$ lb	IRR	Potential NPV A$ at $5 lb	LOM
Current Pre XTR scenario			4.6	20%	260m	9 years
Further mineralisation Open Pit			3.6	50%	1300m	5 years
Underground Mining Ext			3	35%	1000m	5 years
Secondary Targets (SE)			2	60%	1500-2500m	9-14 years

 

Xtract Resources - XTR Bushranger IP anomaly release.

 

It's important to start with this picture. I am sorry for the rough nature of this post, It's literally been typed in about 15 mins.

For simplicity, in Blue we have a fault line (probably subduction). Its dipping pretty much east-west (going down at a 45 degree angle as you move west)

The yellow area is the area of possible mineralisation.

The brown area the area of more likely mineralisation - maybe heavier.

The most important thing about this map - imo, is the fault. This would have been evident within a week or two of the IP survey and was not evident prior.

Secondly we have the extent of the IP - mineralisation zone.

Thirdly we have the slightly unusual fact that the mineralisation seems to follow the IP anomaly completely. This includes the small open pit to the east of the JORC. - not common place for porphyry.

Conclusions:

The IP anomaly is far to big and doesn't in anyway resemble the finger porphyry intrusion anomalies of Boda or Northparkes.

The fault line is also a clear signal, as the IP anomaly shows the potential mineralisation dipping as the fault dips.

It's a give away that we are looking at a skarn/dyke deposit, with associated finger intrusion porphyries, providing the higher .4-.5 CU values.

It's no wonder that XTR are looking at open pit as this plays perfectly into open territory.

The IP mapping seems to push Bushranger from Boda/Northparkes to Winu/Copper version of Cadia.

The new geological understanding of finger intrusions within a dyke/skarn system would explain perfectly the large extent of the outer alteration zone, in comparison with the smaller size of the intrusion body.

Put simply, as the east side of the subduction zone travelled south, it would have pushed fluids up through smaller fracture zones, creating the tilt we see in the initial JORC finger intrusion. smaller fracture zones cooled more quickly providing the illusion of gold rich mineralised. The heavier mineralisation would have re-treated down, to the larger fractures closer to the intrusion, and possibly closer to the fault zone?...the slower cooling allowed for more copper rich formation.

A final word IF the assays come back with .1 to .3 cu within the outer alteration zone i.e the anomalies shown indicating the skarn/dyke mineralisation, then this is potentially at least as large as Rio's Winu..

Xtract Resources - XTR's Eureka maybe I was wrong!

 

It’s no secret that I have attributed very little value to the African assets that Xtract Resources hold. I am a huge proponent of Bushranger and the potential of the porphyry asset;  it’s model, its attractiveness to large companies and its ability to be commercialised.

The biggest problem with the African assets, are the general lack of information in the public domain. They tend to be complicated both in ownership and geology. Valuing assets in Africa is very tricky due to uncertain political situations, and often hidden and surprising costs. Trying to commercial African assets is very challenging. Lumping all the African countries together in a single basket is maybe not the best country risk approach, there is certainly considerable difference in the country risk between Gambia and Nigeria or Botswana and the Congo. Regardless, there is still an African risk factor associated with the long potential LOM (length of mine) that this industry has.

Now, lets turn our attention to Eureka. Eureka is your typical African-AIM project. It has been mined previously using labour intensive, older mining techniques. The easy to extract and higher-grade copper has already been extracted. There is without doubt still mineralisation on the license, but we immediately have questions. How much is there? Is it going to be patchy? What will the costs be? Is it worth the effort? Simply we do not know.

I don’t invest in these kinds of scenarios for all the reasons above, the risk reward just isn’t there. The risk is that we will only find bits of copper, that it will be a pain to extract, that the costs will just keep going up. The reward is limited, some profit can be made. Profits large enough to overcome the costs of director wages, AIM admission etc are tricky. For a private investor owning the resource, the risk might well be worth it; as a shareholder in an LSE listed company the answer is normally, no.

That doesn’t mean that the African assets that Xtract holds are a problem. They require minimal capital expenditure and if they do go on to be mined, will probably be neutral to the company overall. With luck they might contribute money to the company, not enough to sustain a large share price, but enough to be a welcome contribution.

To be a real driver of the share price, any of the African projects needs to become something it currently is not. It needs to be transformed. So, is Eureka on the verge of being transformed?

Eureka is not a porphyry like Bushranger, it does not have a central intrusion, with a quartz outer shell. With layers of onions and vast alteration zones. Eureka is a far more localised breccia, a fractured mineralisation of small veins, created by a rising magma outlet. Leaching of minerals then pushes it wider through a mish mash of small fractures. Grades can be anything from 0.1% to 20% copper. The biggest problem with these kinds of deposits is the consistency. It looks like the near surface breccia that existed in the nape of the fault was largely mined out. Around this was a layer of lower mineralisation, some of which is still intact.

The area for mining is roughly 150m long and up to 40m in width.

 

Open pit exploration has pushed the mineralisation in a thin band NW up through P3, giving a shallow 5m depth at 2.65% copper. In 2020 Xtract produced a small 3D model of the mineralisation.

 

The above is an IP anomaly map of the key license area. IP anomalies are NOT the be all and end of exploration. If only it were that easy! Mining exploration companies like to make out it is. They all put out the maps, as evidence that they have between 100-200 tier 1 mining assets…The truth is that IP anomaly maps by themselves are just geological guides, they show magnetised areas which 90% of the time are barren of any kind of valuable mineralisation. Even if they are loaded with copper or gold, they give no indication of how much. To make much sense you need trenching and sampling to find moly, copper, gold etc near surface (an indication that they are sourced from an anomaly). To make matters worse, porphyries might be in the centre surrounded by positive anomalies, whereas a breccia might exist on top of one. Without information to back up the IP anomaly maps, preferably drilling but at least very extensive trenching I tend to ignore them.

Eureka, certainly this far, is a simple breccia (magma event) oxide deposit sat atop a positive anomaly. An IOCG – an oxide and sulphate system would also tend to follow the positive IP anomaly.

Moving forward to the latest results. They show that to the SE of the main deposit, the mineralisation tails off. This is expected. The IP anomaly shows the highest gradient towards the SE and the shallowest gradient to the NW. This would indicate the mineralisation/magma rose up from the NW moving SE as it hit the surface. The natural conclusion would be that the mineralisation would therefore get deeper as we move from the deposit to the NW. At this point a standalone small breccia would see limited mineralisation to the NW. However, mineralisation – particularly at depth in the NW, would indicate the source flow that created the breccia is still in situ.

The diagram below, shows the IP anomaly and where the current open pit sits, at the top of the anomaly at surface. In my opinion the drilling results indicate a joint deeper flow rising up, topping out at surface with the current open pit. The green is the possible extent of the mineralisation, probably down to 300m depth if the IOCG is loaded. To my knowledge no exploration has explored this potential.

Conclusions. Drilling showed the original open pit to still contain high grade 3-20% copper, probably enough for 3-5 years, as it extends with 10-25m of overburden to the NW. Drilling to the NW seems to indicate that the source flow and subsequent breccia events do exist as hoped. Deeper drilling will be needed, but if sulphides are found and an IOCG is confirmed it would provide higher copper grades are turn Eureka into a potential strategic resource, with a LOM of 20-30 years (some 10-30 times its current size). A LOM of this size WILL attract majors even in Africa, particularly given Eureka would be a working mine and the IOCG would be a massive extension.

This update for Eureka, ticks off a couple of boxes. It is still Africa. It is still a risk. However, for a smallish company like Xtract it is looking far more likely to add considerable revenues, if they get the sample production flowing later this year. It has also ticked the beginning box of a much deeper, strategic IOCG. A deeper hole (probably to 150m or so) would prove this. IF and it’s still an IF, this is the case it could prove to add almost as much value to Xtract as Bushranger.

Xtract Resources XTR – Bushranger Progression

 

Exceptionally well funded.

“With this level of mineralisation, XTR should have no trouble increasing the JORC -after a planned infill program- to trigger the 2mt of Copper that requires Anglo American to buy 80% of the project. The company has talked about further IP surverys etc, but a second drill plan should complete a new, trigger JORC by the end of the year.

XTR has talked about finding new nearby porphyries that can attract an economy of scale in the same vein as the Cadia-Ridgeway grouping.

There is no doubt that further funding will be needed to complete the infill drilling and JORC creation of Bushranger to the 2mt mark. Whether that funding is created by the revenue streams of the African projects, via share issue or even by a partner coming on board for a cut of any sale price is largely immaterial for 2021.”

XTR have now announced the fundraising of a further £5m @5.6p to pay for the 16000-20000m of exploration that needs to be undertaken to complete phase 2 of Bushranger, this will complete the infill drilling and probably the outer margin exploration, to meet and exceed, the 2Mt CU EQ that will trigger the AA buy-out clause.

As I mentioned above, over a month ago above, this was fully expected by the market, the director buy, from Colin Bird @ 5.7p prior the fundraise put a likely floor in the placing price, at which the company would have been unlikely to have deviated much from. The placing also rose £1/4m through broker warrants at 5.6p and further warrants at 8.5p to raise an additional £4.2m if they are executed. Given the current buy price that would be over a 50% gain before they would be executed, giving a built in fundraise at a very attractive price for the future. The warrants do need to be voted on to take effect, but this is not a barrier to the placing funds being raised and spent, as the shares are to be tradable from the 10^th of May. To conclude the finance discussion Colin Bird again brought shares in the open market, post placing, 1m @ 5.7p. A pleasant display of Director confidence.

Xtract Resources– Bushranger – Hole 1 920m @0.3% Copper.

We still only have the single exploration assay result of 920m at 0.3% from XTR. Normally a degree of uncertainty would still exist in determining the success of the phase 1 drilling and its 5 holes. The financing that has been raised and the planned expansion of phase 2, to include 2 diamond drill rigs along with the much-needed building of an inhouse team.

Despite the importance of the assays of holes 2 to 6, to some extent it has already been superseded by the planning of the commencement of phase 2. -It is probably important to add here, that although 5 holes were completed hole 4 was stopped, as it was only really confirming what was already learnt in hole 3. The completed holes were 1,2,3,5 and 6, making 5 holes in total.

I fully expect the company to release assays this week, to help with the understanding of what we will be looking at it’s probably worth examining holes 2 and 3.

Hole 2 was drilled across the core intrusion, with an aim to intersect the down plunge. It was drilled at a close to vertical dip. It was not testing the extension of the near surface mineralisation, which was seen particularly in holes 5 and 6 and to a lesser extent in hole 3. Hole 2 was drilled to a greater depth than planned, as it was still finding mineralisation beyond its initial estimate. My expectation from hole 2 is of a zone of 60-80m containing .4 Cu eq at a depth of approx. 500m. A wider zone of mineralisation extending from 400m to 600-650m at .25% Cu Eq. The big unknown of hole 2 is how much mineralisation existed prior 400m, and beyond the 600-650m. If any of this is above cut off grade, then that will be a welcome bonus to the modelling of the Bushranger deposit.

Hole 3 was drilled across the width of the intrusion, at a far shallower angle to hole 2. In many regards it was a reformation drill of the existing Anglo American JORC drilling. The hope of hole 3 was really to extend the lower grade but above cut off mineralisation – in other words extending the commercial width of Bushranger.

A detail interpretation by the company is below:

0 - 119m Unaltered and unmineralised andesitic to basic volcanics interlayered with andesitic sandstone and siltstone

119 - 123m Shear/Breccia zone with quartz-pyrite alteration and minor sphalerite and chalcopyrite

123 - 188m Unaltered volcanics

188 - 198m Quartz-pyrite-pyrrhotite alteration zone with minor chalcopyrite

198 - 240m Unaltered volcanics

240 - 495m Volcanic rocks - outer alteration zone of porphyry copper system with pyrite and lesser chalcopyrite-sphalerite mineralisation as veinlets and stringers

495 - 570m Intermediate volcanic alteration zone with pyrite-pyrrhotite-chalcopyrite both disseminated and hosted in veinlets/stringers

570 - 598m Porphyritic intrusion - pyrite-pyrrhotite-chalcopyrite both disseminated and hosted in veinlets/stringers

598 - 825m Central volcanic (potassic) alteration zone with pyrite-pyrrhotite and stronger chalcopyrite mineralisation, both disseminated and hosted in veinlets/stringers

825 - 890m Intermediate to outer volcanic alteration zone with continuing pyrite-pyrrhotite-chalcopyrite, similar in style to the earlier zones

890 - 975.5m Outer porphyry alteration zone. Continuing pyrite-pyrrhotite-chalcopyrite, both disseminated and hosted in veinlets/stringers. Sphalerite-galena occurs in places, also hosted in veinlets/stringers. Mineralisation diminishes towards the base of the hole

The unaltered volcanics will not be mineralised, so we would expect low grade copper .1% to .25%  Cu eq. to extend from 250-500m. 500m to 650m to be >.25% Cu eq. 650m-850m should contain approx. 100-150m @.3-4% Cu eq. and 850-900, to be .25% Cu eq. This would give a headline figure of 400m at .25% Cu eq. with a core of 100-150m at >0.3% Cu eq.

As with hole 2 it will be interesting to see whether this 400m above cut off is expanded by the outer alteration.

Expectations.

I think its important to set realistic expectations with regards to the drill assays, in part so that they can be assessed correctly, but also to refute suggestions that the assays might not be commercial. The expectations I have laid out are to ensure that the Bushranger prospect remains on track to be both commercial and attractive for Anglo American or any other mid-sized or above miner.

There has been some discussion as to why Anglo might not want Bushranger or that its copper targets will be met by other copper targets such as Africa. This is a mistake. Any mid-cap miner will be able to easily raise funds in the current market. Copper production targets are largely driven by risk. There will be a desire to restrict the possibility of over extending themselves by taking on too much risk and thereby having an expensive failure. Every time a new project is taken on board, the key geo-political risks increase. Essentially it’s a balancing act. Bushranger, and to be fair almost any Australian project has minimal geo-political risk. It’s mostly geological and price risk. If Xtract can determine a JORC giving 2Mt of copper, the geological risk is largely removed, leaving mainly price risk for Bushranger. Price risk, is the risk that the price of copper will fall low enough as to make the project uncommercial. Price risk, is without doubt the biggest risk that will be attached to Bushranger. Personally, I am of the opinion, that the risk is small, due to the demand for copper over the next 20 years and the limitations of supply. I’ll leave it up to the reader to pick which of the many price forecasts they want to use, or the in-depth reports into how supply will increasingly come from lower cut off, bulk projects or risky geo-political gambles. The consensus is pretty clear.

Xtract and Bushranger Valuations.

In my opinion one of the reasons for the rather subdued share price is the inability to put any firm valuations on the company or its projects. There is simply too little firm information to put a valuation on the company’s African assets. Bushranger, with only a single new assay, also doesn’t have the solid information for a valuation target, yet!

Although an investor might view this as a negative, it is precisely this fact, which means that the share price has such strong potential for growth, as the future valuations are not priced in.

The key points going forward to achieve share price growth. 1. The African assets having enough information, firm dates and concrete actions to make a fair valuation possible. 2. Confidence in the Bushranger JORC expansion through phase 1 assay delivery. 3. Delivery of new resource model. 4. Phase 2 exploration results meeting or exceeding expectation. 5. Successful identification of secondary porphyry targets on surrounding licenses.

We have confirmation that phase 2 drilling will take place end of June-July. The assays for ALL phase 1 holes should be delivered by the beginning of June. The updated 3D model that will drive phase 2 drill targets will be available by the end of June.

To conclude this update, the speed of exploration at Bushranger has been incredible. At the start of the year Xtract Resources had not completed a single new hole, by the end of 2021, two drill campaigns will have taken place and, we hope, an JORC update will be delivered confirming a strategic copper resource for the mining giant that is Australia.