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RTG to acquire 90% of Chanach from White Cliff

2019-09-05 13:01 ET - News Release

Ms. Justine Magee reports


RTG Mining Inc. has entered into a sale and purchase agreement with White Cliff Minerals Ltd. (WCN) to acquire its majority (90 per cent) stake in the high-grade Chanach gold and copper project in the Kyrgyz Republic.

Highlights of the transaction include:

  • Strategic addition to RTG's portfolio with an existing high-grade JORC-compliant inferred mineral resource of 2.95 megatonnes at 5.11 grams per tonne gold for 484,000 ounces of Au and 17.23 megatonnes at 0.37 per cent copper for 64,000 tonnes of Cu (141.1 million pounds Cu) from only limited drilling to date;
  • Acquisition cost of $3.65 (U.S.) per ounce of gold and 0.63 U.S. cent per pound of copper;
  • Consideration of $2.15-million (U.S.) cash and $500,000 (U.S.) in RTG shares (escrowed for 12 months);
  • Transaction subject to WCN shareholder approval with a target completion date of mid to late October, 2019;
  • Unanimous WCN board recommendation and shareholder support statements from 20 per cent of WCN's shareholders to vote in favour of the transaction (both in the absence of a superior proposal);
  • Experienced technical expert, advising RTG, believes the exploration potential at the Chanach project is excellent.

The Chanach project is located in the prolific southern Tien Shan metallogenic belt, which runs more than 1,500 kilometres from Uzbekistan through to China and hosts one of the world's largest open-pit gold mines, Murantau (175 million ounces) with production believed to be in the order of two million ounces per annum. RTG have appointed Greg Hall of Phoenix Gold International and former chief geologist for Placer Dome as a consultant given his knowledge of the Chanach project and other projects in similar geological settings.

The Chanach project has extensive outcropping mineralized geology with high-grade gold veins from surface and significant gold and copper inferred mineral resources. With only 5 per cent of the identified strike length tested to date, RTG believes the Chanach project has substantial upside. The Chanach project area is considered to be highly prospective for world-class epithermal gold, porphyry copper-gold and polymetallic skarn deposits with numerous targets already identified.

To date the limited exploration activities have defined an inferred mineral resource of 2.95 megatonnes at 5.11 g/t Au for 484,000 ounces of Au and 17.23 megatonnes at 0.37 per cent Cu for 64,000 tonnes of Cu.

Deal terms

RTG has agreed to acquire a 90-per-cent interest in the high-grade Chanach project in the Kyrgyz Republic (licence AP590) through the acquisition of 100 per cent of PB Partners (Malaysia) Pte. Ltd., a wholly owned subsidiary of WCN. The transaction is subject to the approval of WCN shareholders under Chapter 11.2 of the ASX listing rules. The purchase price consists of: (i) cash consideration of $2.15-million (U.S.) and (ii) $500,000 (U.S.) in new RTG shares to be issued at a price equal to the five-day volume-weighted average price of the RTG shares on the ASX for the five trading days leading up to completion of the transaction.

The purchase price, together with the planned initial drill program, have been fully financed by a new unsecured loan of $2.5-million (U.S.), obtained by RTG from an external financier, on arm's-length terms and conditions.

This represents a highly attractive and value accretive deal for RTG with an acquisition cost of only $3.65 (U.S.) per gold ounce and 0.63 U.S. cent per pound copper (metal contained in inferred mineral resources).

On completion, RTG will be manager and operator of the Chanach project joint venture company (Chanach LLC) and will solely finance operating expenditures until completion of a bankable feasibility study at which time financing will then be contributed on a pro rata basis in accordance with Chanach project interests.

The 10-per-cent joint venture partner is represented by two local brothers, both geologists, who have a strong understanding of the region, orebodies and new targets for extension, with good local support and strong relationships with the mining authorities. They have been very supportive of the RTG acquisition, waiving their pre-emptive rights.

WCN has provided customary exclusivity undertakings to RTG in connection with the transaction, including no-shop and no-talk restrictions, and provided RTG with a notification right in respect of any competing proposal.

In addition to WCN shareholder approval, the transaction and the transactions contemplated in the sale and purchase agreement are subject to any applicable regulatory approvals and no material adverse change/breach of warranties.

Country background

The Kyrgyz Republic is a stable, democratic and mining-friendly jurisdiction in Central Asia bordering China and Kazakhstan. With four new mines approved since 2014 and with another mine under construction by Chaarat Gold Holdings Ltd., there is strong government support for new mining projects, and a growing awareness and recognition of both the significant economic contribution made by the country's biggest industry and the potential for this contribution to grow rapidly, with the gold industry already contributing half of the country's industrial output and 60 per cent of export earnings.

Chaarat has two new projects planned, with the Tulkubash mine under construction (target production of 94,000 to 110,000 ounces per annum) to be followed by the Kyzyltash mine which has measured and indicated resources of 4.5 million ounces at an average grade of 3.7 g/t, with target production in the order of 200,000 to 300,000 ounces per annum.

The Kumtor mine operated by Toronto Stock Exchange-listed Centerra Gold Inc. has produced over 12 million ounces during its 22 years of uninterrupted profitable production since inception in 1997, with current production in excess of 500,000 ounces per annum. It has recently finalized negotiations with the Kyrgyz government which has resulted in a significant rerating of the company on the TSX, trading now with a market capitalization of approximately $3.5-billion. In addition to Centerra, there are other major players including Zijin Mining Group Co. Ltd. which are operating, exploring and expanding their investment in the country.

The Kyrgyz Republic has a simple revenue-based tax system, strong rule of law, secure licensing processes and does not have local project ownership requirements. Mining infrastructure is well established, with a readily available and skilled mining labour force.

Geological setting

The Chanach project (prospecting licence AP590) is located in the northwestern part of the Kyrgyz Republic in the Jalal-Abad province and covers an area of 57.25 square kilometres of the Chatkal ranges inside the southwestern Tien Shan metallogenic belt.

Regionally, the world-class Tien Shan system spans from Uzbekistan in the west across the Kyrgyz Republic and into Mongolia and China, and is one the best-endowed gold provinces in the world. It hosts multiple styles of mineralization due to its complex tectonic history. The juxtaposition of multiple crustal sections within the Tien Shan, including volcanic arcs, continental margins, accretionary and fore-arc complexes, and continental collisional zones, have resulted in a complex mix of overlapping mineralized systems which developed in different crustal environments. These mineralizing systems are prolific producers of base and precious metals. The geology of the southwestern Tien Shan is generally regarded as being highly fertile ground for sedimentary-hosted gold deposits, copper-gold porphyry deposits, and their associated epithermal and polymetallic skarn deposits.

The underexplored system plays host to some significant discoveries and operations, including very large sediment-hosted gold deposits such as Kumtor in Kyrgyzstan (19 million ounces) and Muruntau in Uzbekistan (175 million ounces), which is recognized as one of the world's largest gold deposits. It also hosts large porphyry copper deposits like Almakyr in Uzbekistan. Major deposits located within 100 km of Chanach contain inventories of up to 93 million ounces of gold and 25 million tonnes of copper.

Discovery and drill results

The Chanach project area was discovered around 1963 with geological mapping and surface sampling intermittently up to 2010. The geology of the Chanach project area is prospective for epithermal gold deposits, porphyry copper deposits and polymetallic skarn deposits. The project area has outcropping mineralized geology seen as multiple high-grade outcropping epithermal veins and skarns, which have indicated several porphyry targets.

From 2010, more modern exploration has taken place with approximately $8-million (U.S.) spent by WCN on exploration, of which $5.7-million (U.S.) is attributable to the Chanach gold project, with the balance spent on Chanach copper project exploration and resource development.

Targeting has been enhanced by various structural and geophysical surveys including a structural geology study completed by Orefind in 2017, a ground magnetics study by Southern Geoscience in 2016 and a geophysical study completed by Baoding Geological Engineering Institute in 2011.

The Chanach project is a target-rich environment with 2019 planned exploration focusing on multiple gold targets designed to extend the current inferred mineral resource.

Total exploration drilling includes 142 reverse circulation and diamond holes totalling approximately 19,500 metres, of which 111 drill holes (87 RC and 24 diamond) for a total length of 14.1 km can be attributed to the Chanach gold project, and the balance to copper exploration and the development of the Chanach copper project.

To date, the Chanach project has generated an inferred gold mineral resource of 484,000 ounces Au at a grade of 5.1 g/t at an extremely cost-effective rate of $11.80 (U.S.) per ounce, and this metric is expected to improve with the continuing enhancement and refinement of geological understanding and targeting.

Exploration drilling at the Chanach gold project commenced in 2014 and to date there have been spectacular intersections of gold mineralization spanning across the project area, as previously reported by WCN.

Significant intervals from the quartz gold zone include:

  • UGZ-15-35 -- eight m at 57.08 g/t Au from 75 m including one m at 85.53 g/t Au from 76 m, one m at 89.34 g/t Au from 80 m followed by one m at 73.28 g/t Au from 81 m;
  • ERC16-035 -- seven m at 23.52 g/t Au from 45 m including one m at 149.41 g/t Au from 45 m;
  • ERC16-036 -- 12 m at 15.65 g/t Au including one m at 63.24 g/t Au from 82 m followed by one m at 95.12 g/t Au from 83 m.

Significant intervals from the sandstone gold zone include:

  • UGZ-15-33 -- four m at 99.15 g/t Au from 65 m including one m at 348.48 g/t Au from 67 m;
  • UGZ-15-32A -- three m at 41.45 g/t Au including one m at 71.58 g/t Au from 53 m.

Significant intervals from the lower and upper gold zone include:

  • LGZ-15-29A -- six m at 38.40 g/t Au from 26 m with four m at 56.46 g/t Au from 26 m including one m at 49.79 g/t Au from 26 m, one m at 23.55 g/t Au from 27 m, one m at 95.22 g/t Au from 28 m and one m at 57.29 g/t Au from 29 m;
  • CH14-18 -- four m at 23.83 g/t Au from 85 m including one m at 30.19 g/t Au from 86 m.

Readers are advised that these assay intervals have not been top-cut prior to reporting and true mineralization widths are not reported. Mineralization is expected to be subvertical. Intervals selected have used a lower cut-off of 0.5 g/t Au.

Resource growth potential

The current gold resources at Chanach are open at depth and along strike. RTG consultant and chartered professional geologist Mr. Hall of Phoenix Gold International and former chief geologist for Placer Dome has visited the Chanach project area and notes, "The extensive red hematite staining in the project area is an indication of the size of the system, which, along with other geological factors and anomalies, would indicate an exploration target materially greater than the current inferred gold mineral resource with further upside in several porphyry and skarn targets that remain untested."

The mineralized faults (vein groups) that are currently defined by field mapping at the Chanach gold project span over a three km strike length with drilling along only 5 per cent of the strike length identified and mapped to date, and with drilling to an average depth of only 120 m. Given the existing resource is open at depth, with 95 per cent of veins as yet untested by drilling over the existing three km strike length and recent mapping programs likely to extend the mineralized strike length by a further four km, the potential for resource growth is thought to be significant. Additionally, the Chanach copper inferred mineral resource is open at depth and along strike, with multiple additional porphyry targets identified for testing including several outcropping copper zones four km to the east of the current resource. Copper skarn mineralization has also been identified along porphyry-limestone contacts over a two km trend within the Chanach project area.

Anomalous antimony, which is used as a proxy to estimate the distribution of ore-stage pyrite that accompanies gold mineralization (defined by antimony assays in soil sample), extends more than three km in an east-west direction and two km in a north-south direction. The anomaly is coincident and thought to define the Chanach low-sulphidation epithermal gold vein system.

Three of the gold vein zones have an expression along the western contact of the antimony anomaly. The eastern extent of the antimony anomaly is defined by outcropping porphyry copper mineralization and its causative intrusion. Ground magnetic data support the interpretation that the mineralized intrusion (and its precursor variably magnetic intrusion) underlie the full extent of the antimony anomaly.

Fluid flow has been vertical from this underlying intrusion into the limestone where the mineralizing fluid has intersected a groundwater aquifer within the limestone, resulting in oxidation of the iron within the mineralized fluid and extensive deposition of red hematite. This hematite staining is another indicator of the size of the system and extends the full length of the antimony anomaly (three km in an east-west direction). The sequence is tilted 15 to 20 degrees north, so the veins now dip 70 to 75 degrees to the south.

It is believed that the drilling of the gold vein systems to date, using relatively shallow holes to an average of 120 m, is representative of the overall strike and dip length of veins over the three km strike length (mapped and coincident with the antimony anomaly). Given that only 5 per cent of the mineralized veins have been drilled and the veins are likely to extend vertically at least to the limestone contact, or the base of the valley (approximately 400 vertical m), then it is believed by RTG consultant Mr. Hall that there is an exploration target materially greater than the current inferred gold mineral resource.

Development potential

Although currently in the exploration stage, the Chanach project has a number of factors that would favour the development of a new mining operation. The RTG team is experienced in international mine development and operations, and experienced in unlocking resource project value in emerging markets. With previous experience in Kyrgyzstan and central Asia, and excellent in-country capability, RTG believes the coupling of the potential for rapid resource growth and scalability at Chanach, strong government support, and good infrastructure will be highly conducive to a project development opportunity. Access to the Chanach project area is straightforward, there is a proximal grid power line and the Chanach project area resides in an uninhabited valley void of any artisanal mining activity. From a technical standpoint, preliminary metallurgical test work performed for the Chanach gold project indicates that the sandstone-hosted gold mineralization will be free milling with a high-gravity gold component and is likely to be amenable to standard gold-processing methods.

Mineral resource

In May, 2018, WCN reported an inferred mineral resource of 2.95 megatonnes at 5.1 g/t gold for 484,000 ounces and 17.23 megatonnes at 0.37 per cent copper for 64,000 copper tonnes.

The most recent mineral resource estimates for the Chanach gold project are summarized in the included tables for gold and copper. These mineral resources are reported in accordance with JORC code, 2012, and were first publicly reported on May 30, 2018, by WCN.

                      (Cut-off grade: one g/t Au)

Resource category               Zone  Tonnes (Kt)  Au (g/t)  Ounces (KOz)

Inferred             Lower gold zone        1,155      4.00           148         
Inferred             Upper gold zone          772      4.67           116         
Inferred              Sandstone zone          279     11.41           102         
Inferred                 Quartz main          325      6.22            65          
Inferred                  Quartz min          185      1.87            11          
Inferred           Eastern gold zone          123      2.79            11          
Inferred              Camp gold zone          106      8.77            30          
Inferred                       Total        2,945      5.11           484         

                (Cut-off grade: 0.25 per cent Cu)

Resource category       Zone  Tonnes (Kt)  Au (g/t)  Ounces (KOz)

Inferred           Quartz Cu          700      0.51             4           
Inferred             Chanach       16,534      0.36            60          
Inferred               Total       17,234      0.37            64          

The mineral resource estimates were originally compiled and announced by WCN on May 30, 2018, in accordance with the JORC code, 2012, and was last disclosed in WCN's March, 2019, quarterly report on April 30, 2019.

RTG believes that this information has not materially changed since it was last reported. The mineral resources have been reviewed by RTG's competent person.

However, it is important to note that:

  • An inferred mineral resource is that part of a mineral resource for which quantity and grade are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade continuity. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. An inferred mineral resource has a lower level of confidence than that applying to an indicated mineral resource and must not be converted to an ore reserve. It is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.
  • Nothing has come to the attention of RTG's competent person that causes it to question the accuracy or reliability of the former owner's estimates.

Technical summary -- mineral resource estimation methodology and data

WCN mineral resource estimates were compiled by Optiro Pty. Ltd. and has been reviewed by the competent person.

Geology and geological interpretation

The reported Chanach inferred gold mineral resource occurs in quartz veining and faults one to 10 m wide within sandstone and porphyries. The sandstones dip at negative 20 degrees to the north-northeast and the porphyry intrusions are subvertical in several orientations. The quartz veins and fault zones are orientated northwest to north-northwest are subvertical and cross all lithologies indicating that they formed after the sandstone deposition and after the main porphyry intrusion. The mineralized faults and veins cover an extensive area of over five square kilometres and less than 5 per cent of the identified faults have been drilled. The reported Chanach inferred copper resource occurs entirely within a main porphyry intrusion as several east-northeast to easterly trending shear zones that are subvertical.

Drilling techniques

The inferred mineral resource drilling has been conducted with a Korean Hanjin tracked reverse circulation rig drilling 130-millimetre diameter holes using a pneumatic hammer and face sampling bit. This technique shatters the rock into small sub 10 mm chips which flow into the centre of the drill rod and are transported to surface using high-pressure air. The sample is collected in a cyclone before passing into a sample bag. Diamond drilling has also been conducted using the same drill rig configured for collection of NQ (50 mm) rock core. Drilling has been conducted on approximately 50 m spaced lines with approximately 20 to 25 m spaced drill holes at the Chanach gold deposit. Drilling has been conducted on approximately 100 m spaced lines with approximately 50 m spaced drill holes at the Chanach copper deposit.


Sampling of one m drill chip intervals takes place by splitting the 30-kilogram samples using a three-tier riffle splitter that reduces the sample to three kg for laboratory analysis. The remnant sample is stored for metallurgical test work if required. At the laboratory the three kg drill sample is dried, crushed to 90 per cent passing a one mm screen then subsampled by a Jones riffle splitter to 300 grams. The 300-gram sample is milled to 90 per cent passing 75 microns (0.075 mm). A 30-gram subsample is weighed and analyzed for gold by either an acid digest (aqua regia) with atomic absorption spectroscopy (AAS) or by fire assay and an AAS analysis. Copper and base metals are assayed using a two- to 10-gram sample four-acid digest followed by inductively coupled plasma mass spectrometry.

Estimation methodology

Mineralization envelopes were constructed by WCN using a minimum grade of 0.3 g/t for gold and 0.25 per cent for copper. Up to two m of internal dilution has been allowed for at zero grade. Mining industry consultants Optiro were engaged to estimate the gold and copper mineral resource. Samples were selected with each mineralization envelope and composited to one metre. Where required, top cuts were applied before estimation of grade using ordinary kriging within the mineralization envelopes. There are no assumptions in any of the estimates relating to byproducts, deleterious elements, selective mining units or correlations between estimation variables. The model estimates are validated by comparing model inputs (composites) with model outputs (panel or block estimates) on a global and moving window (trend plot) basis for each estimation domain. The models and composites are also inspected on screen to confirm that the trends in the input data are reproduced as expected in the block estimate.

Cut-off grade

The Chanach mineral resource has been classified as inferred and reported in accordance with the JORC code, 2012, using a cut-off of one g/t gold and 0.25 per cent copper. The cut-offs were chosen based on assumed economic mining scenarios.

Resource classification criteria

The resource classification of inferred is based on the quality of information for the geological domaining, as well as the drill spacing and geostatistical measures to provide confidence in the tonnage and grade estimates. The mineral resource estimate appropriately reflects the competent person's view of the deposit.

Qualified person and competent person statement

The information in this release that relates to exploration results and mineral resource estimates is based upon information compiled, reviewed and approved by Elizabeth Haren who is a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects and a competent person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, who is a member and chartered professional of the Australian Institute of Mining and Metallurgy, and a member of the Australian Institute of Geoscientists. Ms. Haren is employed by Haren Consulting Pty. Ltd. and is a consultant to RTG. Ms. Haren has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration, and to the activity being undertaken to qualify as a competent person and a qualified person for the purposes of NI 43-101. Ms. Haren consents to the inclusion in the release of the matters based on her information in the form and the context in which it appears.

About RTG Mining Inc.

RTG Mining is a mining and exploration company. RTG is focused on a proposal with a landowner lead consortium to secure an exploration licence at the high-tonnage copper-gold Panguna project in Bougainville, Papua New Guineau, and the high-grade copper/gold/magnetite Mabilo project in the Philippines, while also identifying major new projects which will allow the company to move quickly and safely to production, such as the Chanach gold and copper project.

We seek Safe Harbor.

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