IG Copper LLC

EMX has been participating in the advancement of the Malmyzh porphyry copper-gold project in Far East Russia since identifying IG Copper LLC ("IGC") as an early-stage strategic investment opportunity in 2011. EMX is IGC's largest shareholder with 42% of the issued and outstanding shares (39% fully diluted). The Malmyzh exploration and mining licenses are held by a joint venture between IGC (51%) and Freeport-McMoran Exploration Corporation (49%), with IGC operating and managing the project. Malmyzh is a grassroots discovery that has rapidly developed into an important district-scale porphyry copper-gold project. IGC has also acquired, and 100% controls, additional early-stage exploration projects in the same belt of prospective rocks as Malmyzh.

EMX has been advised by IGC that a definitive Share Purchase Agreement (the “Agreement”) was executed to sell the Malmyzh project to a wholly owned subsidiary of Russian Copper Company (“RCC”), a privately held, leading copper producer in the Russian Federation (the “Transaction”) (see EMX news release dated June 14, 2018).  The closing of the Transaction, which is expected to occur in the third quarter of 2018, is contingent on RCC completing additional due diligence that includes drilling and metallurgical studies, as well as receiving approval from the Russian Federal Anti-Monopoly Service. In addition, there are certain financial arrangements and closing logistics that need to be completed to effect the Transaction. There can be no assurance that these conditions precedent will be satisfied, or that the Transaction will be completed. The estimated value of the Transaction to EMX's interest in IGC, net of the financial arrangements, is approximately US $68 million.

Scotiabank Europe plc (“Scotiabank”), the U.K. subsidiary of The Bank of Nova Scotia, is an advisor to IGC regarding the Transaction. Scotiabank is a leading financial institution in international banking and markets, with widely recognized expertise in advisory services for the natural resources and mining sectors. 
 

Malmyzh Project Overview

Malmyzh is located approximately 220 kilometers northeast of the city of Khabarovsk and the nearby border with China. The joint venture's land position totals 226.9 square kilometers covering the project area, and consists of the Malmyzh and Malmyzh North exploration and mining licenses (152.8 sq km), as well as the Malmyzh Flanks exploration license (74.1 sq km).

Malmyzh's porphyry deposits, prospects, and targets occur within a district-scale 16 by 5 kilometer intrusive corridor concealed beneath shallow cover. Mineralization extends from shallow subcrop (~1 to 50 meters) to greater than 400 to 800 meters depth. The porphyry centers occur as Cretaceous-age dioritic stocks that intruded and hornfels-altered siltstone and sandstone sedimentary sequences. Copper-gold mineralization occurs in the porphyry intrusives, as well as in the hornfels-altered and stockworked sedimentary wall rocks.

IGC's drill campaigns have been designed to meet Russian Federation and international reporting requirements. Over 77,000 meters of diamond drilling has intersected porphyry copper-gold mineralization at fifteen separate target areas concealed beneath a shallow cover of overburden. The majority of the drill meters (i.e., ~55,000 m) have been concentrated on defining the Valley, Freedom (SE), Central, and Flats inferred resource deposits on nominal 200 meter centers.

The open pit constrained inferred resources at a 0.30% copper equivalent cut-off are 1,661 million tonnes at average grades of 0.34% copper and 0.17 g/t gold, or 0.42% copper equivalent, containing 5.65 million tonnes (12.45 billion pounds) copper and 9.11 million ounces gold, or 7.06 million tonnes (15.56 billion pounds) copper equivalent*. All four inferred resource deposits (i.e., Valley, Freedom (SE), Central, and Flats) are open at depth.

Malmyzh Inferred Resources at a 0.30% CuEq Cut-off.
Deposit Million
Tonnes
CuEq % Cu % Au
g/t
CuEq Million
Tonnes
Cu Million
Tonnes
CuEq
Billion lbs
Cu
Billion lbs
Au
Million Oz
Valley 1,000 0.41 0.34 0.15 4.13 3.38 9.10 7.44 4.88
Freedom
(SE)
334 0.46 0.34 0.24 1.54 1.13 3.40 2.50 2.63
Central 218 0.45 0.39 0.12 0.97 0.85 2.15 1.87 0.81
Flats 109 0.38 0.27 0.23 0.41 0.29 0.91 0.64 0.79
TOTAL 1,661 0.42 0.34 0.17 7.06 5.65 15.56 12.45 9.11

Note: Totals may not sum to 100% and calculations based on this table may differ due to rounding.

* Phil Newall, PhD, BSc, CEng, FIMMM, a Qualified Person under NI 43-101 and managing director of Wardell Armstrong International, an independent UK based consulting company, provided the statement of Malmyzh open pit constrained Inferred Resources effective as of May 1, 2015 under NI 43-101 Standards of Disclosure for Mineral Projects and CIM definition standards. Copper equivalent was calculated as CuEq% = Cu% + (Au g/t x 0.5), and assumed prices of $3.25/lb Cu and $1400/oz Au, with recoveries of 90% Cu and 70% Au. See EMX news release dated May 26, 2015, and SEDAR filed report titled "NI 43-101 Technical Report on the Initial Mineral Resource Estimate for the Malmyzh Copper-Gold Project, Khabarovsk Krai, Russian Federation" with an effective date of May 1, 2015 and filing date of July 10, 2015 (which can be downloaded here). For more information on the CuEq calculation, exploration results, QA/QC procedures, and methodology used to estimate the Malmyzh inferred resources.

In-fill drilling may lead to the delineation of discrete higher grade zones of copper-gold mineralization, and will provide additional confidence for resource estimation. Relatively elevated copper-gold grades are often hosted in the potassically altered rocks at Malmyzh. For example, at Valley, this style of alteration and mineralization is developed to the southeast in shallow hornfels-host rocks that occur from near-surface to depths of ~150 to ~250 meters. A table of inferred resources at a range of cut-off grades is given below (base case at 0.30% CuEq cut-off).

Malmyzh Inferred Resources at a Range of CuEq% Cut-offs.
CuEq%
Cut-off
Million
Tonnes
CuEq % Cu % Au
g/t
CuEq
Million Tonnes
Cu
Million Tonnes
CuEq
Billion lbs
Cu
Billion lbs
Au
Million Oz
0.20     2,544 0.37 0.29 0.14 9.29 7.49 20.49 16.52 11.62
0.25     2,149 0.39 0.31 0.15 8.41 6.76 18.54 14.89 10.64
0.30     1,661 0.42 0.34 0.17 7.06 5.65 15.56 12.45 9.11
0.35     1,107 0.48 0.38 0.19 5.26 4.20 11.59 9.25 6.85
0.40        757 0.52 0.41 0.21 3.95 3.14 8.72 6.93 5.22
0.45        517 0.57 0.45 0.24  2.94 2.32 6.47 5.11 3.98
0.50        346 0.61 0.48 0.27 2.12 1.66 4.68 3.67 2.96
0.55        220 0.67 0.51 0.30 1.46 1.13 3.22 2.49 2.14

Note: Calculations based on this table may differ due to rounding.

Freedom, comprised of two distinct northeast trending bodies of copper-gold mineralization, has an inferred resource for the Southeast (SE) deposit, but also has mineralization initially drilled on 400 by 400 meter fences for the Northwest (NW) prospect, which is not currently defined as a resource deposit.

In-fill drilling at Freedom NW during late 2016 intersected 747.4 meters (108.7-856.1 m) averaging 0.49% copper equivalent (0.41% copper and 0.17 g/t gold) in hole AMM-213 (interpreted as true width with additional 2017 drilling), principally hosted in magmatic-hydrothermal and phreatic breccias. Freedom NW 2017 follow-up drilling intersected chalcopyrite-rich and chalcopyrite-bornite-magnetite mineralization hosted in polymictic magmatic-hydrothermal breccias, and to a lesser extent in intrusive and phreatomagmatic breccias, diorite porphyries and hornfelsed sandstones. The 2017 results included an intercept of 417.3 meters (219.4-636.7 m) averaging 0.60% copper equivalent (0.50% copper and 0.21 g/t gold), including a higher grade sub-interval of 142.6 meters (255.4-398.0 m) averaging 0.74% copper equivalent (0.62% copper and 0.26 g/t gold) from hole AMM-216 (true width) (see EMX news release dated July 25, 2017).  The Freedom NW drill results suggest a broad, inferred outline of a pipe-like breccia body with approximate dimensions of 800 x 800 meters in plan view, and a vertical dimension of ~650 to over 850 meters. IGC's dill successes at Freedom NW emphasize the Malmyzh project's upside exploration potential.

Within the Malmyzh district the extent of porphyry copper-gold mineralization has not been fully determined. There is substantial exploration upside given by at least eleven additional prospects with reconnaissance drilling that intersected porphyry alteration and mineralization. Further, there is considerable exploration potential in undrilled areas of the property, particularly towards the southeast where there is more than 15 meters of cover that provides opportunities for additional "blind" discoveries within the project area.

The Malmyzh project has excellent physiographic, infrastructure and logistical characteristics. The property occurs in the low relief hills of the Amur River valley, which is the major shipping river in the region. There are multiple options for transportation besides the Amur that include an adjacent paved Federal highway and regional rail facilities. As well, the project has readily available power and water sources.

Malmyzh Project Status

Approval to advance the Malmyzh project was received in 2016 from the Government Commission on Monitoring Foreign Investment (the "Commission") (See Company news release dated July 25, 2016). The Commission's approval represented the successful completion of the review process required for "strategically significant" deposits according to Russian law (i.e., the Law on Foreign Investments in Strategic Industries, also termed the Strategic Industries Law or "SIL"). The SIL approval process commenced after the Joint Venture, through its Russian subsidiary Amur Minerals LLC, received certified "on balance C1+C2 reserves" from the GKZ (State Reserves Committee) that exceeded thresholds for both copper and gold defining Malmyzh as a "strategically significant" mineral deposit. EMX emphasizes that the Malmyzh "C1+C2 reserves" were estimated according to the rules and regulations of the Russian Federation, and are not the same as reserves under NI 43-101. Highlights of the Commission's approval include:

  • The Joint Venture, as a majority foreign owned business entity, has been approved to retain control of the Malmyzh project exploration and mining licenses.
  • The Joint Venture, therefore, maintains mining and production rights for the Malmyzh and Malmyzh North exploration and mining licenses. The original license terms can be extended until the end of mining.
  • The Joint Venture holds 100% of the rights for the Malmyzh and Malmyzh North exploration and mining licenses, and is entitled to recover all minerals of economic value including copper, gold and by-product minerals.

The conclusion of the SIL process initiated a multi-year phase in the project's development that includes additional technical work (i.e., drilling, exploration, metallurgy, engineering, and hydrology), as well as environmental, social, and economic assessments. This next phase of work is underway, and will ultimately conclude as a detailed "TEO of Permanent Conditions" report, which is a precursor to commencement of exploitation and mining.

IGC's 2017-2018 winter drill campaign commenced with two metallurgical drill holes, one each at Valley and Freedom Southeast (see EMX news release dated March 5, 2018). IGC has since proceeded with drill delineation of the Freedom Northwest prospect, as well as in-fill drilling at the project's resource deposits.

 

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